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.

Don’t hesitate to call the office if you have any questions or need assistance.

Starting May 13, 2019 only individuals with tax identification numbers may request an Employer Identification Number (EIN) as the “responsible party” on the application. An EIN is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax filing and reporting purposes.

The change prohibits entities from using their own EINs to obtain additional EINs. Individuals named as the responsible party must have either a Social Security number (SSN) or an individual taxpayer identification number (ITIN). The requirement applies to both the paper Form SS-4, Application for Employer Identification Number, and online EIN application.

A detailed explanation of who should be the responsible party for various types of entities is provided on the Form SS-4 Instructions, but generally, the responsible party is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. In cases where more than one person meets that definition, the entity may decide which individual should be the responsible party.

Certain Entities Exempt

Governmental entities (federal, state, local and tribal) are exempt from the responsible party requirement as well as the military, including state national guards.

No Change for Tax Professionals

There is no change for tax professionals who may act as third-party designees for entities and complete the paper or online applications on behalf of clients.

Purpose

The new requirement will provide greater security to the EIN process by requiring an individual to be the responsible party and improve transparency. If there are changes to the responsible party, the entity can change the responsible official designation by completing Form 8822-B, Change of Address or Responsible Party. A Form 8822-B must be filed within 60 days of a change.

As a reminder, individuals with “seriously delinquent tax debts” are subject to a new set of provisions courtesy of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. These provisions went into effect in February 2018.

The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt and also requires the State Department to deny their passport application or deny renewal of their passport. In certain instances, the State Department may revoke their passport.

Taxpayers affected by this law are those with a seriously delinquent tax debt, generally, an individual who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired, or the IRS has issued a levy.

Taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt by doing the following:

• Paying the tax debt in full
• Paying the tax debt timely under an approved installment agreement,
• Paying the tax debt timely under an accepted offer in compromise,
• Paying the tax debt timely under the terms of a settlement agreement with the
• Department of Justice,
• Having requested or have a pending collection due process appeal with a levy, or
• Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

However, a taxpayer’s passport won’t be at risk under this program if an individual:

• Is in bankruptcy
• Is identified by the IRS as a victim of tax-related identity theft
• Has an account that the IRS has determined is currently not collectible due to hardship
• Is located within a federally declared disaster area
• Has a request pending with the IRS for an installment agreement
• Has a pending offer in compromise with the IRS
• Has an IRS accepted adjustment that will satisfy the debt in full

For taxpayers serving in a combat zone, and who also owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.

Taxpayers who are behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS and may qualify for one of several relief programs, including the following:

• Taxpayers can request a payment agreement with the IRS by filing Form 9465, Installment Agreement Request. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers may be eligible to use the online payment agreement to set up a monthly payment agreement for up to 72 months.
• Financially distressed taxpayers may qualify for an offer in compromise, an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay.

The tax credit available for purchasers of new General Motors plug-in electric vehicles begins phasing out on April 1, 2019. The phaseout was triggered because General Motors, LLC has sold more than 200,000 vehicles eligible for the plug-in electric drive motor vehicle credit during the fourth quarter of 2018.

Qualifying vehicles by the manufacturer, which include Chevrolet Spark EV (2014-2016), Chevrolet Volt (2011-2019), Chevrolet Bolt (2017-2019), Cadillac CT6 Plug-In (2017-2018), and Cadillac ELR (2014, 2016) are eligible for a $7,500 credit if acquired before April 1, 2019. Beginning April 1, 2019, however, the credit is reduced to $3,750 for General Motors’ eligible vehicles. For the next two quarters beginning on October 1, 2019, the credit will be reduced even further to $1,875. After March 31, 2020, no credit will be available.

The plug-in electric drive motor vehicle credit was enacted in the Energy Improvement and Extension Act of 2008 and subsequently modified. The law enables owners of eligible passenger vehicles and light trucks to take the credit. By law, five quarters after reaching the sales threshold, the credit ends for the manufacturer. General Motors vehicles are eligible for some portion of the credit until April 1, 2020.

In most cases, taxpayers who turned 70 1/2 during 2018 must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Monday, April 1, 2019.

The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by December 31. In other words, a taxpayer who turned 70 1/2 in 2018 (born after June 30, 1947, and before July 1, 1948) and receives the first required distribution (for 2018) on April 1, 2019, for example, must still receive the second RMD by December 31, 2019.

Affected taxpayers who turned 70 1/2 during 2018 must figure the RMD for the first year using the life expectancy as of their birthday in 2018 and their account balance on December 31, 2017. The trustee reports the year-end account value to the IRA owner on Form 5498, IRA Contribution Information in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70 1/2 in 2018 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary. Both tables can be found in the appendices to Publication 590-B.

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

Now is the time to begin planning for distributions required during 2019. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2018 RMD, this amount would be on the 2018 Form 5498 that is normally issued in January 2019.