State & Local Tax Impacts of COVID-19 for Iowa – 2021

Thoughtware Alert Published: May 03, 2020 | Updated: May 05, 2021
SALT GOV COVID TW - 1

Information current as of April 7, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Iowa

  • Iowa issued guidance on the taxability of federal COVID-19 economic impact payments in the state for individual income tax purposes. Specifically, the recovery rebates authorized in Section 2201 of the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act) or §272 of the federal 2021 Consolidated Appropriations Act, whether in the form of a rebate or a refundable tax credit, won’t be included in the state taxable income or added back as part of an individual’s reportable federal income tax refund. 
    • Iowa DOR, COVID-19 FAQs; January 28, 2021.
  • Iowa issued information regarding the state’s nonconformity with retroactive provisions of the CARES Act to the extent they apply to a tax year beginning prior to January 1, 2020. The provisions include 1) exclusion of the 2020 economic impact payments and forgiven Paycheck Protection Program (PPP) loans from Iowa taxable income; 2) modification for net operating losses; 3) modification of limitation on losses for taxpayers other than corporations (excess business losses); 4) modification of limitation on business interest; and 5) technical amendments regarding qualified improvement property.
    • Iowa DOR News Release, February 5, 2021.
  • Iowa updated information regarding the state’s nonconformity with retroactive provisions of the CARES Act to the extent they apply to a tax year beginning prior to January 1, 2020. The guidance also provides explanations of certain provisions and their effect on Iowa individual income, corporate income, and trust income taxes for tax years beginning on or after January 1, 2020. The provisions include 1) exclusion of the 2020 economic impact payments and forgiven PPP loans from Iowa taxable income; 2) modification for net operating losses and limitation on losses for taxpayers other than corporations (excess business losses); 3) modification of limitation on business interest; 4) modification for wages to which the Employee Retention Credit applies; and 5) technical amendments regarding qualified improvement property.
    • Iowa DOR, New Release; March 18, 2021.
  • Iowa has extended the filing and payment deadline for personal income tax returns and first-quarter estimated income tax payments from April 30, 2021, to June 1, 2021.
    • Iowa DOR, Order 2021-01; March 29, 2021.
  • Iowa automatically conforms with the Internal Revenue Code, so the retroactive exclusion of the first $10,200 of 2020 unemployment benefits per the American Rescue Plan Act of 2021 also is excluded for Iowa individual income tax purposes. The federal legislation was enacted after many taxpayers had already filed their returns. As a result, and to assist these taxpayers, Iowa will begin making unemployment compensation-related automatic adjustments. Taxpayers won’t need to file an amended Iowa tax return if their only adjustment pertains to unemployment compensation.
    • Iowa DOR, Notice, March 29, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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