CARES Act Provides Favorable Tax Treatment for Withdrawals from Retirement Plans and IRAs

Individuals and businesses should know that the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides favorable tax treatment for withdrawals from retirement plans and Individual Retirement Accounts (IRAs). Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.

Individuals eligible to take coronavirus-related withdrawals may also, until September 22, 2020, be able to borrow as much as $100,000 (up from $50,000) from a workplace retirement plan, if their plan allows. Loans are not available from an IRA. For eligible individuals, plan administrators can suspend, for up to one year, plan loan repayments due on or after March 27, 2020, and before January 1, 2021. A suspended loan is subject to interest during the suspension period, and the term of the loan may be extended to account for the suspension period.

In addition, to be eligible for COVID-19 relief, coronavirus-related withdrawals or loans can only be made to an individual if:

• The individual is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetics Act);


• The individual’s spouse or dependent is diagnosed with COVID-19 by such a test; or


• The individual, their spouse or a member of the individual’s household experiences adverse financial consequences as a result of: (1) being quarantined, furloughed or laid off, having work hours reduced, being unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19; or (2) closing or reducing hours of a business owned or operated by the individual, the individual’s spouse, or a member of the individual’s household, due to COVID-19.

Individuals and businesses can learn more about these provisions by contacting a tax professional for assistance.  Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division and Criminal Division.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Newport Beach and Yorba Linda, California

Tel: (949) 397-2292 (Newport Beach Office)

Tel: (714) 463-4430 (Yorba Linda Office)

New Coronavirus Aid for Businesses to Carryback Losses Five-Years

Proposed and temporary regulations provide guidance for consolidated groups regarding net operating losses (NOLs). Specifically, the proposed regulations explain application of the rule enacted by the Tax Cuts and Jobs Act which limits the NOL deduction to 80 percent of taxable income less pre-2018 NOLs, effective for tax years beginning after 2020. In addition, the proposals remove obsolete provisions from the rules for consolidated groups that contain both life insurance companies and nonlife insurance companies.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows NOLs arising in tax year to be carried back five years, effective for NOLs arising in tax years beginning after 2017 and before 2021. Temporary regulations allow certain acquiring consolidated groups to make an election to waive all or a portion of the pre-acquisition portion of this extended carryback period for certain losses attributable to certain acquired members.

Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division and Criminal Division.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Newport Beach and Yorba Linda, California

Tel: (949) 397-2292 (Newport Beach Office)

Tel: (714) 463-4430 (Yorba Linda Office)

 

IRS Announces More Than $1.5 Billion of Unclaimed Tax Refunds for 2016 Tax Year

The IRS announced that more than $1.5 billion of unclaimed income tax refunds awaited an estimated 1.4 million individual taxpayers who did not file a 2016 federal income tax return. The IRS extended the due date for filing tax year 2016 returns and claiming refunds for that year to July 15, 2020, as a result of the COVID-19 pandemic. The IRS urged taxpayers who haven't filed past due tax returns no later than this year's extended tax due date of July 15, 2020 to claim refunds. However, the IRS reminded taxpayers that there would be no penalty for filing late when a refund is involved.

The law provides most taxpayers with a three-year window of opportunity to claim a tax refund, in cases where a tax return was not filed. Further, taxpayers are required to properly address, mail and ensure the tax return is postmarked by the July 15 date. It is worth noting that checks of taxpayer's seeking a 2016 tax refund may be held if they have not filed tax returns for 2017 and 2018. Additionally, the refund would be applied to any amounts owed to the IRS or state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

Taxpayers stand to lose more than just their refund of taxes withheld or paid during 2016, if they fail to file a tax return. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). Finally, current and prior year tax forms (such as the tax year 2016 Form 1040, 1040A and 1040EZ) and instructions are available on the IRS Forms and Publications page or by calling toll-free 800-TAX-FORM (800-829-3676).

Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney's Office, Central District of California, Tax Division and Criminal Division.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Newport Beach and Yorba Linda, California

Tel: (949) 397-2292 (Newport Beach Office)

Tel: (714) 463-4430 (Yorba Linda Office)