Archive for CARES ACT

Who Is In Charge? Dealing With Conflicting Guidance

Who Is In Charge? Dealing With Conflicting Guidance

In March 2022, the Joint Committee on Taxation released a Bluebook on tax legislation enacted in the 116th Congress (JCS-1-22, 3/8/22). On page 315 of this report, there is what I find to be a troubling statement and footnote on how the Employee Retention Credit (ERC) works. The ERC was enacted in March 2020 by the CARES Act and applied to qualified wages from March 13, 2020 through September 30, 2021 (longer for recovery startup businesses). So this credit has been around for a while and widely claimed.

The issue is one I raised in a blog post on 6/4/20. The ERC is fairly complex due to numerous definitions and special rules and changes made when it was extended and one change enacted in December 2020 was retroactive. The ERC works differently depending if the employer is large or small based on number of full-time employees.

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Written by | Posted in CARES ACT • Employee Retention Credit • IRS Rules • Joint Committee On Taxation

The CARES ACT And The IC-DISC

The CARES ACT And The IC-DISC

Congress sent the Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’ to the President, who signed it into law.

There are three significant provisions that impact 2018, 2019, and 2020 income taxes and your use of the IC-DISC.

Net operating loss carrybacks.  The provisions enacted as part of the Tax Cuts and Jobs Act at the end of 2017 eliminated the ability to carry back net operating losses to obtain tax refunds.  The CARES Act provides for a five-year net operating loss carryback for losses generated in years beginning after December 31, 2017 and before January 1, 2021.

Section 461(l) delayed effective date.  Section 461(l) limits the deductibility of losses for taxpayers other than corporations.  The provisions, enacted as part of the Tax Cuts and Jobs Act at the end of 2017 limited the current deductibility of these losses to $500,000 for married filing jointly taxpayers ($250,000 for all others).  The CARES Act delays the impact of this provision until taxable years beginning after 2020 for most taxpayers, however the provision was completely eliminated for excess farm losses.

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Written by | Posted in CARES ACT • IC-DISC

U.S. Digital Service Providers With Mexican Customers: Avoid Being ¨Shut-Down¨ In Mexico

U.S. Digital Service Providers With Mexican Customers: Avoid Being ¨Shut-Down¨ In Mexico

COVID times has brought us tough changes in our lives, and tax reform is one of them. In the U.S., the CARES Act provided relief to multiple sectors of the economy to alleviate the impact of the pandemic. However, the perspectives of tax reform in other jurisdictions are quite different, mainly considering the impact of COVID in public finances. Mexico is aimed in that direction.

Earlier November of this year, the Mexican Senate approved multiple tax amendments that aim to strengthen the revenue-collection capacity of the tax authorities, but more importantly, intend to regulate certain business activities, such as those provided by Digital Service Providers (DSP) with no tax residence in Mexico.

In the following lines, we will discuss how DSPs will be subject to harsh regulations in Mexico as consequence of the newly approved tax reform which may lead to a ¨shut-down¨ of their operations.

Subjects and Compliance Rules

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Written by | Posted in CARES ACT • Digital Service Providers • Mexico

CARES ACT: Coronavirus Aid, Relief And Economic Security Act (Three Significant Provisions You Should Know)

Congress sent the Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’ to the President, who signed it into law. There are three significant provisions that impact 2018, 2019, and 2020 income taxes and your use of the IC-DISC.

Congress sent the Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’ to the President, who signed it into law.

There are three significant provisions that impact 2018, 2019, and 2020 income taxes and your use of the IC-DISC.

Net operating loss carrybacks. The provisions enacted as part of the Tax Cuts and Jobs Act at the end of 2017 eliminated the ability to carry back net operating losses to obtain tax refunds. The CARES Act provides for a five-year net operating loss carryback for losses generated in years beginning after December 31, 2017 and before January 1, 2021.

Section 461(l) delayed effective date. Section 461(l) limits the deductibility of losses for taxpayers other than corporations. The provisions, enacted as part of the Tax Cuts and Jobs Act at the end of 2017 limited the current deductibility of these losses to $500,000 for married filing jointly taxpayers ($250,000 for all others). The CARES Act delays the impact of this provision until taxable years beginning after 2020 for most taxpayers, however the provision was completely eliminated for excess farm losses.

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Written by | Posted in CARES ACT • IC-DISC Opportunity • Net Operating Loss Carrybacks • Section 461(I)

The Coronavirus Aid, Relief, And Economic Security Act Provides Relief To Eligible Individuals Taking Early Withdrawls

The Coronavirus Aid, Relief, and Economic Security Act

The Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136 (CARES Act), provides relief to eligible individuals taking withdrawals or loans from qualified employer retirement plans and Individual Retirement Arrangements (IRAs).

Coronavirus-related withdrawals and loans

Individuals may be eligible for coronavirus-related relief on withdrawals from qualified employer retirement plans or IRAs and on loans from qualified employer retirement plans. The relief only applies to certain withdrawals and loans made to the following individuals:

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Written by | Posted in CARES ACT • National Taxpayer Advocate

Recovery Rebate Fix Needed By Congress To Not Encourage MFS Filing Status

Annette Nellen- Economic Impact Payment

The CARES Act enacted March 27, 2020 included the 2020 recovery rebate for individuals that provided over 160 million adults with $1,200 to help them with financial challenges during the pandemic (see GAO data). The IRS refers to this payment as the Economic Impact Payment (EIP) and as of(8/1/20) has provided 70 FAQs to help explain it! The provision added Section 6428 to the Internal Revenue Code.

I was surprised by FAQ 26 and its answer because I would think that if for a married couple one spouse has an SSN and the other has an ITIN which disqualifies that spouse for an EIP, the spouse with the SSN would still have been given $1,200. But that will only happen if they file as Married Filing Separately rather than as Married Filing Jointly.

Q26. I filed a joint return with my spouse. Will we receive a Payment if I have a valid SSN and my spouse has an IRS Individual Taxpayer Identification Number (ITIN)?

A26. No, when spouses file jointly, both spouses must have valid SSNs to receive a Payment with one exception. If either spouse is a member of the U.S. Armed Forces at any time during the taxable year, only one spouse needs to have a valid SSN.
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Written by | Posted in CARES ACT • Economic Impact Payments

Treasury Department And IRS Issue Guidance For Consolidated Groups Regarding Net Operating Losses

Treasury Department And IRS Issue Guidance For Consolidated Groups Regarding Net Operating Losses

The Department of the Treasury and the Internal Revenue Service issued proposed regulations and temporary regulations that provide guidance for consolidated groups regarding net operating losses (NOLs).

The Tax Cuts and Jobs Act (TCJA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amended the rules for NOLs. After amendment, the NOL deduction is the sum of:

The total of the NOLs arising before January 1, 2018 (pre-2018 NOLs) that are carried to that year; plus
The lesser of:
The total of the NOLs arising after December 31, 2017; or
80% of taxable income less pre-2018 NOLs (the 80% limitation).
The TCJA generally eliminated NOL carrybacks and permitted NOLs to be carried forward indefinitely. The TCJA also provides special rules for nonlife insurance companies and farming losses. Nonlife insurance companies are permitted to carry back NOLs two years and forward 20 years, and the 80% limitation does not apply. Farming losses are permitted to be carried back two years and carried forward indefinitely, subject to the 80% limitation.
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Written by | Posted in CARES ACT • NOLs • Tax Cuts and Jobs Act • TaxConnections

National Taxpayer Advocate Discusses Taxpayer Challenges Arising From Pandemic

Erin M Collins: National Taxpayer Advocate

National Taxpayer Advocate Erin M. Collins released her first report to Congress identifying taxpayer challenges due to the pandemic, the CARES Act(Coronavirus Aid, Relief And Economic Security Act) and the IRS’s implementation of the Taxpayer First Act.

The report praises the IRS for acting quickly to postpone over 300 filing, payment, and other time-sensitive deadlines, provide broad relief from compliance actions under its “People First Initiative,” and disburse some 160 million Economic Impact Payments (EIPs) authorized by the CARES Act, enacted on March 27, 2020.

However, the report says that despite the IRS’s best efforts, there have been notable adverse taxpayer impacts, including:

• Taxpayers who filed a 2019 paper return and are entitled to refunds may be in for a long wait. The IRS had to suspend the processing of paper tax returns, and as of May 16, it estimated it had a backlog of 4.7 million paper returns. Although the IRS is reopening some of its core operations, it is not clear when it can open and process all the returns sitting in mail facilities.
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Written by | Posted in CARES ACT • National Taxpayer Advocate • Taxpayer First Act

IRS Outlines Changes To Health Care Spending Available Under CARES Act

IRS: TaxConnections: Care Act

The Internal Revenue Service has advised that new rules under the CARES Act provide flexibility for health care spending that may be helpful in the current environment where more people may need at-home services due to measures to fight the coronavirus.

Telehealth And High Deductible Health Plans

Under the CARES Act, a high deductible health plan (HDHP) temporarily can cover telehealth and other remote care services without a deductible, or with a deductible below the minimum annual deductible otherwise required by law. Telehealth and other remote care services also are temporarily included as categories of coverage that are disregarded for the purpose of determining whether an individual who has other health plan coverage in addition to an HDHP is an eligible individual who may make tax-favored contributions to his or her HSA. Thus, an otherwise eligible individual with coverage under an HDHP may still contribute to an HSA despite receiving coverage for telehealth and other remote care services before satisfying the HDHP deductible, or despite receiving coverage for these services outside the HDHP. The temporary rules under the CARES Act, as extended by IRS Notice 2020-29, apply to services provided on or after Jan. 1, 2020, with respect to plan years beginning on or before Dec. 31, 2021.

Expansion Of Qualified Medical Expenses

The CARES Act also modifies the rules that apply to various tax-advantaged accounts (HSAs, Archer MSAs, Health FSAs, and HRAs) so that additional items are “qualified medical expenses” that may be reimbursed from those accounts. Specifically, the cost of menstrual care products is now reimbursable. These products are defined as tampons, pads, liners, cups, sponges or other similar products. In addition, over-the-counter products and medications are now reimbursable without a prescription. The new rules apply to amounts paid after Dec. 31, 2019. Taxpayers should save receipts of their purchases for their records and so that they are able to submit claims for reimbursements.
More information

The IRS will provide any further updates as soon as they are available on its webpage at IRS.gov/coronavirus

IR-2020-122

Written by | Posted in CARES ACT • IRS

The Cares Act And IC-DISC

Brian Schwam: The cares Act And IC-DISC

Congress sent the Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’ to the President, who signed it into law.

There are three significant provisions that impact 2018, 2019, and 2020 income taxes and your use of the IC-DISC.

Net operating loss carrybacks. The provisions enacted as part of the Tax Cuts and Jobs Act at the end of 2017 eliminated the ability to carry back net operating losses to obtain tax refunds. The CARES Act provides for a five-year net operating loss carryback for losses generated in years beginning after December 31, 2017 and before January 1, 2021.

Section 461(l) delayed effective date. Section 461(l) limits the deductibility of losses for taxpayers other than corporations. The provisions, enacted as part of the Tax Cuts and Jobs Act at the end of 2017 limited the current deductibility of these losses to $500,000 for married filing jointly taxpayers ($250,000 for all others). The CARES Act delays the impact of this provision until taxable years beginning after 2020 for most taxpayers, however the provision was completely eliminated for excess farm losses.

Section 163(j) interest limitation. The provisions, enacted as part of the Tax Cuts and Jobs Act at the end of 2017, limited the deductibility of interest to 30 percent of modified taxable income. The CARES Act modifies this provision for tax years beginning in 2019 and 2020 and allows for the deductibility of interest to 50 percent of modified taxable income.
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Written by | Posted in CARES ACT • IC-DISC

CARES Act Permits Penalty-Free Payroll Tax Deferral For Employers

William Byrnes

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50% by December 31, 2021 and the remaining 50% by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

William Byrnes

Written by | Posted in CARES ACT • Employer Tax Deferral

CARES Act Bonus Depreciation Fix: Amended Returns For Partnerships

CARES Act Bonus Depreciation Fix: Amended Returns For Partnerships

The CARES Act provided retroactive relief to partnerships on multiple fronts, including by fixing the so-called “retail glitch” to allow businesses to take advantage of 100% bonus depreciation on qualified improvement property through 2022. Existing law may have prevented partnerships from filing amended Forms 1065 and Schedules K-1. Instead, partnerships would have been required to file an administrative adjustment request, so that partners would not have received relief until filing returns for the current tax year. Revenue Procedure 2020-23 allows partnerships to file amended returns and issue revised Schedules K-1 for 2018 and 2019 to take advantage of retroactive CARES Act relief (and, absent further guidance, even if they are not taking advantage of CARES Act relief). For more information, visit Tax Facts Online. Read More

Written by | Posted in CARES ACT • Partnerships
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