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Rise of the (fax) machines

By BRIAN FALER

04/14/2020 10:00 AM EDT

Editor’s Note: Morning Tax is a free version of POLITICO Pro Tax morning newsletter, which is delivered to our subscribers each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

Quick Fix

- The IRS is turning to fax machines to cope with office closures spurred by the coronavirus outbreak.

- Roughly 80 million economic stimulus payments are on their way to Americans' bank accounts - but questions remain.

IT'S TUESDAY, though, really, who can even tell anymore? Every day is Groundhog Day when you’re in quarantine.

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Driving the Day

FAX MACHINES TO THE RESCUE: The IRS is turning to some old-school technology to help get through the coronavirus shutdown: the fax machine. With most of its employees working from home - and unable to retrieve the mail - the agency is asking companies that normally must file forms on paper to fax them. That’s how the agency intends to implement a key business provision in the coronavirus stimulus [http://antmc.pl/forum/member.php?action=profile&uid=59622 read more] response, our Aaron Lorenzo reports. That legislation liberalized so-called net operating loss rules, which allow companies to apply for quickie tax returns. It’s a time-tested way of getting money fast to cash-strapped businesses. The problem was those forms, until now, had to be filed on paper.

It’s not the first time the IRS is turning to faxes in the wake of coronavirus. It previously asked companies to fax the form needed to claim new tax breaks for keeping workers on the rolls, and also for offering family and medical leave. Meanwhile, the mail is piling up at the IRS.

“There is so much mail that the post office can’t hold it so we are literally holding it in trailers until our employees can get back,” Sunita Lough, deputy commissioner for enforcement, said Monday at a webcast panel sponsored by the Tax Policy Center. Not everyone can turn to the fax, though - if you’ve filed your own individual tax return the old-fashioned way, and it hasn’t already been processed, you’re out of luck. “Paper returns will be processed once processing centers are able to reopen,” the IRS said.

JOIN TOMORROW - A PLAYBOOK INTERVIEW WITH BIDEN CAMPAIGN MANAGER JEN O'MALLEY DILLON: Join Playbook co-authors Anna Palmer and Jake Sherman for a virtual interview with Joe Biden's campaign manager, Jen O'Malley Dillon, to discuss how her team is adapting to this new election landscape, whether Bob Woodward's new bombshell book will have lasting impact on the campaign, and the Biden campaign's assessment of the state of play in the top battleground states. REGISTER HERE.

IRS LOOKING KINDLY ON TAXPAYERS: The agency has been issuing some taxpayer-friendly interpretations of the latest coronavirus stimulus measure. It has said, for example, that businesses can participate in the new Paycheck Protection Program and also take advantage of new provisions allowing them to defer payroll taxes, under certain conditions. That had been in question because both initiatives were designed to do the same thing: subsidize companies that keep workers on. Tapping both, for companies, could amount to double dipping. And the law includes rules against having loans forgiven under the paycheck program while also deferring payroll taxes. Some figured the IRS would make businesses choose between the two. Instead, the agency said they can take advantage of both up until the point at which they have any loans forgiven - then the deferral ends.

“Treasury gave out some pretty darn favorable taxpayer-friendly guidance here,” said Rick Grafmeyer, a lobbyist at Capitol Tax Partners.

The agency also extended a slew of deadlines, including some that were easy to miss. Among them: The IRS is giving people more time to complete like-kind exchanges, a priority for the real estate industry. The agency also extended a deadline for people to roll over capital gains into Opportunity Zone funds. “On behalf of 1.4 million realtors across the United States, I want to commend the IRS for moving quickly,” said Vince Malta, president of the National Association of Realtors.

And about that guidance: The IRS has churned out a mountain of guidance filling in the blanks of the stimulus package. One reason it's been able to do so much, so quickly: The agency is emphasizing FAQs instead of traditional regulations. It’s much faster to write a list of questions and answers about the legislation than writing regulations that must be put out for public comment and revised. But one question going forward will be how well this less formal guidance stands up in court, where judges have given far more weight to traditional regulations.

80 MILLION STIMULUS PAYMENTS ON THEIR WAY: Lough said the IRS hit send on the first batch of payments on Friday, and that people who had direct deposit information on file with the agency should have already started seeing the money. Within the next two weeks, the Treasury Department said, most will have received their payments. One lingering question still facing the IRS: How do deal with people on supplemental security income, which provides monthly benefits to low-income elderly and disabled people. Many do not file tax returns because they earn so little, and some don’t receive Social Security benefits either. (The IRS says it can use Social Security statements to process payments.) A challenge there, Lough said, is dependents: “Are they dependents of somebody else’s return? Do they have dependents? It’s an item of conversation daily.”

CORONAVIRUS NOT STOPPING THE SUPREME COURT: After postponing hearings because of the coronavirus, the high court announced it will hold hearing next month via telephone. Among the cases the justices will hear: Democrats’ demands for President Donald Trump’s financial records. Their suits seeking documents from his accounting firm Mazars as well as his bankers at Deutsche Bank will be heard sometime between May 4 and May 13, POLITICO's Josh Gerstein reports. (House Ways and Means Chairman Richard Neal’s suit for Trump’s federal returns is still on hold in a D.C. district court.)

HAPPENING WEDNESDAY - HOW WILL WE RETURN TO AIR TRAVEL? Air travel has been significantly disrupted by the coronavirus pandemic. The decline in passengers has cost billions - an unprecedented blow to the economy, at home and abroad. As Congress mulls granting an extension in payroll assistance in the CARES Act to U.S. airlines, join CEOs Patrick Steel of POLITICO and Scott Kirby of United Airlines for a virtual conversation about the future of air travel and what it will take to get Americans back into the sky. REGISTER HERE.

Around the World

AN ADDED INCENTIVE TO FIGHT CORONAVIRUS: Thailand is giving medical companies new tax breaks in hopes of bolstering their efforts to fight the virus. The provisions will subsidize “the production of medical devices, diagnostic test kits and active pharmaceutical ingredients,” Reuters reports. Thailand will also “exempt import duties on existing manufacturing of medical devices and parts.”

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Quick Links

The Committee for a Responsible Federal Budget sees the deficit hitting $3.8 trillion.

Free-filed tax returns are up 22 percent.

Tax Foundation President Scott Hodge on the OCED and digital taxes.

TPC’s Janet Holtzblatt on how to possibly game those stimulus payments.

Did You Know?

The Titanic sunk 108 years ago today.

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About The Author : Brian Faler

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