WASHINGTON – The Internal Revenue Service continues to look for ways to assist taxpayers affected by the COVID-19 pandemic.  As part of that effort, the IRS reminds taxpayers and tax practitioners of the procedures for requesting expedited handling of requests for letter rulings under Rev. Proc. 2020-1, 2020-1 I.R.B. 1 (Jan. 2, 2020).

As set forth in Rev. Proc. 2020-1, the IRS ordinarily processes requests for letter rulings in the order that they were received.  A taxpayer with a compelling need to have a request processed more quickly may request expedited handling.  The request for expedited handling must be made in writing, preferably in a separate letter submitted with the letter ruling request.  Requests for expedited handling are granted at the discretion of the IRS and typically involve a factor outside of the taxpayer’s control that creates a real business need to obtain a letter ruling before a certain date in order to avoid serious business consequences.  Requests for expedited handling should be submitted as promptly as possible after the taxpayer has become aware of the deadline or compelling business need. 

The COVID-19 pandemic is a factor outside of the taxpayer’s control that can support a request for expedited handling under Rev. Proc. 2020-1. As a result, and consistent with Executive Order 13924 of May 19, 2020, taxpayers are encouraged to seek expedited handling if they face a compelling need related to COVID-19.  Such requests will be handled as provided in Rev. Proc. 2020-1.

More information on the procedures for requesting expedited handling is provided in Section 7.02(4) of Rev. Proc. 2020-1.  In addition, Rev. Proc. 2020-29, 2020-21 I.R.B. 859 (May 18, 2020), sets forth procedures for the electronic submission of letter ruling requests.

The IRS has issued an advance copy of TD 9914 on Eligible Terminated S Corporations.

WASHINGTON — The Internal Revenue Service today issued final regulations for taxpayers who claim the rehabilitation credit. 

The Tax Cuts and Jobs Act (TJCA) amended the rehabilitation credit so that taxpayers now claim the rehabilitation credit over a five-year period.  The TCJA amendments generally apply to a taxpayer’s qualified rehabilitation expenditures paid or incurred after Dec. 31, 2017. 

Taxpayers, however, may claim the credit all in one year under pre-TCJA rules for projects that qualify under a transition rule. The transition rule allows taxpayers to use the prior law if the project meets these conditions:

The final regulations require taxpayers to determine the rehabilitation credit amount in the year they place the building into service and allocate that amount ratably over the five-year period.

The final regulations also include a rule to coordinate the TCJA amendments with the special rules for the investment credit, of which the rehabilitation credit is part.  Finally, the final regulations include examples illustrating how to apply the rules.
 
Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.

Revenue Ruling 2020-20 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274.  

The rates are published monthly for purposes of sections 42, 382, 412, 642, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code. 

Revenue Ruling 2020-20 will be in IRB:  2020-41, dated October 5, 2020.

Notice 2020-72 provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code.  In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), as reflected by the application of § 430(h)(2)(C)(iv). 

Notice 2020- 72 will be IRB:  IRB 2020-40, dated 09/28/2020.

WASHINGTON — The final regulations for the business interest expense deduction limitation published in the Federal Register today. The final regulations vary slightly from the document released on IRS.gov on July 28, 2020.

The Treasury Department and the IRS released a version of the final regulations on the business interest expense deduction limitation on IRS.gov on July 28, 2020. The version released on IRS.gov contains a disclaimer that the document had been submitted to the Office of the Federal Register for publication, and notes that the version of the final regulations may vary slightly from the document published in the Federal Register.

The version of the final regulations published in the Federal Register contains minor editorial changes.  In response to questions from taxpayers and practitioners, the final regulations published in the Federal Register clarify that taxpayers may rely on the final regulations for any taxable year beginning after Dec. 31, 2017, provided that certain conditions are met. 

The document published in the Federal Register is the official document.

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

Notice 2020-71 announces the special per diem rates effective October 1, 2020, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home.  This notice provides the special transportation industry rate, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method. 

Notice 2020-71 will be in IRB:   2020-40, dated 9/28/20.

WASHINGTON — The Internal Revenue Service has selected 10 new members for the Electronic Tax Administration Advisory Committee.

Established in 1998, the ETAAC is a public forum for the discussion of issues in electronic tax administration. Its aim is to prevent identity theft and refund fraud in support of paperless filing of tax and information returns. ETAAC members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and the nation's tax industry to fight identity theft and refund fraud.

The following individuals have been appointed to serve three-year terms on the ETAAC beginning in September 2020:

ETAAC leadership

For the committee’s new working year, which begins this month, Geno Salo, Senior Director at Thomson Reuters, will serve as Chair. Kay-Decker will serve as Vice Chair.

Committee members include state tax officials, consumer advocates, cybersecurity and information security specialists, tax preparers, tax software developers and representatives of the payroll and financial communities.

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.