In response to the economic shutdown caused by coronavirus, Congress unanimously passed the CARES Act and President Trump signed it into law on March 27, 2020. The CARES Act is a two trillion-dollar plus aid and stimulus package including a provision that is a game-changer for taxpayers that have or will experience losses in the years 2018 through 2020.
The CARES Act revived the NOL carryback so that Net Operating Losses can be carried back for up to five years if they occurred in the following years:
Thanks to the CARES Act, many taxpayers that lost money in 2018 and 2019 will immediately be eligible for refunds. Taxpayers that had profits in the years 2015 through 2019 will be looking to maximize their losses and take full advantage of the resurrected NOL carryback.
Specifically in regards to the year 2020, because of the disruption caused by coronavirus and the ensuing economic shut down, it stands to reason that a significant number of taxpayers will likely have large NOLs.
Due to the coronavirus economic crisis in the tax year 2020, many businesses will likely sustain significant operating losses. It is a natural consequence of an unplanned shut down of the United States economy.
The first businesses that come to mind when thinking about these 2020 losses are primarily restaurants and oil companies. That said, the overall effect the pandemic has had on the economy will result in businesses in almost every industry experiencing losses for that same year.
However, there is some light at the end of the tunnel. For businesses and individuals that have a history of taxable income for the last five years, these 2020 losses could turn into cash refunds thanks to the resurrection of NOL carrybacks.