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The Internal Revenue Service issued guidance providing tax relief under the CARES Act for taxpayers with net operating losses (NOLs). The IRS also recently issued tax relief for partnerships filing amended returns.

Relief for taxpayers claiming NOLs

Revenue Procedure 2020-24 provides guidance to taxpayers with net operating losses (NOLs) that are carried back under the CARES Act by providing procedures for:

  • Election to waive NOL carryback waives the carryback period in the case of a net operating loss arising in a taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2021,
  • Election to exclude section 965 years certain amounts of foreign income subject to transition tax that would normally have been included as income during the five-year carryback period; and,
  • Election of special rule to waive a carryback period, reduce a carryback period, or revoke an election to waive a carryback period for a taxable year that began before Jan. 1, 2018, and ended after Dec. 31, 2017.

Six month extension for filing NOL forms

In Notice 2020-26, the IRS grants a six-month extension of time to file Form 1045 or Form 1139, as applicable, to do a carryback of a NOL that arose in any taxable year that began during calendar year 2018 and ended on or before June 30, 2019.  Individuals, trusts, and estates would file Form 1045, and corporations would file Form 1139.

The deadline for corporations to claim a minimum tax credit described in Sec. 53(e)(5) is December 30, 2020, but in order to file one application for a tentative refund and claim both the NOL carryback and the minimum tax credit at the same time, the taxpayer must do so by the earlier of the two deadlines.

Relief for partnerships with NOLs

IRS Revenue Procedure 2020-23 allows eligible partnerships to file amended partnership returns using a Form 1065, U.S. Return of Partnership Income, by:

  • Checking the Amended Return box;
  • Issuing amended Schedules K-1, Partner’s Share of Income, Deductions, Credits, to each of its partners; and,
  • Clearly writing “FILED PURSUANT TO REV PROC 2020-23” at the top of the amended return and attach a statement with each Schedule K-1 sent to its partners with the same notation.

Source: IRS

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