COVID-19 Federal and Washington State Tax Briefing

3.23.2020, 8:45 a.m. (PST)

Federal Tax – IRS

Refundable credit for small and medium-size employers – Employers with fewer than 500 employees are eligible for two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees.  

Paid Sick Leave for Workers – For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees’ children’s schools are closed or child care providers are unavailable.

Complete Coverage – Employers receive 100% reimbursement for paid leave including (1) Health insurance costs are also included in the credit, (2) no payroll tax liability for the benefit provided , and (3) self-employed individuals receive an equivalent credit.

Reimbursement will be quick and easy to obtain – An immediate dollar-for-dollar tax offset against payroll taxes is provided. If a refund is owed, the IRS will send the refund ASAP.

Small Business Protection – Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.

Easing Compliance – Requirements subject to 30-day non-enforcement period for good faith compliance efforts.

Filing deadline – Federal income tax return due date for calendar year taxpayers has been extended from April 15, 2020 to July 15, 2020. The IRS is processing returns and encourages taxpayers with refunds due to file promptly to obtain access to the refund.

Federal income tax payment due date extended – automatically. NOTE:  The below applies only to income taxes (and in some cases employment taxes) not payment or deposit of other federal taxes

March 23 update:  Under guidance that will be released this week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.  The payroll taxes that are available for retention include withheld federal income tax, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.  

https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus

Individuals, trusts and estates: Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. The payment due date extension applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, for example, trusts or estates. The relief is automatic.  There is no need to file any additional forms or contact the IRS to qualify for this relief.

Corporations: For C Corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million of their 2019 tax due.

This relief also includes estimated tax payments for tax year 2020 due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances effective July 16, 2020. Filing the return or requesting an extension of time to file by April 15, 2020 will automatically avoid interest and penalties on the taxes paid by July 15.

The IRS encourages filing extensions electronically (Form 4868 for individuals) through tax professionals, tax software or the Free File link on IRS.gov. Businesses must file Form 7004.

The relief only applies to federal income tax (including SE tax) payments otherwise due April 15, 2020, not state tax payments, or deposits or payments of any other type of federal tax. The IRS has provided a link to state taxing websites:  https://www.taxadmin.org/state-tax-agencies .

Coverage of Covid-19 testing/treatment costs under High Deductible Health Plans – High-deductible health plans (HDHPs) can pay for COVID-19-related testing and treatment, without jeopardizing their status. An individual with an HDHP that covers these costs may continue to contribute to an HSA.  HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. The IRS also noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.  Plan sponsors have begun notifying subscribers of the benefit’s availability, usually via “blast” emails.

In-person tax appointments suspended – Taxpayer assistance centers are closed and face-to-face contact with taxpayers is suspended until further notice.  Informal advice is that the suspension will continue through the end April, at least.

Washington State – Department of Revenue (DOR)

The following is a link to the DOR’s webpage on Covid-19 relief for business taxpayers.  Check the site for updates as the situation evolves: https://dor.wa.gov/about/business-relief-during-covid-19-pandemic

The relief applies to any “Covid-impacted business.”  The Department advises that a complete list of “Covid impacted businesses” is provided at: https://medium.com/wagovernor/inslee-announces-statewide-shutdown-of-restaurants-bars-and-expanded-social-gathering-limits-bb19095b2251

However, there is not (as of March 23, 2020 at 8:45 a.m.) a single published list.  The following business categories, which have been shut down or severely curtailed, would seem eligible for relief presently:

• Restaurants, Food courts, Bars and taverns, Wine, beer and spirits tasting venues, Doughnut shops and ice cream parlors, Coffee shops, and sit-down airport restaurants and bars
• Theaters and Bowling alleys
• Gyms and fitness centers
• Non-tribal card rooms
• Museums and art galleries
• Tattoo parlors
• Barbers, hair salons and nail salons

Synopsis from the DOR webpage’s Q&As (as of March 20, 2020)

What if I am unable to file and pay my monthly, quarterly or annual return? Upon request, the Department will provide extensions for filing and paying tax returns (even if the request is after the due date). This only applies to returns that are due and not already paid during the state of emergency (Feb. 29, 2020, through the end of the state of emergency, yet to be determined).

• 60 days for monthly returns (this applies to the February 2020 and March 2020 returns at this time)
• 30 days for the Q1/2020 return
• 30 days for the Annual 2019 return

What if I need to, or have been, working with DOR on a collection related issue? DOR will delay issuing new compliance assessments for the next 30 days and reassess then. This delay includes tax warrants, notices of withhold and deliver, and revocations.

What if I have a payment plan with DOR?  Upon request, Revenue will work with taxpayers impacted by COVID-19 to adjust payment plan amounts or extend payment dates 30 to 60 days. If payment is extended, additional penalties and interest that would have normally accrued during the extension period will be waived.

Requesting Relief – Businesses can request the relief above by sending a secure email in their My DOR account or by calling Revenue’s customer service staff at 360-705-6705, Monday through Friday 8 a.m. to 5 p.m.