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IRS simplifies CARES Act net operating loss refund claims

April 9, 2020 | Blog

IRS makes it easier to claim net operating loss refunds

The IRS yesterday asked taxpayers to wait for additional guidance on filing refund claims arising out of the CARES Act. For taxpayers with 2018 net operating losses, it was a brief wait.

The CARES Act allows all taxpayers with 2018, 2019, and 2020 net operating losses to carry them back five years. Prior to that change, such losses, except for farmers, could only be carried forward. The change naturally made many taxpayers with losses in 2018 eager to file refund claims.

Notice 2020-26 allows taxpayers to claim such refunds using the simplified "Application for Tentative Refund" under Forms 1139 (Corporations) or 1045 (other taxpayers). Taxpayers with 2018 losses now can use the simplified forms if they file by June 30, 2020. 

The IRS also issued Rev. Proc. 2020-24, dealing with some procedural issues. Items covered:

  • How to elect to waive the carryback, which normally must be done when you file the tax return for the carryback year:

A taxpayer within the scope of this revenue procedure may elect under § 172(b)(3) to waive the carryback period for an NOL arising in a taxable year beginning in 2018 or 2019. Such an election must be made no later than the due date, including extensions, for filing the taxpayer’s Federal income tax return for the first taxable year ending after March 27, 2020.

  • Rev. Proc. 2020-24 also provides procedures for excluding "Section 965 years" from a carryback. Sec. 965 required U.S. shareholders of controlled foreign corporations 
  • Finally, Rev. Proc. 2020-24 also allows taxpayers who had NOLs arising in fiscal years straddling January 1, 2018, to carry losses back on Forms 1045 or 1139. 

Related: The CARES Act Has Been Passed—What You Should Know.

 

 


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