WASHINGTON – The Internal Revenue Service today announced a number of changes designed to help struggling taxpayers impacted by COVID-19 more easily settle their tax debts with the IRS.

The IRS assessed its collection activities to see how it could apply relief for taxpayers who owe but are struggling financially because of the pandemic, expanding taxpayer options for making payments and alternatives to resolve balances owed.

“The IRS understands that many taxpayers face challenges, and we’re working hard to help people facing issues paying their tax bills,” said IRS Commissioner Chuck Rettig. “Following up on our People First Initiative earlier this year, this next phase of our efforts will help with further taxpayer relief efforts.”

“We want people to know our IRS employees are committed to continue helping taxpayers wherever possible, including offering many options for those struggling to pay their tax bills,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support. Guillot discussed the new relief options in a new edition of IRS “A Closer Look.”

Taxpayers who owe always had options to seek help through payment plans and other tools from the IRS, but the new IRS Taxpayer Relief Initiative is expanding on those existing tools even more.

The revised COVID-related collection procedures will be helpful to taxpayers, especially those who have a record of filing their returns and paying their taxes on time. Among the highlights of the Taxpayer Relief Initiative:

Additional details on the Taxpayer Relief Initiative

The IRS offers options for short-term and long-term payment plans, including Installment Agreements via the Online Payment Agreement (OPA) system. In general, this service is available to individuals who owe $50,000 or less in combined income tax, penalties and interest or businesses that owe $25,000 or less combined that have filed all tax returns. The short-term payment plans are now able to be extended from 120 to 180 days for certain taxpayers.

Installment Agreement options are available for taxpayers who cannot full pay their balance but can pay their balance over time. The IRS expanded Installment Agreement options to remove the requirement for financial statements and substantiation in more circumstances for balances owed up to $250,000 if the monthly payment proposal is sufficient. The IRS also modified Installment Agreement procedures to further limit requirements for Federal Tax Lien determinations for some taxpayers who only owe for tax year 2019. 

In addition to payment plans and Installment Agreements, the IRS offers additional tools to assist taxpayers who owe taxes:

Temporarily Delaying Collection — Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves.

Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an Offer in Compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool. Now, the IRS is offering additional flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted offer in compromise.

Relief from Penalties — The IRS is highlighting reasonable cause assistance available for taxpayers with failure to file, pay and deposit penalties. First-time penalty abatement relief is also available for the first time a taxpayer is subject to one or more of these tax penalties. 

All taxpayers can access important information on IRS.gov. Many taxpayers requesting payment plans, including Installment Agreements, can apply through IRS.gov without ever having to talk to a representative.

Other requests, including this new relief, can be made by contacting the number on the taxpayer’s notice or responding in writing. However, to request relief, the IRS reminds taxpayers they must be responsive when they receive a balance due notice.

“If you’re having a tax issue, don’t go silent. Please don’t ignore the notice arriving in your mailbox,” Guillot said. “These problems don’t get better with time. We understand tax issues and know that dealing with the IRS can be intimidating, but our employees really are here to help.”

Throughout COVID-19, the IRS has continued to adjust operations to help ensure the health and safety of employees and taxpayers, including the extensive and temporary relief of the IRS People First Initiative. More information and background on the collection relief and procedures can be found in “A Closer Look.”

“While it’s been important for us and the nation to resume our critical tax compliance responsibilities, we continue to assess the wide-ranging impacts of COVID-19 and other difficulties people are experiencing,” Guillot said.

WASHINGTON — The Internal Revenue Service reminds U.S. citizens, entities and resident aliens with a foreign bank or financial account that they have until Oct. 31, 2020, to file their 2019 Report of Foreign Bank and Financial Accounts (FBAR).

The IRS coordinated the extension from the usual Oct. 15 deadline with the Financial Crimes Enforcement Network (FinCEN) for this year only to filers for 2019 calendar year FBARs. FBAR filers impacted by the California Wildfires, the Iowa Derecho, Hurricane Laura, the Oregon Wildfires and Hurricane Sally continue to have until Dec. 31, 2020, to file their FBARs.

This requirement applies to, among others, U.S. citizens and anyone with dual citizenship. It also applies to legal entities, such as corporations, partnerships, limited liability companies, estates and trusts. In addition, U.S. citizens, entities and resident aliens should check to see if they have a U.S. tax liability and a federal tax return filing requirement. Those required to file should check to ensure all income is reported and federal tax return filing requirements are met regarding the reported accounts.

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2019. Because of this threshold, the IRS encourages U.S. persons or entities with foreign accounts, even relatively small ones, to check if this filing requirement applies to them. The FBAR, FinCEN Form 114, is only available through the BSA E-Filing System website.

Here are key points regarding the FBAR to keep in mind:

Deadline for reporting foreign accounts
By law, the deadline for filing the FBAR is the same as for a federal income tax return. This means that the FBAR, FinCEN Form 114, normally must be filed electronically with FinCEN by April 15. U.S. persons or entities who want to paper-file their FBAR must call FinCEN’s Regulatory Helpline to request an exemption from e-filing.

People and entities who miss the April 15 deadline have an automatic extension until Oct. 15 to file the FBAR. This extension is granted without any required action by the U.S. persons or entities. For 2019 only, that deadline is further extended to Oct. 31, 2020, for most filers, and to Dec. 31, 2020, for those impacted by the California Wildfires, the Iowa Derecho, Hurricane Laura, the Oregon Wildfires and Hurricane Sally.

Taxpayers should never file the FBAR with individual, business, trust or estate tax returns.

For more information, see the FBAR Fact Sheet posted on IRS.gov.

The IRS has announced that it will resume issuing the 500 series balance due notices to taxpayers later in October. While these notices were paused on May 9 due to COVID-19, the agency did not officially confirm this pause until August 21, 2020. 

"Although the IRS continued to issue most agency notices, the 500 series were suspended temporarily because of a backlog of mail at the IRS due to COVID-19. The mail backlog is now caught up enough to account for the timely mailed payments. Some taxpayers will begin seeing in late October or early November, the updated 500 series notices with current issuance and payment dates," the IRS said.

The 500 series includes the CP501, the CP503 and the CP504 notices.

The full IRS announcement is available to read here.

WASHINGTON — As part of an ongoing initiative to provide information and assistance to underserved communities more effectively, the Internal Revenue Service announced today that it is making two key publications designed for tax professionals available in Spanish.

A Spanish-language version of Publication 947, Practice Before the IRS and Power of Attorney, is now available. A Spanish version of Circular No. 230, Regulations Governing Practice before the Internal Revenue Service, will soon be posted to IRS.gov. Making these two publications available in Spanish helps the IRS reach its goal of serving all taxpayers, no matter where they live, their background, or what language they speak.

“Spanish-speaking tax pros have long played a vital role in helping businesses and families understand their tax-reporting responsibilities and take full advantage of valuable tax benefits,” said IRS Commissioner Chuck Rettig. “We believe adding these two important professional resources in Spanish will help tax pros more effectively serve and represent this important community. This is just one more step in our continuing efforts to increase the information and services available in Spanish and other languages.”

Circular 230 is a critical document for those practicing before the IRS. The title refers to Treasury Department Circular No. 230, which defines and governs who may practice before the IRS. Those covered by Circular 230 include attorneys, certified public accountants, Enrolled Agents, enrolled retirement plan agents, enrolled actuaries and others practicing before the IRS. The IRS Office of Professional Responsibility oversees Circular 230, including enforcing violations.

“Circular 230 will turn 100 years old in February, and making this document available in Spanish for the first time is an appropriate milestone,” said Sharyn Fisk, IRS Office of Professional Responsibility Director. “We will continue to look for other opportunities to make information available to tax professionals in additional languages.”

In tax-year 2020, for the first time, Form 1040 will be available in Spanish and English. In another first, the 2020 Form 1040 will also allow taxpayers to indicate on the form whether they wish to be contacted in a language other than English should the IRS need to contact them. 

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

Rev. Proc. 2020-45 provides certain inflation adjustments, including the tax tables for Tax Year 2021, generally used on returns filed in 2022.

Notice 2020-79 provides a listing of dollar limitations applicable to qualified retirement plans as adjusted for cost-of-living adjustments for 2020.

WASHINGTON — The Internal Revenue Service today announced the tax year 2021 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2020-45 provides details about these annual adjustments. 

Highlights of changes in Revenue Procedure 2020-45: The Consolidated Appropriation Act for 2020 increased the amount of the minimum addition tax for failure to file a tax return within 60 days of the due date. Beginning with returns due after Dec. 31, 2019, the new additional tax is $435 or 100 percent of the amount of tax due, whichever is less, an increase from $330. The $435 additional tax will be adjusted for inflation. 

The tax year 2021 adjustments described below generally apply to tax returns filed in 2022. 

The tax items for tax year 2021 of greatest interest to most taxpayers include the following dollar amounts:

WASHINGTON — The Internal Revenue Service announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2021 in Notice 2020-79, posted today on IRS.gov. 

Highlights of changes for 2021

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2021.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2021:

Key employee contribution limits remain unchanged

The limit on contributions by employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans remains unchanged at $6,500.

The limitation regarding SIMPLE retirement accounts remains unchanged at $13,500.

The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Details on these and other retirement-related cost-of-living adjustments for 2021 are in Notice 2020-79, available on IRS.gov.

WASHINGTON – The next quarterly payroll tax return due date is Oct. 31, and the Internal Revenue Service urges business owners to use the speed and convenience of filing the returns electronically.

IRS Forms 940, 941, 943, 944 or 945 are used to report employment tax information. The IRS recommends electronic filing, or e-filing, of these returns for many reasons.

E-filing saves taxpayers time by performing calculations and populating forms and schedules using a step-by-step process. Once submitted, the information is quickly available to the IRS, thus reducing processing time.

E-filing is the most accurate method to file returns. Those who e-file receive missing information alerts. Electronically filed returns have fewer errors, which reduces a taxpayer's chance of receiving an IRS notice.

The IRS takes safeguarding personal information seriously, and e-filing security is a top priority at the agency. E-file security standards ensure tax information is protected from security breaches. The IRS requires all authorized IRS e-file providers to ensure only authorized users have access to secure information.

The IRS acknowledges receipt of e-filed returns within 24 hours. The agency retains the information on the tax return. Unlike filing a return on paper, e-filing assures the filer that the tax return is with the IRS and not misplaced or lost in the mail.

There are two options for electronically filing payroll tax returns:

Self-file

o Businesses purchase IRS-approved software. A list of providers offers options based on the relevant tax year.

o Business owners may need to pay a fee to electronically file their returns.

o The tax software requires a signature. The taxpayer has the option to apply for an online signature PIN or to scan and attach Form 8453-EMP, Employment Tax Declaration for an IRS e-file Return.

Tax professional file on behalf of the business

o Use the Authorized IRS e-file Provider Locator Service to find a tax professional who offers this service.

Only the business owner, authorized signers and reporting agents can apply for an online signature PIN. Third parties, such as attorneys, CPAs, tax return preparers or other tax professionals can't request a PIN on behalf of the business, nor can they use the PIN to sign returns on behalf of their clients.

For more information on electronic filing of payroll tax returns, see the E-file Employment Tax Forms Page.