03 Jun How Are Taxes Computed During A Pandemic?
In an effort to fight off an unprecedented crisis, the U.S. Congress passed legislation that provides $2.2 trillion in aid to states, citizens, and businesses, both small and large. The IRS plays a central role in this process, administering the CARES Act (Coronavirus Aid, Relief, and Economic Security) and other federal government relief efforts, most notably the EIPs
(Economic Impact Payments) to over 150 million individuals. The agency will also have to make considerable changes to its returns processing to justify all of the Tax Code relief changes found in the numerous COVID-19 relief provisions.
IRS makes significant adjustments to the way it does business
The global pandemic took everyone by surprise, including the IRS. That’s why the agency will have to do its best to conduct business, starting with building a remote work option for over 70,000 employees. This means that cooperating with the IRS will be very different than before for many taxpayers and tax professionals. Here are just some things to expect from interacting with the IRS and its operations until things get back to normal:
1. Phone lines down
Delays are expected due to the sheer number of people applying for various stimulus packages and the lack of telework capacity. The offices that are still open are working with half of the available workforce, due to social distancing measures. Nevertheless, taxpayers should not worry about missed deadlines or enforcement activity, as the IRS has suspended most of the compliance activities, such are audits, collection, etc. through July 15.
2. New employer tax credits
Many businesses that have been impacted by the ongoing pandemic will be able to qualify for the new tax credits – the Credit for Sick and Family Leave and the Employee Retention Credit.
Credit for Sick and Family Leave entitles all sick, quarantined, or self-quarantined employees, along with those who are seeking a medical diagnosis, to paid sick leave for up to ten days at the employee’s regular rate of pay, or, the Federal minimum wage, if higher.
Employees who are unable to work due to caring for someone with coronavirus or caring for a child are entitled to paid sick leave for up to two weeks at two-thirds the employee’s regular rate of pay or, the Federal minimum wage, if higher. Up to ten weeks of qualifying leave can be counted towards the family leave credit.
Eligible employers are also entitled to receive a credit for the full amount of the required sick or family leave, plus related health plan expenses, and the employer’s share of Medicare tax on the leave, from April 1, 2020, until December 31, 2020.
3. Employee Retention Credit
Eligible employers – businesses partially or fully suspended due to governmental orders, as well as businesses that have a substantial decline in gross receipts compared to last year – can claim a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages (including health plan expenses) paid after March 12, 2020, and before January 1, 2021. The goal of this credit is to keep employees on their payroll.
The Bottom Line
All these measures our country is taking, including the IRS, are there to help citizens, businesses, and the overall economy to get back on track, with as little damage as possible. But, as with anything in these trying times, they involve gradual trial-and-error attempts. If you want to learn more, or you need some help with the IRS, feel free to contact Golden Tax Relief. We are here to help!