COVID-19 Tax Return Filing and Payment Relief and Cares Act

James Pope |
Categories
Cares Act
COVID-19
Tax

03/31/2020

We hope this writing finds you in good spirits and staying safe from the Coronavirus (COVID-19). As you know, we are living in some very taxing times and I mean that literally. Since the pandemic, things in the tax world and each of our personal lives have been very fluid and feels as if they are changing daily.

Over the course of the last two weeks, I have been knee deep in getting everyone set up to work remotely, working through the kinks and keeping up with the various relief for filing and paying annual income taxes, the three phases of assistance for the Coronavirus and continuing education on all the changes.

I am sure each of you have read or seen many articles or news cast reporting on this. So we wanted to highlight a few provisions and relief items; we feel will be most notable to you.

You all know I am tax geek so if you fall asleep reading this, please do not hesitate to call to set a time to discuss how all this applies directly to you.

We will start with the relief provided by the Internal Revenue Service as well as the States for the filing of annual income tax returns, payments for annual tax returns and quarterly estimated tax payments then we will cover the Coronavirus Aid, Relief, and Economic Security (CARES) Act. (With regards to the CARES ACT, all information is our interpretation of the law as written. Neither the IRS nor the US Treasury have issued any official guidance on the implementation of the act.)

Filing of Annual Income Tax Returns, Payments for Annual Tax Returns and Quarterly Estimated Tax Payments

Federal Relief

Notice 2020-18, 2020-20, IR 2020-58 and IRS FAQ for Notice 2020-18

  • Postpones the filing of certain federal income tax returns and federal income tax payments due on 04/15/2020 until 07/15/2020.
    • Individuals filing 1040
    • Trust and Estates filing a Form 1041
  • This relief applies to the following returns and payments due on 04/15/2020
    • 2019 Federal Income Tax Return for Individuals, Trust and Estates
    • 2019 Federal Income Tax Payment Individuals, Trust and Estates
    • 2020 1st Quarter Estimated Tax Payment
  • This relief also provides that interest, penalties, and additions to pay begin to accrue on 07/16/2020 for all payments postponed until 07/15/2020.
  • At the time of the writing, there is no stated relief for underpayment penalties for 2020 estimated tax payments.
  • Extends the deadline for 2019 IRA, Roth IRA and HSA contributions until 07/15/2020.
  • Please take note of the following:
    • The payment date for the 2nd Quarter Estimated Tax Payments has not been postponed. Therefore, these will be due on 06/15/2020.
    • All deadlines referenced refer solely to Federal Income Tax Returns and Federal Income Tax Payments

State Relief

Alabama Department of Revenue - Order of the Commissioner of Revenue 03/23/2020

  • Postpones the filing of certain state individual income tax or corporate income tax returns and state income tax payments due on 04/15/2020 until 07/15/2020.
  • Postpones the 2020 1st quarter tax payment due on 04/15/2020 until 07/15/2020.
  • This relief also provides that interest, penalties, and additions to pay begin to accrue on 07/16/2020 for all payments postponed until 07/15/2020.
  • At the time of the writing, there is no stated relief for underpayment penalties for 2020 estimated tax payments.
  • Please take note of the following:
    • The payment date for the 2nd Quarter Estimated Tax Payments has not been postponed.
    • Therefore, these will be due on 06/15/2020.

Louisiana Department of Revenue - Revenue Information Bulletin No. 20-009

  • Postpones the filing of certain state income and franchise tax returns and state income tax payments due on 05/15/2020 until 07/15/2020.
  • This relief also provides that interest, penalties, and additions to pay begin to accrue on 07/16/2020 for all payments postponed until 07/15/2020.
  • At the time of the writing, please note the following:
    • The payment date for the 1st quarter Estimated Tax Payments has not been extended beyond 04/15/2020.
    • There is no stated relief for underpayment penalties for 2020 estimated tax payments.

Mississippi Department of Revenue – Notice 2020-01

  • Postpones the filing of certain state individual income tax or corporate income tax returns and state income tax payments due on 04/15/2020 until 05/15/2020.
  • Postpones the 2020 1st quarter tax payment due on 04/15/2020 until 05/15/2020.
  • This relief also provides that interest, penalties, and additions to pay begin to accrue on 06/16/2020 for all payments postponed until 05/15/2020.
  • At the time of the writing, there is no stated relief for underpayment penalties for 2020 estimated tax payments.

New York Department of Taxation and Finance – Important Notice N-20-2

  • Postpones the filing of certain state income and franchise tax returns and state income tax payments due on 04/15/2020 until 07/15/2020.
  • This relief also provides that interest, penalties, and additions to pay begin to accrue on 07/16/2020 for all payments postponed until 07/15/2020.
  • At the time of the writing, please note the following:
    • The payment date for the 1st quarter Estimated Tax Payments has not been extended beyond 04/15/2020.
    • There is no stated relief for underpayment penalties for 2020 estimated tax payments.

Virginia Department of Taxation – Tax Bulletin 20-4

  • The filing deadline will remain 05/01/2020.
  • Postpones the payment of the income tax payments due from 04/01/2020 to 06/01/2020 until 06/01/2020.
  • Postpones the 2020 1st quarter tax payment due on 04/15/2020 until 06/01/2020.
  • This relief also provides that interest, penalties, and additions to pay begin to accrue on income tax payments due from 04/01/2020 to 06/01/2020 shall be postponed until 06/01/2020.
  • At the time of the writing, there is no stated relief for underpayment penalties for 2020 estimated tax payments.

Coronavirus Aid, Relief, and Economic Security (CARES) Act

§2201. 2020 Recovery Rebates for Individuals

  • Allows for a refundable tax credit as follows:
    • Recovery rebate for each taxpayer of $1,200 ($2,400 for joint returns).
    • Plus $500 for every qualifying child. (Please note a qualifying child is a dependent child under the age of 17.)
    • The credit will be reduced by 5% of adjusted gross income (AGI) over $150,000 joint, $112,500 head of household and $75,000 all other statuses.
    • The credit will be completely phased out at $198,000 joint, $136,500 head of household and $99,000 all other statuses
    • No payment shall be made without a valid Social Security Number or Adoption Tax Identification Number
  • How will the credit be calculated?
    • The IRS will base the credit
      • on the taxpayer’s 2019 tax return
      • 2018 tax return if 2019 not yet filed
      • If no filing for either year, then based on information provided by Form SSA-1099 or RRB-1099, 2019 Social Security Benefit Statement
  • How will the credit be issued?
    • Via direct deposit to the to bank authorized after 01/01/2018
    • Via Check to the last known address
    • A notice will be mailed 15 days after the payment. The notice will contain the amount of the payment and method of the payment
  • The advanced credit is not subject to offset with the exception of back child support.
  • The advanced credit will be reconciled on 2020 return.
  • Estates, Trusts and Individual claimed as dependents (or could be claimed) are not eligible.

§2202. Special Rules for Use of Retirement Funds

  • Waiver of the 10% penalty for coronavirus related distributions up to $100,000 aggregated.
  • The term “Coronavirus-related distribution” means any distribution made from January 1, 2020 through December 31, 2020 to an individual:
    • Who has been diagnosed with COVID-19 (Coronavirus) by a test approved by the CDC,
    • Whose spouse or dependent is Diagnosed with COVID-19 (Coronavirus) by a test approved by the CDC,
    • Who has experienced adverse financial consequences as result of:
      • Being quarantined, furloughed, laid off, or hours reduced due to coronavirus,
      • Unable to work due to the lack of childcare,
      • Closing or reducing hours of business owned or operated by an individual,
      • Other factors as prescribed by the Secretary of Treasury,
  • The distribution maybe paid back during a three-year period starting on the date after the distribution providing the plan does accept rollovers.
  • The distribution maybe included in the gross income ratably of the next three years (2020, 2021 and 2022). 
  • Employer plan loan limits are increased from $50,000 to $100,000 for any loan for a 180-day period from the date of enactment.   

§Sections 2203 Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Accounts and Plans

  • Minimum distribution rules for certain retirement plans and accounts are waived for 2020.
  • The waiver applies to calendar year 2020 only

§2204 Special Allowance of Partial Above the Line Deduction for Charitable Contributions

  • Allows for a maximum $300 deduction for cash charitable contributions for taxpayers taking the standard deduction.
  • This applies to taxable years beginning after 12/31/2019.
  • Please not contributions to donor advised funds or supporting organizations can not be used.
  • THIS IS A PERMANENT CHANGE.

I commend you if you made it this far and are still with me. 

In closing, everyone’s scenario is unique. Therefore, we will be reviewing individual situations and reaching out with our recommendations for your individual scenario.

In the meantime, we encourage you to contact our office should you have any questions.

We are wishing everyone the best through this and looking forward to less eventful remainder of year!

Shantelle Palermo, E.A.