Tax Filing Date and Payment Extension
Pursuant to IRS Notice 2020-18, the tax filing deadline and deadline for making individual federal income tax payments has been automatically postponed to July 15, 2020. This means that there is no penalty or interest for tax payments that are made by July 15, 2020. This is an automatic change and taxpayers do not need to file requests for extension. The State of Iowa has also extended the deadline for filing and payment of individual income taxes to July 31, 2020.
Businesses also have until July 15, 2020 to file their tax returns and make any necessary payments without interest or penalties. There is no cap on the deferred payments.
Tax Credits for Paid Sick Leave and Paid Family Leave
Pursuant to the Families First Coronavirus Act (“FFCA”), employers with under 500 employees are required to provide up to 10 business days of paid sick leave. The FFCA provides qualifying employers a refundable payroll tax credit equal to 100% of the total wages paid on these additional sick leave days. Generally, these credits will apply to the employer’s portion of it Social Security taxes and the credit is limited to $511 per day if the employee is taking time off to care for themselves, or $200 per day if the employee is taking time off to care for others who are quarantined, showing symptoms of the Coronavirus, or is taking care of a minor child whose school is closed. Similarly, self-employed individuals will receive a similar credit with the credits being taken against the taxpayer’s income tax.
The FFCA also requires most employers with under 500 employees to provide public health emergency leave under the Family and Medical Leave Act when an employee is unable to work due to taking care of a minor whose school or daycare is closed due to the Coronavirus. The FFCA requires employers to provide at least ⅔ of the employee’s pay up to $200 per day. Employers will receive a refundable credit that is equal to the amount of these family leave payments to be used against its share of payroll taxes for each employee.
Although the final bill has not been released, it appears that that taxpayers will receive significant direct payments from the government.
Single filers will get $1,200, with qualifying children to add $500 to the total. Phaseouts begin at $75,000 adjusted gross income with payments being completely phased out at $99,000.
Taxpayers filing jointly will get $2,400, with qualifying children to add $500 to the total. Phaseouts begin at $150,000 adjusted gross income with the payments being completely phased out at $198,000.
As the bill stands right now, even low income taxpayers with no tax liability are eligible for these payments.
At this point, it is unclear whether the adjusted gross income will be based upon the 2018 or 2019 tax year. Likely, it will be based upon the 2018 tax year unless the tax payer did not file, in which case it will be based upon the 2019 tax year. As details become clearer, it would be prudent for taxpayers to determine which tax year would be better for their situation and evaluate either filing as soon as possible or waiting to file until stimulus payments have been made.