As we are writing this on March 28, 2020, COVID-19 (Coronavirus) is a global pandemic and, more or less, has grinded the world – citizens and economies – to a virtual halt. It’s the worst pandemic since the Influenza (H1N1) Pandemic of 1918 when 33% of the world’s population became infected and 3.3% died.
Today, lockdowns have been instituted, employees are working from home, and non-essential businesses have been forced to close their physical doors. Amazon is readying its warehouses for essentials-only shipping and storage beginning in early April, toilet paper supplies have dwindled (while bidet sales have increased), and gyms, pools, and tennis courts have temporarily closed their doors (while bike sales have increased).
Taxpayers are concerned. Some still are paid by their employers, others have had their hours reduced, while others have been laid off. Businesses have witnessed a precipitous drop in demand for their products while service businesses either lose clients or see dwindling revenue generation from them. The financial and economic impact is potentially staggering. How will parents feed their families? How will mortgage, insurance, and utility bills be paid? If you’re a renter, how will you pay your rent. Can you be evicted? Can businesses secure lines of credit or promises of credit easing? Can the government help?
Details of the Coronavirus Relief Bill
On Friday, the $2.2 trillion Coronavirus stimulus bill was signed into law. It includes the following:
- Direct payments are coming: Americans with incomes equal to or less than $75,000 per year ($150,000 for married couples) will receive a one-time direct payment of up to $1,200 with an additional $500 added on for each child (married couples get $2,400). Direct payments also apply to those with no income, those who rely on Social Security benefits, and those whose income is derived from non-taxable, means-tested benefit programs.
- You can tap your retirement accounts: the 10% early withdrawal penalty for distributions up to $100,000 gets waived for coronavirus-related purposes. It’s retroactive to January 1, 2020.
- Assistance to small businesses that keep their employees: $350 billion is allocated to businesses as a counterbalance to 1) closing, and 2) laying off their workforce. Eight-week cash-flow assistance will be directed to companies with 500 or fewer employees as long as they continue to pay them. It gets better: the loans are forgiven if businesses use them to cover payroll, mortgage interest, rent, and utilities.
- Unemployment benefits ramped up: $250 billion added to the Unemployment Insurance Program which expands eligibility and offers the unemployed workforce an additional $600 more per week for 4 months. For some, benefits are extended through December 31, 2020. Self-employed, independent contractors and gig economy workers are all eligible.
- More personal and protective equipment coming to hospitals and health care providers: $140+ billion will be directed to hospitals as well as the provision of personal and protective equipment for health care providers (HCPs), COVID-19 testing supplies, and the hiring and training of additional HCPs. Funds will also support Medicare payments and the CDC.
- Patient costs for Coronavirus testing are free: COVID-19 testing protocols and vaccines are free to every US patient.
- Loans to large corporations: $500 billion is allocated for loans and loan guarantees. Airlines are included and will receive $58 billion for passenger and cargo airplanes. Loans cannot be forgiven.
- Payroll taxes are deferred: 2020 payroll taxes can be deferred until 2021 and 2022.
- States and local governments get relief: $150 billion of relief aid is set aside for state, local, and tribal governments, of which California is allocated $15.3 billion.
- Agriculture bailout: $20 billion in additional funds are allocated to the Agriculture Department for its bailout program.
Federal Tax Filing Deadline Extended to July 15th
The IRS extended the federal income tax filing deadline from April 15, 2020 to July 15, 2020.
The tax filing extension means that taxpayers who owe money will not have to file a tax return until July 15th. No additional penalties or interest will be charged and no tax extension papers need to be filed. The extension applies to individuals, businesses, trusts, estates et al.
The new tax filing extension also affects your IRA contributions. Under normal circumstances, IRA contributions through April 15th could be applied to your 2019 tax return. With the new extension, IRA contributions through July 15th can be applied to your 2019 tax return.
California State Tax Filing Deadline Extended to June 15th
While the IRS has extended its tax filing deadline to July 15th, The Franchise Tax Board (FTB), the de facto collector of state taxes, has extended its tax filing deadline to June 15th.
This new extension applies to partnerships and LLCs whose taxes are due on March 15th and to individual tax filers whose taxes are typically due on April 15th. It is said that the June 15th due date may be pushed back further if the IRS allows for a longer deferment period.