Questions accompany new tax legislation in response to coronavirus

Middle market seeks clarity on new deadlines, paid leave, cash flow

Mar 21, 2020
Compensation & benefits
COVID-19 Federal tax Tax policy Employee benefits

Tax legislation designed to help businesses withstand the COVID-19 pandemic has middle-market companies asking how new policies can help them. Questions about extended filing and payment deadlines, paid leave requirements and cash flow relief are top of mind for many businesses in a fluid legislative landscape.

Two of RSM’s tax professionals discussed the Families First Coronavirus Response Act (FFCRA) and the upcoming economic stimulus package in a special episode of RSM’s “Tax Policy Now” audiocast.

Patti Burquest, principal in charge of RSM’s Washington National Tax practice, recommended that businesses wait to file income tax returns at least until the stimulus package, known as the CARES Act, moves closer to becoming law.

“It does contain some very significant income tax provisions that could either increase a refund that taxpayers are going to be getting when they file their income tax returns, or it could also decrease their income and thus they will be paying less tax,” Burquest said. “Even though they might be ready to file them and might be expecting a refund, they should hold off on that until towards the end of the week.”

Burquest explained how the IRS has pushed back filing and payment deadlines from April 15 to July 15, 2020, with the possibility of an additional delay, depending on specific legislation in the stimulus package.

With many companies concerned about business continuity in the short term, questions about paid leave requirements stem from the new and developing legislation.

Karen Field, senior director at RSM’s Washington National Tax compensation and benefits group, acknowledged some open-ended issues within the FFCRA, including how companies determine whether they have 500 employees and how employees can prove they qualify for sick leave.

Field also discussed two types of leave for which employers must pay employees who cannot work or telework because of various complications arising from the novel coronavirus.

“The employer may have to pay different amounts to different employees based on the reason why the employee can’t work,” Field said. “For example, is the employee quarantined or self-quarantined? Is the employee working at home or not being able to work as much because they’re caring for a child because schools are closed?”

The FFCRA provides a payroll tax credit to employers to help pay for employees’ leave. Of course, businesses are curious about how to receive those credits from the IRS.

Field explains that the IRS has said an employer can hold back federal income tax, FICA and Medicare that’s otherwise due to be deposited with any compensation the employer is paying.

“I’ve heard clients saying, ‘But I need money now,’” Field said. “The IRS has also said in this guidance that it’s possible … the employer might be able to apply for a refund of amounts already paid in.”

Listen to the recording and visit RSM’s Coronavirus Resource Center for more analysis and guidance on managing through the COVID-19 pandemic.

RSM contributors