Notice 2020-59 contains a proposed revenue procedure with a safe harbor for a trade or business that manages or operates a qualified residential living facility to be treated as a real property trade or business solely for purposes of qualifying as an electing real property trade or business under section 163(j)(7)(B) of the Internal Revenue Code.

Notice 2020-59 will be in IRB:  2020-34, dated August 17, 2020.

WASHINGTON — The Internal Revenue Service issued final regulations regarding the provision of the Tax Cuts and Jobs Act that limits the deduction for business interest expense, including basic statutory amendments made by the CARES Act.

For tax years beginning after Dec. 31, 2017, business interest expense deductions are generally limited to the sum of:

The business interest expense deduction limitation does not apply to certain small businesses whose gross receipts are $26 million or less, electing real property trades or businesses, electing farming businesses, and certain regulated public utilities. The $26 million gross receipts threshold applies for the 2020 tax year and will be adjusted annually for inflation.

A real property trade or business or a farming business may elect to be excepted from the business interest expense limitation. However, taxpayers cannot claim the additional first-year depreciation deduction for certain types of property held by the electing trade or business.

Taxpayers use Form 8990, Limitation on Business Interest Expense Under Section 163(j), to calculate and report their deduction and the amount of disallowed business interest expense to carry forward to the next tax year.

Along with the final regulations, the IRS today issued the following additional items of guidance related to the business interest expense deduction limitation.

Proposed Regulations that provide additional guidance on various business interest expense deduction limitation issues not addressed in the final regulations, including more complex issues related to the amendments made by the CARES Act. Subject to certain restrictions, taxpayers may rely on some of the rules in these proposed regulations until final regulations implementing the proposed regulations are published in the Federal Register. Written or electronic comments and requests for a public hearing on these proposed regulations must be received within 60 days of date of filing for public inspection with the Federal Register.

Notice 2020-59 contains a proposed revenue procedure that provides a safe harbor allowing taxpayers engaged in a trade or business that manages or operates qualified residential living facilities to treat such trade or business as a real property trade or business solely for purposes of qualifying as an electing real property trade or business. Written or electronic comments on the proposed revenue procedure must be received no later than Monday, Sept. 28, 2020.

Aggregation FAQs provide a general overview of the aggregation rules that apply for purposes of the gross receipts test, and that apply to determine whether a taxpayer is a small business that is exempt from the business interest expense deduction limitation.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform

WASHINGTON — With heightened threats during COVID-19, the Internal Revenue Service and Security Summit partners today called on tax professionals to select multi-factor authentication options whenever possible to prevent identity thieves from gaining access to client accounts.

Starting in 2021, all tax software providers will be required to offer multi-factor authentication options on their products that meet higher standards. Many already do so. A multi-factor or two-factor authentication offers an extra layer of protection for the username and password used by the tax professional. It often involves a security code sent via text.

Using multi-factor authentication is the second in a five-part series called Working Virtually: Protecting Tax Data at Home and at Work. The public awareness initiative by the IRS, state tax agencies and the private-sector tax industry – working together as the Security Summit – spotlights basic security steps for all practitioners, but especially those working remotely or social distancing in response to COVID-19.

“Cybercriminals continue to find new ways to try accessing tax professional and taxpayer data. The multi-factor authentication option is an easy, free way to really step up protection of client data,” said IRS Commissioner Chuck Rettig. “All tax software products will make it a feature, and it’s part of a larger effort to protect taxpayers and the tax community.”

Of the numerous data thefts reported to the IRS from tax professional offices this year, most could have been avoided had the practitioner used multi-factor authentication to protect tax software accounts.

Thieves use a variety of scams – but most commonly by a phishing email – will download malicious software, such as keystroke software. This malware will eventually enable them to steal all passwords from a tax pro. Once the thief has accessed the practitioner’s networks and tax software account, they will complete pending taxpayer returns, alter refund information and use the practitioner’s own e-filing and preparer numbers to file the fraudulent return.

However, with multi-factor authentication, it’s unlikely the thief will have stolen the practitioner’s cell phone so he would not receive the necessary security code to access the account. This protects the tax pro’s account information.

Practitioners can download to their mobile phones readily available authentication apps offered through Google Play or the Apple Store. These apps will generate a security code. Codes also may be sent to practitioner’s email or text but those are not as secure as the authentication apps. Use a search engine for “Authentication apps” to learn more.

In additional to tax software accounts, practitioners should use multi-factor authentication wherever it is offered. For example, cloud storage providers and commercial email products offer multi-factor protections as do social media outlets. IRS e-Services is an example of an account using multi-factor authentication.

Additional resources

Tax professionals also can get help with security recommendations by reviewing the recently revised IRS Publication 4557, Safeguarding Taxpayer Data (PDF), and Small Business Information Security: the Fundamentals (PDF) by the National Institute of Standards and Technology.

Publication 5293, Data Security Resource Guide for Tax Professionals (PDF), provides a compilation data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media or visit Identity Theft Central at IRS.gov/IdentityTheft.

WASHINGTON – The Internal Revenue Service issued a temporary regulation and a proposed regulation to reconcile advance payments of refundable employment tax credits and recapture the benefit of these credits when necessary. 

The regulations authorize the assessment of erroneous refunds of the credits paid under both the Families First Coronavirus Response Act (Families First Act) and Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Families First Act generally requires employers with fewer than 500 employees to provide paid sick leave for up to 80 hours and paid family leave for up to 10 weeks if the employee is unable to work or telework due to COVID-19 related reasons. Eligible employers are entitled to fully refundable tax credits to cover the cost of the leave required to be paid.

The CARES Act provides an additional credit for employers experiencing economic hardship due to COVID-19. Eligible employers who pay qualified wages to their employees are entitled to an employee retention credit.

The IRS has revised or is in the process of revising the Form 941, Form 943, Form 944 and Form CT-1, so that employers may use these returns to claim the paid sick and family leave and employee retention credits.

Employers may also receive advance payment of the credits up to the total allowable amounts. The IRS has created Form 7200, Advance Payment of Employer Credits Due To COVID-19, which employers may use to request an advance of the credits. Employers are required to reconcile any advance payments claimed on Form 7200 with total credits claimed and total taxes due on their employment tax returns.

Any refund of these credits paid to a taxpayer that exceeds the amount the taxpayer is allowed is an erroneous refund for which the IRS must seek repayment. 

For more information on the employer credits, see Employer Tax Credits

The information on Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, helps law enforcement combat money laundering, tax evasion, drug dealing, terrorist financing and other criminal activities. Here are facts on who must file the form, what they must report and how to report it.

Who must file
Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file a Form 8300. By law, a “person” is an individual, company, corporation, partnership, association, trust or estate. For example, dealers in jewelry, furniture, boats, aircraft or automobiles; pawnbrokers; attorneys; real estate brokers; insurance companies and travel agencies are among those who typically need to file Form 8300.

Tax-exempt organizations are also “persons” and may need to report certain transactions. A tax-exempt organization doesn’t have to file Form 8300 for a charitable cash contribution. However, under a separate requirement, a donor often must obtain a written acknowledgement of the contribution from the organization. The organization must report noncharitable cash payments on Form 8300. For example, an exempt organization that receives more than $10,000 in cash for renting part of its building must report the transaction. See Publication 526, Charitable Contributions, for details

What’s cash
For Form 8300 reporting, cash includes coins and currency of the United States or any foreign country. It’s also cash equivalents that include cashier’s checks (sometimes called a treasurer’s check or bank check), bank drafts, traveler’s checks or money orders with a face amount of $10,000 or less that a person receives for:

Note that money orders and cashiers checks under $10,000, when used in combination with other forms of cash for a single transaction that exceeds $10,000, is defined as cash for Form 8300 reporting purposes.
 
A designated reporting transaction is the retail sale of tangible personal property that’s generally suited for personal use, expected to last at least one year and has a sales price of more than $10,000. Examples are sales of automobiles, jewelry, mobile homes and furniture.

A designated reporting transaction is also the sale of a collectible, such as a work of art, rug, antique, metal, stamp or coin. It’s also the sale of travel and entertainment, if the total price of all items for the same trip or entertainment event is more than $10,000.

Note that under a separate reporting requirement, banks and other financial institutions report cash purchases of cashier’s checks, treasurer’s checks and/or bank checks, bank drafts, traveler’s checks and money orders with a face value of more than $10,000 by filing currency transaction reports.

Reporting cash payments
A person must file Form 8300 if they receive cash of more than $10,000 from the same payer or agent:

Examples of reporting situations:

New or used automobile dealers
If a husband and wife purchased two vehicles at one time from the same dealer, and the dealer received a total of $10,200 in cash, the dealer can view the transaction as a single transaction or two related transactions. Either way, the dealer needs to file only one Form 8300.

Taxi company
When lease payments made in cash by a taxi driver to a taxi company within a 12-month period exceed $10,000 in total, the taxi company needs to file Form 8300. Then, if the company receives more than $10,000 cash in additional payments from the driver, the company must file another Form 8300.

Landlords
This 12-month period also applies to landlords who need to file Form 8300 once they’ve received more than $10,000 in cash for a lease during the year. If a person uses a dwelling unit as a home and rents it less than 15 days during the year, its primary function isn’t considered rental in a trade or business, so they don’t need to report a cash receipt of more than $10,000.

Bail-bonding agent
A bail-bonding agent must file Form 8300 when they receive more than $10,000 in cash from a person. This applies to payments from persons who have been arrested or anticipate arrest. The agent needs to file the form even though they haven’t provided a service when they received the cash.

Colleges and universities
Colleges and universities must file Form 8300 if they receive more than $10,000 in cash in one or more transactions within 12 months. A Form 8300 exception applies for government entities but not for educational entities.

Contractors
Contractors must file Form 8300 if they receive cash of more than $10,000 for building, renovating, remodeling, landscaping and painting.

When to file Form 8300
A person must file Form 8300 within 15 days after the date the person received the cash. If a person receives multiple payments toward a single transaction or two or more related transactions, the person should file Form 8300 when the total amount paid exceeds $10,000. Each time payments aggregate more than $10,000, the person must file another Form 8300.

How to file
A person can file Form 8300 electronically using the Financial Crimes Enforcement Network’s BSA E-Filing System. Those who file many forms may find the batch e-filing option helpful. E-filing is free, quick and secure. Filers will receive an electronic acknowledgement of each submission.

Those who prefer to mail Form 8300 can send it to Internal Revenue Service, Detroit Federal Building, P.O. Box 32621, Detroit, MI  48232. Filers can confirm the IRS received the form by sending it via certified mail with return receipt requested or by calling the IRS Bank Secrecy Act Helpline in Detroit at 866-270-0733.

Taxpayer identification number
Form 8300 requires the taxpayer identification number (TIN) of the payer using cash. If they refuse to provide it, the person should inform the payer that the IRS may assess a penalty.

If the person is unable to obtain the payer’s TIN, the they should file Form 8300 anyway and include an explanation why the form doesn’t have the TIN. The person should keep records showing they requested the payer’s TIN and provide the records to the IRS upon request.

Informing customers about Form 8300 filing
A Form 8300 filer must give each party named on the form written notice by January 31 of the year following the transaction that they filed Form 8300 to report the payer’s cash transaction. The government doesn’t offer a specific format for the payer’s statement, but it must:

A person can give a payer who only had one transaction during the year a copy of the invoice or Form 8300 as notification if it has the required information. The government doesn’t recommend using a copy of Form 8300 because of sensitive information on the form, such as the TIN of the person filing the Form 8300.

A person may voluntarily file Form 8300 to report a suspicious transaction below $10,000. In this situation, the person doesn’t let the customer know about the report. The law prohibits a person from informing a payer that it marked the suspicious transaction box on the Form 8300.

More information:

• Publication 1544, Reporting Cash Payments of Over $10,000
• IRS Form 8300 Reference Guide
• Guidance for the Insurance Industry on Filing Form 8300
• Form 8300 and Reporting Cash Payments of Over $10,000
• FAQs for Indian Tribal Governments regarding Non-Casino Cash Transactions Over $10,000 - Form 8300

WASHINGTON — The Internal Revenue Service reminds businesses required to file reports of large cash transactions that e-filing is a fast, easy and secure option for filing their reports. Now, businesses can batch file their reports, which is especially helpful to those required to file many forms. 

Although businesses have the option of filing Form 8300, Report of Cash Payments Over $10,000, on paper, many have already found the free and secure e-filing system is a more convenient and cost-effective way to meet the reporting deadline. The form is due 15 days after a transaction and there’s no charge for the e-file option.

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

Businesses that file Form 8300 electronically get free, automatic acknowledgment of receipt when they file. In addition, electronic filing is more accurate, reducing the need for follow-up correspondence with the IRS.

To file Form 8300 electronically, a business must set up an account with FinCEN’s BSA E-Filing System. For more information, interested businesses can call the BSA 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-2020-11, available on IRS.gov.

RP 2020-36 provides indexing adjustments required by statute for certain provisions under section 36B.  Specifically, this revenue procedure updates the applicable percentage table used to calculate an individual’s premium tax credit for taxable years beginning in calendar year 2021 and updates the required contribution percentage for plan years beginning after calendar year 2020.

It will appear in IRB 2020-32 dated Aug. 3, 2020.

WASHINGTON – The Internal Revenue Service announced today the creation of the new Enterprise Digitalization and Case Management office, which will spearhead IRS efforts to empower taxpayers and IRS employees to rapidly resolve issues in a simplified digital environment.

The office’s efforts will support overall IRS modernization and implementation of long-term changes stemming from the Taxpayer First Act.

Serving as co-directors of the new office will be Hampden “Harrison” Smith, IV, currently the agency’s Deputy Chief Procurement Officer, and Justin Lewis Abold-LaBreche, who is the Director of Enterprise Case Management.

The new stand-alone office will focus on enhancing the taxpayer experience by improving business processes and modernizing systems. The office will apply agile, customer-centered thinking and draw on leading industry test-and-learn practices to rapidly identify what combination of business process and technology works best for the IRS’s customers and employees. In the digitalization space, a portfolio-based approach will be utilized for the challenges the IRS faces, in the form of multiple small pilot projects for business process changes and technology solutions. The pilots will be focused on a desired outcome instead of a prescriptive approach, and they will be scaled and funded as they demonstrate value and return on investment. In the case management space, the office has already procured a commercial-off-the-shelf platform, Pega Systems, and its first release is well underway.

The IRS has had a dedicated team focused on the Enterprise Case Management initiative, which is focused on standing up a consolidated enterprise case management approach to overcome the challenges the IRS currently faces from having case work taking place on more than 60 aging systems, most of which can’t talk with one another. As the team continued its work, it became clear that the digitalization of processes as well as paper, including items such as case files, was an integral part of improving overall case management and the mission of the agency.

“Ultimately, you cannot improve case management without improving the digitalization of paper records,” said Jeff Tribiano, Deputy Commissioner for Operations Support. “To reflect the importance of this area, we decided to establish this new office to help focus our efforts on moving forward.”

The office will report to both Tribiano and Sunita Lough, the Deputy Commissioner for Services and Enforcement. Staffing for the new office is still being determined, and employees currently working on case management issues will continue in their current roles.

“This new office reflects an agency-wide priority,” Lough said. “To help this effort, we turned to Harrison and Justin, who bring a variety of skills and expertise to help us navigate this challenging area that holds promise for improved service and efficiency for both taxpayers and the IRS.”

Smith has served as the deputy in the IRS procurement office since July 2019 and has recently been focused on the application of automation and machine learning technologies in the procurement space.  Prior to joining the IRS, he served as the Industry Liaison for the Department of Homeland Security (DHS), where he focused on industry engagement, innovation labs, and creative pricing arrangements, and also served as a principal adviser to the DHS Chief Procurement Officer. Smith has 15 years of operational procurement experience with various DHS offices and the Naval Sea Systems Command. A former Presidential Management Fellow, Smith also worked on policy and strategic analysis positions in Congress. He holds a B.A. in International Relations and an M.A. in US Foreign Policy from The American University, and an M.B.A. from George Washington University. 

Abold-LaBreche has served as the Director, Enterprise Case Management Office since May 2019. Prior to this assignment, he held executive positions in each of the IRS’s business operating divisions including: acting Director, Government Entities and Shared Services, Tax Exempt and Government Entities (TE/GE) Division;  Field Director, Accounts Management, Austin in the Wage and Investment (W&I) Division; acting Director of Examination Policy in Small Business / Self-Employed (SB/SE) Division; and Assistant to the Industry Director, Global High Wealth in the Large Business and International (LB&I) Division. Abold-LaBreche also served as the Initiative Director and then acting Director and Senior Advisor to the IRS Commissioner in the Office of Compliance Analytics. Abold-LaBreche also worked in DHS and is a former U.S. Air Force officer. A Fulbright Scholar, he holds a PhD from Oxford University, M.S. in Strategic Intelligence from the National Defense Intelligence College and a B.S. in Applied Mathematics from Yale University.

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued a final regulation addressing the treatment of income earned by certain foreign corporations that is subject to a high rate of foreign tax. 

The final regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their Global Intangible Low Taxed Income (GILTI) computation on an elective basis. 

Treasury and the IRS today also issued a proposed regulation regarding the high-tax exception with the GILTI high-tax exclusion. Treasury and the IRS welcome public comments. 

Updates on the TCJA can be found on the Tax Reform page of IRS.gov.

WASHINGTON — For those who missed the July 15 tax deadline and didn’t request an extension, the Internal Revenue Service reminds taxpayers about some important tips, including filing electronically as soon as possible to reduce potential penalties. 

Some taxpayers may have extra time to file and pay any taxes due without penalties and interest. These include:

The IRS offers these after-tax-day tips:

File to get a tax refund
The only way to get a refund is to file a tax return. There is no penalty for filing after the deadline if a refund is due. Use electronic filing options including  IRS Free File available on IRS.gov through Oct. 15 to prepare and file returns electronically.

The IRS reminds taxpayers that, while we continue to process electronic and paper tax returns, issue refunds, and accept payments, we’re experiencing delays in processing paper tax returns due to limited staffing. If a taxpayer filed a paper tax return, we will process it in the order we received it. Do not file a second tax return or call the IRS.

Taxpayers can track a refund using the “Where’s My Refund?” tool on IRS.gov, IRS2Go and by phone at 800-829-1954. Taxpayers need the primary Social Security number on the tax return, the filing status and the expected refund amount. The tool updates once daily, usually overnight, so checking more frequently will not yield different results. The “Where’s My Refund?” tool cannot be used to track Economic Impact Payments.

File to reduce penalties and interest
Normally, taxpayers should file their tax return, or request an extension, and pay any taxes they owe by the deadline to avoid penalties and interest. Taxpayers need to remember that an extension to file is not an extension to pay. Penalties and interest will apply to taxes owed after July 15.

Even if a taxpayer can’t afford to immediately pay the taxes they owe, they should still file a tax return as soon as possible to reduce possible penalties. The IRS has more information for taxpayers who owe the IRS, but cannot afford to pay.

Ordinarily, the failure-to-file penalty is 5% of the tax owed for each month or part of a month that a tax return is late. But if a return is filed more than 60 days after the due date, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less. Filing and paying as much as possible is important because the late-filing penalty and late-payment penalty add up quickly. The basic failure-to-pay penalty rate is generally 0.5% of unpaid tax owed for each month or part of a month. For more see IRS.gov/penalties.

Taxpayers who have a history of filing and paying on time often qualify for penalty relief. A taxpayer will usually qualify if they have filed and paid timely for the past three years and meet other requirements. For more information, see the first-time penalty abatement page on IRS.gov.

Pay taxes due electronically
Those who owe taxes can view their balance, pay with IRS Direct Pay, by debit or credit card or apply online for a payment plan, including an installment agreement. Several other electronic payment options are available on IRS.gov/payments. They are secure and easy to use. Taxpayers paying electronically receive immediate confirmation when they submit their payment. With Direct Pay and the Electronic Federal Tax Payment System (EFTPS), taxpayers can opt in to receive email notifications about their payments.

Need help? Tips for selecting a tax professional
Taxpayers can also look for help from a tax professional. Taxpayers can use several options to help find a tax preparer. One resource is Choosing a Tax Professional, which includes a wealth of consumer guidance for selecting a tax professional. There are various types of tax return preparers, including enrolled agents, certified public accountants, attorneys and some who don't have a professional credential.

The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications is a free searchable and sortable database. It includes the name, city, state and zip code of credentialed return preparers who are CPAs, enrolled agents or attorneys, as well as those who have completed the requirements for the IRS Annual Filing Season Program.  A search of the database can help taxpayers verify credentials and qualifications of tax professionals or locate a tax professional in their geographic area.

Taxpayer Bill of Rights
Taxpayers have fundamental rights under the law that protect taxpayers when they interact with the IRS. The Taxpayer Bill of Rights presents these rights in 10 categories. IRS Publication 1, Your Rights as a Taxpayer, highlights these rights and the agency’s obligation to protect them.