As a result of the impacts of COVID-19, Maryland is one of just a few states so far that has taken measures independent of federal guidelines to ease the burden on taxpayers. Following is a briefing on statewide and federal tax changes in light of COVID-19.
Delayed State Tax Filing Deadline
The first and most immediate benefit is that the deadline to file Maryland business tax returns is pushed back to June 1. As of this writing, the IRS is still requiring federal tax returns to be filed by April 15, but most individuals and businesses that owe money will get a 90-day extension to pay, without penalties or interest.
The delayed state tax filing deadline applies to businesses with due dates in the months of March, April and May 2020. Applicable tax filings include:
- Sales and use tax
- Withholding tax
- Admissions & amusement tax
- Alcohol, tobacco and motor fuel excise taxes
- Tire recycling fee
- Bay restoration fee returns
As of now, individuals and corporations should follow the state tax filing deadlines of the IRS. However, if the IRS extends the federal due date for all taxpayers, then Maryland is expected to adjust its deadlines accordingly.
Besides the extended filing deadline, Maryland businesses negatively affected by COVID-19 can apply for Small Business Administration (SBA) Economic Injury Disaster Loans. These loans have low interest rates – 3.75 percent for businesses and 2.7 percent for nonprofit organizations – and long repayment periods, some as long as 30 years for higher amounts. Currently, Montgomery County and Prince George’s County are eligible to apply; more counties may be added as the situation develops.
Paid Leave Requirements and Tax Credits
Remember that under the Maryland Healthy Working Families Act, all employers with employees whose primary work location is in Maryland are required to provide earned sick and safe leave, regardless of where the business is located. Businesses with 15 or more employees are required to provide paid earned safe and sick leave. Employers with fewer than 14 employees still must provide protected leave, even if it is unpaid. Federal legislation is underway that would mandate up to 10 days of paid leave for employees; there are several restrictions, such as allowing employers with fewer than 50 employees to apply for a hardship exemption. Employees who are unsure about their paid leave status should contact their employer directly.
Help may be available soon from the federal government, in terms of tax credits, for employers that provide paid leave to workers during the outbreak of COVID-19. Legislation is currently moving to the Senate that contains millions of dollars of tax and financial relief for individuals and businesses affected by COVID-19.
One of the measures allows qualifying businesses to claim tax credits for offering paid leave. Employers can claim a tax credit worth up to 100 percent of paid leave wages for each quarter for employees who are directly affected by COVID-19 and must quarantine themselves. The credit is taken against the employer portion of Social Security taxes. If paid leave is provided for employees who take care of a loved one who has COVID-19 or needs to self-isolate, the employer can take a lesser tax credit. There are exclusions.
Self-employed individuals may also be able to claim tax credits for sick leave due to COVID-19; details will be available as they’re confirmed.
Any client with questions or concerns should feel free to contact their Naden/Lean representative directly or reach out to us here. We know this is a very challenging time and we are here to help ease the stress and worry of tax planning and managing the financial impact of a pandemic.
Additional updates on tax and financial news related to COVID-19 can be found on Naden/Lean’s social media channels, in client e-news alerts, and on our blog.