Covid-19 Unlocks Huge Tax Refunds
While much ink has been used in discussing the $1,200 stimulus check given to people who report less than $75,000 in income, a larger refund to wealthy taxpayers was hiding in the details. The Coronavirus Aid, Relief, and Economic Security Act, (“CARES Act”) passed by President Donald Trump delayed the “excess business loss” provision under section 461(l), which has unlocked huge refunds for PMG Intrinsic’s clients.
Prior to passage of the CARES Act, the IRS limited all net losses from all trades or businesses that exceeded $500,000 per married couple joint return ($250,000 for singles) per tax year. For partnerships, S corporations, and other pass-thru business entities, the loss limitation applied at the partner/shareholder level, not the entity level. As a result, PMG Intrinsic clients who had multiple entities with losses from a struggling economy were limited by a cap of $500,000 if they were married. PMG Intrinsic previously allocated these disallowed losses as net operating losses (NOLs) for the next tax year, which sat idle waiting to be absorbed by future income.
However, with the passage of the CARES Act, the implementation of 461(l) has been delayed till 2021. As a result, with our guidance, clients have been able to report all previously disallowed losses in 2018 as NOLs. The CARES Act also allows for PMG Intrinsic’s clients to carryback their NOLs as far back as five years; as a result, one of our clients was able to actually get a refund in excess of $1 million for his 2013 and 2014 tax returns!
Many high net-worth individuals believe they are unable to unlock the tax benefits generated by the Covid-19 pandemic because they believe they make too much money, or they do not have the representation that large corporations can afford. PMG Intrinsic wants to dispel that notion. With our guidance, you may be able to unlock huge tax refunds that the media does not write about.