The coronavirus pandemic has sparked action by the US government as it tries to curtail the damage to the economy. As economies around the world take a hit from the global crisis, some countries are responding with sweeping tax changes for this year while others are hardly acknowledging the crisis.
Here in the US, the government has just begun adjusting tax rules for the upcoming filing season for 2020 taxes. While it’s hard to know what further relief we can expect from the government, they say the best predictor of future action is past behavior. So what clues can we glean?
Support Will Grow More Robust
Since the announcement of the cancellation of all in-person support from the IRS Taxpayer Assistance Center, the department has launched a Coronavirus Tax Relief page that is updated with the latest information as rules are established and next steps are announced.
Deadlines May be Extended (Further)
The IRS has changed the 2020 federal tax deadline to July 15. Neither individuals nor businesses are required to file any kind of extension. But now that the IRS has set the precedent for changing the date, it’s possible that, depending on how the health crisis unfolds, it may extend again. Each state’s tax agency may also be looking to extend the deadline as well.
Changes to Paid Leave
At the moment, the IRS’s special announcement has stipulated that “employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay” if the employee cannot work because of quarantine “and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis.” While the sentiment isn’t likely to change, the specifics might as testing becomes faster and more wide-spread. If testing is as easy as a cheek swab and an hour wait, employees (and their families) won’t have to be quarantined and can return to work faster. On the other hand, as the medical community learns more about the length of time victims are contagious or the length of recovery, that 80-hour number may change.
Reimbursements for Small Business
According to the March 20 joint announcement by the US Department of the Treasury, the Internal Revenue Service (IRS), and the US Department of Labor (Labor), small and midsize employers can immediately take advantage of two 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.” The coverage goes even further to protect employers.
Employers who support families by allowing for leave to provide childcare while schools and child care facilities are closed may receive a refundable child care leave credit equal to two-thirds of the employee’s regular pay.
Non-Enforcement Periods Will End
The Department of Labor is currently providing employers a buffer period while they get into compliance in areas like allowing for paid leave as long as the employers are acting in good faith. But as the timeline extends, look for the government to be less forgiving of employers who aren’t granting paid leave for their employees.
As with everything in this crisis, the specifics of tax support and relief from the IRS will likely change. But now that the support infrastructure is starting to emerge, we have a sense of how the US government can support the population during the crisis.