Articles Posted in Coronavirus

Congress has passed two major pieces of legislation intended to stimulate the economy and provide direct support to businesses, their employees, and others hurt by the economic effects of the fight against the coronavirus and COVID-19. Many benefits take the form of refundable payroll tax credits for employers. The IRS is waiving certain penalties related to payroll taxes, and allowing employers to request advance payment of refunds under these new laws.

Payroll Tax Credits

Paid Sick Leave and Family Leave

The Families First Coronavirus Response Act (FFCRA) creates temporary systems for paid sick leave, paid family leave, and expanded unpaid family leave. Employers with fewer than five hundred employees are subject to these provisions, although employers with fewer than fifty employees may request a waiver.

The amount of leave and rate of pay depends on the purpose of the leave. Paid leave for one’s own diagnosis or quarantine is capped at $511 per day. Paid leave to care for a sick or quarantined family member or a child out of school is capped at $200 per day.

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Congress passed the largest economic stimulus bill in the nation’s history in March 2020 to address problems caused by the global coronavirus pandemic. Its provisions include a waiver of the rule requiring employees to take a minimum distribution from certain types of retirement accounts by a date after they attain a particular age or when they retire, whichever is later. In 2019, Congress amended the Internal Revenue Code (IRC) to change the age after which a person must take a required minimum distribution (RMD) from 70½ to 72. People who turned 70½ in 2019 were not covered by the new law, however, which created some confusion. The coronavirus stimulus bill alleviates this confusion by waiving all RMDs during 2020.

Required Minimum Distributions Before 2020

Section 401(a)(9) of the IRC requires employees with individual retirement accounts (IRAs) and certain other types of retirement accounts to take an RMD by a “required beginning date,” defined as April 1 of the year following whichever occurs later:
– The person “attains age 70½”; or
– The person retires.

The use of a “half birthday” caused some confusion for people, since anyone born more than halfway through a calendar year would not turn 70½ until the following calendar year. For example, a person who turned 70 in June 2010 would turn 70½ in December 2010. Their RMD date would be April 1, 2011. A person who turned 70 in July 2010, however, would turn 70½ in January 2011. Their RMD date would be the following year, on April 1, 2012.

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The IRS recently began sending stimulus payments authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. These payments, which are technically tax rebates, can be up to $1,200 for individuals or $2,400 for married couples, with some exceptions. To assist individuals and families who have not received their payment yet, the IRS launched an online tool that allows people to check on their status. It is reportedly similar to the tool used to track tax refunds. The IRS has also issued a warning about possible financial scams targeting these payments.

Coronavirus Stimulus Payments

Section 2201 of the CARES Act establishes “2020 recovery rebates for individuals.” These are more commonly known as stimulus payments. The IRS sometimes refers to them as Economic Impact Payments. The “payments” are a credit against future federal income taxes, but since the CARES Act makes them refundable, the IRS is sending payments to individuals and families.

The maximum amount of $1,200 is available to any individual whose 2018 or 2019 federal income tax return shows adjusted gross income (AGI) of $75,000 or less. For married couples who filed a joint return, the maximum payment of $2,400 is available to anyone with AGI of no more than $150,000. Additionally, households with minor dependent children receive $500 per child.

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The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a massive stimulus package that became law on March 27, 2020. In total, the bill provides roughly $2 trillion, making it the largest economic stimulus bill in U.S. history. One noteworthy provision for small businesses involves a refundable employment tax credit for employers, known as the Employee Retention Credit (ERC). This credit is available to qualifying businesses that are experiencing a severe downturn in business, or that must suspend operations entirely under state and local public health orders.

Employee Retention Credit

Section 2301 of the CARES Act establishes the ERC. This tax credit is available for wages paid between March 12, 2020 and January 1, 2021.

Amount of Wages

Employers may take the credit against the Social Security portion of payroll taxes in an amount equal to fifty percent of wages, up to a maximum of $10,000 per employee. The maximum tax credit is therefore $5,000 per employee. If an employer ordinarily pays an employee $1,500 per week, the available tax credit for that week is $750.

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As local and state governments continue to implement protective measures against the global coronavirus pandemic, businesses have had to adapt quickly. Many businesses have had to close indefinitely because of “shelter in place” orders that urge people to remain home except for essential functions. The IRS has extended the deadline for paying income taxes and filing returns. Other federal agencies have taken similar actions. A de facto ban on social gatherings in many parts of the country has almost certainly had an impact on businesses that sell alcohol, along with other businesses regulated by the Alcohol and Tobacco Tax and Trade Bureau (TTB). In late March 2020, this agency announced postponement of multiple filing and tax deadlines.

The Alcohol and Tobacco Tax and Trade Bureau

Like the IRS, the TTB is part of the U.S. Department of the Treasury. It was created when the Homeland Security Act of 2002 moved the law enforcement functions of the Bureau of Alcohol, Tobacco and Firearms (ATF) to the Department of Justice. The Treasury Department retained ATF’s regulatory and tax collection roles and transferred them to the newly created TTB. It has authority over the federal taxation of alcohol, tobacco, and firearms.

National Emergency

The Internal Revenue Code (IRC) gives the Secretary of the Treasury the authority to postpone payment and filing deadlines in the event of a “federally declared disaster.” The president made an emergency declaration on March 13, 2020.

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