Tax News Galore

There is still money left for a Paycheck Protection Program Loan, but the PPP loan program shuts down on June 30, 2020. It’s a rush, but maybe the struggling small business person can get funds to keep afloat for a few more months. If your client can’t make the June 30th deadline, there is some hope that Congress will extend the program until the allocated money runs out.

If your client has a 2018 NOL, the client must file the Form 1045, Application for a Tentative Carryback Adjustment by June 30, 2020. Form 1045 is processed more quickly, generally in 90 days. If you can’t make the June 30th deadline, you can still file an amended return to carry back the NOL as long as the statute of limitations allows. See Temporary procedures to fax certain Forms 1139 and 1045 due to COVID-19.

20 million backlogged notices. During the COVID-19 shutdown at the IRS, the Service issued 20 million notices under its automated system — however, the notices were not mailed until the last few weeks. The notices have the wrong date and many tax due dates have expired. BUT, the IRS reassured the taxpayer (who called you a dozen times on the “mistake” you made) with the following insert:

“Due to the challenges of the ongoing Coronavirus Disease 2019 (COVID-19) Pandemic, we were unable to mail the notice included in this envelope on the date listed on the notice. In addition, the date on the notice by which you are asked to pay may have already passed by the time you receive it. Do not be concerned about these dates.”

Millions of unopened pieces of mail. The IRS has somewhere between 10 million and 14 million pieces of unopened mail, including paper-filed returns (about 10% of individuals still file by paper), payments, and amended returns.

You would be wise to send returns (and payments) by certified mail so that you can prove that the return was filed on time or even filed at all. Expect notices of tax due because the return and the payment have not been properly linked.

Note. Soon you may be able to file Forms 1040x electronically — the IRS says in the summer but pundits expect the date to be October or November.

A CPA friend relayed his experience with the Missouri Service Center. “I sent off a couple of gift tax returns in early June to the IRS Center in Kansas City, MO. I checked a few weeks later to get the delivery confirmation to send to my client. And what I saw when I typed in the tracking number was the following:

“We attempted to deliver your package at 7:46 AM on June 15, 2020, in Kansas City, MO 64999 but could not access the delivery location. We will redeliver on the next business day”.

As of yesterday (June 24th), there was not any further activity reported (i.e., no redelivery attempt). So, I sent an Email inquiry to USPS with my tracking number. And here is the response I got today (June 25th):

“Article was scanned business closed due to the IRS being closed for Covid-19 all mail is being held in an IRS secured facility till they reopen. They have been closed since March 24th. Currently, the USPS has not been provided a firm reopening.” 

Interest on refunds. The IRS is going to pay interest on 2019 refunds issued after April 15. The interest rate is 5% between April 15, 2020, and June 30, 2020. If the refund is issued between July 1, 2020, and Sep. 30, 2020, the interest rate is 3%. Watch for the Form 1099 when preparing the 2020 tax return.