More COVID-19 Tax Relief: IRS extends additional tax deadlines for individuals to May 17 and affirms deductibility of PPE

The IRS announced that individuals have until May 17, 2021 to meet certain deadlines that would normally fall on April 15th, such as making IRA contributions and filing certain claims for refund.  Additionally, the IRS announced that the purchase of personal protective equipment (PPE), such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of coronavirus are deductible medical expenses.

This follows a previous announcement from the IRS on March 17, 2021, that the federal income tax filing due date for individuals for the 2020 tax year was extended from April 15, 2021, to May 17, 2021.  Notice 2021-21 provides details on the additional tax deadlines which have been postponed until May 17th.

Time to make contributions to IRAs and health savings accounts extended to May 17th

In extending the deadline to file Form 1040 series returns to May 17th, the IRS is automatically postponing to the same date the time for individuals to make 2020 contributions to their individual retirement arrangements (IRAs and Roth IRAs), health savings accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Coverdell education savings accounts (Coverdell ESAs).  This postponement also automatically postpones to May 17, 2021, the time for reporting and payment of the 10% additional tax on amounts includible in gross income from 2020 distributions from IRAs or workplace-based retirement plans.  The IRS is also postponing the due date for Form 5498 series returns related to these accounts to June 30, 2021.

2017 unclaimed refunds – deadline extended to May 17th

For tax year 2017 Federal income tax returns, the normal April 15th deadline to claim a refund has also been extended to May 17, 2021. The law provides a three-year window of opportunity to claim a refund.  If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the May 17, 2021, date.

Additionally, foreign trusts and estates with federal income tax filing or payment obligations, who file Form 1040-NR, now have until May 17, 2021.

2021 AFSP deadline postponed to May 17th

Tax preparers interested in voluntarily participating in the Annual Filing Season Program (AFSP) for calendar-year 2021 now have until May 17, 2021 to file their application with the Internal Revenue Service. The normal due date is April 15th.

First Quarter 2021 estimated tax payment remains due April 15th

IRS’ announcement does not alter the April 15, 2021 deadline for estimated tax payments.  These payments are still due on April 15th. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

Deductibility of PPE

Expenses for masks, hand sanitizers, sanitizing wipes and other personal protective equipment (PPE) used primarily to prevent the spread of COVID-19 will be treated as amounts paid for medical care under Internal Revenue Code (IRC) §213(d).  These expenses are included in Medical Expenses on Schedule A, Itemized Deductions, and the amount in excess of 7.5% of your Adjusted Gross Income is deductible.

Alternatively, the amounts paid for PPE are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).

An Opportunity For Taxpayers Who Owe The IRS

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2021, taxpayers who expect to owe for 2020 should have their 2020 income tax returns done now so that the 2020 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2021.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s extension to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Northern California (Sacramento and San Francisco Bay Area) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Tax Relief During COVID-19: How taxpayers struggling with tax debts can benefit.

If you are struggling financially because of the pandemic you should tap into the IRS’ newest program – the “Taxpayer Relief Initiative” – with its expanded taxpayer options for making payments and alternatives to resolve balances owed.

On November 2, 2020 The Internal Revenue Service announced a number of changes designed to help struggling taxpayers impacted by COVID-19 more easily settle their tax debts with the IRS by establishing a new program called the “Taxpayer Relief Initiative”.  This program follows what was previously established by the IRS earlier in 2020, specifically the “People First Initiative”.

Taxpayers who owe always had options to seek help through payment plans and other tools from the IRS, but the new IRS Taxpayer Relief Initiative is expanding on those existing tools even more.

The revised COVID-related collection procedures will be helpful to taxpayers, especially those who have a record of filing their returns and paying their taxes on time.

Among the highlights of the Taxpayer Relief Initiative:

  • Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of 120 days.
  • The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
  • The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and out of business taxpayers. This taxpayer-friendly approach will occur instead of defaulting the agreement, which can complicate matters for those trying to pay their taxes.
  • To reduce burden, certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient.
  • Some individual taxpayers who only owe for the 2019 tax year and who owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
  • Additionally, qualified taxpayers with existing Direct Debit Installment Agreements may now be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

Additional details on the Taxpayer Relief Initiative

The IRS offers options for short-term and long-term payment plans, including Installment Agreements via the Online Payment Agreement (OPA) system. In general, this service is available to individuals who owe $50,000 or less in combined income tax, penalties and interest or businesses that owe $25,000 or less combined that have filed all tax returns. The short-term payment plans are now able to be extended from 120 to 180 days for certain taxpayers.

Installment Agreement options are available for taxpayers who cannot full pay their balance but can pay their balance over time. The IRS expanded Installment Agreement options to remove the requirement for financial statements and substantiation in more circumstances for balances owed up to $250,000 if the monthly payment proposal is sufficient. The IRS also modified Installment Agreement procedures to further limit requirements for Federal Tax Lien determinations for some taxpayers who only owe for tax year 2019.

In addition to payment plans and Installment Agreements, other solutions for taxpayers who owe taxes include Temporarily Delaying Collection Actions, applying for an Offer in Compromise and Relief from Penalties through penalty abatement.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now at the end of 2020, taxpayers who expect to owe for 2020 should have their 2020 income tax returns done as early as possible in 2021 so that the 2020 liability can be rolled over into any proposal and the requirement to make estimated tax payments will start for 2021.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

If you are having a tax issue, don’t go silent. Don’t ignore the notice arriving in your mailbox. Tax problems don’t get better with time.

Click here for the KahnTaxLaw Coronavirus Resource Center for more information on COVID-19 tax relief.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Diego County (Carlsbad) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Where Is My IRS Second Economic Impact Payment?

Starting December 29, 2020 the IRS begins delivering the second round of Economic Impact Payments

On December 27, 2020 President Trump signed the $900 million Stimulus Bill formally known as the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (the “CARES Act II”) to provide assistance to workplaces and employees. The CARES Act II provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the immediate cash payments by the Federal government to qualifying taxpayers.

Who is eligible for the economic impact payment?

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $600 for individual taxpayers or if married, $1,200 for married couples.  An additional $600 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple. Nonresident alien individuals and dependents who are 17 and older are ineligible to receive the payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

How will the IRS know where to send my payment?

The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

The cash payments will be based on the most recent tax information available to the IRS looking at a taxpayer’s 2019 tax return filed and if it has not yet been filed, then the taxpayer’s 2018 tax return filed.

The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

If you haven’t filed taxes yet for one of those years, you should still consider having them completed and filed with the IRS so that if further legislation is passed in 2021 extending additional relief, the IRS will have your information to direct deposit any future payments.

The IRS does not have my direct deposit information. What can I do?

If the IRS does not have your bank account information, your check will be mailed to you at your last known address.  NO ONE FROM THE IRS WILL CALL YOU FOR THIS INFORMATION.  Checks should be delivered sometime in January 2021.

I am not typically required to file a tax return. Can I still receive my payment?

The IRS developed a web-based portal for individuals to provide their income information and banking information to receive an economic impact payment. The web-based portal requires you to enter: your personal information, marital status, dependents, bank account information and other information to verify your identity. If you did this already for the first economic impact payment, the IRS should be using this same information for delivering funds for the second economic impact payment.  NO ONE FROM THE IRS WILL CALL YOU FOR THIS INFORMATION.

Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?

Yes. Anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

If you haven’t filed taxes yet for one of those years, you should still consider having them completed and filed with the IRS so that if further legislation is passed in 2021 extending additional relief, the IRS will have your information to direct deposit any future payments.

The IRS developed a web-based portal for individuals to provide their income information and banking information to receive an economic impact payment. The web-based portal requires you to enter: your personal information, marital status, dependents, bank account information and other information to verify your identity. If you did this already for the first economic impact payment, the IRS should be using this same information for delivering funds for the second economic impact payment.  NO ONE FROM THE IRS WILL CALL YOU FOR THIS INFORMATION.

When should I expect to receive my second economic impact payment?

The Treasury Department announced that the initial direct deposit payments may begin arriving as early as December 29th for some and will continue into next week. Paper checks will begin to be mailed, Wednesday, December 30th.  Some taxpayers may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of January 4, 2021. As with the first round of payments under the CARES Act, most taxpayers will receive these payments by direct deposit. For Social Security and other beneficiaries who received the first round of payments via Direct Express, they will receive this second payment the same way.  Anyone who received the first round of payments earlier this year but doesn’t receive a payment via direct deposit will generally receive a check or, in some instances, a debit card. For those in this category, the payments will conclude in January 2021.

What happens when I file a 2020 tax return next year?

Keep in mind that if your 2020 tax return will reflect an AGI higher than the above applicable threshold, you should expect to pay back at least some or perhaps all of the cash payments you received under the CARES Act.  Also, eligible individuals who did not receive an Economic Impact Payment this year – either the first or the second payment – will be able to claim it when they file their 2020 taxes in 2021.

Beware Of New IRS Scam!

You get a call from someone claiming to be working for the IRS claiming:

 “We need your personal information in order for you to claim the coronavirus stimulus money.”

This appears to be an identity theft scheme to obtain recipients’ personal and financial information so the scammers can provide the IRS with their banking information to get your economic impact payment deposited into their account.  In reality, the IRS WILL NOT CALL YOU! Federal aid will either be deposited via account information the IRS already has from your tax filings or they will send you a check.

Where can I get more information?

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.  You can also check out the KahnTaxLaw Coronavirus Resource Center.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now at the end of 2020, taxpayers who expect to owe for 2020 should have their 2020 income tax returns done as early as possible in 2021 so that the 2020 liability can be rolled over into any proposal and the requirement to make estimated tax payments will start for 2021.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Beware That Soon IRS Will Be Unleashed And Fully Operational

Relief Under “The IRS People First Initiative” Expires July 15, 2020. 

IRS Coronavirus Tax Relief 

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS Commissioner Chuck Rettig’s Announcement Of “The IRS People First Initiative”

On March 25, 2020 the IRS issued a press release  announcing a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions in what it calls “The IRS People First Initiative”.

These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions. The IRS will be temporarily modifying the following activities as soon as possible; the projected start date will be April 1, 2020 and the effort will initially run through July 15, 2020. During this period, to the maximum extent possible, the IRS will avoid in-person contacts.

Highlights of the key actions in the IRS People First Initiative include:

Relief For Existing Installment Agreements –For taxpayers under an existing Installment Agreement, payments due between April 1, 2020 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.

Preservation Of Offers in Compromise (OIC) – The IRS is taking several steps to assist taxpayers in various stages of the OIC process:

  • Pending OIC applications– The IRS will allow taxpayers until July 15, 2020 to provide requested additional information to support a pending OIC. In addition, the IRS will not close any pending OIC request before July 15, 2020, without the taxpayer’s consent.
  • OIC Payments– Taxpayers have the option of suspending all payments on accepted OICs until July 15, 2020, although by law interest will continue to accrue on any unpaid balances.
  • Delinquent Return Filings– The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year  However, taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.

Limited Suspension Of Field Collection Activities – Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended through July 15, 2020. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.

Suspension Of New Automated Liens and Levies – New automatic, systemic liens and levies will be suspended during through July 15, 2020.

Suspension Of Passport Certifications to the State Department – IRS will suspend new certifications to the Department of State for taxpayers who are “seriously delinquent” through July 15, 2020.  Certification prevents taxpayers from receiving or renewing passports.

Suspension Of Forwarding New Accounts To Private Debt Collection – New delinquent accounts will not be forwarded by the IRS to private collection agencies to work through July 15, 2020.

Limited Suspension Of New Field, Office and Correspondence Audits – Through July 15, 2020, the IRS will generally not start new field, office and correspondence examinations. We will continue to work refund claims where possible, without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.

Suspension Of In-Person Meetings  In-person meetings regarding current field, office and correspondence examinations will be suspended through July 15, 2020; however, these examinations can continue remotely, where possible.

Earned Income Tax Credit and Wage Verification Reviews – Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.

Independent Office of Appeals – Appeals employees will continue to work their cases. Although Appeals is not currently holding in-person conferences with taxpayers, conferences may be held over the telephone or by video-conference.

Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when IRS enforcement activity regains momentum after July 15, 2020, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Paycheck Protection Program Changes Are Here!

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the access of funds through banks to qualifying businesses and self-employed taxpayers to pay for payroll, insurance premiums and mortgage, rent and utility payments.  This is known as the “Paycheck Protection Program” (PPP).

Under this program, small businesses with 500 or fewer employees including not-for-profits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors are eligible for loans to pay up to eight weeks of payroll costs including benefits as well as other costs. The PPP launched in early April with $349 billion in funding that was exhausted in less than two weeks. Congress then provided an additional $310 billion in funding.

However, there has been criticism of this program as many businesses have been subject to continued lockdown orders preventing them to achieve loan forgiveness within the original 8-week timeframe, and businesses located in metropolitan areas with higher-than-average rent expenses who would have greater difficulty achieving loan forgiveness within the pre-existing terms of PPPP.  So on June 5, 2020 President Trump signed the Paycheck Protection Flexibility Act which makes it easier for businesses to secure the full benefits provided in this program.

What can PPP funds be used to pay?

PPP funds can be used to pay payroll costs including benefits (with salaries being under $100,000 per employee), interest on mortgages, rent payments, and utility bills; however, no more than 40% (was previously 25%) of the funds can be used for non-payroll costs.

What counts as payroll costs?

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  • State and local taxes assessed on compensation; and
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

What counts as non-payroll costs?

  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.

Under what circumstances do I have to repay these PPP funds received?

The loan of the PPP funds will be forgiven if you maintain your pre-existing employees at their pre-existing salary levels.  Also, that you do not pay out more than 40% (was previously 25%) of the PPP funds for non-payroll costs specifically limited to: interest on mortgages, rent, and utilities.

How soon can one apply?

Starting April 3, 2020, small businesses and sole proprietorships affected by the coronavirus pandemic can apply for loans under the PPP.  Independent contractors and self-employed individuals can apply starting April 10, 2020.  The application period ends June 30, 2020.

Where do I apply?

The application can be found here on the United States Treasury website, along with details for borrowers and lenders.  After completing the application, you would then go to any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit www.sba.gov for a list of SBA lenders.

How large can my loan be?

Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.

How many loans can I take out under PPP?

Only one.

Are there any charges or requirements for collateral or personal guarantees?

No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

What if I do not spend all the funds or make non-qualifying expenditures?

The amount of loan forgiveness will be reduced including if full-time headcount declines or if salaries and wages decrease.  Also, if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 24 weeks (was previously 8 weeks) after getting the loan.  Current PPP borrowers who applied before June 5, 2020 can keep the original eight-week period if they choose not to extend the period to 24 weeks.

Do I need to restore workforce levels and wages to pre-pandemic levels?

Yes, but borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels in order to apply for full forgiveness. This must be done by December 31, 2020 (was previously June 30th).

Are there any exceptions to secure loan forgiveness if not fully restoring workforce levels?

Yes, there are two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce.

  1. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic.
  2. The new law allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to February 15, 2020, levels due to COVID-19 related operating restrictions.

How can I request loan forgiveness?

You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments.

Can I appeal a decision by the lender denying loan forgiveness?

Yes.

What is my interest rate?

1% fixed rate.

When do I need to start paying interest on my loan?

Unless the loan is forgiven, all payments are deferred for 10 months (was previously 6 months) after the end of the covered period; however, interest will continue to accrue over this period.

When is my loan due?

In 5 years (was previously 2 years). Current PPP borrowers who applied before June 5, 2020 can keep the original 2-year period if they choose not to extend the period to 5 years.

Can I pay my loan earlier than 5 years?

Yes. There are no prepayment penalties or fees.

Can I delay payment of payroll taxes as provided under the CARES Act?

Yes (was previously no).  The CARES Act provides for a deferral of the employer’s share of payroll taxes for the period beginning on March 27, 2020 to January 1, 2021.

What Should You Do?

Let the attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California assist you in securing the maximum amount of financing allowed and to maximize the amount of loan forgiveness.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

U.S. Attorney’s Office Files Charges In Rhode Island Against Two Borrowers Alleging Fraud In Seeking Paycheck Protection Loans

This is the first case in the nation to be charged with fraudulently seeking CARES Act SBA Paycheck Protection Loans.

The U.S. Attorney’s Office for the District Of Rhode Island announced on May 5, 2020 in a press release that two businessmen have been charged with allegedly filing bank loan applications fraudulently seeking more than a half-million dollars in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Charges Filed By The U.S. Attorney’s Office

David A. Staveley, aka Kurt D. Sanborn, 52, of Andover, Massachusetts, and David Butziger, 51, of Warwick, Rhode Island, are charged with conspiring to seek forgivable loans guaranteed by the SBA, claiming to have dozens of employees earning wages at four different business entities when, as alleged by prosecutors, there were no employees working for any of the businesses.

Staveley and Butziger are charged by way of a federal criminal complaint with conspiracy to make false statement to influence the SBA and conspiracy to commit bank fraud. Additionally, Staveley is charged with aggravated identity theft. Butziger is charged with bank fraud.

According to court documents unsealed in U.S. District Court in Providence, Rhode Island, the fraudulent loan requests were to pay employees of businesses that were not operating prior to the start of the COVID-19 pandemic and had no salaried employees, or, as in one instance, to pay employees at a business the loan applicant did not own.

Allegedly, Staveley and Butziger discussed via email the creation of fraudulent loan applications and supporting documentations to seek loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program (PPP). It is alleged that Staveley posed as his brother in real estate transactions.

It is alleged that Staveley claimed in loan applications requesting more than $438,500 that he had dozens of employees at three restaurants he owned, two in Warwick, Rhode Island, and one in Berlin, Massachusetts. An investigation determined that one of the Rhode Island restaurants, the former Remington House, and the Massachusetts restaurant, On The Trax, were not open for business prior to the start of the COVID-19 pandemic, at the time the loan applications were submitted, or at any time thereafter. Moreover, Staveley did not own or have any role in the second Rhode Island restaurant, Top of the Bay, for which he was seeking financial relief.

According to court documents, Staveley’s Massachusetts restaurant was closed by March 10, 2020, when the town of Berlin revoked the business’ liquor license for numerous reasons, including that “Sanborn” allegedly misrepresented that his brother owned the restaurant. Investigators obtained information that Staveley/Sanborn allegedly used his brother’s personal identifying information in other real estate transactions as well.

According to court documents, it is alleged that on April 6, 2020, Butziger filed an application seeking a $105,381 SBA loan under the PPP as owner of an unincorporated entity named Dock Wireless.  Butziger claimed in documentation filed with the bank and in a telephone call with an FBI undercover agent posing as a bank compliance officer that he had seven full-time employees on Dock Wireless’ payroll, including himself. Butziger falsely represented to the agent that he brought the employees on full-time on January 1, 2020, and laid them off at the end of March. Butziger claimed the employees continued to work without being paid through April 2020, and that he would use SBA PPP funds to pay them.

The Rhode Island State Department of Revenue provided information to the IRS of having no records of employee wages having been paid in 2020 by Butziger or Dock Wireless. Agents interviewed several of the supposed Dock Wireless employees who reported that they never worked for Butziger or Dock Wireless.

Keep in mind that the filing of charges in a federal criminal complaint is merely an accusation. A defendant is presumed innocent unless and until proven guilty.

The CARES Act

The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP.  In April 2020, Congress authorized over $300 billion in additional PPP funding.

The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1%.  PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities.  The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75% of the forgiven amount for payroll.

On April 23, 2020, the SBA issued guidance in the form of an additional FAQ. The guidance, outlined in FAQ 31, reminds borrowers that they “should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

More specifically, FAQ 31 provides:

Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?

Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.

Ramifications for Certifications Not Made in Good Faith

Borrowers that fail to make their certifications in good faith may be subject to civil and criminal penalties. Any borrower who knowingly makes a false statement to obtain forgiveness of an SBA-guaranteed loan is punishable under the law, including 18 USC §§1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC §645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a Federally insured institution, under 18 USC §1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.  The Federal District Courts could expect to see more of these cases as the SBA and U.S. Treasury audits any borrower that has received over $2 million in PPP loan proceeds and conducts spot checks for smaller loans.

What Should You Do?

Whether you are looking to legally optimize the disbursement of your PPP Loan proceeds to assure loan forgiveness or defending charges of certification not made in good faith, it is important that you seek legal counsel as soon as possible to preserve your rights and/or mitigate your losses.  The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Francisco Bay Area (including San Jose and Walnut Creek) and elsewhere in California know exactly what to say and how to handle issues with Federal agencies including the SBA, U.S. Treasury and the IRS.  Our experience and expertise not only level the playing field but also puts you in the driver’s seat as we take full control of resolving your tax problems. Also, if you are involved in cannabis, check out what our cannabis tax attorney can do for you.  Additionally, if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

What To Do If Your Economic Impact Payment Is Wrong

I think the amount of my Economic Impact Payment is incorrect.  What can I do?

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the immediate cash payments by the Federal government to qualifying taxpayers.

Who is eligible for the economic impact payment?

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $1,200 for individual taxpayers or if married, $2,400 for married couples.  An additional $500 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple.

Nonresident alien individuals and a person who is the dependent of another are ineligible to receive the payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

So if your economic impact payment is too low, how do you claim the missing funds?

The Treasury Department has reported that over 130 million Americans have received their economic impact payment.  While many have received the correct payment amount, some have reported receiving payments that were too low. One of the most common cases appears to be parents who did not receive $500 payments for each qualifying dependent child, despite filing a 2018 or 2019 tax return claiming children.

So if your economic impact payment was too low, how do you claim the missing funds?  Question #19 of the Frequently Asked Questions section on the IRS website provides the following answer:

“If you did not receive the full amount to which you believe you are entitled, you will be able to claim the additional amount when you file your 2020 tax return.  This is particularly important for individuals who may be entitled to the additional $500 per qualifying child dependent payments.”

In short, you’ll have to wait until at least the end of January 2021 to claim the missing amount as a tax credit, when you file your 2020 taxes.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you. 

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. You can also check out the KahnTaxLaw Coronavirus Resource Center.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Still Waiting For Your IRS Economic Impact Payment?

Still Waiting For Your IRS Economic Impact Payment?

As the IRS closed its web-based portal for non-filers and taxpayers for whom the IRS does not have your Direct Deposit Information, taxpayers with a filing requirement must file a tax return to get an Economic Impact Payment.

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the immediate cash payments by the Federal government to qualifying taxpayers.

Who is eligible for the economic impact payment?

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $1,200 for individual taxpayers or if married, $2,400 for married couples.  An additional $500 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple.

Nonresident alien individuals and a person who is the dependent of another are ineligible to receive the payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

How will the IRS know where to send my payment?

The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

The cash payments will be based on the most recent tax information available to the IRS looking at a taxpayer’s 2019 tax return filed and if it has not yet been filed, then the taxpayer’s 2018 tax return filed.

The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

So if you haven’t filed taxes yet for one of those years, now is a good time.

I need to file a tax return. How long are the economic impact payments available?

For those concerned about visiting a tax professional in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

What happens when I file a 2020 tax return next year? 

Keep in mind that if your 2020 tax return will reflect an AGI higher than the above applicable threshold, you should expect to pay back at least some or perhaps all of the cash payments you received under the CARES Act.

Beware Of New IRS Scam!

You get a call from someone claiming to be working for the IRS claiming:

“We need your personal information in order for you to claim the coronavirus stimulus money.”

This appears to be an identity theft scheme to obtain recipients’ personal and financial information so the scammers can provide the IRS with their banking information to get your economic impact payment deposited into their account.

In reality, the IRS WILL NOT CALL YOU! Federal aid will either be deposited via account information the IRS already has from your tax filings or they will send you a check.

Where can I get more information?

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.  You can also check out the KahnTaxLaw Coronavirus Resource Center.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS Announces Temporary Procedures To Fax Forms 1139 And 1045 Due To COVID-19

IRS Announces Temporary Procedures To Fax Forms 1139 And 1045 Due To COVID-19

President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.

On April 13, 2020 the IRS issued temporary procedures to fax certain Forms 1139 and 1045 due to COVID-19.

The following provisions have retroactive effect that business may be able to claim refunds of previously paid taxes by filing amended tax returns (using Forms 1139 or 1045) for 2018:

Suspension Of Restrictions On The Use Of Net Operating Losses (Section 2303 of The CARES Act)

Under the 2017 Tax Cuts And Jobs Act (TCJA), net operating losses were no longer eligible to be carried back, and their usage, when carried forward, was limited to 80% of taxable income. Under the CARES Act, net operating losses created in the 2018, 2019 and 2020 tax years can be carried back five years with no limitation on their usage.

Suspension Of Prior Business Loss Limitations (Section 2303 of The CARES Act)

Under the TCJA, taxpayers (other than C corporations) were limited in utilizing net business losses (i.e., business losses in excess of business income). These taxpayers were limited to using only $250,000 ($500,000 on a married joint return) of net business losses against non-business income. The CARES Act suspends this rule so that net business losses for 2018, 2019 and 2020 can be used without limit.

Immediate Refund Of Corporate AMT Credit (Section 2305 of The CARES Act)

The TCJA provided that the alternative minimum tax no longer applied to C corporations.  Those corporations with AMT credits were given the ability to recover these amounts as tax reductions and refunds over a four-year period (2018 to 2021.) The CARES Act cuts this refund period in half (2018 to 2019) and corporations can make an election to recover the AMT credit entirely in 2018.

Only claims allowed under sections 2303 and 2305 of the CARES Act that are made on Form 1139 or Form 1045 are eligible refund claims under temporary procedures described below

Temporary Procedures For Digital Transmissions Of Forms 1139 Or 1045

Starting on April 17, 2020 and until further notice, the IRS will accept eligible refund claims Form 1139 submitted via fax to 844-249-6236 and eligible refund claims Form 1045 submitted via fax to 844-249-6237. Before then, these fax numbers will not be operational.

File size limitations: A maximum of 100 pages can be initially faxed to either of the fax numbers listed above. If additional documentation is required to be attached or deemed to be necessary, taxpayers will be notified during the processing of the Form 1139 or Form 1045.

How does the process change from the normal hard copy mailing requirement?

Previously, these forms could be filed only via hard copy delivered through the USPS or by a private delivery service. This temporary procedure to accept these forms via fax permits the IRS to make the relief in the CARES Act available to taxpayers before IRS processing centers are able to reopen. The procedures to process claims will remain the same – the only difference is to allow an additional method to file eligible refund claims.

If I previously mailed in my Form 1139 or Form 1045, can I now fax it to these numbers?

Yes.  The IRS states that if you previously mailed a hard copy of either of these forms that is an eligible refund claim (because it contains changes permitted by the AMT and NOL provisions of the CARES Act identified above) after March 27, 2020, you can now submit that same claim to the fax numbers stated above starting on April 17.

Is there an order of priority in processing Form 1139 and Form 1045 under this temporary fax procedure?

The IRS states that all claims (including those received before IRS processing centers were closed) will be processed in the order of receipt.

What happens if a document faxed as instructed above is deemed an ineligible refund claim under this temporary fax procedure?

The IRS states it will be processed after normal operations resume.

Section 2303 of the CARES Act amended section 172(b)(1) to provide for a carryback of any net operating loss (NOL) arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the taxable year in which the loss arises (carryback period). I am carrying back an NOL to a tax year in which I have a section 965(a) inclusion (section 965 year) and am now entitled to a refund for the section 965 year because my section 965 net tax liability is fully paid. May I use Form 1139 or Form 1045, as applicable, to apply for a refund for the section 965 year?

Yes.  The IRS states you may disregard the instructions for Form 1139 and Form 1045 which prohibit taxpayers from using these forms to apply for refunds for section 965 years. The instructions to these forms will be updated to reflect this change. However, please be aware that because the CARES Act added section 172(b)(1)(D)(iv) to provide that a taxpayer who has a carryback to a section 965 year is deemed to have made a section 965(n) election that limits the amount of the loss that can be carried back to each such year, an NOL can be carried back only to reduce income in excess of the amount of the net section 965(a) inclusion. The IRS expects to issue additional instructions on filing requests for tentative refunds for taxpayers with outstanding section 965(h) net tax liabilities, so that these requests and liabilities can be identified, routed, and tracked appropriately, and so that payment schedules can be adjusted to avoid unintentional or erroneous acceleration of deferred section 965(h) installment payments, delays in refunds, or other processing complications.

Will the IRS be establishing a similar procedure for Form 4466 “Corporation Application for Quick Refund of Overpayment of Estimated Tax”?

No.  The IRS states that the Form 4466 must be filed in accordance with existing form instructions. If a Form 4466 is faxed to one of the fax numbers noted above, it will not be accepted for processing.

Will this temporary faxing process become permanent?

No.  The IRS stated that accepting faxed versions of these forms that are normally delivered through the USPS or by a private delivery service is meant as a short-term measure to assist taxpayers in receiving refunds provided under the CARES Act as quickly as possible.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes and with these tax law changes it is possible that business can claim refunds now by filing an amended return.  If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Northern California (including Sacramento, San Francisco and San Jose) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.