June 4 Update
House Bill H.R. 7010 passed the Senate and is now on its way to the President to sign. In addition to amendments relating to the PPP loan program, the bill provides that the deferral of employment taxes is now available even for taxpayers who have PPP loans that re forgiven under the CARES Act. This will allow taxpayers who obtain PPP loans and intend to apply for loan forgiveness to also defer the applicable employment taxes.
April 30, 2020 Update
The IRS has issued Notice 2020-32, which provides further guidance on some certain tax consequences associated with PPP loans. In particular, the IRS has confirmed that expenses paid with PPP loans will not be deductible to the extent attributable to the portion of the loan forgiven.
The Internal Revenue Service announced further tax relief for individuals, trusts, estates, corporations and other non-corporate tax filers.
Individuals and Businesses Extensions
Penalties and interest have been waived for every U.S. taxpayer, including those living and working abroad, who wish to wait until July 15, 2020 to file their 2019 federal tax return and/or pay any taxes owed. Should an individual need an extension beyond the July 15 deadline, they must file Form 4868.
A business who needs an extension must file Form 7004. Granted extensions will allow individuals and business owners until October 15, 2020 to file. This extension will not extend the July 15 deadline to pay taxes owed. Taxpayers requesting the October extension should estimate their tax liability and pay in full by July 15 to avoid accumulating interest and penalties.
Estimated Tax Payment and Unclaimed Refunds
It is important to note that any individual or corporation that pays taxes quarterly and has a payment due after April 1, 2020 and before July 15, 2020 can now wait until July 15 to make that payment, without penalty. Additionally, the three year window to claim a tax refund (i.e., unclaimed refunds) from 2016 has been extended to July 15, 2020.
Relief for taxpayers claiming NOLs
On Thursday, the IRS issued Revenue Procedure 2020-24, which provides guidance to taxpayers with net operating losses (“NOLs”) that are carried back under the CARES Act. Procedures outlined within are:
- waiving the carryback period in the case of a loss after Dec. 31, 2017 and before Jan. 1, 2021;
- disregarding certain foreign income subject to transition tax in the past 5 years; and
- waiving, reducing a carryback period, or revoking an election to waive a carryback period for a taxable year that ended after Dec. 31, 2017.
Additionally, the IRS provided guidance for partnerships with NOLs in Revenue Procedure 2020-23. Eligible partnerships may now file amended partnership returns using Form 1065, by checking the “Amended Return” box, and writing “FILED PURSUANT TO REV PROC 2020-23” at the top of the amended return. Amended Schedule K-1s, Partner’s Share of Income, Deductions, and Credits must also be issued to each partner.
Extension to file NOL Forms
Lastly, individuals, trusts and estates filing their NOL Form 1045, or corporations filing their NOL Form 1139, have been granted a six month extension under IRS Notice 2020-26. This extension is with respect to the carryback of a NOL that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019.