Tax Deadline and Other Tax Season Changes
Many tax changes, including the tax day deadline, are occurring in light of the COVID-19 pandemic. These changes are affecting individuals, small business, and tax-exempt entities alike. This article provides a general overview of the federal tax relief measures and changes recently implemented.
Tax Deadline Day
The Treasury Department and Internal Revenue Service announced that the federal income tax deadline for filing has been extended from April 15, 2020, to July 15, 2020. Federal income tax payments are also deferred to July 15, 2020, without interest or penalties, regardless of the amount owed. The postponement applies to all taxpayers, including individuals, estates, trusts, corporations and other non-corporate tax filers as well as those who pay self-employment tax.
Tax Credits and Relief
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, is designed to encourage eligible employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19, with an employee retention tax credit.
The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.
The Families First Coronavirus Response Act (FFCRA) contains two separate provisions: The Emergency Paid Sick Leave Act (EPSLA) and The Emergency Family and Medical Leave Expansion Act (Expanded FMLA). It provides small and midsize businesses a refundable tax credits that reimburses them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19.
Small-Employer FICA Tax Relief relates to sick leave and family medical leave payments authorized by the Act are exempt from the 6.2% Social Security tax component of the employer’s federal payroll tax that normally applies to wages. Employers must pay the 1.45% Medicare tax component of the federal payroll tax, but they can claim a credit for that amount.
Other Tax Updates
The Standard Deduction amounts will be increased slightly this year compared to previous years.
Single & Married Filing Separate $12,200
Head of Household $18,350
Married Filing Joint $24,400
The Insurance Penalty for not having health insurance no longer applies for 2019 federal tax returns. However, some states have their own individual health insurance mandate.
The Alimony Deduction was eliminated for divorce rulings signed after December 31, 2018 that require alimony payments. The payer will not be allowed a deduction for payments made, nor will the payee be required to claim the alimony as income on their respective tax returns.
If you need help with bookkeeping services or accounting services, or have questions understanding the new tax changes, please reach out to Consultance Accounting and we will be happy to assist.