There are possible tax strategies that are particularly suited to the times that we are in. Here are two that I keep seeing, with the latest in a press release from a major tax publisher. According to analysts with the Tax & Accounting business of Thomson Reuters, C corporations may secure a refund of overpaid estimated taxes, or use projected current-year NOL to offset taxes owed for the previous year.

The Thomson Reuters press release indicates, “Where a corporation has overpaid estimated federal income taxes for the tax year that’s about to end, or the year that has just ended (depending on whether the corporation uses a calendar or noncalendar tax year), a rightful refund can be secured by filing Form 4466 (Corporation Application for Quick Refund of Overpayment of Estimated Tax), rather than waiting until after the Form 1120 for the year has been filed. To qualify for a quick refund, the overpayment amount must be: (1) over $500 and (2) at least 10% of the corporation’s actual tax liability.”

As to using projected current-year NOL to offset the amount owed for the previous year, the release states, “[A] C corporation can effectively obtain some or all of the cash flow benefit that would result from carrying back the projected current-year NOL right now. The benefit comes in the form of an extension of time to pay the amount of tax that is still owed for the previous year, but that will be refunded after the projected current-year NOL is carried back. The extension request is made by filing Form 1138 (Extension of Time for Payment of Taxes by a Corporation Expecting a Net Operating Loss Carryback), with the IRS Service Center where the corporation files its Form 1120.”

I also have talked to a number of tax practitioners advising certain clients to consider Roth conversion as the AGI of those individuals dropped enough in 2008 to qualify and the values in the plans took a hit in 2008 deceasing the value of the retirement plan being subject to tax in the conversion.

I have also come across a number of firms that have put together financial crisis teams to consult with clients. Some of these teams are specialized, geared to clients who are impacted significantly by the continuing financial crisis. One of those groups is contractors. These teams are primarily focusing on obtaining financing, improving cash flow, cost reduction, contingency planning, and risk management.

“Having an orientation to the future, anticipating problems and taking affirmative steps to deal positively with them rather than reacting after a situation has already occurred,” is one of the definitions of the word “proactive” The above reflects the proactive kind of thinking that is particularly needed in these tough times.

 

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