Announcement 2020-17 postpones, until January 15, 2021, the due dates for reporting and paying the excise taxes under §§ 4971(a)(1) and 4971(f)(1) of the Internal Revenue Code with respect to certain delayed minimum required contributions to a single employer defined benefit plan.  This postponement applies with respect to a required contribution to which the extended due date under § 3608(a) of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136 (134 Stat. 281) (CARES Act), applies. 

Announcement 2020-17 will be in IRB:  2020-40, dated September 28, 2020.

WASHINGTON — The Internal Revenue Service today urged individuals who owe taxes but have not yet filed for 2019 to act now to avoid larger penalties that, by law, start after Sept. 14.

The tax deadline was July 15 this year. Taxpayers who submitted an extension have until Oct. 15 to file and do not face the failure to file penalty if they file their taxes by that deadline. But taxpayers need to remember that an extension to file is not an extension to pay. Any taxes they owed after the July 15 deadline are subject to the failure to pay penalty and interest.

Those taxpayers who didn’t request an extension, and still owe taxes, face both the failure to file and the failure to pay penalties. They should file now and pay what they can before larger penalties take effect after Sept. 14.

The penalty for not filing a federal tax return by the due date, or extended due date, is generally 5% of the unpaid tax for each month or part of a month that a tax return is late, up to 25% of the unpaid tax. However, if the return is more than 60 days late, a minimum penalty applies. If no return has been filed after 60 days, the minimum penalty that can be charged is $435 or 100% of the unpaid tax, whichever is less. This year, that important 60-day date occurs after Sept. 14. In addition to penalties, interest will also be charged on any tax not paid by the July 15 due date.

Remember, if a refund is due, no penalty is charged on the late return filed by a taxpayer.

IRS Free File is available on IRS.gov through Oct. 15 to prepare and e-file a 2019 individual return.

Penalty relief may be available

Taxpayers who have not been assessed any penalties for the past three years often qualify to have penalties abated. A taxpayer who does not qualify for the first-time penalty relief may still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not willful neglect. By law, interest cannot be abated.

Get more time to pay

There are options for taxpayers who owe but can’t pay the full amount. Qualified taxpayers can choose to pay any taxes over time through a payment plan, including an installment agreement that can be set up in a matter of minutes on IRS.gov. A taxpayer’s specific tax situation will determine which payment options are available. The IRS has more information for taxpayers who owe taxes, but cannot afford to pay the full amount.

Check withholding

To avoid surprises next year, taxpayers can use the IRS Tax Withholding Estimator to do a Paycheck Checkup to have the right amount of tax withheld during the year.

The IRS reminds taxpayers that unemployment compensation is generally taxable. To determine if unemployment is taxable, taxpayers can visit the Are Payments I Receive for Being Unemployed Taxable? tax tool at IRS.gov.

Taxpayers can choose to have federal income tax withheld from their unemployment payments. For more information, go to Form W-4V, Voluntary Withholding Request. Otherwise, taxpayers receiving unemployment benefits may be required to make quarterly estimated tax payments.

WASHINGTON – On Aug. 28, the IRS announced that it would temporarily allow the use of digital signatures on certain forms that cannot be filed electronically. Today, the agency added several more forms to that list.

The IRS made this decision to help protect the health of taxpayers and tax professionals during the COVID-19 pandemic. The change will help to reduce in-person contact and lessen the risk to taxpayers and tax professionals, allowing both groups to work remotely to timely file forms.

The IRS added the following forms to the list of those being accepted digitally:

The forms are available at IRS.gov and through tax professional’s software products. These forms cannot be e-filed and generally are printed and mailed.

The below list was announced Aug. 28, and all of these forms can be submitted with digital signatures if mailed by or on Dec. 31, 2020:

The IRS will continue to monitor this temporary option for e-signatures and determine if additional steps are needed.

In addition, the IRS understands the importance of digital signatures to the tax community. The agency will continue to review its processes to determine where long-term actions can help reduce burden for the tax community, while at the same appropriately balancing that with critical security and protection against identity theft and fraud.

WASHINGTON – The Internal Revenue Service today reminded the self-employed, investors, retirees and others with income not subject to withholding that third quarter estimated tax payments for 2020 are due Sept. 15. 

Taxes are paid as income is received during the year through withholding from pay, pension or certain government payments such as Social Security or unemployment; and/or making quarterly estimated tax payments. 

Who should pay quarterly?

Individuals, including sole proprietors, partners and S corporation shareholders, generally make quarterly estimated tax payments if they expect to owe $1,000 or more when their tax return is filed. Taxpayers with income not subject to withholding, including interest, dividends, capital gains, alimony and rental income, normally make estimated tax payments.

Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. Publication 505, Tax Withholding and Estimated Tax, provides more information on estimated tax rules. The worksheet in Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations, has details on who must pay estimated tax.

Penalty for underpayment

If a taxpayer underpaid their taxes, they may have to pay a penalty. This applies whether they paid through withholding or through estimated tax payments. A penalty may also apply for late estimated tax payments even if someone is due a refund when they file their tax return. 

In general, taxpayers don’t have to pay a penalty if they meet any of these conditions:

at least 90% (however, see 2018 Penalty Relief, below) of the tax for the current year

100% of the tax shown on their tax return for the prior year – this can increase to 110% based on adjusted gross income 

To see if they owe a penalty, taxpayers should use Form 2210. The IRS may waive the penalty if someone underpaid because of unusual circumstances and not willful neglect. Examples include:

There are special rules for underpayment for farmers and fishermen. Publication 505 has more information.

Tax Withholding Estimator

The Tax Withholding Estimator on IRS.gov offers taxpayers a clear, step-by-step method to have the right amount of tax withheld from wages and pensions. It also has instructions to file a new Form W-4 to give to their employer to adjust the amount withheld each payday. 

Other IRS.gov resources 

The fourth and final 2020 estimated tax payment is due Jan. 15, 2021.

Notice 2020-66 provides guidance addressing whether certain Medicaid coverage of COVID-19 testing and diagnostic services is minimum essential coverage for purposes of the premium tax credit under section 36B of the Code.  This notice also announces that the Treasury Department and the IRS intend to amend § 1.5000A-2 of the Income Tax Regulations to add Medicaid coverage of COVID-19 testing and diagnostic services to the list of health care coverage that is not minimum essential coverage under a government-sponsored program. 

The IRS has issued an advance copy of TD 9911 on life insurance reserves under IRC 807(f)

Revenue Ruling 2020-19, which provides guidance on what constitutes a change in basis of computing life insurance reserves under § 807(f) of the Internal Revenue Code, as amended by the Tax Cuts and Jobs Act, and § 1.807-4 of the final regulations (TD 9911), which is being released contemporaneously with this revenue ruling.  This revenue ruling provides specific holdings in a number of different situations, with each holding indicating whether the described situation is a change in basis under § 807(f). 

WASHINGTON — As part of a larger effort to reach underserved communities, the Internal Revenue Service is taking a number of aggressive steps to expand information and assistance available to taxpayers in additional languages, including providing the Form 1040 in Spanish for the first time.

In addition to being available in English and Spanish, the 2020 Form 1040 will also give taxpayers the opportunity to indicate whether they wish to be contacted in a language other than English. This is a new feature available for the first time this coming filing season. 

Other changes include Publication 1, Your Rights as a Taxpayer, is now available in 20 languages. The 2020 version of Publication 17, Your Federal Income Tax, will be available early next year in seven languages – English, Spanish, Vietnamese, Russian, Korean and Chinese (Simplified and Traditional).

The agency’s newly expanded multilingual initiative is a key part of helping the IRS reach its goal of helping everyone, no matter where they live, what their background is, or what language they speak.

“Our diverse workforce is extremely proud to be able ease the inherent burden on taxpayers attempting to voluntarily comply with their tax responsibilities, including people who are more comfortable with other languages,” said IRS Commissioner Chuck Rettig. “We are continually increasing the information and services available in other languages as well as expanding our interpreter services so that we can interact in a more respectful manner with taxpayers in their most comfortable language. We expect to continue these important efforts as we work to earn the trust and respect of every American.”
 
As part of this expansion, many of the pages on the IRS.gov site are now available in seven languages and basic tax information is newly available in 20 languages on IRS.gov. It also means that taxpayers who interact with an IRS representative now have access to over the phone interpreter services in more than 350 languages. The IRS has also recently begun inserting information about translation services and other multilingual options into the high-volume notices that IRS sends out to taxpayers.

While the IRS has long provided some assistance in Spanish and some other languages, the agency is increasing the materials available in multiple languages and expanding outreach with multilingual community partners. Most recently, the IRS worked with partners in the tax and low-income communities and provided them with information and resources that they quickly translated and made available in an unprecedented 35 languages, promoting the Economic Impact Payments. The IRS plans to continue this effort on other agency priorities, including the 2021 filing season. The agency has also been increasing its multilingual outreach on Instagram, Twitter and other social media platforms during the past 18 months.

In coming months and years, the agency will continue to expand the availability of widely used IRS forms and popular publications in multiple languages. This includes increasing the number of highly visited IRS.gov web pages accessible in seven languages later this year.

For more information about tax help in other languages, visit IRS.gov.

Notice 2020-68 provides further information regarding certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019, and the Bipartisan American Miners Act of 2019.  

Revenue Procedure 2020-40 amends section 15.05 of Rev. Proc. 2016-37 and section 12.02 of Rev. Proc. 2019-39 to provide that a discretionary amendment made to a qualified pre-approved plan or 403(b) pre-approved plan is timely adopted if it is adopted by the deadline set forth in a statutory provision or guidance that is earlier or later than the general deadline applicable to discretionary amendments.  

Both items of guidance will be published in Internal Revenue Bulletin  2020-38 on Sept. 14, 2020

Revenue Procedure 2020-41 provides the domestic asset/liability percentages and domestic investment yields needed by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) of the Internal Revenue Code for taxable years beginning after December 31, 2018.

Revenue Procedure 2020-41 will be in IRB:   2020-40, dated September 28, 2020.