Amending 2018 Tax Returns
Wolters Kluwer Tax & Accounting Reviews Retroactive Tax Provisions of the Further Consolidated Appropriations Act, 2020
(NEW YORK, NY, February, 2020) – The Further Consolidated Appropriations Act, 2020, enacted on December 20, 2019, included a many tax changes with retroactive effect, requiring taxpayers and their advisors to consider filing amended 2018 tax returns.
“These retroactive changes affecting the 2018 tax year could result in the largest number of amended tax returns every filed,” said Mark Luscombe, JD, LLM, CPA, and Principal Federal Tax Analyst for Wolters Kluwer Tax & Accounting.
Below are some of the tax changes made by the Further Consolidated Appropriations Act, 2020, that have a retroactive impact on 2018:
Expired Tax Provisions
A set of regularly expiring tax provisions that had expired at the end of 2017 and have now been retroactively extended. The individual provisions include the exclusion from gross income of discharge of qualified principal residence indebtedness, the treatment of mortgage insurance premiums as qualified residence interest, the deduction for qualified tuition and related expenses, the nonbusiness energy property credit, the qualified fuel cell motor vehicles credit, and the 2-wheeled plug-in electric vehicle credit. There are also nine provisions related to particular businesses or areas and eleven energy-related provisions.
A package of disaster relief provisions was also enacted that have application to disasters back to 2018. These provisions include special disaster-related rules for use of retirement funds, the employee retention credit for employers affected by qualified disasters, a temporary increase in the limitation on qualified contributions, special rules for qualified disaster-related personal casualty losses, additional low-income housing credit allocations for qualified 2017 and 2018 California disaster areas, and payments to U.S. possessions with mirror tax systems.
A Couple of Technical Corrections to the Tax Cuts and Jobs Act also Relate Back to 2018
One would repeal the so-called “church parking lot” provision that treated fringe benefits provided by exempt organizations as unrelated business income.
Tax Cuts and Jobs Act Changes
A few provisions represent changes or corrections to the Tax Cuts and Jobs Act and also relate back to 2018. The Tax Cuts and Jobs Act revised the Kiddie Tax to require taxation of a child’s unearned income not at the parents’ tax rate but at the trust tax rate. This provision has now been repealed effective after December 31, 2019, with an election provided to also apply the change in the 2018 and 2019 tax years.
Further Possible Tax Changes Affecting 2018 Tax Returns
Congress has never before waited so long to retroactively extend these expired provisions. There are still significant technical corrections to the Tax Cuts and Jobs Act that have not yet been enacted that, if enacted, could result in additional need to amend 2018 tax returns. These include significant areas such as depreciation of qualified improvement property and net operating loss carry-backs.