Tax Alert: IRS Extends Tax Filing Deadline and Allows Unlimited Tax Deferral

Tax Alert: IRS Extends Tax Filing Deadline and Allows Unlimited Tax Deferral

As most of you read yesterday, Secretary of the Treasury Steven Mnuchin said the deadline to file taxes has been extended to July 15. “We are moving Tax Day from April 15 to July 15,” Secretary Steven Mnuchin wrote on Twitter. “All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.” He said he was acting at President Donald Trump’s direction. The White House had announced previously they were deferring tax payments for 90 days, but that Americans would still need to file by April 15. Later in the day, the IRS issued formal guidance that superseded and expanded previous guidance that gave taxpayers extra time to pay, but included limitations on the amount of tax they could defer ($1M for individuals and $10M for corporations). The new guidance removes those caps and permits unlimited income tax payment deferral until July 15, 2020. The extension of the Federal deadline does not automatically apply to all states. Some states have already extended their due date. We are waiting for New York to issue formal guidance and will continue to monitor for future developments. If you have any questions, please contact a member of your Insero tax professional team.

Tax Alert: Senators Introduced the Tax Filing Relief for America Act

Tax Alert: Senators Introduced the Tax Filing Relief for America Act

On March 19, 2020, a group of senators introduced the Tax Filing Relief for America Act (S. 3535), a bill to extend the tax filing deadline from April 15, 2020, to July 15, 2020 after guidance from the Treasury Department and the Internal Revenue Service extended only the tax payment deadline in response to the novel coronavirus pandemic. The Tax Filing Relief for America Act would provide for basically the same timeline as the Treasury and IRS guidance that was issued this week. The legislation would enable taxpayers, along with their preparers, extra time to file their taxes without filing for an extension.

 

We will continue to monitor this bill. If you have any questions, please contact a member of your Insero tax professional team.

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

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

On March 18, the IRS issued Notice 2020-17 which provides more details regarding the deferral of Federal income tax payments previously discussed by Treasury Secretary Mnuchin, which was the subject of a prior Insero Tax Alert.

The current guidance provides that any person with a Federal income tax payment due April 15, 2020 is considered an Affected Taxpayer by the COVID-19 crisis and is eligible for the deferral of Federal income tax payments due on April 15, 2020, until July 15, 2020, without imposition of penalty or interest. This deferral applies to Federal income tax payments due up to the “Applicable Postponed Payment Amount” (APPA), which is:

  • $10 million for each consolidated group or for each C corporation that does not join in filing a consolidated return; and
  • $1 million for all other Affected Taxpayers.

The Notice confirms that the APPA is the same amount for individuals regardless of filing status. This means that a single individual and married individuals filing a joint return have the same $1 million APPA. The Notice also states that any tax due in excess of the APPA will be subject to penalties and interest if not paid by the original April 15, 2020 due date. This means that if a single individual taxpayer owes $2 million for 2019 Federal income taxes, including self-employment tax, the payment of the first $1 million can be deferred until July 15, 2020, but the additional $1 million will be subject to penalties and interest if not paid by April 15, 2020.

The relief provided in this Notice is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020 in respect of an Affected Taxpayer’s 2019 taxable year and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an Affected Taxpayer’s 2020 taxable year.

The Notice expressly states that no extension is provided for the payment or deposit of any other type of Federal tax (e.g., payroll taxes, gift taxes or excise taxes) or for the filing of any tax return or information return. Therefore, Affected Taxpayers should consider requesting an extension of time to file their income tax return under the normal rules. Please note that state filing and payment obligations are not covered by the IRS guidance. Each state is addressing filing and payment obligations at the individual state level.

Although the Notice provides some additional clarification, a number of questions still remain. We will continue to update you when we receive additional clarification. If you have any questions, please contact a member of your Insero tax professional team.

Tax Alert: House passes new version of coronavirus bill that contains employer tax credit

Tax Alert: House passes new version of coronavirus bill that contains employer tax credit

On March 16, 2020, the House passed, by unanimous consent, an updated version of the coronavirus relief bill that it originally passed on March 14. The bill has been sent to the Senate. The bill, H.R. 6201, the Families First Coronavirus Response Act (the Act), provides: a) paid leave benefits to employees; b) tax credits for employers and self-employed taxpayers; and c) FICA tax relief for employers.

The tax changes in the updated version include:

  • The original bill provided that sick leave and family and medical leave paid under the Act are not considered wages under Code Sec. 3111(a) (employer tax – old age, survivors and disability insurance portion of FICA; 6.2%). The updated version includes that provision and also provides an employer credit for the 1.45% hospital insurance portion of FICA with respect to sick leave and family and medical leave paid under the Act.
  • The amount of the sick leave credit and the amount of the family and medical leave credit are increased by the portion of the employer’s “qualified health plan expenses” that are properly allocable to qualified sick leave wages. Qualified health plan expenses means amounts paid or incurred by the employer to provide and maintain a group health plan (as defined in Code Sec. 5000(b)(1)), but only to the extent that such amounts are excluded from the gross income of employees by reason of Code Sec. 106(a).
  • The sick leave and family and medical leave credits may be taken against the employer’s railroad retirement tax.
  • Sick leave and family and medical leave paid under the Act will not be considered wages under Code Sec. 3221(a) (employer’s railroad retirement tax).

 

Brief Summary of the Original Bill

Early on March 14, the House passed H.R. 6201, the “Families First Coronavirus Response Act” (the “Act”) to provide emergency supplemental appropriations and support Americans during the COVID-19 pandemic. Parts of the Act provide for emergency family and medical leave benefits, emergency paid sick leave benefits, and employer and self-employed tax credits and exclusion from employer FICA tax with respect to the payment of those benefits. The vote was 363-40.

Employer Tax Credits

The Act provides tax credits to employers to cover wages paid to employees while they are taking time off under the bill’s sick leave and family leave programs.

  • The sick leave credit for each employee would be equal to his or her wages, limited to $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child whose school is closed. An additional limit applies to the number of days per employee: the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters.
  • The family leave credit for each employee is limited to $200 per day with a maximum of $10,000.
  • The credits are refundable to the extent they exceed the employer’s payroll tax.
  • Employers don’t receive the credit if they’re also receiving the credit for paid family and medical leave in Code Sec. 45S.

These rules apply only to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury which is during the 15-day period beginning on the date of the enactment of the Act, and ending on December 31, 2020.

Comparable Credits for Self-Employed.

The Act also provides for similar refundable credits against the self-employment tax.

  • It covers 100% of a self-employed individual’s sick-leave equivalent amount, or 67% of the individual’s sick-leave equivalent amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing. The sick-leave equivalent amount is the lesser of average daily self-employment income, or $511/day to care for the self-employed individual, or $200/day to care for a sick family member or child following a school closing.
  • Self-employed individuals could receive a family leave credit for as many as 50 days multiplied by the lesser of $200 or their average self-employment income.

These rules apply only to days occurring during the period beginning on a date selected by the Secretary of the Treasury, which is during the 15-day period beginning on the date of the enactment of this Act, and ending on December 31, 2020.

Employer FICA Exclusion.

Under the Act, sick leave and family and medical leave paid under the Act will not be considered wages under Code Sec. 3111(a) (employer tax – old age, survivors and disability insurance portion of FICA; 6.2%).

If you have any questions, please contact a member of your Insero tax professional team.

Tax Alert: IRS Extends Payment Date For 90 Days

Tax Alert: IRS Extends Payment Date For 90 Days

Treasury Secretary Steven Mnuchin stated, during a press conference yesterday, that the IRS will allow taxpayers to defer payments for 2019 tax returns for 90 days. For individuals, the amount of tax which can be deferred is up to $1 million. Corporations can defer up to $10 million. These limits were selected to provide benefits to small businesses which report income through pass-through entities such as partnerships or S corporations. He indicated that the net impact of this action by the IRS will put $300 billion into the economy as another measure to minimize the consequences of the coronavirus pandemic.

Official details have not been released. We expect more information to be provided shortly, but his comments raise several questions which we are monitoring:

  • Is the tax return filing deadline also extended? While 2019 tax payments will be deferred, it appears that the filing date will remain April 15, 2020, unless an extension is requested. Although Secretary Mnuchin said penalties and interest will not apply to the deferred payment, it would be prudent to request an extension of time to file since it is not clear from his statement that there will also be a waiver of late filing penalties. Furthermore, some taxpayers have certain information reporting included with their filings that can have steep late-filing/failure to file penalties.
  • Are estimated tax payments, which are generally due on April 15 and June 15, subject to waiver and deferred under these caps? Technically, they are not payments for the 2019 tax year and may not be covered.
  • What is the impact on state tax filings? Most states have been silent as to an extension, and those that had previously commented said they would follow the federal lead. It is unclear how states will conform to the federal guidance since it is not as simple as filing an extension.

The announcement was unclear as to what is required from individuals owing more than $1,000,000 or corporations owing more than $10,000,000. The announcement did not address payroll taxes or estate and gift taxes. However, if you are due a tax refund, you may want to file your return as quickly as possible.

We will continue to follow these developments and provide information on these issues as they are clarified. If you have any questions, please contact a member of your Insero tax professional team.

Tax Update: February 2020

TRENDING IN TAX

Confusion over qualified leasehold improvements may create opportunity
Many companies miscalculate the available accelerated depreciation on qualified leasehold improvements. Is your company one of them?

Multiple residences, one domicile: Where is income reported?
It should be easy to know where you live, but for state personal income tax purposes, the question becomes “where are you domiciled?”

 

Confusion over qualified leasehold improvements may create opportunity

 

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/additional-tax-resources/tax-ideas-insights.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Insero is separated from other CPA firms by our client service model which offers you year-round interaction and proactive advice from your client service partner. Yes, we’re sticklers about deadlines and compliance, but among our larger objectives is to help clients with tax management. So we keep an eye on federal, state, local, and international tax laws, including those which are pending and alert you to changes and help you respond in a timely way.

Tax Update: January 2019

TRENDING IN TAX

Post-tax reform: Obtaining capital gain treatment on sale of patents
Clarity on how capital gain treatment is available on the sale of patents, in certain scenarios.

Opportunity zones and the ripple effect on credits and incentives
In the rush to take advantage of the qualified opportunity zones program, taxpayers may overlook the benefits of state and local tax credits.

California reverses position on limited partnership tax and filings
The California Franchise Tax Board ruled that limited partnerships disregarded for federal income tax purposes are not subject to minimum tax or filing requirements.

Retailers must be mindful of gift card tax pitfalls
Retailers should assess gift card procedures including an annual review of reporting, sales tax, unclaimed property and more.

 

 

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/additional-tax-resources/tax-ideas-insights.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Insero is separated from other CPA firms by our client service model which offers you year-round interaction and proactive advice from your client service partner. Yes, we’re sticklers about deadlines and compliance, but among our larger objectives is to help clients with tax management. So we keep an eye on federal, state, local, and international tax laws, including those which are pending and alert you to changes and help you respond in a timely way.

Tax Update: December 2019

TRENDING IN TAX

Top 5 reporting and withholding actions to take before year-end
There are five key actions to take now to prepare to file information returns in January to ensure compliance with FATCA. From reviewing your structure to evaluating your 1099 and 1042 processes, conducting a self-assessment to identify and remediate gaps in your processes for complying with reporting and withholding requirements before year-end ensures that you file accurate and complete returns and do not under or over withhold taxes next year.

Regulations on acquired corporate life insurance policies
Favorable rule for corporate stock acquisitions where life insurance contracts are less than 50 percent of the target corporation’s assets. This exception applies upon the acquisition of any interest in a C corporation. It thus applies to an interest acquired via a tax-free reorganization structured as a stock acquisition. It does not, however, apply to an acquisition made via a tax-free reorganization structured as an asset acquisition.

 

op 5 reporting and withholding actions to take before year-end

 

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/additional-tax-resources/tax-ideas-insights.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Insero is separated from other CPA firms by our client service model which offers you year-round interaction and proactive advice from your client service partner. Yes, we’re sticklers about deadlines and compliance, but among our larger objectives is to help clients with tax management. So we keep an eye on federal, state, local, and international tax laws, including those which are pending and alert you to changes and help you respond in a timely way.

Tax Update: November 2019

TRENDING IN TAX

IRS proposes regulations for the switch from LIBOR
Guidance would facilitate transitions of existing debt and derivatives to alternative benchmark rates without creating taxable exchanges.
Replacing a key benchmark interest rate, the London Inter-Bank Offered Rate (LIBOR) is a stated goal of financial regulators. LIBOR rates are quoted for many different currencies, including U.S. dollars, and are referenced in lending and derivative transactions throughout the world. Trillions of dollars of transactions are based, in whole or in part, on U.S. dollar LIBOR.

EU’s VAT action plan ‘Quick Fixes’
More than $750bn VAT revenue has been lost across the EU over a 5-year period from VAT fraud and more significantly to noncompliance.
U.S. businesses with operations and transactions across the European Union (EU) are required to comply with EU VAT rules and regulations.  U.S. businesses that, directly or through subsidiary operations, are involved in the movement of goods across EU borders will be impacted by these upcoming changes. Failure to comply can lead to penalty exposure and further scrutiny by the tax authority.

 

IRS proposes regulations for the switch from LIBOR

 

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/additional-tax-resources/tax-ideas-insights.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: October 2019

TRENDING IN TAX

Emerging issues for the family office
From taxation complexity to understanding cyberthreats, what are today’s top five concerns for family offices?
Family offices come in all shapes and sizes and the differences from one to another can be vast. It’s been said that if you’ve seen one family office, you’ve truly seen just one family office. From single-generation members focused on mutual goals to a multigenerational family with complex interests and diverging investment and philanthropic objectives, variations of the family office construct are endless.

State and local gross receipts taxes a new trend in state tax law
Recent activity among state and local gross receipts taxes may signify that a historic approach to taxation is ready to be a new trend.
As states continue to face the uncertain impact of federal tax reform on their budgets, a possible downturn in the economy, and several years of lackluster state and local tax collections, many state legislatures have been considering new (or bringing back old) methods of revenue generation. In addition to rolling back spending, increasing tax rates, and broadening sales tax bases, one trend that may be developing is state and local gross receipts taxes. Gross receipts taxes are generally levied on a company’s gross receipts instead of its net income and are imposed with a low tax rate on a broad tax base with fewer exemptions and deductions than an income tax.

 

State and local gross receipts taxes a new trend in state tax law

 

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/additional-tax-resources/tax-ideas-insights.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.