The global coronavirus pandemic has upended the fabric of people's lives across the world in a way none of us has experienced in our lifetimes.
While individual health and safety are top priorities, another major stress point for society is the economic turmoil that the virus is imposing on businesses and individuals in the United States and elsewhere.
But the federal government has recently taken numerous steps to address the financial impact of COVID-19, said Nichole Walker, a senior wealth planner at City National Bank. Some state governments are following suit.
“Several tax relief initiatives are in place, as well as relief programs for impacted employers and employees. A stimulus package is also under discussion to mitigate the impact of a likely recession on the economy and to help families suffering because of the pandemic," Walker said.
The biggest tax-related announcement is that the usual April 15 deadline for filing 2019 federal income tax returns has been extended to July 15, 2020. All affected taxpayers, including individuals, trusts, estates, partnerships, associations, companies and corporations, have been given a 90-day extension to pay any 2019 income tax liability they owe. The accrual of interest and penalties for late payments have all been suspended until July 15.
Several state governments, including California, New York and Connecticut, have announced that they are extending their tax filing deadlines to July 15, with other states indicating that they will follow suit. It is important to regularly check with your state tax authorities for the latest information.
The U.S. Treasury Department is expected to issue written guidelines to clarify the rules around this extension.
“You may want to consult your tax advisor if you wish to delay your tax payment, just to be sure you're in compliance with the guidelines," said Walker. “Also, keep in mind the extension applies only to federal tax returns. The tax filing and payment deadlines for state tax returns vary, although many states have also extended their deadlines."
The Treasury has also extended the deadline for 2020 estimated tax payments. The first estimated quarterly tax payment made by self-employed workers and businesses, typically due April 15, is now due July 15.
While the Trump administration initially considered a payroll tax holiday to stimulate the economy in response to the pandemic, that idea was mostly rebuffed by members of both chambers of Congress, Walker said.
In an effort to reduce the threat to the U.S. economy, some financial steps have already been taken and others are being negotiated.
“The growing economic crisis is affecting millions of American workers and major industries," said Walker. “Congress and the Trump administration are working on a series of packages to provide relief and support for both individuals and businesses."
Funding for coronavirus vaccine research and development was enacted by Congress on March 6, providing $8.5 billion for the development of vaccines, therapies and diagnostic tests to reduce the spread of COVID-19 and its impact on patients.
“The comprehensive coronavirus relief bill that was passed by the House of Representatives and the Senate and signed by President Trump on March 18 includes a $105 billion spending package that will help families," said Walker. “At the same time, the bill includes free coronavirus testing."
The “Families First Coronavirus Response Act" includes funds for paid sick leave and paid family leave for families whose children are home due to school closures. In addition, the funds will go to unemployment insurance for an estimated 40 million Americans.
Under the legislation, business owners with fewer than 500 employees must provide at least two weeks of paid sick leave and an additional 10 weeks of leave at two-thirds pay. However, the bill exempts health care providers, emergency responders and small business owners who have under 50 employees. Businesses with more than 500 employees are also exempt.
“Direct payments to many American households and loans to specific industries and small businesses have been proposed by the Treasury Department as another way to relieve financial strain for individuals and businesses," said Walker.
The proposed stimulus package ranges from $850 billion to $2 trillion, including $500 billion in direct payments to American households, based on income levels and family size. The payments, estimated to be $2,000 per household, would be sent in two installments: April 6 and May 18.
For businesses, the proposal includes $50 billion in loans for the airline industry, $150 billion for other negatively impacted industries and $300 billion for a “small business interruption" loan program that would temporarily cover payroll taxes for employees. This program would require businesses to continue paying their employees for eight weeks after the date of the loan distribution.
In addition, the White House Office of Management and Budget has requested $45.8 billion in emergency funding for multiple federal agencies to support their responses to the pandemic.
“The multi-pronged approach to addressing the financial fallout of this global pandemic is meant to provide both reassurance to investors and business owners and concrete financial support in this unprecedented time," said Walker. Learn more about how City National Bank can help with your business and personal wealth needs at this time.
This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.
City National, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented, taking into account your own particular circumstances.