March 26, 2020
Coronavirus bill to trigger refund claims, employee retention tax credits.
The $2 trillion Coronavirus aid package that cleared the Senate last night includes retroactive tax provisions that will allow many businesses to claim refunds and reduce 2019 and 2020 taxes.
The House of Representatives is scheduled to take up the bill tomorrow.
Tax provisions in the bill include:
- Allowing taxpayers to carry back net operating losses generated in 2018, 2019 and 2020 for five years. The 2017 tax reforms had eliminated the ability to carry losses back.
- Relaxation of limits on business losses reported on 1040s for 2018 through 2020. This will also result in amended returns and refund claims.
- The cap on interest deductions for 2019 and 2020 is raised to 50 percent of taxable income before interest, depreciation and amortization. The cap had been 30%. This will allow some taxpayers who have already filed 2019 business returns to amend their returns to deduct more interest.
- An employee retention credit of 50% of wages paid for employers with up to 100 employees. The credit applies to wages up to $10,000, and will be available for employers shut down by government orders for the virus, or that have seen revenue declines of 50%. It is available for wages paid starting March 13 through the end of the year.
The bill does not include additional filing and payment deferrals. That means second quarter individual 2020 estimated payments are still due June 15, while first quarter payments are deferred to July 15.
Senate Unanimously Passes Coronavirus Relief Package - Jad Chamseddine and Alexis Gravely, Tax Notes ($)
Senate Approves Roughly $2 Trillion in Coronavirus Relief - Joshua Jamerson, Andrew Duehren, and Natalie Andrews, Wall Street Journal ($). "The legislation will provide one-time checks of $1,200 to Americans with adjusted gross income up to $75,000 for individuals and $150,000 for married couples."
Tax Provisions Under Consideration in $2 Trillion Coronavirus Bill - Kristine Tidgren, The Ag Docket.
Congress Reaches Agreement On A Coronavirus Relief Package: Tax Aspects Of The CARES Act - Tony Nitti, Forbes.
How Soon Can The IRS Get Coronavirus Payments Out The Door? Janet Holtzblatt, TaxVox. "I hope the IRS can get those checks out speedily, but I expect—if not the worst—a lot of disappointed people who will have to wait months."
Senate Passes Updated Economic Relief Plan (CARES Act) for Individuals and Businesses - Garrett Watson, Taylor LaJoie, Huaqun Li, and Daniel Bunn, Tax Policy Blog. "The proposed recovery rebates will use 2019 tax returns (2018 if the taxpayer has not filed in 2019) to determine the advanced rebate amount and reconcile the rebate based on 2020 income. This means that taxpayers who receive a smaller rebate than they are eligible for based on 2020 income will receive the difference after filing a 2020 tax return, but overpayments of rebates due to a higher income in 2020 will not be clawed back."
Senate Passes Coronavirus Stimulus Bill: Here’s What The Relief Looks Like - Kelly Phillips Erb, Forbes. "The bill would expand the eligibility for small businesses (those under 500 employees) to receive a loan of up to $10 million under the Small Business Act... Loans are eligible for forgiveness if they meet specific criteria."
Grassley Releases Phase 3 Coronavirus Response Legislation - Senate Finance Committee release.
Other Coronavirus Tax News
IRS Puts Taxpayers First in New COVID-19 Initiative - Amie Kuntz, Tax News & Views.
Exams, Payments Suspended in IRS Coronavirus Response - William Hoffman, Tax Notes ($). "The agency announced March 25 that, starting April 1 and extending initially through July 15, its People First Initiative will, among other emergency measures, suspend the following: payments on existing installment agreements; actions on liens, levies, and most seizures; most new field, office, and correspondence examinations; and new certifications of severely delinquent taxpayers to the State Department for potential passport revocation."
IRS unveils new People First Initiative; COVID-19 effort temporarily adjusts, suspends key compliance program - Internal Revenue Service release.
IRS Easing Up On Collection Activity During Crisis - Peter Reilly, Forbes. "If you are on an installment agreement, you don’t have to make any payments that are due between April 1 and July 15."
IRS Eases Installments Due, Slows Audits, Sweeping Relief Puts People First - Robert Wood, Forbes. "New automatic, systemic liens and levies will be suspended during this period."
More states defer tax filing dates. State Tax Notes reports that Georgia, Illinois, and Oklahoma have jointed the list of states deferring filing or payment deadlines. Different states have different dates and returns covered. Updated lists of revised state filing deadlines are available from the AICPA and Bloomberg Tax.
Grants Available for Iowa Small Businesses via Iowa Economic Development Authority - Michael Holdren, Eide Bailly (Linked-in).
Frequently Asked Nonprofit Questions on COVID-19 - Deb Nelson and Kim Hunwardsen, Eide Bailly. "Nonprofits with fewer than 500 employees are included in this temporary relief which provides expanded family and medical leave and paid sick leave for coronavirus-related absences."
Extensions, IRAs, HSAs, and 2016 - Russ Fox, Taxable Talk. "The deadline to contribute to an IRA or Roth IRA is now July 15th."
IRA and HSA contribution deadline also is July 15 - Kay Bell, Don't Mess With Taxes.
Tax Lawyers Can Fight the Coronavirus Crisis with the Internal Revenue Code - Bob Rubin, Procedurally Taxing. "Under section 139, gross income does not include any amount received by an individual as a qualified disaster relief payment.
Planning in a Time of Uncertainty: How COVID-19 is Affecting You Financially - Chad Flanigan, Eide Bailly. "As we continue to experience volatility for weeks and months to come, it’s important to stay focused. Preserving cash flow and reducing risk are critical. Of course these things are easier said than done."
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