In response to the Coronavirus (COVID-19), the tax controversy group has put together a chart detailing tax controversy-related developments as they arise. Please refer to the following list of tax and tax controversy-related alerts for additional insight and guidance:

For additional resources, please visit the Ropes & Gray Coronavirus Resource Center, with up-to-date insights on best practices, legal considerations, and maintaining the health and safety of employees.

 

 

The CARES Act provides for economic impact payments of $1,200 per individual ($2,400 for joint filers). (See Ropes & Gray Alerts on CARES Act, and certain key tax provisions of CARES Act.) The chart below summarizes the CARES Act, the IRS Press Release IR-2020-61, and the U.S. Department of the Treasury April 1, 2020 Press Release.

On April 2, 2020, the IRS Press Release IR-2020-65 warned of possible scams related to these payments.

Am I eligible for an economic impact payment?
  • United States residents (i.e., an individual who has a social security number).
  • Income limitation, without qualified children:
    • $99,000 for single filers,
    • $136,500 for head of household filers, or
    • $198,000 for joint filers.
  • For each qualifying child add an additional $10,000 to the income limitation.
    e.g., the income limitation for joint filers with two qualifying children is $218,000.
What do I need to do in order to receive an economic impact payment?
  • Nothing, if
    1. 2018 or 2019 income tax return has been filed, or
    2. you receive Social Security payments.
  • File a simple return, if your 2018 or 2019 income tax return has not been filed, or you do not receive Social Security payments.1
  • If possible, any 2019 or 2018 income tax returns or simple returns should be filed electronically. As of April 2, 2020, only one IRS service center, in Ogden, UT, is open, which means that the IRS may be delayed in sorting and handling paper forms.
How do I receive my economic impact payment?
  • Direct Deposit: The economic impact payment will be deposited directly into the same banking account reflected on the filed income tax return or with the Social Security administration.
    • Treasury will develop a web-based portal for individuals to track their payments, and for individuals to provide their banking information to the IRS, so that individuals can receive payments immediately as opposed to checks in the mail.
    • The IRS expects to start sending economic impact payments via direct deposit the week of April 13, 2020.
  • Check: If the IRS does not have direct deposit information for you, the economic impact payment will be sent in the mail, via paper check.
    • The IRS expects that it will take more time to make payments via check.
How much will my economic impact payment be?
  • $1,200 per individual ($2,400 for joint filers).
  • An additional $500 per qualifying child.
    • Qualifying child means an individual who, in the rebate year, is under the age of 17 and
      • is the taxpayer’s child, brother, sister, stepbrother or stepsister, or a descendent of such child or relative;
      • has the same principal place of abode as the taxpayer for the majority of such taxable year;
      • has not provided over one-half of their own support for the taxable year;
      • has not filed a joint income tax return with their own spouse for the taxable year; and
      • is a U.S. Citizen or resident with a social security number or, if adopted, an adoption taxpayer identification number.
Do I earn too much money to receive a full economic impact payment?
  • For individuals with income above $75,000 ($112,500 head of household filers; $150,000 joint filers), the economic impact payment amount is reduced by $5 for each $100 above the $75,000 / $112,500 / $150,000 thresholds.
  • Individuals without qualifying children with income exceeding $99,000 ($136,500 for head of household filers; $198,000 for joint filers) will not receive the payment.
  • For each qualifying child add an additional $10,000 to the two income limitations discussed above.

In this Ropes & Gray podcast, benefits partners Loretta Richard and Josh Lichtenstein discuss the Coronavirus Aid, Relief and Economic Security Act (also known as the CARES Act) in the context of 401(k) plans and other tax-qualified defined contribution retirement plans, including coronavirus-related distributions and loans that can be taken from qualified defined contribution retirement plans, the issues plan sponsors should focus on under the CARES Act, and other issues and challenges for plan sponsors to consider related to the coronavirus more generally.

HEADLINE: On March 31, 2020, the IRS and the Treasury Department issued guidance for businesses, to implement the refundable employment tax credits for qualified sick and family leave wages provided for by the Families First Coronavirus Response Act (FFCRA, commonly known as Phase 2), and for employee retention wages under the CARES Act (commonly known as Phase 3). This new guidance expands on the IRS’s March 20, 2020 press release IR-2020-57, by providing concrete steps for eligible employers to immediately benefit from anticipated credits. (Ropes & Gray Alert).

The newly published employer tax credit guidance includes:

Taken as a whole, the employer tax credit guidance makes two main points clear:

  1. Employers eligible for tax credits under the FFCRA (Phase 2) and the CARES Act (Phase 3) may — instead of paying these amounts to IRS — retain both (i) withheld federal income tax and (ii) Social Security and Medicare taxes (both employee and employer share).
  2. If available tax credits exceed retained amounts, eligible employers would then file Form 7200 for advance payment of tax credits.

IRS Form 7200 and Instructions

Eligible employers can use Form 7200 to request advance payment of tax credits for qualified sick and family leave wages, under the FFCRA (Phase 2), and advance payment of tax credit for employee retention, under the CARES Act (Phase 3). Eligible employers can use Form 7200 to request advance payment of tax credits that are otherwise paid on Form 941, Form 941-SS, Form 943, Form 943-PR, Form 944, and Form CT-1.

In contrast, Form 7200 cannot be used by self-employed individuals for credits available to them, because self-employed individuals are not eligible for advance credits.

There are two types of eligible employers: employers eligible under the FFCRA and employers eligible under the CARES Act. Under the FFCRA, eligible employers generally are businesses and tax-exempt organizations that have fewer than 500 employees and that are required to pay sick and family leave wages under the FFCRA. Under the CARES Act, employers are eligible if the employer’s operations were fully or partially suspended by a governmental authority due to COVID-19 or if gross receipts are less than 50% of gross receipts for the same calendar quarter in the prior year.

Under the FFCRA (Phase 2):

  • qualified sick and family leave wages apply for wages paid from April 1–December 31, 2020;
  • credit is permitted for 100% of
    • sick leave wages paid under the FFCRA up to a maximum of:
      • $5,110 per employee for quarantine or self-care ($511 per day for two weeks), or
      • $2,000 per employee for care for others ($200 per day for two weeks); and
    • family leave wages are a maximum of $10,000 per employee ($200 per day for ten weeks).

For the CARES Act (Phase 3):

  • qualified employee retention wages are wages paid from March 13–December 31, 2020,
  • for a maximum of $10,000 per employee; and
  • the maximum employee retention tax credit is 50% of qualified wages, or $5,000 per employee.

Eligible employers can request advanced credits using Form 7200 at any time before the end of the month following the quarter in which the qualified wages were paid. For example, most immediately, eligible employers paying employee retention wages in March 2020 under the CARES Act may file Form 7200 for 2020 Q1 any time before May 1, 2020.

Next year, when eligible employers file their 2020 employment tax returns, they will have to reconcile both reduced deposits and advance credits received. Form 7200’s instructions specify that employers must retain “documentation” for their FFCRA and CARES Act credit calculations, without specifying further what type of documentation is sufficient. Eligible employers that use a third-party payer for payroll payments will have to provide any filed Form 7200s to the third-party payer.

Notice 2020-22

Notice 2020-22 provides that employers eligible for tax credits under the FFCRA (Phase 2) and CARES Act (Phase 3) will not be subject to a penalty under section 6656 of the Internal Revenue Code of 1986 (the Code) for failing to deposit employment taxes relating to qualified sick leave, family leave, or employee retention wages in a calendar quarter. The types of employment tax for which penalties will be waived include:

  • deposits of withheld income taxes,
  • taxes under the Federal Insurance Contributions Act (FICA), and
  • taxes under the Railroad Retirement Tax Act (RRTA).

In order to receive the relief contemplated by Notice 2020-22, eligible employers must have paid qualified sick leave, family leave, or employee retention wages to employees in the calendar quarter prior to the time of the required deposit. In order for penalties to be waived, the amount of employment taxes retained must be equal to or less than the amount of the employer’s anticipated credits under the FFCRA and the CARES Act

German papers have called it the most complicated tax fraud trial in modern German history, but the “Cum-Ex” scandal could have implications for the entire financial services industry. Litigation & Enforcement  partners and attorneys Judith Seddon, Rosemarie Paul, Paige Berges and Chris Stott, along with Tax partners Kat Gregor and Andrew Howard team up with Sarah Wrigley, Derek Patterson, Anant Modi, Rob Mason and Simon Taylor of Forensic Risk Alliance, to discuss a recent conviction in a German court in what is described as the “biggest tax swindle in the history of Europe”, and its implications for financial institutions in the UK. The authors describe the specifics of this case, the tax evasion offences at hand, and touch upon a potential ripple effect throughout the finance industry.

Please click here to read the full alert.

A bipartisan agreement for the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), commonly referred to as Phase 3 of the federal government’s response to the coronavirus outbreak, was signed by President Trump on March 27, after having been passed by the Senate on March 25, 2020 and the House on March 27, 2020. This version updated a prior Senate bill introduced on March 18, 2020. The Senate vote was unanimous (96-0) of those present. The key tax provisions are summarized in this Alert.

Key amongst its relief provisions, the bipartisan CARES Act, if passed by the House of Representatives, would:

  • Expand Small Business Loans to businesses with up to 500 employees (including loosening existing affiliation rules for hotel, food service and franchise businesses), with increased forgiveness of loans used to meet payroll (the Paycheck Protection Program).
  • Establish the Exchange Stabilization Fund to provide direct loans (including funds earmarked for the airline industry and businesses important to national security), loan guarantees and investments broadly in support of the Federal Reserve’s efforts to mitigate adverse economic consequences.
  • Extend Unemployment Insurance Benefits to self-employed individuals and those with limited work histories, provide supplemental benefits for all individuals and extend coverage for up to four months.
  • Provide extensive aid to the healthcare industry and states in addressing the COVID-19 crisis.

The CARES Act also implements several key individual and business tax provisions intended to provide relief to impacted businesses, affected individuals and encourage retention of employees.

Previously, on Thursday night, March 18, 2020, Mitch McConnell introduced into the Senate a prior version of the CARES Act (the “Senate Proposal”) that did not pass the Senate. Ropes & Gray published two Alerts on the Senate Proposal, on the tax-related sections and on all sections. The CARES Act as passed by the Senate on March 25 reflected bipartisan negotiations, and is expected to be put to a vote by the House of Representatives on Friday morning.

Certain key highlighted tax-related provisions of the CARES Act are summarized below, with differences from the March 18 Senate Proposal noted. Continue Reading Bipartisan Proposal for Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – Analysis of Certain Key Tax-Related Provisions

On Friday, March 27, the House approved the bipartisan CARES Act by voice vote, and the President signed it into law.

A bipartisan agreement for the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), commonly referred to as Phase 3 of the federal government’s response to the coronavirus outbreak, was passed by the Senate on March 25, 2020. The vote was unanimous (96-0) of those present. Key amongst its relief provisions, the bipartisan CARES Act, if passed by the House of Representatives and signed by the President (who said he will sign the legislation as soon as it reaches his desk), would:

  • Expand Small Business Loans to businesses with up to 500 employees (including loosening existing affiliation rules for hotel, food service and franchise businesses), with increased forgiveness of loans used to meet payroll (the Paycheck Protection Program).
  • Establish the Exchange Stabilization Fund to provide direct loans (including funds earmarked for the airline industry and businesses important to national security), loan guarantees and investments broadly in support of the Federal Reserve’s efforts to mitigate adverse economic consequences.
  • Extend Unemployment Insurance Benefits to self-employed and those with limited work histories, supplement benefits for all individuals and extend coverage to up to 39 weeks.
  • Provide extensive aid to the healthcare industry and states in addressing the COVID-19 crisis.

The CARES Act also implements several key individual and business tax provisions, intended to provide relief to impacted businesses, affected individuals and encourage retention of employees.

Previously, on Thursday night, March 18, 2020, Mitch McConnell introduced into the Senate a prior version of the CARES Act (the “Senate Proposal”) that did not pass the Senate. Ropes & Gray published two Alerts on the Senate Proposal, on the tax-related sections and on all sections. The CARES Act as passed by the Senate on March 25 reflected bipartisan negotiations, and is expected to be put to a vote by the House on Friday morning. The last-minute amendment proposed to the bill, designed to limit the unemployment benefits provided in the bill, was rejected by the Senate. The proposed bill can be found here.

This Alert covers the following sections of the CARES Act:

  • Keeping American Workers Paid and Employed Act (Title I)
  • Unemployment Insurance Provisions (Title II, Subtitle A)
  • Tax Provisions (including Title II, Subtitles B and C)
  • Life Sciences Provisions (Title III and Title VI)
  • Health Care Provisions (Title III and Title V)
  • Health Care Provisions, Labor Provisions (Title III, Part IV, Subtitle C)
  • Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy (Title IV)

Continue Reading Bipartisan Proposal for Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – Summary of Key Provisions

On Friday, March 20, 2020, the Treasury Department, Internal Revenue Service, and the Department of Labor issued primary guidance on the Families First Coronavirus Response Act (the Act) (commonly referred to as Phase 2) in Notice IR-2020-57 (the Notice). Please see alert for discussion of two new important tax details provided in the Notice regarding the Act’s employer tax credits, and for additional discussion of the Act, generally.  The two new important tax details are (1) that employers can be “paid” by retaining certain funds otherwise due to the government  (including income tax withholding from ALL employees), and (2) that rebate requests will be processed by IRS within two weeks or less. Continue Reading First Published Guidance on Implementation of Families First Coronavirus Response Act

This legal development is still in progress. We will update this Alert as the Act makes its way through the legislative process.***

**This Alert supplements the Tax Alert, previously published**

On Thursday night, March 18, 2020, Mitch McConnell introduced into the Senate proposed language for the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), commonly referred to as Phase 3 of the federal government’s response to the coronavirus outbreak. The proposed Act builds on the prior two pieces of legislation to expand relief to individuals and business. Among other things, the proposed Act provides changes to tax policy, including authorizing a refund of tax of up to $1,200 per individual and delaying tax filing and payment deadlines for employers and individuals; provides for a $300 billion small business interruption loan program, with maximum loans for eligible businesses capped at $10 million; authorizes the Secretary of Treasury to make or guarantee loans of up to $208 billion to eligible businesses; mandates insurance coverage of coronavirus testing; expands access to telehealth; and provides a number of significant changes to FDA requirements in connection with the prevention or mitigation of life-saving drug shortages. The proposed bill can be found here. The bill is currently being negotiated in the Senate, and must still be approved by the House of Representatives. Negotiations are expected to continue through the weekend. Continue Reading Additional Insight into the Senate Proposal for the Coronavirus Aid, Relief, and Economic Security Act

***This legal development is still in progress. We will update this Alert as the Act makes its way through the legislative process.***

On Thursday night, March 18, 2020, Mitch McConnell introduced into the Senate proposed language for the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), commonly referred to as Phase 3 of the federal government’s response to the coronavirus outbreak.

Complete language for the CARES Act’s proposal can be found here.

Certain key highlighted provisions of the CARES Act are summarized immediately below. Further below, these sections are included in a high-level summary of all of the CARES Act’s tax-related sections.

Continue Reading Senate Proposal for Coronavirus Aid, Relief, and Economic Security Act (CARES Act)