Trump-era stimulus let corporations claim $14 billion in tax refunds, watchdog says

IRS office
  • Tax breaks included in the CARES Act let corporations receive $14 billion in refunds, the GAO said.
  • Roughly 1,200 firms received refunds worth more than $1 million, according to the Wednesday report.
  • The CARES Act won bipartisan support, but Democrats have since slammed the breaks as poorly targeted.
  • See more stories on Insider’s business page.

The Internal Revenue Service (IRS) will dole out $14 billion in tax refunds to corporations thanks to controversial provisions included in last year’s CARES Act, the Government Accountability Office (GAO) said Wednesday.

The $2.2 trillion stimulus package signed by President Donald Trump in the early stages of the pandemic included a swath of measures aimed at reducing tax burdens for struggling businesses. Tenets included carrybacks for business losses and refunds linked to the Alternative Minimum Tax.

The IRS has already received more than 41,000 cases from businesses looking to access refunds through either, or both, of the two tax breaks, according to a GAO report. Roughly $14 billion in related refunds were approved by the end of last year. Of that, about $11 billion has already been distributed.

Yet while the tax breaks included in the CARES Act were touted as ways to keep small businesses afloat, many of the companies filing for relief are winning massive refunds. Nearly 3,000 companies filing for refunds received between $100,000 and $999,000, according to the report. And roughly 1,200 firms got refunds worth more than $1 million.

Bloomberg first reported on the tax break.

US tax law allows businesses to use net operating losses from unprofitable years to cancel out future tax bills in a carryover process. The CARES Act widened this provision to allow operating losses to be carried back as far as five years, effectively letting companies hit by the pandemic dodge some tax burdens.

The CARES Act passed in March 2020 on a nearly unanimous basis, but Democrats have since criticized some of its tax breaks for issuing relief to wealthy companies and Americans. Some lawmakers have even called for the measures to be repealed.

Republicans, however, have pointed out that Democrats backed the bill’s passage and that similar policies have been used in past downturns.

The GAO’s report suggests the $14 billion in approved refunds are the tip of the iceberg for CARES-related tax breaks. IRS officials said in late January they received more than 12,000 more applications for carrybacks and credit refunds, but that they aren’t yet sure how many are related to the CARES Act. A backlog of revised tax returns could also add to the total amount refunded to corporations, the GAO said.

Read the original article on Business Insider

The IRS is moving to issue refunds for Americans who paid taxes on $10,200 in unemployment benefits last year

Charles Rettig
IRS Commissioner Charles Rettig.

  • The IRS is aiming to issue refunds to people who already paid taxes on some unemployment insurance.
  • “We believe we will be able to automatically issue refunds associated with the $10,200,” Rettig told Congress.
  • The IRS recently extended the tax filing deadline from April 15 to May 17 for individuals.
  • See more stories on Insider’s business page.

The IRS chief said during a congressional hearing on Thursday that the agency is taking steps to issue refunds for people who paid taxes on the first $10,200 in jobless aid.

IRS Commissioner Charles Rettig urged taxpayers to refrain from filing an amended return. Instead, the organization is aiming to distribute refunds soon.

“We believe we will be able to automatically issue refunds associated with the $10,200,” Rettig told the House Ways and Means Committee. He added he expected a formal announcement “in the near future.”

The commissioner is referring to a part of President Joe Biden’s stimulus law that provides tax relief for unemployed workers. The first $10,200 in jobless aid is tax-free for Americans earning below $150,000, but some people may have filed taxes without claiming – or even knowing about – this exemption.

“We’re sensitive to the situation,” Rettig said.

The IRS recently extended the tax filing deadline by a month from April 15 to May 17 for individuals filing 1040 forms, providing some people with additional time to submit their returns. The extension doesn’t apply to corporate or nonprofit tax filings.

The agency is struggling to get through a massive backlog of 24 million unprocessed returns from businesses and individuals stretching back to the 2019 tax filing season – and it’s piling up as Americans continue turning in their taxes. Many stimulus checks from past relief laws have not gone out as a result.

“We would hope to be through this backlog by the summer,” Rettig said.

H&R Block and TurboTax customers, meanwhile, are grappling with other delays as neither company has updated software to apply the new stimulus law’s changes on taxing jobless benefits.

Read the original article on Business Insider