DC Tax Flash: IRS Taxpayer Advocate Aims to Improve CARES Act Implementation for Businesses

Tax Alert

The National Taxpayer Advocate (NTA) today issued a report that outlines its goals and activities planned for the 2021 fiscal year. The NTA's annual Objectives Report to Congress includes several concerns about business-related tax incentives enacted in response to the coronavirus outbreak, including the Employee Retention Credit (ERC), net operating losses (NOLs), and the Paycheck Protection Program (PPP).

Regarding the PPP, the report does not cite an objective, noting only that "considering the complexity and the newness of this program, it is not entirely clear how it will be audited, and the extent to which the IRS will need to commit resources to conduct those audits."

On the ERC, the NTA plans to advocate "for the IRS to provide clear guidance as to what is considered operations 'comparable' to pre-pandemic operations for the ERC."

"For businesses to determine the optimal application of the CARES Act NOL provisions, they may need to develop complex models involving multiple tax years," the report notes. "The guidance the IRS has provided in the form of frequently asked questions (FAQs), while timely, is not authoritative or binding on the IRS." As such, the NTA says it aims to:

  • Identify potential systemic delays in processing refund claims (e.g., those arising from NOL carrybacks) and work with the IRS on solutions; and
  • Advocate for the IRS to issue guidance to clarify the NOL carryback rules or to clarify that taxpayers can rely on FAQs to avoid penalties and to bind the IRS.

The full text of the report is posted here.

The report's section on "Reducing Burden Resulting From Implementation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act" is posted here.

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