CARES ACT | TaxConnections

05 May 2020

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 William Byrnes | Posted in CARES ACT • Partnerships

29 Apr 2020

CARES ACT: How U.S. Citizen Taxation Leads To Sending Relief Money To Individuals Outside The United States And Denies Relief Money To Individuals Inside The United States

Introduction

This post is based on my Quora answer to the question: “Do you agree with the policy of not issuing checks to US citizens who jointly file taxes with someone who has an ITIN?”

The Quora answer was rewritten with the generous technical assistance of CPA Olivier Wagner of 1040 Abroad.

Part I – Objective Analysis

This post focuses on the class of individuals entitled to relief. It does not discuss how the relief is administered.

The statute authorizing the relief is found in Section 6428 or Subtitle F (the Procedure And Administration section of the Internal Revenue Code). The following sections specify WHO is entitled to the relief:
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Written by John Richardson | Posted in TaxConnections

29 Apr 2020

Business Loss Change By CARES Act – Track Changes And Policy

The CARES Act (P.L. 116-136; 3/27/20) or Phase 3 of COVID-19 relief includes several tax law changes for individuals and businesses. Most notable for many (but not all) individuals is the recovery rebate or what the IRS calls the economic impact payment. Generally, this provides many adults with an advance, refundable credit for 2020 – today, of $1,200 +$500 if they have a child under age 17.

A few notable ones for businesses include the ability to carryback net operating losses (NOLs) for 2018, 2019 and 2020 for 5 years even though the TCJA ended this for tax years beginning after 2017 and even though the carryback can go to years when tax rates were higher than today. Employers also have some payroll credits and deferrals that should help with cash flow and some financial relief.

In addition to a temporary NOL change, the CARES Act also temporary changes another TCJA item. The limitation on losses for non-corporate taxpayers (IRC Section 461(l)) is changed to go into effect for tax years beginning after 12/31/20 rather than after 12/31/17. The TCJA’s expiration date of tax years beginning before 1/1/26 remains.
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Written by Annette Nellen | Posted in TaxConnections

22 Apr 2020

CARES ACT: NOL Relief For Struggling Businesses

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80 percent taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online.

Have a question? William Byrnes

Written by William Byrnes | Posted in TaxConnections

16 Apr 2020

Will New York’s Businesses Suffer Because The State Tax System Rejected Adopting The CARES Act Tax Reliefs?

Anything that improves the employment of tax professionals, I am for. Thus, states with their own tax codes that do not correspond to the federal Internal Revenue Code, at least for my students and alumni, are OK by me. Unless I own a business. Then it’s maddeningly complex, and compliance expensive, to operate in several tax regimes.

Not saying that the CARES Act provisions made good tax policy sense. But unless New York state (and city) has something better to offer, the Covid-19 meltdown does not seem like an opportune time to ‘stick it’ to Congress’ because Congress seems to enact ineffectual tax provisions. Not that the typical New York voter understands or cares about 163(j) relief or NOL. And arguably, most voters do not feel sympathy for the large business and investment partnership vehicles (at least until I remind them that it is their retirement accounts that own the majority of the publicly held businesses and investment vehicles, and thus they’ll be working a little longer than they hoped for).

New York based business in particular may come to understand when the CPA / tax advisor informs that on the federal return Covid-19 stimulus relief is allowable but not so on the NY state return. Some NY based businesses are going to feel that their state didn’t have their backs. Other businesses that are large enough and able because of industry to relocate operations have time a plenty at this moment to think about such relocation. (Texas will be open for business again soon).
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Written by William Byrnes | Posted in CARES ACT

10 Apr 2020

10 Ways The CARES Act Puts Money In Your Pocket

(Special Note: Read To End Regarding Wealthfront $25,000 Giveaway On April 16th 2020)

The CARES Act, which was signed into law on March 27, is a $2 trillion stimulus package to help Americans cope with the economic fallout caused by the spread of COVID-19. We know these are difficult times, and it’s not always easy to figure out these policies on your own. We want to help. There are a variety of provisions in this bill that put money in your pocket, whether you’ve lost your job or you need to withdraw from your retirement accounts early. We’ve compiled a list of the ways you can benefit from the CARES Act and how to take advantage of them:

1. There’s a new deadline to file and pay your federal taxes
The CARES Act changes the federal tax filing and payment deadline from April 15 to July 15, meaning you’ll have an additional three months to file your federal tax return and pay any taxes you owe. In the meantime, money you owe can earn interest for you. That said, if you expect to receive a refund, we recommend filing ASAP so you can take advantage of your refund sooner. State filing and payment deadlines vary and aren’t always the same as the federal deadlines. Check with your state tax agency for those details. You can find more information here.

2. There’s a new deadline to make IRA contributions
If you’ve been planning to contribute to an IRA for the 2019 tax year, you now have three extra months to do so. As a reminder, the maximum allowable contribution for 2019 is $6,000 if you are under 50, and $7,000 if you are 50 or older. For more information about IRAs, check out our recent blog post and our IRA Account Selection Tool.

3. Depending on your income, you could get a direct payment from the IRS
If you earn $75,000 or less as a single filer, you’re likely eligible for a $1,200 payment. If you are married, file jointly, and earn $150,000 or less, you’re likely eligible for a $2,400 payment. Your income is determined based on your 2019 taxes if you have already filed. If not, they’re based on your 2018 tax return.
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Written by Andy Rachleff | Posted in CARES ACT

10 Apr 2020

IRS Provides Guidance Under The CARES Act To Taxpayers With Net Operating Losses

The Internal Revenue Service today issued guidance providing tax relief under the CARES Act for taxpayers with net operating losses. Recently the IRS issued tax relief for partnerships filing amended returns.

COVID Relief For Taxpayers Claiming NOLs

Revenue Procedure 2020-24 (PDF) provides guidance to taxpayers with net operating losses that are carried back under the CARES Act by providing procedures for:

-waiving the carryback period in the case of a net operating loss arising in a taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2021,
-disregarding certain amounts of foreign income subject to transition tax that would normally have been included as income during the five-year carryback period, and
-waiving a carryback period, reducing a carryback period, or revoking an election to waive a carryback period for a taxable year that began before Jan. 1, 2018, and ended after Dec. 31, 2017.

Six Month Extension Of Time For Filing NOL Forms

In Notice 2020-26 (PDF), the IRS grants a six-month extension of time to file Form 1045 or Form 1139, as applicable, with respect to the carryback of a net operating loss that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. Individuals, trusts, and estates would file Form 1045 (PDF), and corporations would file Form 1139 (PDF).
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Written by IRS | Posted in CARES ACT

02 Apr 2020

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.

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 Brian Schwam | Posted in CARES ACT • IC-DISC

30 Mar 2020

CARES ACT: Coronavirus Aid, Relief And Economic Security Act

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides relief to taxpayers affected by the novel coronavirus (COVID-19). The CARES Act is the third round of federal government aid related to COVID-19 TaxConnections provides you the 880 page Cares Act as published by the Tax Foundation.

Any reference to this Act shall be treated as referring only to the provisions of that division:
A—KEEPING WORKERS PAID AND EMPLOYED,HEALTH CARE SYSTEM ENHANCEMENTS, AND ECONOMIC STABILIZATION, TITLE I—KEEPING AMERICAN WORKERS PAID AND EMPLOYED ACT
Sec. 4001. Short title.
Sec. 4002. Definitions.
Sec. 4003. Emergency relief and taxpayer protections.
Sec. 4004. Limitation on certain employee compensation.
Sec. 4005. Continuation of certain air service.
Sec. 4006. Coordination with Secretary of Transportation.
Sec. 4007. Suspension of certain aviation excise taxes.
Sec. 4008. Debt guarantee authority.
Sec. 4009. Temporary Government in the Sunshine Act relief.
Sec. 4010. Temporary hiring flexibility.
Sec. 4011. Temporary lending limit waiver.
Sec. 4012. Temporary relief for community banks.
Sec. 4013. Temporary relief from troubled debt restructurings.
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