On May 28, 2020, the IRS issued Notice 2020-35, postponing deadlines for more time-sensitive actions until July 15, 2020. Notice 2020-35 is the latest in a series of IRS notices issued since mid-March providing for delays under the authority of section 7508A due to the COVID-19 emergency declaration. Specifically, the relief relates to employment tax returns and returns filed by employee benefit plans exempt organizations due on or after March 30, 2020, and before July 15, 2020. The big news arising out of the notice—although certainly not broadcast by the IRS—pertains to the extension of the period for correcting errors that occurred in prior calendar years until July 15, 2020. This extension of time until July 15, 2020, permits employers to correct errors ascertained with respect to calendar year 2016 employment taxes, which ordinarily would have to have been corrected on or before April 15, 2020—the day on which the period of limitations would otherwise have lapsed.
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Notice 2020-17
COVID-19 Emergency Declaration: Notice 2020-17 Suggests Code Section 139 is Available to Provide Tax-Free Payments for Certain Expenses
In an earlier alert, we expressed concern about the applicability of Section 139. Our concern was based on the fact that the President’s declaration of an emergency on March 13, 2020, with respect to the COVID-19 pandemic was under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford Act”) pertaining to national emergencies, rather than Section 401 pertaining to disasters. Our alert called on the IRS to issue guidance immediately confirming the application of Section 139, which would permit employers to offer “qualified disaster relief payments” to employees as a means of mitigating the expenses associated with the pandemic’s effects. Based on communications with the IRS, we understand the IRS is considering that request. We now believe, based on recent IRS guidance, that it would be reasonable for employers to take the position that Section 139 is available to employers, but IRS guidance is still needed to make this clear and to provide further clarity on the types of expenses for which it may be used given the unique circumstances of the present emergency.
Continue Reading COVID-19 Emergency Declaration: Notice 2020-17 Suggests Code Section 139 is Available to Provide Tax-Free Payments for Certain Expenses