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Federal Tax Responses to the Coronavirus Crisis

Client Alert

Gibbons Special Alert

March 19, 2020

The federal government has started to take action to mitigate the impact of the coronavirus pandemic on the economy, including with respect to tax issues. Treasury Secretary Steven Mnuchin announced on Tuesday, March 17 that the April 15 deadline for payment of income taxes is being pushed back three months, to July 15, subject to certain restrictions. There have also been reports that the administration is considering delaying estimated quarterly income tax payments for self-employed workers and businesses.

Under Secretary Mnuchin’s new policy, formalized by the IRS on Wednesday, March 18 with the release of Notice 2020-17, taxpayers will still be required to file timely income tax returns or apply for extensions under normal procedures. Under the new policy, individuals will be able to defer payment on up to $1 million of income tax liability for three months. This limit applies regardless of filing status – meaning that both single individuals and those filing joint returns are subject to the same $1 million limit. Consolidated groups will be able to defer up to $10 million per consolidated group. C corporations filing alone will also have a $10 million maximum postponed amount, in both cases for the same three-month period.

No interest will accrue and no penalties will be assessed on these deferred payments. The individual deferment will apply to many of the small businesses most directly impacted by this pandemic, which often operate as pass-through entities such as partnerships, S corporations, and LLCs, and therefore pay taxes at the individual level.

H.R. 6201, the Families First Coronavirus Response Act, was recently adopted by the House, and then quickly passed by the Senate and signed by the President on March 18. The Act provides a payroll tax credit of an amount equal to 100% of the qualified paid family and medical leave benefits paid by employers or self-employed individuals. The Joint Committee on Taxation has summarized the bill and estimated its projected cost at almost $105 billion. For a more detailed description of this Act, click here.

Separately, the IRS circulated an alert to its employees on Tuesday, March 17, instructing them to stop many enforcement actions, including certain levies and collection notices, until further notice. The IRS’s automated collection system will cease distribution of all levies and notices, effective immediately, with an exception only for taxpayer-friendly LP68 notices, which provide notification that a levy has been released.

Gibbons stands ready to assist with any concerns. If you have any questions regarding tax-related issues, please contact Peter J. Ulrich. In addition, we will continue to monitor the coronavirus situation and update you accordingly.

More in the “Coronavirus and Your Business” Series: