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Relief for Businesses with Net Operating Losses

09/14/2020

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.

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