NOL (Net Operating Loss) Rules Changes

The CARES Act made three changes to Net Operating Losses (NOLs) to improve cash flow for struggling businesses:

  • Provided a five-year carryback for losses earned in 2018, 2019, or 2020, which allows firms to modify tax returns up to five years prior to offset taxable income from those tax years.
  • Suspended the NOL limit of 80 percent of taxable income. This means that firms may deduct their NOLs to eliminate all of their taxable income in a given year, instead of having to carry forward any NOL beyond 80 percent of taxable income.
  • Pass-through business owners may use NOLs to offset their non-business income above the previous limit of $250,000 (single) or $500,000 (married filing jointly) for 2018, 2019, and 2020.

The IRS has also granted a six-month extension of time to file Form 1045 or Form 1139, as applicable, with respect to the carryback of an NOL that arose in … Read More

Economic Injury Disaster Loans

Economic Injury Disaster Loans

Since the onset of the coronavirus pandemic, the federal government has adjusted eligibility guidelines to better serve businesses affected by the pandemic. Sole proprietors, freelancers and independent contractors are among the newly eligible groups for Small Business Association (SBA) Economic Injury Disaster Loans (EIDLs). Similar to a PPP loan, EIDL loans provide funds for industries struggling to stay afloat in the wake of the coronavirus or any other qualifying disaster. An EIDL loan can be used to cover payroll and inventory, pay debt, cover increased costs due to supply chain interruption, to pay obligations that cannot be met due to revenue loss and for other uses. The interest rate on these loans is 3.75% for small businesses and 2.75% for nonprofits with up to 30 years to repay the loan, and the first payment is deferred for one year.

To qualify for an EIDL under the CARES … Read More

CARES ACT – $300 Charitable Contribution Rule

Usually, only those who itemize their deductions qualify for the charitable contribution deduction, and taxpayers are also only allowed to deduct donations that are up to 60% of their AGI. However, the new $300 deduction from the CARES Act is specifically for those who don’t itemize their deductions and would typically not get any tax benefit for donations. Since it’s considered an above-the-line deduction, the IRS applies it when calculating your AGI. In other words, if you donate up to $300 in cash to a qualified organization, your AGI will be reduced by up to $300—and you can still claim the standard deduction.

Remember, the deduction only applies to cash donations made to qualified 501(c)(3) organizations. The site has a database with every qualified organization, which you can search to make sure your charity of choice qualifies.… Read More