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PrimeGlobal member firm KROST details the tax measures taken by California Governor Gavin Newsom in order to protect against COVID-19.

California Governor Gavin Newsom just issued a new executive order on March 12, 2020 in response to COVID-19 pandemic. The executive order granted a 60-days extension for individuals or businesses who are unable to timely file their tax returns or make timely payments as a result of:

  1. Complying with a state or local public health official’s imposition or
  2. Recommendation of social distancing measures related to COVID-19.

Governor Newsom and state public health officials announced that gatherings should be postponed or canceled across the state until at least the end of March. California Department of Public Health has issued social distancing guidelines that recommend small gatherings should not be held unless the organizers can implement social distancing of 6 feet per person. Groups of individuals who are at higher risk for severe illness from COVID-19 should be limited to no more than ten people.

The full executive order can be found here and social gathering guidance can be found here.

What does that mean to you?

Income Taxes

California Department of Tax and Fee Administration has existing procedures set in place for taxpayers to request relief penalty and interest for late tax return filing and/or late tax payments. Franchise Tax Board (FTB) has granted relief to COVID-19 affected taxpayers to file California tax returns and make certain payments until June 15, 2020, consistent with the Governor’s executive order.

  1. Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 90-day extension to file and pay by June 15.
  2. Individual filers whose tax returns are due on April 15 now have a 60-day extension to file and pay by June 15.
  3. Quarterly estimated tax payments due on April 15 now have a 60-day extension to pay by June 15.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply. The FTB’s June 15 extended due date may be pushed back even further if the Internal Revenue Service grants a longer relief period.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period.

» Read the News Release

Payroll Taxes

California employers directly affected by the emergency or disaster may request an extension of up to 60 days to file their state payroll reports and to deposit state payroll taxes with the Employment Development Department (EDD).

If you need to file and/or deposit payroll taxes late, you can file and pay payroll taxes with EDD within 60-days from the original due date and request penalty and interest relief. With the delinquent filing, you will need to attach a letter specifically requesting an extension of time under Section 1111.5 of the CUIC and provide details as to why the payroll returns and/or payments could not be submitted in a timely manner.

For more information, you can contact the EDD Taxpayer Assistance Center at (888) 745-3886.

Federal Measures

President Trump also announced on March 11, 2020 that he would direct the Treasury to “defer tax payments without interest or penalties for certain individuals and businesses negatively impacted.” Up to today, March 13, 2020, there has been no details released regarding the date of which taxpayers would be allowed to delay tax filings, nor the criteria to be met by taxpayers in order to be eligible for this relief.

Update as of 3/17/2020

Treasury Secretary Steven Mnuchin has announced on Tuesday, 3/17/2020, that certain taxpayers can delay paying their income tax for up to 90 days without incurring late payment penalty and interest. This applies to individual with tax payments up to $1M and corporation with tax payments up to $10M. The IRS has not yet confirmed whether or not they will extend the tax filing due date as well. If filing due date is not extended, an extension should still be filed by April 15 (although tax payment is not due until July 14) or else late filing penalty will still apply. Taxpayers who are expecting refund is encouraged to file their income tax return early.

Contact us for more information on how this affects your tax return deadline.

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KROST Certified Public Accountants & Consultants

Established in 1939 in Pasadena, California, KROST, is a full-service Certified Public Accounting and Consulting firm serving clients across various industries. Our focus is recognizing opportunities and creating value for our clients by equipping them with the tools to make better business and financial decisions for the future. As trusted advisors, our clients depend on us to provide timely information, innovative solutions, and result-driven teamwork to ensure success.

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