IRS Tax News

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  • 01 Jul 2020 3:12 PM | Anonymous

    The Internal Revenue Service is issuing proposed regulations,
    REG-123027-19  relating to the compliance-monitoring duties of state agencies for purposes of the low-income housing credit.  The proposed regulations relax the minimum compliance-monitoring sampling requirement for purposes of physical inspections and low-income certification review, providing flexibility and reduced burdens with respect to the requirements set forth in the final regulations published on February 26, 2019.


  • 01 Jul 2020 3:11 PM | Anonymous

    WASHINGTON ― The Internal Revenue Service today announced additional retail partners are accepting cash payments for federal taxes. This cash payment option is for individual and business taxpayers.

    The IRS' continuing partnership with ACI Worldwide's OfficialPayments.com and the PayNearMe Company allows taxpayers to make a payment without a bank account or credit card at participating 7-Eleven stores, Ace Cash Express and Casey's General Stores nationwide.

    "We continuously look for ways to enhance the services we provide for our taxpayers," said IRS Wage and Investment Division Commissioner Ken Corbin. "The IRS offers many ways for taxpayers to pay their tax bills including direct debit, credit card and through electronic funds withdrawal when filing electronically. This cash option lets people pay their taxes without having to make an appointment at an IRS Taxpayer Assistance Center."

    Individuals wishing to take advantage of this payment option should visit the IRS.gov/payments, select the cash option in the "Other Ways You Can Pay" section and follow the instructions. There is a $1,000 payment limit per day and a $3.99 fee per payment.

    Because PayNearMe involves a three-step process, the IRS urges taxpayers choosing this option to start the process well ahead of the tax deadline to avoid interest and penalty charges.

    The IRS reminds individuals without the need to pay in cash that there are other ways to pay online, by phone or with a mobile device and the IRS2Go app. IRS Direct Pay is a secure online payment option that allows taxpayers to pay directly from their bank accounts for free. The IRS has been partnering with Official Payments since 1999 for taxpayers wanting to use a credit card to pay their taxes.

    The IRS reminds taxpayers to watch out for email schemes. Taxpayers will only receive an email from OfficialPayments.com or PayNearMe if they have initiated the payment process.

  • 01 Jul 2020 3:11 PM | Anonymous

    IRS provides tax relief for the low-income housing credit and bonds for qualified residential rental projects

    WASHINGTON – In response to the ongoing COVID-19 pandemic, the Internal Revenue Service today issued Notice 2020-53 (PDF) to provide tax relief to issuers, operators, owners, and tenants of qualified low-income housing projects or qualified residential rental projects financed with exempt facility bonds, and state agencies that have jurisdiction over these projects.

    For certain time-sensitive actions scheduled to be performed and requirements to be met on or after April 1, 2020 and before December 31, 2020, owners and operators now have until December 31, 2020 to perform the actions and satisfy the requirements.

    Further, between April 1, 2020 and December 31, 2020, owners of qualified low-income housing projects are not required to perform certain income recertifications or reduce the eligible basis in a building because of the temporary closure of an amenity or common area due to the COVID-19 pandemic, and state agencies that have jurisdiction over the projects are not required to conduct compliance-monitoring.

    Additionally, between April 1, 2020 and December 31, 2020, owners and operators of these projects, issuers, and state agencies may treat medical personnel and other essential workers providing services during the COVID-19 pandemic as if they were Displaced Individuals, as defined in Rev. Procs. 2014-49 and 2014-50, and therefore, may provide emergency housing for these persons as described in these revenue procedures.

    Additional information about tax relief for those affected by the COVID-19 pandemic can be found on IRS.gov.

    The Internal Revenue Service also is issuing proposed regulations (PDF) relating to the compliance-monitoring duties of state agencies for purposes of the low-income housing credit. The proposed regulations relax the minimum compliance-monitoring sampling requirement for purposes of physical inspections and low-income certification review, providing flexibility and reduced burdens with respect to the requirements set forth in the final regulations published on February 26, 2019.

  • 01 Jul 2020 3:10 PM | Anonymous

    Notice 2020-53 provides temporary relief from certain requirements under § 42 of the Internal Revenue Code (Code) for qualified low-income housing projects.


  • 01 Jul 2020 10:41 AM | Anonymous

    WASHINGTON – Unclaimed income tax refunds worth more than $1.5 billion await an estimated 1.4 million individual taxpayers who did not file a 2016 federal income tax return, according to the Internal Revenue Service. 

    “The IRS wants to help taxpayers who are owed refunds but haven’t filed their 2016 tax returns yet,” said IRS Commissioner Chuck Rettig. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on July 15. To claim the refund, a return for tax year 2016 must be filed by July 15, 2020.”

    In Notice 2020-23, the IRS extended the due date for filing tax year 2016 returns and claiming refunds for that year to July 15, 2020, as a result of the COVID-19 pandemic. As the IRS is issuing Economic Impact Payments to Americans, the agency urges taxpayers who haven’t filed past due tax returns to file now to claim these valuable refunds. 

    To collect refunds for tax year 2016, taxpayers must file their 2016 tax returns with the IRS no later than this year's extended tax due date of July 15, 2020. 

    The IRS estimates the midpoint for the potential refunds for 2016 to be $861 — that is, half of the refunds are more than $861 and half are less. 

    In cases where a federal income tax return was not filed, the law provides most taxpayers with a three-year window of opportunity to claim a tax refund. If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury. 

    For 2016 tax returns, the window closes July 15, 2020, for most taxpayers. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15 date. 

    The IRS reminds taxpayers that there is no penalty for filing late when a refund is involved. Taxpayers seeking a 2016 tax refund should know that their checks may be held if they have not filed tax returns for 2017 and 2018. In addition, the refund will be applied to any amounts owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans. 

    By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2016. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2016, the credit was worth as much as $6,269. 

    The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2016 were: 

    • $47,955 ($53,505 if married filing jointly) for those with three or more qualifying children;
    • $44,648 ($50,198 if married filing jointly) for people with two qualifying children;
    • $39,296 ($44,846 if married filing jointly) for those with one qualifying child, and;
    • $14,880 ($20,430 if married filing jointly) for people without qualifying children.

    Current and prior year tax forms (such as the tax year 2016 Form 1040, 1040A and 1040EZ) and instructions are available on the IRS.gov Forms and Publications page or by calling toll-free 800-TAX-FORM (800-829-3676). 

    Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2016, 2017 or 2018 should request copies from their employer, bank or other payer. Taxpayers who are unable to get missing forms from their employer or other payer can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool. Alternatively, they can mail Form 4506-T to request a wage and income transcript. A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return. 

    State-by-state estimates of individuals who may be due 2016 income tax refunds 

    State or

    Estimated

    Median

    Total

    District

    Number of

    Potential

    Potential

     

    Individuals

    Refund

    Refunds

    Alabama

    23,300

    $859

    $24,614,400

    Alaska

    5,500

    $979

    $6,754,900

    Arizona

    32,400

    $762

    $32,281,600

    Arkansas

    13,400

    $822

    $13,798,800

    California

    130,600

    $816

    $135,981,300

    Colorado

    27,500

    $809

    $28,276,500

    Connecticut

    14,300

    $930

    $16,213,300

    Delaware

    5,600

    $878

    $6,114,500

    District of Columbia

    3,700

    $904

    $4,224,600

    Florida

    99,000

    $874

    $105,706,400

    Georgia

    48,600

    $792

    $49,682,700

    Hawaii

    7,700

    $932

    $8,785,600

    Idaho

    6,200

    $727

    $5,876,000

    Illinois

    51,700

    $909

    $57,312,200

    Indiana

    32,700

    $887

    $35,129,700

    Iowa

    14,700

    $908

    $15,735,600

    Kansas

    14,600

    $877

    $15,706,800

    Kentucky

    18,700

    $869

    $19,517,100

    Louisiana

    24,400

    $849

    $26,410,100

    Maine

    5,600

    $802

    $5,482,200

    Maryland

    28,200

    $873

    $31,619,700

    Massachusetts

    29,900

    $956

    $34,261,900

    Michigan

    46,600

    $853

    $49,591,400

    Minnesota

    21,000

    $803

    $21,155,300

    Mississippi

    12,900

    $777

    $12,931,600

    Missouri

    32,400

    $828

    $33,522,400

    Montana

    4,600

    $781

    $4,582,000

    Nebraska

    7,800

    $845

    $8,081,700

    Nevada

    15,900

    $859

    $16,922,300

    New Hampshire

    6,500

    $965

    $7,474,300

    New Jersey

    36,200

    $936

    $41,268,900

    New Mexico

    9,600

    $833

    $10,219,600

    New York

    70,300

    $958

    $80,830,100

    North Carolina

    44,900

    $833

    $46,044,500

    North Dakota

    4,000

    $949

    $4,539,800

    Ohio

    52,900

    $841

    $54,542,900

    Oklahoma

    21,000

    $866

    $22,600,000

    Oregon

    21,400

    $762

    $21,237,200

    Pennsylvania

    55,200

    $919

    $60,505,200

    Rhode Island

    3,900

    $926

    $4,410,100

    South Carolina

    17,200

    $769

    $17,323,700

    South Dakota

    3,800

    $899

    $3,976,100

    Tennessee

    29,000

    $840

    $29,834,800

    Texas

    143,400

    $898

    $159,809,900

    Utah

    11,100

    $766

    $11,037,700

    Vermont

    2,800

    $892

    $2,897,400

    Virginia

    37,900

    $827

    $39,977,600

    Washington

    37,200

    $918

    $42,273,300

    West Virginia

    7,200

    $921

    $7,830,000

    Wisconsin

    19,900

    $781

    $19,483,100

    Wyoming

    3,400

    $920

    $3,766,100

    Total

    1,418,300

    $861

    $1,518,154,900

  • 30 Jun 2020 11:12 AM | Anonymous

    IRS has easy ways to help taxpayers who need more time or payment options 

    WASHINGTON ― The Department of the Treasury and IRS today announced the tax filing and payment deadline of July 15 will not be postponed. Individual taxpayers unable to meet the July 15 due date can request an automatic extension of time to file until Oct. 15.

    Due to COVID-19, the original filing deadline and tax payment due date for 2019 was postponed from April 15 to July 15.

    The IRS reminds taxpayers filing Form 1040 series returns that they must file Form 4868 by July 15 to obtain the automatic extension to Oct. 15. The extension provides additional time to file the tax return – it is not an extension to pay any taxes due.

    The IRS urges people who owe taxes, even if they have a filing extension, to carefully review their situation and pay what they can by July 15 to avoid penalties and interest. For people facing hardships, including those affected by COVID-19, who cannot pay in full, the IRS has several options available to help. To avoid interest and penalties, the IRS encourages them to pay what they can and consider a variety of payment options available for the remaining balance.

    “The IRS understands that those affected by the coronavirus may not be able to pay their balances in full by July 15, but we have many payment options to help taxpayers,” said IRS Commissioner Chuck Rettig. “These easy-to-use payment options are available on IRS.gov, and most can be done automatically without reaching out to an IRS representative.”

    Automatic Extension of Time to File

    Taxpayers who need more time to prepare and file their federal tax return can apply for an extension of time to file until Oct. 15. To get an extension, taxpayers must estimate their tax liability on the extension form and pay any amount due.

    Individual taxpayers have several easy ways to file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by the July 15 deadline. Tax software providers have an electronic version available. In addition, all taxpayers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension.

    Save a step: Get an extension when you make a payment 

    Taxpayers can also get an extension by paying all or part of their tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. When getting an extension by making a payment, taxpayers do not have to file a separate extension form and will receive a confirmation number for their records.

    State deadlines may differ

    The IRS also reminds taxpayers to check their state filing and payment deadlines, which may differ from the federal July 15 deadline. A list of state tax division websites is available through the Federation of Tax Administrators.

    Payment options

    Taxpayers who owe taxes can choose from the following payment options:

    The IRS recommends that taxpayers who are unable to pay their taxes in full should act as quickly as possible. Tax bills can quickly accumulate more interest and penalties the longer they sit. 

    Several payment options are available on IRS.gov/payments to help taxpayers who can’t pay in full and some can offer taxpayers smaller penalties. Though interest and late-payment penalties continue to accrue on any unpaid taxes after July 15, the failure to pay tax penalty rate is cut in half while an installment agreement is in effect. The usual penalty rate of 0.5% per month is reduced to 0.25% For the calendar quarter beginning July 1, 2020, the interest rate for underpayment is 3%.

    Most taxpayers who cannot pay in full have the following payment options:

    • Online Payment Agreement — These are available for individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in combined payroll tax, penalties and interest and have filed all tax returns. Most taxpayers qualify for this option, and an Online Payment Agreement can usually be set up in a matter of minutes on IRS.gov/OPA. Online Payment Agreements are available Monday – Friday, 6 a.m. to 12:30 a.m.; Saturday, 6 a.m. to 10 p.m.; Sunday, 6 p.m. to midnight. All times are Eastern time. Certain fees may apply.
    • Installment Agreement — Taxpayers who do not qualify to use the online payment agreement option, or choose not to use it, can also apply for a payment plan by phone, or by mail by submitting Form 9465, Installment Agreement Request. Installment agreements paid by direct deposit from a bank account or a payroll deduction will help taxpayers avoid default on their agreements. It also reduces the burden of mailing payments and saves postage costs. Certain fees may apply.
    • Temporarily Delaying Collection — You can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
    • Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool.

    In addition, taxpayers can consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law.

  • 29 Jun 2020 3:59 PM | Anonymous

    IRS releases new Data Book with redesigned, expanded format to provide more detailed view of service, compliance activities in FY 2019

    WASHINGTON – The Internal Revenue Service today unveiled the 2019 IRS Data Book, featuring a redesigned format that provides a different and expanded look at IRS accomplishments during the past year. 

    Available now on IRS.gov, the redesigned Fiscal Year 2019 edition of the IRS Data Book provides the annual set of statistical tables summarizing tax filings, revenue collections, taxpayer services, enforcement activities and agency operations. The new Data Book features an updated format with additional tables designed to more accurately reflect the way the IRS does business today. 

    “The IRS is changing from many perspectives, and the Data Book reflects that change as well,” IRS Commissioner Chuck Rettig wrote in the Data Book’s introduction. “Along those lines, we’ve redesigned the Data Book for Fiscal Year (FY) 2019 by reorganizing key material and adding new information. This is part of an effort to help the Data Book provide a more complete view of our extensive service and compliance operations in a clear format that is easier to use for taxpayers and the tax community.” 

    The Data Book complements the new IRS Progress Update, a new annual report that premiered in January. 

    “In presenting this information, our goal is to help everyone understand the scope of our work for the nation,” Rettig added. “The IRS touches more Americans than any other entity, public or private. Our employees take pride in providing top-quality service to taxpayers — helping them meet their tax obligations through clear guidance while ensuring their rights are protected. When citizens can perform their civic duty each year by preparing and filing their taxes and paying only what they should, they help fund critical aspects of the United States, ranging from schools and roads to Social Security payments and the nation’s military.” 

    Rettig also notes the IRS response to COVID-19 in the new Data Book. The coronavirus delayed publication of this year’s Data Book. 

    As Rettig further noted, “we realize when the public thinks of compliance, they think of audits, but there is so much more to our work to ensure appropriate compliance with the tax law and serve the nation. We’ve created a new section called “Compliance Presence,” so everyone can easily see the many different activities related to enforcement. Beyond traditional examinations, these activities include more than 5 million compliance steps the IRS takes every year to ensure fairness in our tax system.” 

    Among the compliance steps, illustrated by statistics in this section, are math error notices, matching tax return entries to information returns filed by employers, banks and other third parties, and casework by IRS Criminal Investigation. 

    Recognizing that audits can take several years to complete, for example, new Table 17a takes a long-term view by presenting both audits closed and audits in progress, tied to tax returns for tax-years 2010 through 2018. The new table also presents data based on the taxpayer’s total positive income, excluding losses, the same measure the IRS uses to assign exam codes. 

    This year for the first time, the Data Book also shows the number of installment payment agreements set up by individuals and businesses with the IRS. Another addition is the number of Identity Protection Personal Identification Numbers (IP PINs) issued for filing years 2011-2020 to certain victims of tax-related identity theft. 

    The new Data Book shows that during FY 2019, the IRS:

    • Processed more than 253 million individual and business tax returns and forms, with nearly 73% of them filed electronically. Of that total, about 154 million were individual income tax returns, with about 89% of them being e-filed.
    • Collected more than $3.5 trillion in Federal taxes paid by individuals and businesses, with the individual income tax accounting for about 56% of the total.
    • Issued nearly 121.9 million refunds to individuals and businesses totaling more than $452 billion. The bulk of them — more than 119.8 million totaling over $270 billion—went to individual income tax filers. Of that total, nearly 17.3 million included a refundable Child Tax Credit and nearly 24.6 million included a refundable Earned Income Tax Credit.
    • Attracted nearly 651 million visits to IRS.gov, its popular web site.
    • Set up more than 2.8 million new payment or installment agreements, with nearly 1.1 million of them established online at IRS.gov.
    • Reinvigorated its non-filer compliance initiative by closing over 364,000 cases under the Automated Substitute for Return Program, resulting in nearly $6.6 billion in additional assessments.
    • Completed nearly 2,800 criminal investigations.

    To view or download a pdf file of the complete FY 2019 IRS Data Book, Excel files of any of its 34 tables, or Data Books or tables from past years, visit IRS.gov/statistics/soi-tax-stats-irs-data-book.

  • 29 Jun 2020 12:00 PM | Anonymous

    Notice 2020-52 clarifies the requirements that apply to a mid-year amendment to a safe harbor 401(k) or 401(m) plan that reduces only contributions made on behalf of highly compensated employees.  This notice also provides temporary relief in connection with the ongoing Coronavirus Disease 2019 (COVID-19) pandemic from certain requirements that would otherwise apply to a mid-year amendment to a safe harbor 401(k) or 401(m) plan adopted between March 13, 2020, and August 31, 2020, that reduces or suspends safe harbor contributions.  

    Notice 2020-52 will be in IRB:  2020-29, dated 07/13/2020.


  • 29 Jun 2020 10:32 AM | Anonymous

    National Taxpayer Advocate Erin Collins delivers her first report to Congress; Identifies COVID-19 challenges, CARES Act, and Taxpayer First Act implementation as priority issues for taxpayers

    WASHINGTON — National Taxpayer Advocate Erin M. Collins today released her first report to Congress, identifying taxpayer challenges arising from the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the IRS’s implementation of the Taxpayer First Act as priority issues the Taxpayer Advocate Service (TAS) plans to focus on in the coming year. The report also assesses the 2020 filing season, identifies other TAS areas of focus, and includes the IRS’s responses to administrative recommendations proposed in the National Taxpayer Advocate’s 2019 annual report. 

    “On March 30, 2020, I had the honor and privilege of being sworn in as the third National Taxpayer Advocate,” Collins wrote. “Starting in the midst of a pandemic and witnessing IRS offices closing one by one was not the way I envisioned my role when I accepted the position, . . . but there also has been a silver lining in this experience: As I have participated in conference calls with members of my leadership team, TAS employees, and the IRS’s COVID-19 response team, I have been extraordinarily impressed by their commitment and focus on the health and safety of all employees during this pandemic, while still doing as much as possible to assist taxpayers.” 

    In her preface to the report, Collins expressed appreciation to Nina Olson, who served as the National Taxpayer Advocate from 2001-2019, and Val Oveson, who served as the first National Taxpayer Advocate from 1998-2000. “Over the past 20 years, TAS has successfully assisted more than 4.5 million taxpayers by helping them resolve their tax problems and protecting their rights, and it has made hundreds of administrative recommendations adopted by the IRS and some 45 legislative recommendations enacted by Congress,” Collins wrote. 

    Taxpayer Challenges Arising from COVID-19 Pandemic 

    The report praises the IRS for acting quickly to postpone over 300 filing, payment, and other time-sensitive deadlines, provide broad relief from compliance actions under its “People First Initiative,” and disburse some 160 million Economic Impact Payments (EIPs) authorized by the CARES Act, enacted on March 27, 2020. 

    However, the report says that despite the IRS’s best efforts, there have been notable adverse taxpayer impacts, including: 

    • Taxpayers who filed a 2019 paper return and are entitled to refunds may be in for a long wait. The IRS had to suspend the processing of paper tax returns, and as of May 16, it estimated it had a backlog of 4.7 million paper returns. Although the IRS is reopening some of its core operations, it is not clear when it can open and process all the returns sitting in mail facilities. 
    • Some taxpayers whose returns were mistakenly flagged by IRS processing filters are experiencing lengthy delays in receiving their refunds. All tax returns claiming refunds are passed through filters designed to detect identity theft and other types of refund fraud. As TAS has documented, some of these filters produce “false positive rates” of more than 50 percent (meaning that more than half the taxpayers whose returns are stopped by certain filters are entitled to the refunds they claimed). Affected taxpayers are often asked to mail in documentation to substantiate their claims, but the IRS has not opened or processed many of their responses, delaying their refunds. Refund delays can have a significant financial impact on low-income taxpayers, as refunds often constitute a significant percentage of their annual household incomes. Notably, some of the refund delays have been generated by claims for the earned income tax credit or additional child tax credit. 
    • Taxpayers who have needed help from the IRS have had difficulty obtaining it. The IRS shut down its Accounts Management telephone lines, so taxpayers could not reach a live assistor by telephone. The IRS shut down its Taxpayer Assistance Centers, making it impossible for taxpayers to obtain in-person assistance. The IRS also shut down its mail facilities, so it was unable to log or process taxpayer responses to compliance notices. The only resources readily available were IRS.gov and automated telephone lines. The IRS has begun reopening its operations, but it will take some time before they are restored to full capacity. 
    • IRS systems prepared over 20 million notices during the pandemic that could not be mailed due to closure of notice production centers between April 8 and May 31. The IRS is mailing these notices now. However, some collection notices bear old dates and include response deadlines that often have passed. The IRS plans to include “inserts” with these notices explaining that response deadlines have been postponed, but the report expresses concern that receiving compliance notices with response deadlines that have passed will be confusing and concerning to many taxpayers who may not read the inserts.

    Taxpayer Challenges Relating to the CARES Act

    The report says the IRS generally did a commendable job implementing the CARES Act, but taxpayer challenges remain, including: 

    • Individuals who did not receive some or all of their EIPs may have to wait until next year to receive them. To date, the IRS has taken the position that most taxpayers who did not receive their full payments must wait until they file their 2020 income tax returns to claim the amounts as credits against their 2020 tax liabilities, even though there is no legal constraint on the IRS’s ability to issue additional EIP amounts as advance refunds during 2020. Congress enacted the CARES Act both to provide emergency financial relief to taxpayers on an individual level and to boost spending on the national level. TAS will continue to urge the IRS to provide full EIPs to eligible taxpayers throughout 2020 as rapidly as possible. The report says that making taxpayers wait until next year to receive their EIPs harms the affected taxpayers and is inconsistent with congressional intent. 
    • Employers are struggling to determine whether they qualify for the Employee Retention Credit (ERC) and in what amounts. The ERC is a complex, refundable tax credit that requires employers to determine when a trade or business was fully or partially suspended by government order; the employer’s number of full-time employees; what constitutes qualified wages; whether a business’s operations post-COVID-19 are comparable to its pre-COVID-19 operations; and the application of aggregation rules. To address these complexities, the IRS has provided considerable guidance regarding when and how to claim the ERC. However, several areas require further clarification. If clarity is not provided, taxpayers will be more likely to make unintentional errors, increasing the risk of an audit. Having to untangle these issues in an audit environment would drain the limited resources of both the IRS and the businesses affected by the COVID-19 pandemic. TAS will continue to advocate that the IRS further clarify the rules governing when and how employers should claim this credit. 
    • Businesses are facing challenges when seeking to utilize the CARES Act provision that authorizes the use of net operating losses to offset taxable income in prior years (and in some cases to receive refunds). For businesses to determine the optimal application of the CARES Act provisions so they can exercise their right to pay no more than the correct amount of tax, they may need to create and run complex financial models involving multiple tax years. The report says the IRS has provided timely guidance in the form of frequently asked questions (FAQs), but it expresses concern that FAQs are not authoritative or binding on the IRS.

    Implementation of Taxpayer First Act 

    The Taxpayer First Act (TFA), enacted one year ago, constitutes the most far-reaching revisions to tax administration since the IRS Restructuring and Reform Act of 1998. The TFA included some 23 provisions recommended by the National Taxpayer Advocate. A centerpiece of the TFA is a requirement that the IRS develop four strategic plans: (i) a comprehensive taxpayer service strategy; (ii) a plan to redesign the IRS’s organizational structure; (iii) a comprehensive employee training strategy that includes training on taxpayer rights and the role of TAS; and (iv) a multi-year plan to meet IRS information technology needs. The TFA required the IRS to submit its comprehensive taxpayer service strategy to Congress by July 1, 2020. Because of disruptions caused by COVID-19, the IRS has been delayed in developing these plans, but it expects to deliver its taxpayer service strategy to Congress by the end of the year.  

    The report details some steps the IRS has taken to receive input from taxpayers, practitioners, and TAS, and identifies over two dozen TFA provisions that the IRS has implemented. It expresses concern that the IRS has not properly implemented a provision directing it to establish a single point of contact for identity theft victims and that it may not properly implement a provision directing it to exclude taxpayers with adjusted gross incomes at or below 200 percent of the Federal Poverty Level from assignment to private debt collection agencies by December 31, 2020. 

    Collins said, “I have been impressed by many ideas the IRS is considering, and I look forward to working with the leadership as it refines its taxpayer service strategy in the coming months.” 

    2020 Filing Season Review

    The National Taxpayer Advocate’s mid-year report typically includes an assessment of the filing season that measures performance against the results of prior filing seasons. Because the IRS closed most of its operations in March and postponed many filing and payment deadlines from April 15 to July 15, this filing season cannot fairly be compared with prior years. The disruption caused by COVID-19 and the postponed due date has had – and continues to have – an enormous impact on the 2020 filing season, reflected in the number of returns received, the volume of correspondence received from taxpayers, and the reduction in toll-free telephone service. Among the impacts were: 

    • Due to campus and office closures, the IRS could not staff phone lines to assist callers beginning the week of March 21, 2020. 
    • After March 20, 2020, taxpayers no longer had access to face-to-face customer service. 
    • There is a large backlog of incoming mail (about ten million pieces of mailed tax returns or correspondence sitting in trailers at IRS campuses). The IRS could not process paper returns and process or respond to other written correspondence from taxpayers. 
    • The IRS has sent only a very limited volume of outgoing taxpayer correspondence. 
    • There was a substantial reduction in Volunteer Income Tax Assistance, Tax Counseling for Elderly, and Low Income Taxpayer Clinic services. 
    • The National Distribution Center was shut down, depriving taxpayers of a means to acquire pre-printed forms. 

    Because of the IRS’s limitations and the postponed filing deadline, an assessment of the filing season is necessarily incomplete. The report says TAS may provide a more thorough analysis later. 

    Other TAS Areas of Focus for Fiscal Year 2021 

    Beyond COVID-19, the CARES Act, and TFA implementation, TAS continues to advocate on a broad range of issues. The report describes ten issues TAS plans to focus on during the upcoming fiscal year. These include working with the IRS to provide taxpayers with limited English proficiency meaningful access to tax products and services; improving the clarity and content of IRS notices and correspondence; improving service to and communication with taxpayers in rural and other communities that lack high-speed internet access; and working with the IRS to refine its screening filters so fewer legitimate returns are flagged as potentially fraudulent and cause refund delays for affected taxpayers. 

    IRS Responses to National Taxpayer Advocate Administrative Recommendations

    The National Taxpayer Advocate is required by statute to submit a year-end report to Congress that makes administrative recommendations to resolve taxpayer problems. Section 7803(c)(3) of the Internal Revenue Code authorizes the National Taxpayer Advocate to submit administrative recommendations to the Commissioner and requires the IRS to respond within three months. Under this authority, the National Taxpayer Advocate annually transmits to the Commissioner all administrative recommendations proposed in her year-end report for response. 

    The Acting National Taxpayer Advocate made 78 administrative recommendations in the 2019 year-end report and then submitted them to the Commissioner for response. Of those, 59 were made in the “Most Serious Problems” section of the report. The IRS has implemented or agreed to implement 41 (or 69 percent). 

    The report made 19 administrative recommendations in other sections of the report. The IRS has taken the position that it is not required to respond directly to them and has provided only general narrative responses. The National Taxpayer Advocate believes the IRS is required to provide direct responses. “The intent of the statute is clear,” the report says. “If the National Taxpayer Advocate makes an administrative recommendation to mitigate a taxpayer problem – regardless of whether or where it has appeared in a report – the IRS should evaluate it and respond in writing so that TAS, Congress, and the taxpaying public know whether the IRS plans to implement the recommendation and, if not, why not. General narrative discussions that do not address recommendations directly fail to satisfy this objective.” 

    The IRS responses are published in full in an appendix to the report.

    *           *           *           *           *           *           *

    The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury or the Office of Management and Budget. The first report must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report must discuss the ten most serious problems encountered by taxpayers, identify the ten tax issues most frequently litigated in the courts, and make administrative and legislative recommendations to resolve taxpayer problems. 

    The National Taxpayer Advocate blogs about key issues in tax administration. Click here to subscribe. Past blogs from the National Taxpayer Advocate can be found here

    About the Taxpayer Advocate Service

    The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Your local advocate’s number is in your local directory and at https://taxpayeradvocate.irs.gov/contact-us. You can also call TAS toll-free at 877-777-4778. TAS can help if you need assistance in resolving an IRS problem, if your problem is causing financial difficulty, or if you believe an IRS system or procedure isn’t working as it should. Our service is free. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to https://taxpayeradvocate.irs.gov. You can get updates on tax topics at facebook.com/YourVoiceAtIRS, Twitter.com/YourVoiceatIRS, and YouTube.com/TASNTA.

  • 26 Jun 2020 3:56 PM | Anonymous

    The Internal Revenue Service updated questions 1,3,4 and 5 of the Deferral of Employment Tax Deposit FAQs to reflect changes by the Paycheck Protection Program Flexibility Act of 2020. 


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