Families First Coronavirus Response Act: The new coronavirus relief bill

Families First Coronavirus Response Act: The new coronavirus relief bill

by | Mar 19, 2020 | CARES, coronavirus relief bill, COVID - 19, Emergency FMLA, Emergency paid sick leave act, federal income tax, FFCRA, FMLA, global income tax, Tax credits, Tax exemption, Tax Extension, taxes, US Government

Families First Coronavirus Response Act:

The new coronavirus relief bill

The Families First Coronavirus Response Act has been signed by the US President on 18th March 2020 to provide additional relief for those taxpayers who have been affected by the COVID-19. This Act is applicable for all categories of taxpayers such as individuals, self-employed and business entities as well. This new law would be effective starting from 1st April 2020 till 31st December 2020.

There are several provisions included under this legislative package such as free coronavirus testing, food assistance, increase in medical service budget, etc. However, there are four major aspects of the Family First Coronavirus Response Act that apply to businesses.  These major aspects include provision for employers to offer paid sick leave, paid family leave and medical leaves, tax credits for the paid leave and the expansion of the insurance related to unemployment.

Emergency Family and Medical

  Leave Expansion Act (FMLA)

By this guideline, until the end of December 2020 employers who have a workforce consisting of less than 500 employees must provide their employees with a paid FMLA of up to 10 weeks. The first two weeks of the general 12-week FMLA leave might be unpaid but the employee might be able to be paid by the provision of paid sick leave.

Eligibility for FMLA

Paid FMLA can be availed by an employee who has been employed for at least 30 days and must be taking care of the minor children whose school or child care center has been closed due to the outbreak of COVID-19. An employee who is eligible to obtain FMLA must not be working or even working remotely while taking care of the children.

Payment of employees

during this time

The employers would provide employees unpaid leave for 10 days. Then, the concept of paid leave arises and the employees can receive compensation at two-thirds of their normal rate. The paid leave cannot be more than $200 per day and $10,000 total for a period of full 10 weeks.

Exemptions 

Businesses that have less than 50 employees can be exempted from all these provisions if they can prove that by providing the Emergency Family and Medical leave they would be risking to go out of their business. 

Employees working in health care organizations or emergency services can be excluded from the emergency FMLA due to the outbreak of COVID-19.

 

 

Businesses having fewer than 50 employees are exempted from any civil actions that are brought by employees for creating violations regarding emergency FMLA.

 

Emergency Paid Sick Leave Act 

This is another leave provision of the Families First Coronavirus Response Act which would be effective till the end of December 2020. Employers having fewer employees than 500 should offer paid sick leave to those who meet the criterion associated with a public health emergency.

Eligibility for Emergency Paid Sick Leave

 

This would be available for all those employees who are unable to work due to the below-mentioned circumstances.

  1. Federal, State or even local quarantine due to COVID-19.
  2. Being advised by the doctor to be self-quarantined due to COVID-19.
  3. Experiencing some symptoms of COVID-19 and under medical supervision

4.Taking care of a family member who has been advised for quarantine

5. Caring for minor children if their schools, child care centers are closed or their caretaker is not available due to COVID-19.

Payment of employees

during this time

1.Full-time employees would receive up to 80 hours of paid sick leave whereas part-time employees can receive paid sick leave based on the number of hours they are working in two weeks.

2. For the reasons like need to have self-isolation as advised by doctors sick leave is received at a normal rate capped at $511 in a day.

3.If it is due to taking care of sick persons or minor children then sick leave obtained is two-thirds of regular pay capped at $200 per day. 

 

Exemptions

Businesses that have less than 50 employees can be exempted from all these provisions if they can prove that by providing the emergency paid sick leave they would be threatening the viability of their business

Tax credits for employers 

Since employers are paying the Emergency FMLA or emergency paid sick leave, they can avail of certain reimbursements by tax credits. 

  1. In every quarter, private organizations can avail refundable tax credits for FMLA and paid sick leaves. These tax credits would be applied to the Social Security taxes which the employer owes.

2. Even after this, if the businesses are not able to cover the payouts the Treasury Department can help with cash payouts. 

3. Moreover, the Treasury can also waive any penalties arising due to the failure of businesses in submitting their payroll taxes due to the anticipation of a refund as per the new laws.

4. Furthermore, the tax credit of employers is increased by the amount it is paying to maintain health care related to sick leave and FMLA.

Emergency Unemployment Insurance

By the FFCRA, the State Governments are allocated with $1 billion in funds for those workers who need unemployment insurance. This Act also removes the issue of unemployed workers to wait for one week to be eligible for Unemployment Insurance. This implies that the workers would be able to apply for the unemployment insurance quite faster.

Conclusion

Hence, with the coronavirus creating havoc in the lives of common people it is also evident that many self-employed individuals and small businesses would suffer losses as well. Layoff and workforce downsizing have already been started in several businesses. In such a stressful situation, the FFCRA is a sincere effort by the Federal Government to bring some alleviation in the economic stress of both employers and employees.

References

  1. https://blog.turbotax.intuit.com/tax-news/families-first-coronavirus-response-act-everything-taxpayers-need-to-know-about-the-new-relief-bill-46430/
  2. https://www.uschamber.com/co/start/strategy/families-first-coronavirus-response-act-guide
  3. https://www.natlawreview.com/article/emergency-legislation-families-first-coronavirus-response-act-updated-march-26-2020

 

 

All you need to know about the changes in tax rules due to COVID-19

All you need to know about the changes in tax rules due to COVID-19

by | Mar 18, 2020 | CARES, COVID - 19, federal government, FFCRA, Investment & Income, IRS, state government, tax deadline, Tax Extension, tax filing, Tax Payers, tax return, US Government

All you need to know about the changes in tax rules due to    COVID-19

On 13th March 2020, the US President had issued an emergency declaration in response to the ongoing COVID-19 pandemic. Due to COVID-19 the tax Rules have changed Since the outbreak of COVID-19 has caused huge harm to individuals and businesses, the Federal Government and the State Government have responded very promptly by making significant changes to the tax laws.  

FEDERAL EXTENSIONS: The IRS has announced for the extension of both tax payment and tax return filing deadline for several taxpayers including individuals, business entities, trust, etc. The tax payment and return filing deadline has been extended to 15th July 2020 which would have been 15th April 2020 otherwise. There would be a waiver of interest and late filing penalties for this extension  of these 90 days. This relief applies to a taxpayer’s 2019 income tax liability and the estimated income tax payments for the first quarter of 2020.

STATE EXTENSIONS: Although the tax implications and timelines are different for the states, still a majority of the states have extended their tax return filing and payment deadlines following that of the federal guidelines. However, there might be some states which have responded to this deadline extension separately. State responses to the tax deadline extension might apply to other categories of taxes as well apart from Income tax.

THE CORONAVIRUS STIMULUS PACKAGE: On 27th March 2020, the US President had signed an Act known as CARES i.e. Coronavirus Aid, Relief and Economic basis Security Act. This Act has been transformed into law which ensures a $2 trillion stimulus package. This will help in providing financial relief to business entities, individual taxpayers and even families. Also, by the coronavirus stimulus package taxpayers can avail of the benefits of advanced tax rebates.The taxpayers can receive stimulus checks up to $1,200 for individual taxpayers. 

 Joint taxpayers would receive stimulus checks up to $2,400 and an additional check of $500 in case of each qualifying child. The payment of this stimulus checks associated with COVID-19 would be done based on tax filings that have been done in 2018 or 2019. If a taxpayer has not yet filed the tax returns, then the information of 2018 would be used. The amount which would be paid now would be reconciled in the tax return of the next year depending on the 2020 situation. 

Moreover, the CARES Act also allows the Government to grasp the information of direct deposit in the income tax return filing of 2019 or the tax return 2018. This would help deposit the funds in the stimulus package directly into the taxpayer’s account by electronic means. 

So, in the present situation, it is advisable to file for 2019 tax returns soon and select to obtain the refunds by direct deposit method. By this, the IRS would be able to have the current tax filing information and direct deposit information which would help in the transfer of the stimulus amount conveniently. 

The FAMILIES FIRST CORONAVIRUS RESPONSE ACT (FFCRA): 

President Trump has signed the Families First Coronavirus Response Act into Law which would be effective from no later than 2nd April 2020. According to the guidelines of this Act, employers who have an employee count of less than 500 ought to provide their employees with paid sick leave and expanded Family and Medical Leave Act (FMLA) rights and free testing for COVID-19. 

  1. This Act also helps in providing two refundable payroll tax credits which would help the businesses to make up for the cost incurred with the mandated paid leaves.  The eligible employers can claim both the credits in amounts that are equal to 100% of the amount of family leave wages which are paid under the FFCRA.  
  2. Employers need to offer paid sick leave tax credit and paid family leave or “Child Care Leave” Tax credit. Self-employed individuals or small business owners are required to offer paid sick leave for those employees who are unable to work due to COVID-19 and would also receive sick leave tax credit which is equal to 100% of the wage amount paid. This amount of credit has been limited to $200 per day if the employee is not able to work if he is taking care of a minor child after the closure of his school or an individual under the self-isolation order.
  3. Employers can also obtain refundable family leave tax credit for the wages that are being paid to the employees who are unable to work as they are taking care of a minor child. The school or child care center of the minor is closed due to the outbreak of COVID-19. 

Conclusion

Hence, in these difficult times of national emergency, these changes introduced by the US Government would be highly beneficial for all the taxpayers as it would mitigate the impact of COVID-19 on individuals as well as business entities.

References

https://blog.turbotax.intuit.com/tax-news/is-the-tax-deadline-delayed-what-to-know-about-coronavirus-covid-19-and-your-taxes-46320/

https://www.bradley.com/insights/publications/2020/03/update-on-federal-and-state-tax-responses-to-covid19-pandemic

 

All you need to know about Bank FATCA reporting as a US taxpayer

All you need to know about Bank FATCA reporting as a US taxpayer

by | Nov 27, 2018 | Audits, FATCA, FATCA reporting, Investment & Income, US Government

All you need to know about Bank FATCA reporting as a US taxpayer

Bank FATCA reporting as US Taxpayer.It should not come as a surprise that the US Government looks into a wider array of things for expats and not just the taxation. FATCA is one such avenue.  There are a lot of rumours and misinformation surrounding FATCA, so let’s break it down slowly.

What is It?

FATCA or Foreign Account Tax Compliance Act came into the law books in the year 2010. It made way for reporting of information related to payments towards foreign financial institutions or foreign entities in general. The whole intent of creating this Act was to make it easier for the IRS to keep a track of all the earnings that US citizens and business have from foreign investments or bank accounts.

One thing to keep in mind is that the IRS does not govern the FATCA. In fact, the Financial Crimes Enforcement Network under the US Treasury Department takes care of the same. Though, there is nothing holding them against sharing information at the time of need.

Whom does it Affect?

Knowing whether or not FATCA affects you is important. Simply because if it does, you would need to file everything very carefully and in a timely manner. The following individuals are impacted by FATCA.

  • US citizen or resident aliens (Green card holders) must be compliant with FATCA irrespective of where they stay.
  • US persons owning a business or have a majority stake in a business.
  • Any form of worldwide agreements.
  • US investment houses or banks that have interactions and dealings with foreign financial institutions.
  • Any foreign financial institution that deals with money.

Requirements to File FATCA

US residents who have foreign bank accounts or investments must file the FinCEN Form 114 if their investments meet the threshold amount. The FinCen Form 114 was previously known as the FBAR Form and some people still use the name. There aren’t any minimum age criteria for filing the Form 114.

The threshold amount for individuals stands at $10,000. If at any point in time during a financial year the investments breach the $10,000 mark, it must be reported with the help of FinCEN Form 114. Other forms of income such as interests or dividends must also be reported regularly to avoid any penalties or fines at a later stage.

What you Need to file FinCEN Form 114

In order to fill the FinCEN Form 114, you would need to have the following information handy.

  • Your name, social security details and address.
  • If there are any joint account holders, their name, social security number and address.
  • The type of bank account that you are holding (ex. Current, savings etc.). The type of Securities that you are holding (mutual funds or stocks) and any other type of investments that don’t come under the category of bank account or securities.
  • Details of your bank account.
  • The name and address of the bank with which you hold the account.
  • The bank account number.
  • The number of joint owners of the account.
  • The highest amount of money held in the account for the taxable year in question.

Are there any penalties?

The US Government levies some hefty penalties for withholding such information or failing to declare them during your tax filing. For non-willful violations, you might end up paying up to $10,000 for every year of not filing.

If you are found to be willfully violating the rules, you might face penalties up to $100,000 or 50% of the amount of money in your account at that point in time.