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17004: State Returns Generally - CARES Act, Decoupled States, Amending Returns


State Returns Generally

Information regarding the CARES Act and when to Amend Decoupled State Returns: 

 

In April 2020, federal software updates were released for Drake Tax 2019 to comply with the new CARES Act tax law provisions.  Some states decoupled, which required state software changes to be made. Those state updates were released in August 2020. The following info will help you determine if any of the returns you prepared may need to be amended.

Decoupled states: Colorado, Hawaii, Iowa, Kentucky, Maine, New York, North Carolina, and West Virginia.

  • IF you filed a federal & state return (for one of the states above) before the federal CARES Act software updates were released,
  • AND, the return contained any of these tax scenarios: 
    • A Net Operating Loss carryover from prior years that exceeds 80% of the 2019 taxable income
    • Form 461 – Limitation on Business Losses (due to the 2019 loss exceeding $510,000 for MFJ or $255,000 for all other return)
    • Form 8990 – Limitation on Business Interest Expense (due to business interest paid exceeding 30% of business income)
    • Certain depreciable real property for which an election was made to claim Section 179 expense (Qualified Improvement Property)
  • THEN,
    • you may need to file an amended federal and state return for the taxpayer in order to comply with the Federal CARES Act and the subsequent state decoupling law.

If you determine it is appropriate to amend, please follow the instructions in KB Article 16841 for amending both a federal and state return—it is important to auto-fill both federal and state amended screens before modifying or calculating the return. Once you complete the amended returns, update the return to Drake Tax 2020 to pull forward the calculated numbers on the amended return.

  • ALSO, if you filed a federal & state return (for one of the states above) after the federal CARES act software changes were released, but before the state decoupling software changes were released,
  • AND, the return contained any of the tax scenarios listed above, 
  • THEN, you may need to file an amended state return for the taxpayer in order to comply with the state decoupling law.

The same data entry instructions apply except you will only need to auto-fill the state amended screen. If you do amend, update the return to Drake Tax 2020 after amending to pull forward the calculated numbers on the amended return.

Notes: 

  • Anytime you intend to make changes and/or recalculate a previously-filed, prior-year return, we recommend that you first archive or backup the return as it was filed.
  • You would not update the amended 2019 return to 2020 if you file the 2020 tax return before amending the 2019 return(s).

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