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Tax Updates – Tax Policymakers’ Responses to the Coronavirus

Added by Richard G. Smith in Articles & Publications, News, Tax Law on March 26, 2020

As the world has been turned upside down with the economic effects of the coronavirus, the federal and state governments have implemented relief measures and now an incentive package to mitigate the damage to the economy and assist taxpayers.

The first of such actions was the decision to delay the deadline for filing 2019 federal income tax returns that would have been due on April 15, 2020, and making payments, to July 15. This does not affect corporations, trusts, partnerships or other entities whose filing date was March 15. The extended deadline does apply to the first 2020 estimated tax payment due April 15. The June 15 deadline for the second estimated tax payment is not affected. The deadline for making 2019 contributions to IRAs or HSAs is also extended to July 15, 2020. Employment tax returns and payments are not affected.

Idaho has followed suit, in a fashion, when Governor Little announced the deferral of the April 15 state income tax filing and payment date to June 15. The practical effect of setting the deadline earlier than the federal July 15 deadline is that Idahoans will need to file their federal returns a month early, since state taxable income is based on the income as reported on the federal return, a copy of which is to be attached to the state return. The Governor also extended to June 15 the deadline for applying for the following property tax relief programs: the circuit breaker (providing an exemption for certain low-income homeowners); the property tax deferral (allowing the deferred payment of property taxes for seniors and certain other types of taxpayers with incomes below $45,756); and veterans benefits (up to $1,320 in property tax rebates).

The reason the Governor did not extend the filing and payment deadline to July 15 was because of fiscal concerns. The tax collections in April are so significant that the state will need to use its reserve funds to bridge the gap between April and any later date. The balances of those funds are not high enough to justify an extension beyond June. The fiscal situation could be exacerbated by the pace of sales tax collections, which will be lower than projected because of diminished economic activity.

There are other developments at the federal level. The IRS has provided two new refundable payroll tax credits for small and midsize employers, designed to fully reimburse them for the cost of providing Coronavirus-related leave to their employees. This relief has been provided under the Families First Coronavirus Response Act, signed by President Trump on March 18, 2020. The purpose of the Act is to help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for other individuals, in each case related to COVID-19. Further, the Act would enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus. In addition, eligible employers would be able to claim these credits based on qualifying leave they provide between April 1, 2020 and December 31, 2020.

And finally, the U.S. Senate today passed legislation authorizing about $2 trillion in incentives to a wide variety of individuals and businesses. The bill calls for “no-strings” cash payments to individuals of $1,200 per person and $500 per child. Eligible individuals are those with adjusted gross income less than $75,000 per year, $150,000 for a married couple filing jointly (based on 2018 tax returns). The bill reportedly expands unemployment benefit insurance to self-employed (including “gig economy”) workers, extends the period of full pay, and raises the maximum unemployment benefit. Businesses benefitting from the incentive package include hospitals, the transportation industry, and small businesses. This legislation will be the subject of another article in the near future.

Hawley Troxell stands ready to help our clients navigate these difficult issues as the landscape continues to evolve. Please contact Rick Smith or another Hawley Troxell tax attorney with any questions, we are here to help (even if some of us are teleworking).

This Client Alert has been prepared by Hawley Troxell Ennis & Hawley, LLP for informational purposes only and is not legal advice, a legal opinion or counsel. Readers receiving information through this Client Alert should not act on or rely on it without consulting professional legal counsel. Any such opinions, advice or counsel are dependent upon the application of the law to the particular facts and circumstances of any given situation, and should be given by a licensed attorney in the exercise of his or her professional judgment only after the establishment of an attorney-client relationship and based upon the exercise of the attorney’s professional judgment after consideration of such facts and circumstances. The furnishing of this Client Alert does not constitute or give rise to an attorney client relationship.