Tax Relief for Individuals: Consider Changing 2019 Overpayment from a Carryforward to a Refund

Since the CARES Act passed, there has been a lot of talk about getting funding to businesses to help the economy. Businesses received some relief through Payroll Protection Program loans, Economic Injury Disaster Loans (EIDL),-Employee Retention Credits and an increase in the allowable business interest deduction limit, to name a few.

But what about the individuals? The most noted benefit that individual filers received was the Economic Impact Payment, which depended on adjusted gross income thresholds. Those who lost their jobs or had work hours reduced could apply for unemployment benefits or Pandemic Unemployment Assistance. With millions of people collecting unemployment and unsure what their cash flow might look like in the future, this may not be enough. The good news is there may be another way for individuals to get their hands on some much-needed cash.

Taxpayers who have already filed 2019 individual income tax returns reflecting an overpayment applied to 2020 may elect (retroactively) to receive this overpayment as a refund instead. Pursuant to a 1977 Revenue Ruling, this process is relatively simple. There is no need to file an amended return for 2019, but rather a “Superseded Return.” When filing the superseded return, simply indicate that the overpayment should be refunded instead of carried forward. The superseded return will replace the original 2019 return.

There are a couple things to note. Most importantly, the superseded return needs to be filed before the original due date for your 2019 return. The original due date for filing 2019 individual income tax returns is July 15, 2020 (extended from April 15, 2020 under the CARES Act). Superseded returns must be paper filed and mailed to the appropriate IRS processing center. (The mailing address can be found within the Form 1040 filing instructions.) As with most returns that are paper filed, processing could be delayed; however, providing banking information on the return will speed up the payment by four to six weeks.

For questions about filing a superseded return or receiving a refund of your tax overpayment, contact your Marcum tax advisor.

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