Just when you thought we had exhausted all of the possible news in the world of income taxes, the IRS has provided taxpayers with additional explanations and relief that seem worthy of mention.
On April 9, IRS issued Notice 2020-23 which amplifies Notices 2020-20 and 2020-18. The Notice provides a more thorough description of all of the forms, payments, and taxpayer actions the due date of which have been deferred to July 15, 2020. The deferral now includes essentially every income tax (no other tax payment or filing is impacted) filing and payment that would have been due between April 15 and July 15 and now includes the 2nd quarter estimated tax payments originally due on June 15, 2020. All dates have been deferred to July 15, 2020. Importantly, the deferment covers all acts which would otherwise need to be taken under various statutes by taxpayers on or before the original (or extended) due date of the returns (meaning elections, reinvestment of 1033 proceeds, etc.).
Payroll Protection Program (“PPP”)
Almost concurrent with Friday’s CARES Act communication, Highlights for Small Businesses – Part 2, IRS published additional guidance regarding the deferral of employment tax deposits and payments through December 31, 2020. A link to the IRS site is provided here.
You will recall from our prior communication we highlighted that any employer that had amounts forgiven under the PPP loan program is ineligible to defer payments of employment tax. That left some question regarding an employer’s eligibility if they had received a PPP loan, but had not had the loan forgiven. IRS addressed that question concluding that an employer that has applied for and received a PPP loan that is not yet forgiven may, in fact, defer payment of the employer’s share of payroll tax without incurring penalties. Further, any amount of payroll tax that was deferred prior to a lender’s decision to forgive the PPP loan will remain deferred with 50 percent due on December 31, 2021 and the remaining 50 percent due on December 31, 2022.
Further confirmation is also offered to self-employed individuals that they are eligible to defer 50 percent of the social security tax on net earnings from self-employment. The deferral is effectively accomplished by reducing the self-employed individual’s estimated tax payments by 50% of the social security tax on earnings from self-employment. Those deferred payments are then to be made with 50 percent due on December 31, 2021 and 50 percent due on December 31, 2022.