IRS Tax News

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  • 04 Mar 2021 1:37 PM | Anonymous

    Today, the IRS published the latest executive column, “A Closer Look,” which features Dietra Grant, Customer Account Services Director, discussing the benefits of using Free File options to get tax breaks. “So many people were adversely affected last year in the job market, and their income may be substantially different in 2020 than it was in 2019. Don’t leave money on the table, use Free File online to help,” said Grant. Read more here. Read the Spanish version here.

    A Closer Look” is a column from IRS executives that covers a variety of timely issues of interest to taxpayers and the tax community. It also provides a detailed look at key issues affecting everything from IRS operations and employees to issues involving taxpayers and tax professionals.

    Check here for prior posts and new updates, and refer to the this News Release for more IRS.gov tax time tools.


  • 04 Mar 2021 1:20 PM | Anonymous

    WASHINGTON — The Internal Revenue Service reminds taxpayers that its website, IRS.gov, continues to be the first and best place for people seeking information and assistance on their federal taxes. It is available 24 hours a day from the comfort of home, on a desktop, or from just about anywhere with a mobile device.

    The array of online tools and resources available at IRS.gov range from tax preparation and refund tracking to research tools like the Interactive Tax Assistant and answers for Frequently Asked Questions on many subjects.

    View tax account online
    Taxpayers can use their online account to securely see important information when preparing to file their tax return or following up on balances or notices. This includes:

    • Adjusted Gross Income: This can be useful if using a different tax software or tax preparer this year.
    • Economic Impact Payment amounts: Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 federal tax return. To claim the full amount, taxpayers will need to know the amounts of the Economic Impact Payments received. These amounts can be found on the Tax Records tab in online account.
    • Estimated tax payment amounts: The total of any estimated tax payments made during the year or refunds applied as a credit can be found on the Account Balance tab in online account, and a record of each payment appears under Payment Activity.

    Additionally, taxpayers can view:

    • The amount owed for any past years, updated for the current calendar day
    • Payment history and any scheduled or pending payments
    • Payment plan details
    • Digital copies of select notices from the IRS

    Get a tax return transcript
    The Get Transcript tool is free and also accessible through an online account. It allows taxpayers to view, print or download their tax transcripts after the IRS has processed the return. A tax return transcript shows most line items from an original tax return, along with any forms and schedules, but not changes made after it was filed.

    Get an Identity Protection PIN
    An Identity Protection PIN (IP PIN) is a six-digit number that prevents someone from filing a tax return using another taxpayer’s Social Security number. The IP PIN is known only to the real taxpayer and the IRS and helps the IRS verify the taxpayer’s identity when they file their electronic or paper tax return. Starting in 2021, any taxpayer who can verify his or her identity can voluntarily opt into the IP PIN program. See Get an IP PIN for details and to access the online tool. There are options for those who cannot verify their identities online.

    Locate local free tax preparation
    The IRS's Volunteer Income Tax Assistance (VITA) program has operated for over 50 years. It offers free basic tax return preparation to qualified individuals:

    • People who generally make $57,000 or less
    • People with disabilities
    • Limited English-speaking taxpayers

    The Tax Counseling for the Elderly (TCE) program also offers free tax help for taxpayers, particularly those age 60 and older. The VITA/TCE Site Locator can help eligible taxpayers find the nearest community-based site staffed by IRS-trained and certified volunteers. Please note that some VITA/TCE sites are not operating at full capacity this year and others are not opening. Demand is high for this service so taxpayers may experience longer wait times for appointments. Taxpayers can use the locator tool to find an available site near them. It is updated throughout the tax season, so individuals should check back if they don’t see a nearby site listed.

    DIY tax preparation for free
    The IRS Free File program offers 70% of all taxpayers the choice of nine brand-name tax preparation software packages to use at no cost. Those who earned less than $72,000 in 2020 can choose which package is best for them. Some even offer free state tax return preparation.

    Those who earned more than $72,000 in 2020 and are comfortable preparing their own taxes can use Free File Fillable Forms. This electronic version of paper IRS tax forms can also be used to file tax returns online.

    Free File is available only through IRS.gov. Read more about the Free File program in this week’s A Closer Look.

    Find a local tax professional
    The searchable directory on IRS.gov can help taxpayers find a tax professional in their area. The list can be sorted by credentials and qualifications. Tax return preparers have differing levels of skills, education and expertise. Most tax return preparers provide outstanding and professional service. However, each year, some taxpayers are hurt financially because they choose the wrong tax return preparer. Be sure to check our tips for choosing a tax preparer and how to avoid unethical "ghost" return preparers.

    Track refunds with ‘Where’s My Refund?’
    Taxpayers can easily find the most up-to-date information about their tax refund using the "Where’s My Refund?" tool on IRS.gov and on the official IRS mobile app, IRS2Go. Within 24 hours after the IRS acknowledges receipt of an e-filed return, or four weeks after a paper return is mailed, taxpayers can start checking on the status of their refund.

    Make a tax payment
    Taxpayers can visit the “Pay” tab on IRS.gov to see their payment options. Most tax software products give taxpayers various payment options, including the option to schedule a payment from a bank account when filing their return.

    IRS Direct Pay offers taxpayers a free, fast, secure and easy way to make an electronic payment from their bank account to the U.S. Treasury. Other ways to pay include:

    Make a plan to pay
    Taxpayers can meet their tax obligation in monthly installments by applying for a payment plan. Most can be setup on IRS.gov/paymentplan or through an online account in a matter of minutes. Setup fees may apply for some types of plans. Options include a full-pay agreement, a short-term plan of up to 120 days or a long-term monthly payment plan (installment agreement). The amount a taxpayer owes and their tax- filing compliance determines which payment plan options may be available.

    Other options available may include an offer in compromise -- a way for a taxpayer to settle their tax debt for less than the full amount -- or requesting the IRS to temporarily delay collection until the taxpayer’s financial situation improves.

    The IRS2Go app offers great features

    • Refund Status: Check the status of an income tax refund within 24 hours after the IRS receives the e-filed return, or about four weeks after mailing a paper return.
    • Make a Payment: Get easy access to mobile-friendly payment options like IRS Direct Pay, offering a free, secure way to pay directly from a bank account.
    • Free Tax Help: Directly access Free File tax software from a mobile device to quickly prepare and file taxes or find a VITA or TCE site nearby.
    • Stay Connected: Follow IRS on Twitter, LinkedIn and Instagram, watch helpful videos on YouTube, subscribe to receive IRS Tax Tips and more.
    • Security Code: IRS2Go can generate login security codes for certain IRS online services, allowing the retrieval of codes through IRS2Go instead of using text messages. For more information, visit the Secure Access page.

    The Tax Time Guide is series of news releases designed to help taxpayers get the information they need to file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, on IRS.gov.


  • 02 Mar 2021 3:51 PM | Anonymous

    Revenue Ruling 2021-06 provides the rates for interest determined under Section 6621 of the code for the calendar quarter beginning April 1, 2021, will be 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments, and 5 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 0.5 percent.

    Revenue Ruling 2021-06 will be  in IRB:  2021-12, dated March 22, 2021.


  • 02 Mar 2021 3:50 PM | Anonymous

    WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning April 1, 2021. The rates will be: 

    • 3% for overpayments [2%t in the case of a corporation];
    • 0.5%for the portion of a corporate overpayment exceeding $10,000;
    • 3% for underpayments; and
    • 5% for large corporate underpayments. 

    Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. 

    Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

    The interest rates announced today are computed from the federal short-term rate determined during January 2021 to take effect Feb. 1, 2021, based on daily compounding.

    Revenue Ruling 2021-6, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2021-12, dated March 22, 2021.


  • 02 Mar 2021 12:12 PM | Anonymous

    WASHINGTON – The Internal Revenue Service reminds first-time filers and those who usually don’t have a federal filing requirement to consider filing a 2020 tax return. They may be eligible to claim the  Recovery Rebate Credit, a new refundable credit, authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-related Tax Relief Act.

    Most individuals eligible for the Recovery Rebate Credit have already received the full amount in two rounds of payments, known as Economic Impact Payments. All legally permitted first and second Economic Impact Payments have been issued.

    Individuals who were eligible but did not receive the first or second Economic Impact Payment or received less than the full amounts may be eligible to claim the Recovery Rebate Credit and must file a 2020 federal tax return, even if they do not usually file a tax return. The IRS offers free options to prepare and file a return.

    Taxpayers who received the full amounts of both Economic Impact Payments won’t claim the Recovery Rebate Credit or include any information about the payments on their 2020 tax return because the IRS already issued their Recovery Rebate Credit in advance as Economic Impact Payments.

    Didn’t get an Economic Impact Payment or got less than the full amount?
    People who didn’t get an Economic Impact Payment or got less than the full amounts may be eligible to claim the Recovery Rebate Credit and must file a 2020 tax return, even if they don’t usually file.

    The first Economic Impact Payment was based on an individual’s 2019 tax year information or 2018 if the 2019 tax return information was not available. The second Economic Impact Payment was based on an individual’s 2019 tax year information. The Recovery Rebate Credit is similar except that the eligibility and the amount are based on 2020 information on the tax return. The Recovery Rebate Credit is reduced by any Economic Impact Payments issued.

    People who were not eligible for either or both of the Economic Impact Payments may still be eligible for the Recovery Rebate Credit since it’s based on their 2020 tax return information. Those with lower income in 2020 or who were claimed as a dependent on someone else’s tax return in 2018 or 2019, but who cannot be claimed as a dependent on someone else’s return in 2020, may now be eligible for the Recovery Rebate Credit.

    People eligible to claim the Recovery Rebate Credit based on their 2020 tax information must file a 2020 federal tax return. For more information about the Recovery Rebate Credit, see Frequently Asked Questions at IRS.gov.

    Filing a 2020 tax return
    To avoid refund delays, file a complete and accurate tax return. The best way to file a complete and accurate 2020 tax return is to file electronically. The tax software will ask questions about income, credits and deductions and help taxpayers figure their Recovery Rebate Credit. The Form 1040 and Form 1040-SR instructions includes a worksheet that can also help.

    Individuals will need to know the amount of their Economic Impact Payments to claim the Recovery Rebate Credit. Those who don’t have their Economic Impact Payment notices can view the amounts of their first and second Economic Impact Payments through their individual online account. For married filing joint individuals, each spouse will need to log into his or her own account.

    The Recovery Rebate Credit will be included in any tax refund. It will not be issued separately. For those due a refund (which would include the Recovery Rebate Credit), combining electronic filing with direct deposit is the safest and fastest way to get their refund.

    IRS Free File
    Taxpayers with incomes of$72,000 or less, an use brand-name software to prepare and file their federal tax returns electronically for free with IRS Free File. IRS Free File is a great option for people who are only filing a tax return to claim the Recovery Rebate Credit. Free File Fillable Forms is the only IRS Free File option available for most taxpayers whose adjusted gross income is greater than $72,000.

    Taxpayers who have no taxable income but are filing a return to receive the Recovery Rebate Credit should look for several of the Free File products that have no minimum income for eligibility. Simply go to IRS.gov/Free File, select “Choose an IRS Free File Offer” and then select “Browse All Offers” to find a Free File product with no minimum income as part of its offer.

    Free online tax help for military service members, families and some veterans
    MilTax, Military OneSource’s tax service, provides online software for eligible individuals to electronically file a federal return and up to three state returns for free.

    Free tax preparation in local communities
    First-time filers and those who usually don’t have a filing requirement may also qualify for free assistance from IRS Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs in their community. These programs offer free basic tax return preparation to qualified individuals.

    The VITA program has operated for over 50 years, offering free tax help to:

    • People who generally make $57,000 or less
    • Persons with disabilities; and
    • Limited English-speaking taxpayers who need assistance in preparing their tax return.

    In addition to VITA, the TCE program offers free tax help, particularly for those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors.

    This year, some VITA/TCE sites are not operating at full capacity and others are not opening. Check the VITA/TCE locator tool to search for nearby available sites.

    Help at IRS.gov
    IRS.gov has online resources to answer tax questions immediately. The Interactive Tax Assistant is a tool that provides answers to several tax-law questions specific to a taxpayer’s individual circumstances.

    Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in the local community or finding a trusted tax professional.


  • 02 Mar 2021 8:13 AM | Anonymous

    Notice 2021-20 provides guidance on the employee retention credit provided under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act, as amended by section 206 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, for qualified wages paid after March 12, 2020, and before January 1, 2021. This notice is to provide employers with information about how to determine their eligibility to receive the employee retention credit, largely incorporating the concepts set forth in the Frequently Asked Questions (FAQs) posted on the IRS website and answering additional questions related to changes made by the Relief Act not addressed in the FAQs.

    Notice 2021-20 will appear in IRB 2021-11, dated March 15, 2021.


  • 02 Mar 2021 8:12 AM | Anonymous

    WASHINGTON – The Internal Revenue Service today issued guidance for employers claiming the employee retention credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), for calendar quarters in 2020. The guidance in Notice 2021-20 is similar to the information in the employee retention credit FAQs, but includes clarifications and describes retroactive changes under the new law applicable to 2020, primarily relating to expanded eligibility for the credit. 

    For 2020, the employee retention credit can be claimed by employers who paid qualified wages after March 12, 2020, and before January 1, 2021, and who experienced a full or partial suspension of their operations or a significant decline in gross receipts. The credit is equal to 50 percent of qualified wages paid, including qualified health plan expenses, for up to $10,000 per employee in 2020.  The maximum credit available for each employee is $5,000 in 2020.
     
    A significant change for 2020 made by the Relief Act permits eligible employers that received a Paycheck Protection Program (PPP) loan to claim the employee retention credit, although the same wages cannot be counted both for seeking forgiveness of the PPP loan and calculating the employee retention credit.  Notice 2021-20 explains when and how employers that received a PPP loan can claim the employee retention credit for 2020.

    Notice 2021-20 also provides answers to questions such as: who are eligible employers; what constitutes full or partial suspension of trade or business operations; what is a significant decline in gross receipts; how much is the maximum amount of an eligible employer’s employee retention credit; what are qualified wages; how does an eligible employer claim the employee retention credit; and how does an eligible employer substantiate the claim for the credit.

    While the Relief Act also extended and modified the employee retention credit for the first two calendar quarters in 2021, Notice 2021-20 addresses only the rules applicable to 2020.  The IRS plans to release additional guidance soon addressing the changes for 2021.

    A page on IRS.gov is devoted to providing information to businesses on all aspects of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).


  • 26 Feb 2021 1:26 PM | Anonymous

    WASHINGTON — The Internal Revenue Service today reminds businesses of their responsibility to file Form 8300, Report of Cash Payments Over $10,000, and encourages e-filing to help them file accurate, complete forms.

    Although many cash transactions are legitimate, information reported on Form 8300 can help stop those who evade taxes, profit from drug trading, engage in terrorist financing and conduct other criminal activities. The government can often trace money from these illegal activities through payments reported on complete, accurate forms. 

    To help businesses prepare and file reports, the IRS created a video on How to Complete Form 8300 – Part I, Part II. The short video points out sections of Form 8300 for which the IRS commonly finds mistakes and explains how to accurately complete those sections.

    Also, the IRS encourages businesses to electronically file completed forms. Although they have the option of filing Form 8300 on paper, electronic filing is more accurate and reduces the need for follow-up correspondence with the IRS.

    Many businesses have already found the free and secure e-filing system is a more convenient and cost-effective way to meet the reporting deadline of 15 days after a transaction. They get free, automatic acknowledgment of receipt when they file. And, businesses can batch file their reports, which is especially helpful to those required to file many forms.

    To file Form 8300 electronically, a business must set up an account with the Financial Crimes Enforcement Network’s BSA E-Filing System. For more information, interested businesses can call the Bank Secrecy Act E-Filing Help Desk at 866-346-9478 or email them at BSAEFilingHelp@fincen.gov. The help desk is available Monday through Friday from 8 a.m. to 6 p.m. Eastern time.

    For more information about the reporting requirement, see FS-2021-3 available on IRS.gov.


  • 26 Feb 2021 11:48 AM | Anonymous

    Notice 2021-18 provides for adjustments to the limitation on housing expenses for purposed of section 911 of the Internal Revenue Code.  These adjustments are made on the basis of geographic differences in housing costs relative to housing costs in the United States.  Further, if the limitation on housing expenses is higher for taxable year 2021 than the adjusted limitations on housing expenses provided in Notice 2020-13, qualified taxpayers may apply the adjusted limitations for taxable year 2021 to their 2020 taxable year.  

    Notice 2021-18 will be in IRB: 2021-18, dated March 15, 2021.


  • 25 Feb 2021 12:13 PM | Anonymous

    WASHINGTON – The Internal Revenue Service today reminded taxpayers to choose a tax return preparer with care. Even though the vast majority of tax return preparers provide honest, quality service, some cause great harm through fraud, identity theft and other scams every year.

    People value good tax return preparers for helping them through a complicated tax situation or for being available when they don’t have time to prepare their own tax return. Paid tax return preparers completed more than half of the tax returns submitted to the IRS in tax-year 2018.

    It’s very important to select the right tax professional. After all, people trust them with their most sensitive personal and financial information. No matter who prepares it, the accuracy of a tax return is ultimately the responsibility of the taxpayer. The IRS protects taxpayers by assessing significant civil penalties against dishonest return preparers and working with the Justice Department to end scams and prosecute the criminals behind them.

    What to look for

    The Choosing a Tax Professional page on IRS.gov has information about tax return preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

    By law, anyone who is paid to prepare or assists in preparing most federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.

    Well-intentioned taxpayers can be deceived by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to claim. Fraudulent preparers often do this to increase their fee. Here are more tips to consider:

    • Look for a preparer who is available year-round. In the event questions come up about a tax return, taxpayers may need to contact the preparer after the filing season is over.
    • Inquire whether the tax return preparer has a professional credential (enrolled agent, certified public accountant or attorney), belongs to a professional organization or attends continuing education classes. Because tax law can be complex, competent tax return preparers remain up to date on tax topics. The IRS website has more information regarding national tax professional organizations.
    • Check the preparer’s history. Check the Better Business Bureau website for information about the preparer. Look for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory.
    • Ask about service fees. Avoid preparers who base fees on a percentage of their client’s refund or boast bigger refunds than their competition. Don’t give tax documents, Social Security numbers or other information to a preparer if merely inquiring about their services and fees. Unfortunately, some unscrupulous preparers have used this information to improperly file returns without the taxpayer’s permission.
    • Provide records and receipts. Good preparers ask to see these documents. They’ll also ask questions to determine the client’s total income, deductions, tax credits and other items. Do not hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is against IRS e-file rules.
    • Understand representation rules. Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation. Annual Filing Season Program participants may represent taxpayers in limited situations if they prepared and signed the tax return.
    • Never sign a blank or incomplete return.
    • Review the tax return before signing. Be sure to ask questions if something is not clear or appears inaccurate. Any refund should go directly to the taxpayer – not into the preparer’s bank account. Reviewing the routing and bank account number on the completed return is always a good idea.
    • Report abusive tax preparers to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a return preparer is suspected of filing or changing the return without the client’s consent, also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. Forms are available on IRS.gov.
    • IRS.gov/chooseataxpro has additional information to help taxpayers including tips on choosing a preparer, the differences in credentials and qualifications, as well as how to submit a complaint regarding an unscrupulous tax return preparer.

    Start early; ask for phone or virtual help

    It is advisable to start searching for a tax return preparer as soon possible. This allows for more time to do research and get recommendations. Remember, taxpayers must pay any taxes due by April 15, even if an extension is necessary.

    Be sure to check with the tax return preparer to see if there are any restrictions or additions to the services they provide because of the COVID-19 pandemic. Some may offer phone or virtual assistance options in addition to their usual in-person services. Customers may be asked, for example, to mail documents to them or scan and e-mail documents through a secure internet connection.

    Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed, at home, at work or on the go.

    This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

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