William Byrnes' Tax, Wealth, and Risk Intelligence

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80% taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50% by December 31, 2021 and the remaining 50% by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More