Notice 2020-18; Federal income tax filing and payment relief on account of Coronavirus Disease 2019 (COVID-19) emergency. The Treasury Department and IRS are providing relief to all taxpayers who have Federal income tax returns and Federal income tax payments due on April 15, 2020. The April 15, 2020 deadline is postponed to July 15, 2020. Associated interest, additions to tax, and penalties for late filing or late payment will be suspended until July 15, 2020.

Notice 2020-18 will be in IRB 2020-15, dated April 6, 2020.

WASHINGTON – Today the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of 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. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020. 

The Act will 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 family members. The legislation will 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. 

Key Takeaways 

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.

Health insurance costs are also included in the credit.
Employers face no payroll tax liability.
Self-employed individuals receive an equivalent credit.

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

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.

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

To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.

Background 

The Act provided paid sick leave and expanded family and medical leave for COVID-19 related reasons and created the refundable paid sick leave credit and the paid child care leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and Dec. 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.

Paid Leave 

The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional 10 weeks of expanded paid family and medical leave at 2/3 the employee’s pay.

Paid Sick Leave Credit

For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days. 

For an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period. 

Child Care Leave Credit 

In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Prompt Payment for the Cost of Providing Leave

When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.

Under guidance that will be released next 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 taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees. 

If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week. 

Examples 

If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date. 

If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000. 

Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

Small Business Exemption 

Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard. 

Non-Enforcement Period 

Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period. 

For More Information 

For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted next week.

Notice 2020-17; Payment relief on account of Coronavirus Disease 2019 (COVID-19) emergency. The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals - regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Notice 2020-17 will be in IRB 2020-15, dated April 6, 2020.

The IRS established a special webpage on IRS.gov/coronavirus to include all of the available tax-related information. This page will be updated as more information is available.

Treasury News Release:  Treasury and IRS Issue Guidance on Deferring Tax Payments Due to COVID-19 Outbreak

WASHINGTON — The Internal Revenue Service today reminded taxpayers to remain vigilant with their personal information by securing computers and mobile phones. Proper cybersecurity protection and scam recognition can reduce the threat of identity theft inside and outside the tax system.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. People should be alert to scammers posing as the IRS to steal personal information. There are ways to know if it’s really the IRS calling or knocking on someone’s door.

The IRS also works with the Security Summit, a partnership with state tax agencies and the private-sector tax industry, to help protect taxpayer information and defend against identity theft. Taxpayers and tax professionals can take steps to help in this effort.

Below are a few tips to help minimize exposure to fraud and identity theft:

Set password and encryption protections for wireless networks. If a home or business Wi-Fi is unsecured, it allows any computer within range to access the wireless network and potentially steal information from connected devices. Whenever it is an option for a password-protected account, users also should opt for a multi-factor authentication process.

Set security software to update automatically so it can be updated as threats emerge. Educate children and those with less online experience about the threats of opening suspicious web pages, emails or documents.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed at home, at work or on the go. 

Notice 2020-16 provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code.  In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), as reflected by the application of § 430(h)(2)(C)(iv). 

Notice 2020-16 will be in IRB: 2020-14, dated March 30, 2020.

WASHINGTON — The Internal Revenue Service today announced the release of final regulations that increase the Offer in Compromise application fee to $205 and provide an additional way for the IRS to waive the Offer in Compromise application fee for low-income taxpayers, based on their adjusted gross income (AGI).

An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS to settle a tax debt for less than the full amount owed. Generally, it may be an option for taxpayers who can’t pay their full tax debt, or if doing so would create a financial hardship. The IRS considers the taxpayer’s overall financial circumstances when considering an OIC in an effort to administratively resolve the amount due.

 Applicants who meet the definition of a “low-income taxpayer” receive a waiver of their OIC application fee. A new provision from the Taxpayer First Act provides an additional way for low-income taxpayers to qualify for a waiver of the OIC application fee.

Normally, the IRS determines if taxpayers fall at or below 250% of the poverty level by looking at their household’s size and gross monthly income. The new law provides an additional standard for the IRS to use in making the calculation. The IRS will now also look at a taxpayer’s AGI from the most recent tax return to determine whether it is at or below 250% of the poverty level.

Taxpayers with an outstanding tax debt are encouraged to timely respond to IRS notices and should not ignore correspondence received from the IRS. Taxpayers with an outstanding tax debt should contact the IRS at the phone number set forth in the notice, online or by visiting a local Taxpayer Assistance Center (TAC) – a listing of local TACs is available at IRS.gov. Taxpayers may also seek assistance from the Taxpayer Advocate Service (TAS). Contact information for TAS is available online, including a listing of local TAS offices.

For more information, see Offer in Compromise on IRS.gov.

Notice 2020-15 provides tax relief to health plans as a result of the public health emergency posed by COVID-19, and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID-19. A health plan that otherwise satisfies the requirements to be a high deductible health plan (HDHP) under section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. As a result, the individuals covered by such a plan will not fail to be eligible individuals under section 223(c)(1) merely because of the provision of those health benefits for testing and treatment of COVID-19.

Notice 2020-15 will be in IRB:   IRB 2020-14, dated March 30, 2020.

WASHINGTON — The Internal Revenue Service today advised that high-deductible health plans (HDHPs) can pay for 2019 Novel Coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA).   

In Notice 2020-15, posted today on IRS.gov, the IRS said that health plans that otherwise qualify as 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.

Today’s notice applies only to HSA-eligible HDHPs. Employees and other taxpayers in any other type of health plan with specific questions about their own plan and what it covers should contact their plan.

WASHINGTON – The Internal Revenue Service is encouraging taxpayers to take control of the size of their refund using the Tax Withholding Estimator on IRS.gov.

The estimator has a “slider” feature to let users to choose the refund they want from a range of amounts based on the information they enter. The feature helps taxpayers set their withholding to get a large refund or more money in their paychecks throughout the year.

This news release is part of a series called the Tax Time Guide with information to help taxpayers file an accurate tax return. 

Withholding 
Starting in 2020, income tax withholding is generally based on the worker’s expected filing status and standard deduction. Employers generally use withholding tables to determine how much tax to withhold and send to the IRS. Those who are not subject to withholding should make quarterly estimated tax payments during the year.

The improved and mobile-friendly estimator offers retirees, employees and self-employed individuals a user-friendly way to check their withholding. It also has features specially tailored to the unique needs of those receiving pension payments and Social Security benefits.

People with more than one job and families where both spouses work may need to adjust their withholding to avoid having too little withheld. Not paying enough during the year, either through withholding or by making timely estimated tax payments, may mean paying a penalty.

When to check
Taxpayers should check their withholding annually. They should also check when life changes occur, such as marriage, childbirth, adoption and when buying a home. The IRS recommends anyone who changed their withholding late in 2019 should do a Paycheck Checkup. Taxpayers who receive a tax bill after they file should use the estimator to ensure the right amount is being withheld for 2020.

Taxpayers can use the results from the IRS Withholding Calculator to determine if they should complete a new Form W-4, Employee’s Withholding Certificate.

Submitting a new Form W-4
Employees submit a completed Form W-4 to their employer, not the IRS. Beginning in 2020, all new employees must use the redesigned form. Employees who submitted Form W-4 in 2019 or before are not required to submit a new form. However, the new form must be used to adjust their withholding. New employees who fail to submit a Form W-4 will be treated as a single filer with no other adjustments. This means that a single filer’s standard deduction with no other entries will be considered in determining withholding. 

The new Form W-4 is simpler than the old form and increases the transparency and accuracy of the withholding system. The new design replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.

Self-employed
Those who have self-employment income will generally owe both income tax and self-employment tax. Form W-4 is primarily to be used by employees who are not subject to self-employment tax and does not compute self-employment tax. See Form 1040-ES Estimated Tax for Individuals and IRS Publication 505, Tax Withholding and Estimated Tax.

For more information see the Tax Withholding Estimator FAQs and FAQs on the 2020 Form W-4. Whether at home, at work or on the go, taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov.

WASHINGTON — The Internal Revenue Service today reminded taxpayers, businesses, tax professionals and others to take advantage of a wide variety of free IRS e-mail subscription services that feature things like the annual "Dirty Dozen" list of tax scams, which is coming this month.

The e-News Subscription service issues tax information by email for many different audiences providing tips, tools and helpful materials of interest to taxpayers  and organizations. Among others, the IRS offers subscription services tailored to tax exempt and government entities, small and large businesses as well as individuals. The service is easy to use; sign up for by visiting IRS e-News Subscriptions.

The IRS currently has 20 registration-based e-News options, including: 

For more information and other IRS subscriptions designed for specific groups, visit IRS e-News Subscriptions. The resources will help taxpayers and organizations keep up with the latest information during and after filing season.