Tax Week in a Nutshell – 7.5.20
Updated: Jul 7, 2020
Did you work or play this holiday weekend? For many reading this, I know it was the former but I'm hopeful you also enjoyed the latter somewhat! Before you hit this coming week hard, here's a recap of tax news highlights from the last week.
Deadline Postponement Dead
This is likely not news to many anymore but I couldn’t leave it out! I casually checked the email notification on my phone last Monday night to find the IRS had sent out their statement confirming that taxpayers should file returns or extensions by July 15. The already postponed deadline due to COVID-19 would not be further moved. This was a hot debate item and I talked to people on both sides of the coin. Either way, at least we know and can prepare accordingly.
Reminder a filed extension does not relax the time to pay any tax due, only the time to file a tax return. Estimate what will be due upon return filing and make a payment, if necessary, at extension time.
And don’t forget the state tax return! Watch out for due date differences.
PPP – It’s Alive!
The original June 30th Paycheck Protection Program (PPP) application deadline came and went but in traditional fashion, Congress brought it back to life after the fact. The President signed the bill into law on July 4th, and so now the new PPP application deadline is officially August 8, 2020.
Over $130B in PPP available funding went unused and many businesses in need still had not applied, so the application extension may provide benefits for those who need it yet.
2018 Carryback Claim Confusion
It’s a good news/bad news situation for those who worked their life away trying to get 2018 NOL carryback claims done by the originally stated June 30, 2020 deadline.
Good news: You got them done, nice work! Or if you didn’t, you’re in luck!
Bad news: You didn’t need to stress quite as hard as you did.
The IRS let everyone know [on June 29th] the real due date for calendar year 2018 forms 1045 and 1139 is July 15th, 2020.
What happened? Confusion is what happened, see FAQ #20 here explaining. Notice 2020-23 moved the due date for return filing and other time-sensitive acts taking place between April 1, 2020 and July 14th, 2020 to July 15th, 2020. But Notice 2020-26 related to the 2018 carryback claims indicated a June 30th, 2020 deadline. Since that June 30th deadline falls into the Notice 2020-23 window, the due date is actually July 15th, which is what the IRS FAQ confirmed on June 29th.
Welcome to tax.
PPP Rubberstamped Forgiveness
A bill was introduced this week in the Senate that would streamline forgiveness of Paycheck Protection Program (PPP) loans under $150,000. The idea is for small businesses to have economic certainty and focus efforts on rebuilding rather than having to spend limited resources understanding potentially complex forgiveness rules.
Many are in favor of this concept; stay tuned to see where it goes!
Push for Extended Unemployment Benefits
Senate Democrats introduced the American Workforce Rescue Act, which would extend the $600 increased weekly unemployment beyond the upcoming July 31st, 2020 cliff until a state’s three month average unemployment rate falls below 11%. Full phaseout of the additional funds would be attained when unemployment rates drop below 6%.
“While enhanced unemployment benefits are set to expire in 31 days, it’s clear the unemployment crisis will not.”
Casually Thinking About Casualty Losses
Have you considered if casualty losses apply to asset damages sustained personally given the onslaught of devastation 2020 has provided thus far? Recall that generally, a personal casualty loss deduction is not allowed post-TCJA for tax years 2018-2025 unless under a federally declared disaster. But a couple disasters have been declared already with a potential third on its way:
1) Storms – homes and other personal assets were destroyed in the deadly tornados and other natural disasters hitting parts of the U.S.
2) COVID-19 – I haven’t heard of this yet but got to thinking with another tax mind whether there would be a scenario where this could apply. Potentially scenarios involving losing a job due to the pandemic and subsequently having to sell personal assets at a loss, like a home. It might be worth exploring if this happens to you or a client.
3) Riots – at the time of this post, I don’t believe any states have been granted federal disaster declaration for the recent civil unrest rioting but this week Minneapolis did request for its coverage. If this disaster declaration is granted by the President, look for ways to utilize the personal casualty loss for damaged property.
Also remember that under IRC §165(i)(1) affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return in the year prior to the casualty event. See Publication 547 for details.
That's all for now! I wonder what this week will bring. Until then, enjoy this video of my attempt at fun during this unique socially-distanced Independence Day weekend! Lot of excitement with a letdown upon realizing the wind was not going to blow my way. But as they say, sometimes you gotta be patient and adjust your sails. My gigantic patriotic pinwheel did fly on its own the next day!
Information provided is for educational purposes only and not to be used as tax advice. Please contact your tax and business advisors to review your unique situation.