Federal and State Tax Efforts to Reduce the Impact of COVID-19


By: Mark Dell’Orfano and Peter Beach

March 24, 2020

On March 20, 2020, the IRS issued revised tax guidance for 2019, granting tax filers and advisers coping with the COVID-19 pandemic additional time – until July 15, 2020 – to file tax returns and make required tax payments, without interest or penalties. The March 20 guidance supersedes guidance issued on March 17, 2020, which had given filers an additional ninety days to pay income taxes owed up to $1 million for individuals and $10 million for corporations, but still required filing on April 15, 2020. The difference between the filing and payment dates in the March 17 guidance drew backlash from tax preparers, trade groups, and lawmakers who said having two separate deadlines and rules for filing and paying taxes would likely confuse taxpayers.

Here are the highlights of the new federal tax guidance and some additional comments.

  • Under the new guidance, all taxpayers will have until July 15 to file their 2019 federal income tax returns and pay their taxes.
  • Also, the $1 million and $10 million caps on individual and corporate filers have been removed. The extension for the time of payment without interest and penalties now applies to all tax payments regardless of amount.
  • Taxpayers can file at any time within the extension but may want to file early if they are due a refund.
  • Federal 2020 first quarter income tax estimated tax payments, which are otherwise due on April 15, are due on July 15. However, as of now it appears that 2020 second quarter estimated income tax payments are still due on June 15—before the first quarter estimated income tax payments.
  • No extension of filing or payment has been issued for types of taxes other than federal income tax (e.g., payroll, excise, etc.).

While federal payroll tax filing and payment dates have not been changed, new federal refundable payroll tax credits have been established under the Families First Coronavirus Response Act (the “Act”) that reimburse small employers (those with fewer than 500 employees), dollar for dollar, for the cost of providing coronavirus-related leave to their employees. Here are some highlights of the credits, but keep in mind that application of the details are quite complex and may require professional advice.

  • The new tax credits apply to (i) qualified emergency sick-leave payments (including child care leave payments) and (ii) qualified family-leave payments, both as made by the employer pursuant to the Act. See Sheehan Phinney Alert “What Employers Need to Know About the Families First Coronavirus Response Act” for details regarding the payments to which the credits relate.
  • The credits are available with respect to qualified payments made between the beginning date, which has not yet been determined but will be no later than April 2, 2020, and the end of 2020.
  • Under guidance that the IRS expects to release during the week of March 23, 2020, eligible employers who make qualifying paid-leave and sick or child care leave payments will be able to retain an amount of the payroll taxes equal to the amount of the qualifying payments, rather than deposit them with the IRS.
  • The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
  • If there are not sufficient payroll taxes to cover the qualified payments, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced during the week of March 23, 2020.
  • Equivalent credits are available to self-employed individuals based on similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

Here is the current status of Northern New England state tax responses to the pandemic.

  • New Hampshire. At this time, the state of New Hampshire has not extended the deadline to file or pay any tax administered by the New Hampshire Department of Revenue Administration. However, the DRA continues to monitor the situation and will communicate any changes to New Hampshire’s tax filing or payment deadlines on its website.
  • Massachusetts. The Massachusetts Department of Revenue is in the process of working on a plan to provide relief with respect to Massachusetts returns and payments, but for the time being Massachusetts income tax returns and tax payments are due on April 15, 2020.
  • Maine. Maine’s income tax due date is unchanged and remains at April 15, 2020.
  • Vermont. The Vermont Department of Taxes has announced that the deadline for filing income tax has been extended from April 15 to July 15. Additionally, the state will provide relief to businesses owing Meals and Rooms Tax and Sales and Use Tax by foregoing any penalty or interest for those who are not able to meet the existing March 25 or April 25 deadlines.

Please stay-tuned to Sheehan Phinney’s Client Alerts, which we will continue to update as details of state and federal programs relevant to your business interests are announced. For questions or help related to our Client Alerts, please feel free to contact the authors directly or any attorney at our firm.