The 2020 CARES Act, which put over $2 trillion into the hands of American families and businesses, included a potentially beneficial tax provision for business owners. Before the CARES Act, the Tax Cuts and Jobs Act of 2017 changed the rules for net operating losses to prevent losses from being carried back. That meant that if your business, for example, had profit in 2017 which you paid taxes on, but then a subsequent loss in 2018, the loss had to be carried forward to be applied to future years. The CARES Act now allows those net operating losses to be carried back to the previous two years, making it easier for business owners to potentially apply for refunds that can be used for business cash flows.
Under the CARES Act, losses can now be applied back to the previous five years. For example, if your business has a loss on the 2019 tax return, the loss can now be carried back and applied to any taxable profit from 2018, 2017, 2016, 2015 and 2014, leaving many opportunities to get some tax money back in the hands of taxpayers. The rule only applies to losses generated in 2018, 2019 and 2020.
To claim the loss carryback and recover any potential tax dollars, taxpayers must either file an amended return for the year they are claiming the loss or file form 1139 to claim the refund. The IRS recently modified its processing procedures for Form 1139 to allow taxpayers to fax the form for faster refund processing. Temporary procedures are found on the IRS.gov website.
Other recent tax items to keep in mind:
- The first and second quarter estimated tax payment due dates were pushed back to July 15th along with the 2019 filing deadline for many returns. Be sure to look at individual state filing and estimate due dates as not every state followed suit with Federal guidelines
- A friendly reminder that Unemployment benefits are taxable income for the year in which they were received, and beneficiaries typically do not have Federal and state taxes withheld from unemployment checks. Given the extra unemployment funds received by many, we recommend looking at adjusted withholdings or estimated payments that may need to be modified for the latter half of the year