COVID-19 (officially SARS-CoV-2 or also referred to as novel Coronavirus) is disrupting everyday business and life as we know it.
The United States Treasury Department announced that it would be pushing back the April 15 deadline to file tax returns and pay taxes owed on that date by 90 days, giving Americans three extra months to pay their 2019 income tax bills. This gives millions of individuals and C-Corporation businesses extra time needed to pay these out-of-pocket costs in light of COVID-19.
Treasury Secretary Steven Mnuchin explained that with this new regulation, the IRS, under President Trump’s national-emergency declaration, will also waive interest fees and penalties. Individuals and businesses should file their taxes as normal, if they can, and they will not incur interest or penalties on amounts due.
On Wednesday, March 18, IRS notice 2020-18 granting relief was released. The notice confirms the 90 day extension included in the Treasury Department announcement. The notice further clarified that the relief provided by the extension is available to be applied to first quarter 2020 estimated income tax payments in addition to Federal income tax owed for the taxpayer’s 2019 tax year. As a result, payments of this nature due by April 15 are subject to the relief covered by the IRS notice. All taxpayers are also granted an automatic 90 day extension of time to file until July 15, 2020.
The announcement did not provide guidance on payroll taxes and their respective due date. Uncertainty also remains around whether 2020 second quarter estimated taxes are expected to be paid by the normal June 15 deadline or if they will be deferred as well.
In a time surrounded by uncertainty, the extension will at least provide cash flow relief to both businesses and business-owners as many will qualify for the extension.
The construction industry faces additional challenges due to the on-site necessity of work performance and constraints on the extent of social distancing that can be practiced within the labor force on an active jobsite.
Furthermore, supplies are imported from a variety of international suppliers and disruption to the manufacturing industry both domestically and abroad will impact the availability of supplies necessary to complete projects, while also increasing the cost. It is critical for project management teams to analyze current supply chains to assess the exposure to disruption within those supply chains that ensues.
Labor and material challenges often lead to project delays and cost overruns presenting budgetary and profitability challenges to project management.
As many business interruption policies limit coverage to interruptions related to natural disasters with disease not included in coverage, companies are left wondering how they can mitigate risk exposure.
One possible form of relief for contractors is the force majeure clause that is included in certain contracts. The term itself may not be explicitly included; however, contract language that provides for a time extension in the event of delays caused by an act of God, act of government or other events beyond the reasonable control of the contractor A practice encouraged for contracts currently undergoing negotiation is the inclusion of specific references to force majeure with respect to COVID-19, pandemic and disease specific to time extensions.
While the force majeure clause offers protection to contractors it also protects material suppliers in that contractors may be subjected to price increases or may limit the contractor’s ability to terminate the contract and seek alternative suppliers.
As a result of these challenges it is more important than ever for construction companies to be proactively communicating with project owners and project partners regarding these risks and how they will be handled through the course of a contract’s performance period.
As containment measures continue to intensify across the country, having a variety of communication channels available – teleconference and video conference as an alternative to face-to-face, for instance – as well as a high frequency of communication will be critical for ongoing projects to complete in a timely and cost effective fashion. Social distancing and other sanitary measures will also be key for job sites looking to avoid quarantine delays.
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