*Editor's Note: This blog was originally posted March 17th 2020 but has been updated April 10th 2020 with the most recent guidance.

As businesses and individuals struggle with the financial implications of the coronavirus (COVID-19) outbreak, the federal government is now working on providing tax relief. President Trump signed the Families First Coronavirus Response Act into law March 18, 2020. Senators introduced The Tax Filing Relief for America Act bill on March 20, 2020 which extends the filing deadline to July 15th as well. Here are the details.

Key Provisions

The bill provides the following tax relief provisions for American workers:

Expanded family and medical leave. The bill amends the Family and Medical Leave Act (FMLA) for employees who 1) work for employers with fewer than 500 employees, and 2) have been on the job at least 30 days. Through the new guidance, qualifying employees will be able to take up to 12 weeks of job-protected leave to comply with COVID-19 quarantine requirements or to care for an at-risk family member who’s quarantined due to exposure or symptoms of COVID-19. Parents also may qualify for the expanded leave if their children’s school or place of care has been closed, or the childcare provider is unavailable, because of COVID-19.

Important: Employers with fewer than 50 employees may be exempt from the FMLA expansion if it would jeopardize the viability of the business.

Employers subject to the expanded FMLA provision will be allowed to take a tax credit against their share of Social Security taxes for qualified family leave wages they pay each quarter. The amount of wages for each employee will be capped at $200 per day and $10,000 for all calendar quarters. Any excess credit over its Social Security tax liability will be refundable to the employer. No credit is allowed for wages that are subject to the existing Section 45S business tax credit for paid family and medical leave — and no deduction is allowed for the amount of the credit.

Under the guidance, the refundable family leave credit also is available for certain self-employed individuals, applicable against income taxes. The qualified leave amount is capped at the lesser of $200 per day or the average daily self-employment income for the taxable year per day.

Paid sick leave. The guidance also requires employers with fewer than 500 employees to provide two weeks of paid sick leave to quarantine or seek a diagnosis or preventive care for COVID-19. In addition, employers would be required to provide leave at two-thirds of the employee’s regular rate, if leave is taken to care for a family member for such purposes, or to care for a child whose school has closed or childcare provider isn’t available. Full-time employees are entitled to 80 hours of paid sick leave, and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.

As with expanded family leave, qualifying employers can claim a refundable tax credit for qualified paid sick leave wages, against Social Security taxes. But different rules apply depending on whether an employee is caring for 1) their personal needs, or 2) a family member or child.

Self-employed individuals also may be eligible for the credit at differing amounts depending on who is being treated. The amount of wages is capped at $511 per day or the average daily self-employment income for the taxable year per day.

Important: Benefits received under emergency paid leave program won’t be subject to federal income tax.

Treasury Actions

U.S. Department of Treasury Secretary Steven T. Mnuchin worked directly with House Speaker Nancy Pelosi to negotiate the Families First Coronavirus Response Act. He has also appeared on several television news programs to discuss the state of the U.S. economy and the legislative package to ease the financial impact of the coronavirus outbreak.

Tax payment deferral

On March 17th, Mnuchin announced that affected taxpayers will have until July 15 to pay taxes owed. On April 9th, the IRS announced that this extension applies to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020 and before July 15, 2020. This means that individuals, trusts, estates, nonprofits, corporations, and other non-corporate tax filers (including Americans who live and work abroad) now have until July 15 to file and pay.

Here are some important things to note about the tax payment deferral

• It is strongly recommended that taxpayers file their tax returns as soon as possible, as many may be due refunds.
• As of March 20, 2020 tax payment deferral caps are gone. Previously, payment deferrals were limited to $1 million for individuals and $10 million for large corporations.
• Extension of time (7/15/20) to pay tax also applies to 1st (normally due April 15) and 2nd quarter (normally due June 15) 2020 estimated tax payments.
• Nonprofit organizations will have until July 15 to get their 990s in (normally due May 15)
• The right to defer payment of tax applies to 2019 income taxes, gift and excise taxes.
• The deadline extension also applies to individual retirement account (IRA) contributions.

Other deadlines haven’t been officially extended yet. American Institute of Certified Public Accountants (AICPA) has requested relief from the Treasury and IRS.

Specifically, the AICPA has communicated the following recommendations to the Treasury Department:

• Extending certain deadlines falling on or after March 15, 2020, and before October 15, 2020, to give individuals and businesses additional time to file and make payments through October 15, 2020,
• Extending the IRA contribution deadline for individuals to October 15, 2020,
• Waiving late payment penalties and interest for most individuals and businesses through October 15, 2020,
• Waiving underpayment penalties for individuals for 2020 estimated tax payments if paid by September 15, 2020, and
• Providing automatic extensions without the need to file any forms or request an extension.

No official guidance on these recommendations has been issued by the IRS or Treasury, however. But the IRS has advised that high-deductible health plans (HDHPs) can pay for COVID-19 testing and treatment, without jeopardizing their status — though these plans aren’t required to cover these costs before deductibles are met. Individuals with an HDHP that covers these costs may continue to contribute to a health savings account (HSA). Contact your plan for the details of its coverage before receiving treatment.

Stay Tuned

The Families First Coronavirus Response Act is part of the government’s ongoing efforts to help Americans combat the COVID-19 outbreak. Additional relief may be available from state and local tax authorities in your area. Keep checking our Coronavirus Resource Center for the latest developments.