COVID-19 Tax Updates

Coronavirus Tax Relief

Following are highlights of government assistance programs related to Covid-19 as well as links to additional information and resources for available programs and benefits.

Potential new relief packages are still being discussed and considered in Congress. 

Programs and support available to Individuals/Employees

Individual Provisions:

  • Recovery Rebate checks: Final reconciliation and last chance to claim will be on 2020 tax filings.  Payments are $1,200 per adult taxpayer and $500 per child under age 17 as of 2020.  Eligibility for payment is based on staying under certain AGI income thresholds ($99k Single filers, $198k Joint filers, $136k Head of Household filers).  If you qualified based on 2018 or 2019 AGI, advance rebate checks were mailed in 2020. If you will be eligible based on 2020 AGI, the final opportunity to claim the recovery rebate payment will be on the 2020 tax filing.  Details are here. Eligible individuals, visit the IRS’s Get My Payment page to check your payment status.
  • Increased Unemployment Benefits, including benefits for reduced hours or inability to work due to school closures or lack of childcare, will expire on December 26, 2020 barring additional action.
  • Provisions for IRA withdrawal flexibility
    • Taxes on withdrawals before December 31, 2020 can be spread over three years.
    • IRA funds can be re-contributed within three years to avoid income taxes.
    • If under 59.5, allowed to withdraw up to $100,000 from IRA’s without incurring the 10% early withdrawal penalty (income taxes will still apply). 
    • If subject to Required Minimum Distributions (inherited IRA’s are also included), 2020 withdrawals may be skipped without penalty. 
    • If RMD’s were taken in 2020, rollovers were extended to August 31, 2020 per IRS announcement IR-2020-127.
  • Certain employees impacted by COVID-19 are eligible for 2 weeks of paid sick leave, plus an additional 10 weeks of emergency leave. See the following posters: Federal Employee Rights and Employee Rights. More detailed information detailed below under businesses.

 

Programs and support available to Businesses

Emergency Paid Sick Leave through Families First Coronavirus Response Act (FFCRA) 

Paycheck Protection Program (PPP) through Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and subsequently modified by Paycheck Protection Program Flexibility Act (PPPFA)

  • While no new loans are currently being made, focus now turns to the terms and treatment of loan forgiveness for which conclusive guidance is still outstanding.  
  • The IRS, in Revenue Ruling 2020-27 and Revenue Procedure 2020-51, states that taxpayers cannot claim a deduction for an otherwise deductible expense if paid with funds from a PPP loan that is forgiven or expected to be forgiven.  Application of the IRS rulings will have different implications for different business entities types.  Please see this discussion in a recent Forbes article.   More guidance is still needed.   
  • Forgivable amount - the amount the borrower would expend during the covered period (24 weeks beginning on date of loan) on sum of payroll (maximum of $100k/year per employee), mortgage interest, rent, and utilities – payroll includes retirement and health benefits. Payroll for self-employed individuals is net earnings up to same maximum of $100k/year of compensation, but does not include retirement and health benefits.
    • Borrowers with PPP loans in existence prior to passing of the PPPFA can choose between the original 8 week period or the new 24 week period for forgiveness.
    • The payroll portion of the PPP loan proceeds must be at least 60% to allow the loan to be forgivable. 
  • Can NOT be used in conjunction with the Employee Retention Credit (see below).
  • SBA details for Paycheck Protection Plan (PPP) Loans
  • SBA PPP Loan Forgiveness Application

Employee Retention Credit

  • Similar credit to the Families First Act credit (prior act signed 3/18/20) designed to encourage Eligible Employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19.
  • Payroll tax deferral to 12/31/20, or in some cases to 2021 or 2022.
  • Can NOT be used in conjunction with the Paycheck Protection Program (see above).

Economic Injury Disaster Loans (EIDLs) through the SBA

 

Additional information/links helpful to taxpayers:

Updated: 11/20/2020