Relief for Businesses with Net Operating Losses

May 4, 2020 | Newsletter

Relief for Businesses with Net Operating Losses

Taxpayers with net operating losses (NOLs) form a business are provided tax relief under the CARES Act. Tax relief for partnerships filing amended returns is provided as well. Let’s take a look at three key points:

1. Claiming NOLs

Taxpayers with net operating losses that are carried back under the CARES Act are now able to:

  • Waive the carryback period in the case of a net operating loss arising in a taxable year beginning after December 31, 2017, and before January 1, 2021
  • Disregard certain amounts of foreign income subject to transition tax that would normally have been included as income during the five-year carryback period; and
  • Waive a carryback period, reduce a carryback period, or revoke an election to waive a carryback period for a taxable year that began before January 1, 2018, and ended after December 31, 2017.

2. Six-month Extension Available to File NOL Forms

There is now a six-month extension of time for individuals, trusts, and estates to file Form 1045, Application for Tentative Refund, and corporations to file Form 1139, Corporation Application for Tentative Refund, with regard 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.

3. Partnerships with NOLs

Eligible partnerships are now allowed to file amended partnership returns using a Form 1065, U.S. Return of Partnership Income. The option to file amended returns only applies to partnerships that filed Forms 1065 and furnished Schedules K-1 for the partnership taxable years beginning in 2018 or 2019. To take advantage of the option to file an amended return check the “Amended Return” box and issue amended Schedules K-1, Partner’s Share of Income, Deductions, Credits, to each partner. Partnerships filing these amended returns should write “FILED PURSUANT TO REV PROC 2020-23” at the top of the amended return.

Don’t hesitate to call the office if you have any questions or need assistance.

Choosing the Optimal Accounting Method for Tax Savings

Choosing the Optimal Accounting Method for Tax Savings

The accounting method your business uses to report income for tax purposes, either cash or accrual, can significantly impact your tax bill. While the cash method can offer tax-saving opportunities, the accrual method may in some cases be more appropriate or even...

What’s Your Business Exit Strategy?

What’s Your Business Exit Strategy?

Ever since you became a business owner, you’ve focused on growing revenue, managing expenses and leveraging tax advantages. But don’t overlook a critical element of your long-term financial well-being, that is, a business exit strategy. Ideally, your exit strategy...

Marriage and Taxes: Key Changes After Saying ‘I Do’

Marriage and Taxes: Key Changes After Saying ‘I Do’

It may not be as fun to plan as the wedding venue, invitations and attire, but marriage can result in changes affecting essential tax issues that need prompt attention following the wedding: Name. If your name has changed, report it to the Social Security...