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March 26, 2020 | COVID-19

Summary of Recent IRS Communications

As is true for many areas of our lives these days, new tax developments are emerging daily. Below is a quick recap of the tax news most likely to impact our clients.

Tax Return and Payment Deadlines:

As of March 27, the IRS has deferred the deadline for all income and gift tax returns and their associated payments originally due April 15. These returns and payments can be deferred until July 15 with no interest or penalties to accrue. Further, most of the states have updated their tax deadlines to align with the IRS; the few states that have not yet acted are expected to prior to April 15.

Note that, as of today, subsequent deadlines have not yet been deferred. For example, Foundation income tax returns and payments are currently still due May 15. Likewise, the 2020 second quarter estimated tax payment is still due June 15. Depending on the progression of the COVID-19 in our society and the length of the shelter-in-place guidelines, it is possible additional deferrals will be granted.

Tax Implications of Stimulus Package:

On March 27 the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2.2 trillion stimulus package, was signed by President Trump. The CARES Act includes provisions relating to:

  • Individual, direct cash payments of $1,200 for individuals and $2,400 for married joint filers for taxpayers who made less than $75,000/$150,000 (individuals/married joint filers).
  • IRA accounts:
    • Required Minimum Distributions (RMDs) are waived for calendar 2020; no distributions are required.
    • Early distributions of $100,000 from qualified retirement accounts made for Coronavirus-related purposes are not subject to the 10% penalty and the tax may be paid over three years.
  • Charitable deductions:
    • Taxpayers that do not itemize will still be able to deduct up to $300 of charitable gifts in an above the line deduction in 2020.
    • The AGI income limitation on charitable deductions increases to 100% in 2020.
  • Five-year Net Operating Loss (NOL) carryback without taxable income limitation is brought back for 2018-2020.
    • Taxpayers, that generated NOLs in 2018 and were previously unable to carry back this loss to prior years, may now amend earlier tax returns and claim the NOL to obtain a tax refund.
    • NOLs may now offset 100% of income rather than the 80% limitation implemented under the 2017 TCJA tax law.
  • Excess business loss rules suspended for 2018-2020.
    • The 2017 TCJA tax law limiting business losses to $500,000/year is suspended and there is now no limitation on business losses.
    • Taxpayers with excess business losses limited in 2018 will need to amend their 2018 Form 1040.
  • Deferral of Employer’s Social Security payroll payments
    • The CARES Act allows employers (including self-employed individuals) to defer payment of the 6.2% share of SS payroll taxes on 2020 employee wages paid after March 27, 2020 over two years.
  • Small Business Loans are available for small businesses (generally up to 500 employees).
    • Loan forgiveness may be available if the loans are used to pay certain, specified expenses from March 1 to June 30 to help retain employees.

This story was updated on April 2, 2020 from its original version to reflect more recent information from the IRS.