Short Window to Claim Quick Refund of 2019 Taxes

The COVID-19 pandemic has created an urgent liquidity crisis for countless taxpayers. As governments around the world move quickly to provide tax deferral opportunities and access to capital, many U.S. taxpayers might have a short window to quickly monetize a few of the notable provisions of the CARES Act. Through the IRS quick refund program, corporate taxpayers may be able to recover overpayments of estimated 2019 taxes within a matter of weeks.

Who Can Benefit

Several provisions of the CARES Act had retroactive impact on 2019 taxable income calculations. These changes include:

• Increase in the Section 163(j) limitation on business interest deductions from 30% of adjusted taxable income (effectively, tax EBITDA) to 50% for 2019.
• Repeal of the limitation on post-2017 NOLs, which previously could only be used to offset up to 80% of taxable income.
• Correction of the Tax Cuts and Jobs Act treatment of qualified improvement property (“QIP”), now allowing such property to qualify for 100% bonus depreciation, with retroactive effect to 2018.  The entire cumulative benefit may be claimed on the 2019 return via a change in accounting method.

For taxpayers previously subject to interest limitations, deducting 2018 NOLs, and investing in QIP, these provisions will likely decrease 2019 taxable income. Accordingly, taxpayers who had made estimated payments based on prior law may be significantly overpaid for the 2019 tax year. In addition, some taxpayers may have been very conservative in making estimated payments during the year and have determined they are overpaid regardless of the CARES Act provisions.  Fortunately, the IRS does allow for quick access to that cash.

How to Get a Quick Refund

If the overpayment is at least 10% of the expected tax liability, corporate taxpayers may file Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax.  The application must be filed by the due date of the return, without extensions, or April 15 in the case of calendar year taxpayers.  Note that this due date was not deferred to July 15, as was the case for other April deadlines. Further, the filing is separate from the taxpayer’s extension and return and is only available to corporate taxpayers…

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