Updated: March 25, 2020 at 4:00 p.m. PT

In an effort to provide relief to individuals and businesses affected by coronavirus (COVID-19), the White House recently announced changes to the traditional 2020 tax filing season. Additionally, California’s state government recently announced similar relief.

With that in mind, below are answers to frequently asked questions about coronavirus and taxes, focusing both federal and California tax filings, as well as our role here at Stees, Walker & Company, LLP.

Q. What’s is Stees, Walker & Company, LLP’s role during this time?

A. Accounting firms such as ours employ personnel who have been designated by the State of California (according to Executive Order N-33-20) as part of the “essential” workforce that is needed right now. Not only are we assisting with current tax season issues for individuals and business entities, but we consider ourselves to be part of the financial front line — ready and able to assist businesses take steps now to successfully get back to work as usual when the State’s stay at home order is lifted.

Q. What is the IRS’ role in the National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak?

A. Under the Stafford Act, the IRS Disaster Assistance and Emergency Relief Program provides administrative tax relief to taxpayers and tax practitioners affected by a federally declared disaster in areas FEMA identifies for its Individual Assistance to Households and Families Program.

Authorized tax relief and other assistance the IRS is authorized to provide includes:

  • Extending tax return filing deadlines
  • Extending tax payment deadlines
  • Waiving penalty and interest charges normally applied to late filing and payment
  • Providing free copies of tax return transcripts
    • Tax return records are often needed to claim benefits, file insurance claims, replace lost financial records, etc.
  • Expediting amended tax returns claiming a casualty loss and refund resulting from the disaster.

Q. What accommodations has the Internal Revenue Service (IRS) made to help individual and business taxpayers during the National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak?

A. In addition to the IRS establishing a special section focused on steps to help taxpayers, businesses, and others affected by COVID-19 — on Friday, March 20, 2020, the U.S. Secretary of the Treasury announced that the current federal tax filing deadline has been extended from April 15, 2020 to July 15, 2020. While this essentially means taxpayers are no longer required to file extensions for federal purposes — and that filers have until July 15 to pay any amount they may owe — we here at Stees, Walker & Company, LLP continue to encourage filers to stay on track and file with the April 15, 2020 deadline in mind. For more information on this, see “If the IRS offers filing extensions for individual taxpayers and businesses, should I or my business take advantage of an extension?” below.

Q. Now that the IRS is offer filing extensions for individual taxpayers and businesses, should I or my business take advantage of an extension?

A. Here are some sound reasons to stay on track with your intention to file personal tax returns on April 15, 2020:

  • If you are eligible for a federal tax refund and need those funds to either replace or augment your income, you should file your return as soon as possible.
  • Ben Franklin put it best in the late-1800s when he said, “Don’t put off until tomorrow what you can do today.”
  • If you owe money and have those funds available today, now might be the best time to pay. With markets in flux, those funds may not be available to you at a later date, which would only complicate your relationship with the IRS.
  • If you owe money and file by the original April 15, 2020 deadline, you now have until July 15, 2020 to make your payment. Better to know what you owe and have an extra three months to gather your funds than to be surprised by the amount you owe come July 15.

For businesses, C-corporations are the only type of business entity that may eligible for a tax refund. If your business is in line for a tax refund — because you overpaid on your quarterly estimates — and you need funds from the refund to stay afloat during this time, you should seriously consider filing on time.

Please Note: If you are going to be late with your filing, we recommend that you file an extension by April 15, 2020.  That’s because extensions are valid until October 15, 2020 for individual filers and C-Corporations, and until September 15 for flow-through entities.

Q. Which specific IRS form numbers — for Federal income tax returns — are impacted by the new July 15, 2020 filing deadline?

A. According to the IRS, the following forms are impacted by the new filing deadline of July 15, 2020:

  • Form 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS
  • Form 1041, 1041-N, 1041-QFT
  • Form 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF
  • Form 8960
  • Form 8991

The IRS also notes the following:

With respect to Form 990-T, if that Form is due to be filed on April 15, then it has been postponed to July 15 under the Notice. For taxpayers whose Form 990-T is due on May 15, that due date has not been postponed under the Notice.

With respect to returns due on March 16, 2020, which include Form 1065, Form 1065-B, Form 1066, and Form 1120-S for calendar year taxpayers, the filing of those returns has not been postponed.

Q. What about deadlines for contributions to IRAs, health savings accounts, Archer medical savings accounts, and employer retirement plans — are the deadlines for these saving tools extended as well?

A. Yes. For each savings tool referenced above, the deadline for contributions has been extended to July 15, 2020.

Q. Has the state of California’s Franchise Tax Board made any provisions for taxpayers due to COVID-19

A. Yes. On March 20, 2020, the California Franchise Tax Board (CFTB), which administers two of California’s major tax programs — Personal Income Tax and the Corporation Tax— announced additional tax relief for all California taxpayers, not just those affected by the COVID-19 pandemic. All California taxpayers are now granted an extension to file 2019 California tax returns and make certain payments until July 15, 2020.

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through June 15, 2020, to July 15, 2020. This includes:

  • 2019 tax returns
  • 2019 tax return payments
  • 2020 1st and 2nd quarter estimate payments
  • 2020 LLC taxes and fees
  • 2020 Non-wage withholding payments

Q. Has the IRS said whether high-deductible health plans (HDHPs) can be used to cover coronavirus costs?

A. Yes. On March 11, 2020, the IRS announced that high-deductible health plans (HDHPs) can pay for 2019 novel coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA). The IRS also noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.

Q. Are there COVID-19 tax-related scams I should be aware of?

A. Sadly, there are. In no particular order, here’s what to be on the lookout for:

  • Phone calls from someone claiming to be from the Internal Revenue Service (IRS) asking for your banking information in order to direct deposit COVID-19 relief funds. The IRS will never call asking for this type of information over the phone.
  • Your own bank calling you and asking you to provide your login information for your personal or business online banking account(s) in order for the bank to accept COVID-19 relief funds. Here too, your bank is not likely to do this. To be safe, hang up the phone and call your bank to verify.
  • Phone calls from someone claiming to represent the owner or CEO of your company — similarly asking for your banking information so relief funds may be wired into your account. If you do not recognize the person calling and they’re not from your company’s Human Resources Dept., hang up the phone and place a call to the people you personally know at the firm to verify what’s being asked for.

While not tax related, here’s another scam to be on the lookout for:

  • A vendor for your company reaches out to you by email claiming that they need you to authorize a payment for their services using your company’s credit card. Unless you know the vendor, do not participate. Hang up the phone and call the person at your company who normally handles such transactions.

Q. Has the Small business Administration implemented any changes I should know about?

A. Yes, on March 23, 2020, the U.S. Small Business Administration (SBA) announced changes to help borrowers still paying back SBA loans from previous disasters. By making this change, deferments through December 31, 2020, will be automatic. Now, borrowers of home and business disaster loans do not have to contact SBA to request deferment.

In addition — and please check with your CPA before acting on this — small business owners in all U.S. states and territories are currently eligible to apply for a low-interest loan due to COVID-19. Offered through the Economic Injury Disaster Loan Program, these are working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the current disaster. Again, ask your CPA or business advisor if this loan program offering is right for your business.