WASHINGTON – The Internal Revenue Service reminds eligible residents of the U.S. territories that if they receive unemployment compensation payments that are otherwise subject to U.S. income tax, they may be eligible to exclude up to $10,200 per person of unemployment compensation from U.S.  income tax for 2020, following legislation that was passed March 11, 2021. 

Taxpayers with modified adjusted income of less than $150,000 may exclude the first $10,200 of unemployment compensation from their 2020 federal income tax return.  In the case of taxpayers that are married filing jointly, the maximum exclusion would be $10,200 for each spouse for a maximum of $20,400. Taxpayers who filed before the law was passed should not file an amended return.

Last year, in response to the COVID-19 pandemic, Congress passed legislation providing eligible individuals with two new types of pandemic-related unemployment compensation, which are subject to the same U.S. tax rules that apply to other unemployment compensation:

The $10,200 exclusion applies to these new types of unemployment compensation for U.S. income tax purposes.

The IRS also notes that for U.S. income tax purposes, unemployment compensation is generally considered sourced where the taxpayer performed the underlying services. For guidance on the U.S. income taxation of residents of the U.S. territories, see Publication 570, Tax Guide for Individuals with Income from U.S. Possessions.

The U.S. territories are American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands.

U.S. territory residents should contact their territory tax department with questions relating to the taxation of COVID-related unemployment compensation at the territory level.

WASHINGTON – The Internal Revenue Service today announced several key leadership appointments as work continues implementing major provisions of the Taxpayer First Act.

Douglas O’Donnell will serve as the new IRS Deputy Commissioner, Services and Enforcement. Among other leadership changes, Sunita Lough will be returning to serve as the IRS Commissioner of the Tax Exempt and Government Entities Division (TEGE).

These leadership changes are part of a larger effort underway at the IRS to continue work on the Taxpayer First Act, which includes work to reimagine the agency’s tax administration and work to improve taxpayer service and enforcement.

"I am proud of the dedicated and nimble leadership of the IRS, along with all the employees," said IRS Commissioner Chuck Rettig. "As we emerge from the pandemic, our strong leadership team is making some changes to take on the important challenges ahead. Taxpayers need to see the IRS renewing the fight each day for the highest possible service and tax compliance."

Sunita Lough has served as the IRS Deputy Commissioner, Services and Enforcement, since September 2019. She is returning to her prior position as Commissioner of TEGE, a role she previously held from 2014 to 2019.

"I am eternally grateful to Sunita for her experience, steady leadership and support during the pandemic, which tested every aspect of the IRS, and I am proud to say we have come through the crisis so far with high marks," Rettig said. "Most of her time as deputy commissioner was during the pandemic, and she has overcome every challenge."

Lough has worked for the IRS for nearly 27 years, holding many key leadership roles. She served as the Executive Project Lead for the Tax Reform Implementation Office, effectively spearheading the successful delivery and implementation of the Tax Cuts and Jobs Act, the biggest tax reform legislation in 30 years.

"Helping to lead this agency during the pandemic has been one of the most gratifying things I've done during my career, and I am very grateful to everyone at the IRS,” Lough said. “I’m excited to return to TE/GE as we work to assure our commitment to strengthening the oversight and services within the TE/GE community. I also look forward to assisting and supporting the new Deputy Commissioner, Services and Enforcement.”

O’Donnell has been the Commissioner of the Large Business and International Division of the IRS (LB&I) since 2015, where he also served as the U.S. Competent Authority.

“Having long worked closely with Sunita, I’m looking forward to taking on the broader role as Deputy Commissioner,” O’Donnell said. “We have an exceptionally strong IRS leadership team, and I am hopeful we can continue our efforts to earn the trust and respect of every American. Our employees have worked hard during the unprecedented pandemic to assist the people of our country and, rest assured, we will continue to do so.”

O’Donnell began his career at the IRS as a revenue agent in 1986. Since then, he has held several key positions. He received the Presidential Rank Award for Meritorious Executive in 2010.

Nikole Flax will take over as Commissioner of LB&I after serving as Deputy Commissioner of the division since 2017. She has held many key roles at the IRS including IRS Chief of Staff and Assistant Deputy Commissioner for Services and Enforcement, among others.

"I am excited to lead the agency’s monumental task of overseeing the most complicated noncompliance tax issues, both domestic and international, and continuing to work with employees and taxpayers to improve tax administration,” Flax said.

Holly Paz replaces Flax as Deputy Commissioner of LB&I. She is leaving her current role at LB&I as the Director of the Pass-Through Entities Practice Area, which supports all of LB&I with S Corporation and Partnership Specialty teams and the Ogden TEFRA Unit. She has held other key roles at the IRS including serving as the Director of Corporate Issues and Credits in LB&I’s Enterprise Activities Practice Area, among others.

Edward Killen has been serving as Acting Commissioner of TE/GE and will return to the role of Deputy Commissioner of TE/GE. Prior to joining TEGE, Killen has held several leadership positions including the IRS Chief Privacy Officer and Senior Advisor to the IRS Deputy Commissioner of Operations Support, among others.

"These are all exemplary leaders, who have a demonstrated ability to work together, communicate effectively inside and outside the IRS as well as organize cross-functional teams to take on our biggest compliance challenges," Rettig added.

Businesses can temporarily deduct 100% beginning Jan. 1, 2021

WASHINGTON – The Treasury Department and the Internal Revenue Service today issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning Jan. 1, 2021, through Dec. 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Where can businesses get food and beverages and claim 100%?

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption.  However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores. 

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.

More information for business seeking coronavirus related tax relief can be found at IRS.gov.

Notice 2021-25 provides guidance regarding the temporary 100-percent deduction for expenses that are paid or incurred in 2021 and 2022, for food or beverages provided by a restaurant.  In particular, the notice explains when the temporary 100-percent deduction applies and when the 50-percent limitation continues to apply for purposes of § 274 of the Internal Revenue Code.

Notice 2021-25 will be in IRB: 2021-17, dated 04/26/2021.

WASHINGTON –The Internal Revenue Service today reminded self-employed individuals, retirees, investors, businesses, corporations and others who pay their taxes quarterly that the payment for the first quarter of 2021 is due Thursday, April 15, 2021.

The extension to May 17, 2021 for individuals to file their 2020 federal income taxes does not apply to estimated tax payments. The 2021 Form 1040-ES, Estimated Tax for Individuals, can help taxpayers estimate their first quarterly tax payment.

Income taxes are pay-as-you-go. This means, by law, taxes must be paid as income is earned or received during the year. Most people pay their taxes through withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation.

Most often, those who are self-employed or in the sharing economy need to make estimated tax payments. Similarly, investors, retirees and others often need to make these payments because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying quarterly estimated taxes will usually lessen and may even eliminate any penalties.

Exceptions to the penalty and 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. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for more information.

How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. The fastest and easiest ways to make an estimated tax payment is by using IRS Direct Pay, the IRS2Go app or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). For information on other payment options, visit IRS.gov/payments. If paying by check, taxpayers should be sure to make the check payable to the “United States Treasury.”
 
Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.

IRS.gov assistance 24/7

Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, and Tax Trails to get answers to common questions.

The IRS is continuing to expand ways to communicate to taxpayers who prefer to get information in other languages. The IRS has posted translated tax resources in 20 other languages on IRS.gov. For more information, see “We Speak Your Language.” 

Social Security and other beneficiaries bring total to more than 156 million payments; VA beneficiaries’ payments to be disbursed on April 14

WASHINGTON — Today, the Internal Revenue Service, the U.S. Department of the Treasury, and the Bureau of the Fiscal Service announced they are disbursing more than 25 million payments in the fourth batch of Economic Impact Payments from the American Rescue Plan.

Today’s announcement brings the total disbursed so far to more than 156 million payments, with a total value of approximately $372 billion, since these payments began rolling out to Americans in batches, as announced on March 12. 

The fourth batch of payments began processing on Friday, April 2, with an official payment date of April 7, with some people receiving direct payments in their accounts earlier as provisional or pending deposits. Here is additional information on this batch of payments:

Additional  information is available on the first three batches of Economic Impact Payments from the American Rescue Plan, which began processing on March 26, March 19, and March 12.

No action is needed by most people to obtain this round of Economic Impact Payments. People can check the Get My Payment tool on IRS.gov on to see if the their payment has been scheduled.

Payments to non-filer VA beneficiaries will be disbursed on April 14

The IRS continues to review data received from Veterans Affairs (VA), which covers veterans and their beneficiaries who receive Compensation and Pension (C&P) benefit payments who don’t normally file a tax return.

If no additional issues arise, the IRS expects to begin processing these VA payment files at the end of this week. Because the majority of these payments will be disbursed electronically, they would be received on the official payment date of April 14. The IRS projects VA beneficiary payment information would be available in the Get My Payment tool this weekend, April 10-11.

Payments continue to be made rapidly and effectively

The IRS and Treasury are disbursing Economic Impact Payments authorized by the American Rescue Plan quickly and successfully, while improving on previous rounds of payments.

Special reminder for those who don't normally file a tax return

Some federal benefits recipients may need to file a 2020 tax return, even if they don't usually file, to provide information the IRS needs to send payments for a qualified dependent. Eligible individuals in this group should file a 2020 tax return to be considered for an additional payment for their qualified dependent as quickly as possible.

People who don't normally file a tax return and don't receive federal benefits may qualify for these Economic Impact Payments. This includes those experiencing homelessness, the rural poor, and others. Individuals who didn't get a first or second round Economic Impact Payment or got less than the full amounts may be eligible for the 2020 Recovery Rebate Credit, but they’ll need to file a 2020 tax return. See the special section on IRS.gov: Claiming the 2020 Recovery Rebate Credit if you aren't required to file a tax return.

Free tax return preparation is available for qualifying people.

The IRS reminds taxpayers that the income levels in this new round of Economic Impact Payments have changed. This means that some people won't be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly). The payments end at $80,000 for individuals ($160,000 for married filing jointly); people with Adjusted Gross Incomes above these levels are ineligible for a payment.

Individuals can check the Get My Payment tool on IRS.gov to see the payment status of these payments. Additional information on Economic Impact Payments is available on IRS.gov.

WASHINGTON − As people across the country file their 2020 tax returns, some are claiming the 2020 Recovery Rebate Credit (RRC). The IRS is mailing letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected. 

It’s important to remember that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and shouldn't or don’t need to include this information on their 2020 tax return.

People who didn’t receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. They must file a 2020 tax return to claim the credit, even if they don’t usually file a tax return.

When the IRS processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer’s credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, it will be reduced by the amount of any EIPs already issued to them.

If there’s a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return and the IRS will send the taxpayer a letter or notice explaining any change.

Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should read the notice. Then they should review their 2020 tax return, the requirements and the worksheet in the Form 1040 and Form 1040-SR instructions. 

Here are some common reasons the IRS corrected the credit:

IRS.gov has a special section - Correcting Recovery Rebate Credit issues after the 2020 tax return is filed – that provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter as well as the questions and answers for what information they should have available when contacting the IRS.

The Internal Revenue Service urges people who have not yet filed their 2020 tax return to properly determine their eligibility for the 2020 before they file their 2020 tax returns. To calculate any credit due, start with the amount of any EIPs received. Use the RRC Worksheet or tax preparation software. Taxpayers who didn’t save or didn’t receive  an IRS letter or notice can securely access their individual tax information with an IRS online account.

Anyone with income of $72,000 or less can file their Federal tax return electronically for free through the IRS Free File Program. The fastest way to get a tax refund which will include your 2020 RRC is to file electronically and have it direct deposited  into their financial account. Bank accounts, many prepaid debit cards and several mobile apps can be used for direct deposit when a routing and account number are provided. If using a prepaid debit card, check with the financial institution to ensure the card can be used and to obtain the routing number and account number, which may be different from the card number.

For more information, visit IRS.gov.RRC and the frequently asked questions by topic.

WASHINGTON – Unclaimed income tax refunds worth more than $1.3 billion await an estimated 1.3 million taxpayers who did not file a 2017 Form 1040 federal income tax return, according to the Internal Revenue Service.

“The IRS wants to help taxpayers who are due refunds but haven’t filed their 2017 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 May 17. We want to help people get these refunds, but they will need to quickly file a 2017 tax return.”

The IRS estimates the midpoint for the potential refunds for 2017 to be $865 — that is, half of the refunds are more than $865 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 2017 tax returns, the window closes May 17, 2021, for most taxpayers. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by that date.

The IRS reminds taxpayers seeking a 2017 tax refund that their checks may be held if they have not filed tax returns for 2018 and 2019. In addition, the refund will be applied to any amounts still 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 2017. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2017, the credit was worth as much as $6,318. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2017 were:

Current and prior year tax forms (such as the tax year 2017 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 2017, 2018 or 2019 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 file 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.

First-time filers and EIP eligible
The IRS reminds first-time filers and those who usually don’t have a federal filing requirement that they must file a 2020 tax return to claim the Recovery Rebate Credit (RRC), if they were eligible but did not receive the first or second Economic Impact Payment (EIP), or received less than the full amounts. The IRS offers free options to prepare and file a return at How to File on IRS.gov. Taxpayers who received the full amounts of both EIPs cannot claim the RRC and should not include any information about the payments on their 2020 tax return.

State-by-state estimates of individuals who may be due 2017 income tax refunds

State or	Estimated	Median	Total
District	Number of	Potential	Potential
	Individuals	Refund	Refunds*
Alabama	21,700	$848	$21,542,300
Alaska	5,000	$960	$5,527,400
Arizona	32,900	$766	$30,655,500
Arkansas	12,600	$811	$12,150,900
California	132,800	$833	$129,793,500
Colorado	27,000	$813	$26,020,400
Connecticut	13,200	$928	$13,945,100
Delaware	5,200	$853	$5,254,600
District of Columbia	3,600	$878	$3,765,500
Florida	89,600	$870	$89,767,400
Georgia	46,300	$791	$44,234,300
Hawaii	7,600	$913	$7,827,400
Idaho	6,200	$727	$5,572,300
Illinois	49,000	$901	$50,355,300
Indiana	30,800	$894	$31,291,100
Iowa	13,500	$922	$13,851,800
Kansas	13,400	$865	$13,313,500
Kentucky	17,700	$875	$17,612,600
Louisiana	21,700	$837	$21,659,900
Maine	5,300	$853	$5,158,000
Maryland	26,700	$872	$27,241,700
Massachusetts	28,000	$978	$30,469,100
Michigan	43,100	$863	$43,189,300
Minnesota	20,400	$808	$19,400,200
Mississippi	11,800	$776	$11,087,800
Missouri	30,500	$831	$29,778,200
Montana	4,400	$808	$4,255,500
Nebraska	7,200	$853	$6,982,000
Nevada	15,500	$845	$15,310,600
New Hampshire	5,900	$968	$6,391,000
New Jersey	34,200	$924	$35,778,700
New Mexico	9,000	$837	$8,913,100
New York	66,700	$956	$71,361,600
North Carolina	43,500	$837	$42,307,200
North Dakota	3,600	$958	$3,779,100
Ohio	48,700	$852	$47,892,500
Oklahoma	19,800	$869	$19,890,300
Oregon	21,200	$765	$19,733,900
Pennsylvania	50,900	$931	$52,861,200
Rhode Island	3,600	$921	$3,792,500
South Carolina	16,800	$768	$15,740,900
South Dakota	3,600	$912	$3,665,500
Tennessee	27,100	$851	$26,534,100
Texas	133,000	$904	$138,355,200
Utah	11,100	$771	$10,251,900
Vermont	2,600	$852	$2,505,200
Virginia	36,600	$827	$36,159,900
Washington	36,900	$928	$38,924,900
West Virginia	6,400	$946	$6,769,600
Wisconsin	18,900	$798	$17,759,900
Wyoming	3,100	$944	$3,273,400
Totals	1,345,900	$865	$1,349,654,800

* Excluding cred

Notice 2021-23 provides guidance on the employee retention credit provided under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act, as amended by section 207 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, for qualified wages paid after December 31, 2020, and before July 1, 2021.  Notice 2021-23 amplifies Notice 2021-20 and provides employers with guidance on how to determine their eligibility for and the amount of the employee retention credit they may claim for the first and second calendar quarters of 2021.

Notice 2021-23 will be in IRB:  2021-16, dated April 19, 2021.

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) modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act).

Notice 2021-23 explains the changes to the Employee Retention Credit for the first two calendar quarters of 2021, including:

As a result of the changes made by the Relief Act, eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after Dec. 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum employee retention credit available is $7,000 per employee per calendar quarter, for a total of $14,000 for the first two calendar quarters of 2021.

Employers can access the Employee Retention Credit for the 1st and 2nd calendar quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. Small employers (i.e., employers with an average of 500 or fewer full-time employees in 2019) may request advance payment of the credit (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits. In 2021, advances are not available for employers larger than this.  Further details on how to calculate and claim the employee retention credit for the first two calendar quarters of 2021 can be found in Notice 2021-23.

Under the American Rescue Plan Act of 2021, enacted March 11, 2021, the Employee Retention Credit is available to eligible employers for wages paid during the third and fourth quarters of 2021. The Department of the Treasury and the IRS will provide further guidance on the Employee Retention Credit available under the ARPA.

Additional coronavirus relief information for businesses is available on IRS.gov.