WASHINGTON – The Internal Revenue Service today issued a reminder that employers who offer educational assistance programs can also use them to help pay for their employees’ student loan obligations through Dec. 31, 2025.

Though educational assistance programs have been available for many years, the option to use them to pay for workers’ student loans has only been available for payments made after March 27, 2020. Under current law, this student loan provision is set to expire Dec. 31, 2025.

Traditionally, educational assistance programs have been used to pay for books, equipment, supplies, fees, tuition and other education expenses for the employee. These programs can now also be used to pay principal and interest on an employee’s qualified education loans. Payments made directly to the lender, as well as those made to the employee, may qualify.

In most cases, educational benefits are excluded from federal income tax withholding, Social Security tax, Medicare tax and federal employment (FUTA) tax. By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages.

Employers who don’t have an educational assistance program may want to consider setting one up. Fringe benefits, such as educational assistance programs, can help employers attract and retain qualified workers.

These programs must be in writing and cannot discriminate in favor of highly compensated employees. For information on other requirements, see Publication 15-B, Employer’s Tax Guide to Fringe Benefits.

For details on what qualifies as a student loan, see Chapter 10 in Publication 970, Tax Benefits for Education.

For more information visit the following pages on IRS.gov:

• Education Credits
• Qualified Education Expenses
• Tax Benefits for Education: Information Center

Week 8 of “Protect Your Clients; Protect Yourself” series focuses on important steps to protect data 

WASHINGTON — Concluding a special summer awareness campaign, the Internal Revenue Service and the Security Summit today urged tax professionals to maintain strong safety measures to protect themselves and their taxpayer clients against evolving data security threats.

In this eighth and final installment of the “Protect Your Clients; Protect Yourself” series, the IRS and Security Summit partners strongly recommended tax professionals to embrace critical and necessary steps to protect sensitive information, including taking extra care with how they handle data and security.

“Tax professionals remain a tempting target for identity thieves and cybercriminals,” said IRS Commissioner Danny Werfel. “They face countless attacks from those hoping to harvest valuable personal and financial information that can be used to file an authentic-looking tax return and slip through the tax system’s defenses. By taking some basic steps, tax professionals at firms both large and small can protect their clients and protect themselves from these relentless security threats.”

The Security Summit is a public-private coalition started in 2015 with tax professionals, industry partners, state tax groups and the IRS to guard the tax system against tax-related identity theft and fraud. The Summit group succeeded in bolstering internal defenses to protect against identity theft, a collective effort that has protected millions of taxpayers through the years.

But as the IRS and the Summit partners increased their vigilance, identity thieves shifted their attention to collect better data and focused on targeting tax professionals and businesses to clandestinely harvest information to file authentic-looking tax returns. With this shift in focus, the Summit partners have worked for the past nine years to raise awareness in the tax professional community through the "Protect Your Clients; Protect Yourself" campaign. Stronger tax pro defenses protect not just their firms, but also their clients and the greater tax system.

Tax pros can see the entire summer series on a special page at IRS.gov.

Identity thieves continue to change their tactics, and security threats against tax professionals remain a daily threat. In the first half of the year, IRS Stakeholder Liaisons have already received reports of nearly 200 tax professional data incidents potentially affecting up to 180,000 clients.

This summer’s special awareness campaign coincided with the IRS Nationwide Tax Forum, which visited four cities this summer and concludes the week of September 9 in San Diego. That final session has already sold out.

Tax pros should remain on the lookout  

Tax pros should know identity thieves take many different approaches to steal sensitive information, and there are several common schemes to look out for.

For example, in a presently trending scheme, some scammers pose as new clients reaching out to practitioners to get their sensitive information or client data. In these fake “new client” schemes, a fraudster can send a malicious attachment or include a link to a site that a tax pro wrongly thinks they need to get the supposed new client’s tax information. However, the site is actually collecting information from a tax pro, such as their email and password, or loading malware onto the tax pro’s computer.

Other scammers send phishing emails to trick people into sharing other content, such as Central Authorization Fileinformation.

Phishing and related scams are among the most common threats facing tax pros. These are designed to deceive recipients into disclosing personal information such as passwords, bank account numbers, credit card numbers or Social Security numbers, or fool them into clicking a suspicious link, filling out information or downloading a malware file.

Scammers also employ elaborate schemes involving calls, texts and even fake printed correspondence to try to worm their way into tax pros’ sensitive files. Professionals should also watch out for clients being duped by social media scams circulating inaccurate or misleadingtax information.

Watch out for warning signs  

Tax pros should also learn the signs of data theft so they can act quickly to protect their clients. These red flags can include a notice that an IRS online account was created without their consent, clients receiving a tax transcript they didn’t request or client tax returns being rejected because their Social Security number was already used on another return. Other warning signs can be more technical in nature, like unexpected slowdowns on their computer networks or cursor movements or number changes when no one is touching a mouse or keyboard.

If tax pros encounter situations like these or others, they should contact the IRS immediately when an identity theft issue surfaces.

Helpful tools available 

The IRS and Security Summit reminded tax pros that they now need to have a Written Information Security Plan, or WISP. As part of this summer’s awareness effort, the Summit Tax Professionals Working Group released an updated WISP template to help tax and industry professionals keep customer and business information safe and secure.

The requirements include implementing multi-factor authentication or MFA for any individual accessing any information system unless a firm’s qualified individual has approved in writing the use of reasonably equivalent or more secure access controls.

MFA is required for tax pros’ systems under new Federal Trade Commission rules to strengthen account security by requiring more than just a username and password to confirm one’s identity when accessing any system, application or device. Other factors include something users have, like a token or random number sequence sent to their cell phone, or something about them like biometric information, to provide extra assurance that a tax pro’s client is gaining access rather than an impostor.

This summer’s series also highlights for tax professionals the importance of using a set of protections called the Security Six: anti-virus software, firewalls, backup software or services, encrypted drives, MFAs and virtual private networks or VPNs.

The IRS and the Security Summit partners also reminded tax pros and taxpayers about the IRS Identity Protection PIN Opt-In Program and to set up IRS online accounts. Both steps help further protect people against tax-related identity theft.

After a taxpayer gets a six-digit IP PIN, they must include it on their tax return before e-filing. To get one, taxpayers should visit the Get an IP PIN, and after they have it, remember the following:

• Taxpayers should share their IP PIN only with their trusted tax prep provider.
• Tax pros should never store clients’ IP PINs on computer systems. This reduces taxpayer risk if a tax pro's system is compromised by an identity thief or cyberattack.
• The IRS will never call, email or text either taxpayers or tax professionals to request the IP PIN. This is a sign of a scam.

Tax pro with a security problem? Contact an IRS Stakeholder Liaison, states and FTC  

Tax pros who receive scams by email should send the email to phishing@irs.gov.

Those who fall victim to a security breach should report a theft to their IRS Stakeholder Liaison, who will ensure that appropriate IRS offices are alerted. If incidents are reported quickly, the IRS can take steps to block fraudulent returns in clients’ names and will assist tax pros through the process.

Tax professionals can also share information with the appropriate state tax agency by visiting a special “Report a Data Breach” page with the Federation of Tax Administrators.

Tax professionals should also understand the FTC data breach response requirements as part of their overall information and data security plan. The new WISP also includes information on the requirement to report an incident to the FTC within 30 days of the incident when 500 or more people are affected.

Additional resources  

• Review Publication 5293, Data Security Resource Guide for Tax Professionals, which provides an overview and resources about how to avoid data theft.
• Tax professionals can also get help with security recommendations by reviewing IRS Publication 4557, Safeguarding Taxpayer Data, the IRS' Identity theft information page for tax pros and Identity theft central page.
• Publication 5709, How to Create a Written Information Security Plan for Data Safety.
• Publication 5708, Creating a Written Information Security Plan for your Tax & Accounting Practice.
• Read Small Business Information Security: The Fundamentals, by the National Institute of Standards and Technology.

Tax professionals should also stay connected to the IRS through subscriptions to e-News for tax professionals and its social media sites.

 

Inside This Issue

1. Tax pros: Protect Your Clients, Protect Yourself with “security six”
2. Business Tax Account: New fact sheet available
3. Teachers eligible to deduct up to $300 in classroom expenses for 2024
4. Child and Dependent Care tax credit helps offset summer day camp costs
5. Interest rates unchanged for fourth quarter
6. Technical Guidance

1.  Tax pros: Protect Your Clients, Protect Yourself with “security six”

In the seventh installment of the “Protect Your Clients; Protect Yourself” summer security series, the IRS and its Security Summit partners identify six practices tax professionals should follow to improve data security. The “security six” include anti-virus software, firewalls, multi-factor authentication, backup software, drive encryption and virtual private networks.

In the event of a security breach, tax professionals must:

• Share information with the appropriate state tax agency by visiting Report a Data Breach;
• Review and understand the FTC data breach response requirements as part of their overall information and data security plan; and
• Report the incident to their local IRS stakeholder liaison.

Visit the Data Theft information for tax professionals webpage to learn more.

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2.  Business Tax Account: New fact sheet available

Fact Sheet-2024-27 provides guidance on the Business Tax Account (BTA), an online self-service tool for business taxpayers that facilitates the viewing and payment of balances due. According to the IRS, more features are on the way for the BTA, which is now available in both English and Spanish and offers business taxpayers new options for payment processing.

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3.  Teachers eligible to deduct up to $300 in classroom expenses for 2024

The federal deduction for classroom expenses applies to educators again in 2024, the IRS announced this week. Federal law permits educators to deduct the cost, up to $300, of supplies and other classroom necessities that they buy themselves.

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4.  Child and Dependent Care tax credit helps offset summer day camp costs

The Child and Dependent Care tax credit may be applied to summer day camp expenses, according to the IRS. Publication 503, Child and Dependent Care Expenses, provides a detailed explanation of all the regulations, the requirements to apply for the credit and an exception for certain taxpayers who live apart from their spouse. 

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5.  Interest rates unchanged for fourth quarter

The IRS announced no change in interest rates for the fourth quarter of 2024, beginning Oct. 1. The rates for interest determined under Section 6621 of the code for the calendar quarter beginning October 1, 2024, will be 8 percent for overpayments (7 percent in the case of a corporation), 8 percent for underpayments, and 10 percent for large corporate underpayments. See Revenue Ruling 2024-18 for details.

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6.  Technical Guidance

The IRS released interim guidance for sponsors of 401(k) and other comparable retirement plans that match contributions based on qualifying student loan payments made by their employees. The 2022 regulation allows employers with a 401(k) plan, 403(b) plan, governmental 457(b) plan or SIMPLE IRA plan to offer matching contributions based on student loan payments, rather than based only on elective contributions to retirement plans, in plan years beginning after Dec. 31, 2023.

Notice 2024-62 sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for July 2024 used under section 417(e)(3)(D), the 24-month average segment rates applicable for August 2024, and the 30-year Treasury rates, as reflected by the application of section 430(h)(2)(C)(iv).

Notice-2024-63 provides guidance in the form of questions and answers with respect to section 110 of Division T of the Consolidated Appropriations Act, 2023, Pub. L. 117 328, 136 Stat. 4459 (2022), known as the SECURE 2.0 Act of 2022.

WASHINGTON – As educators gear up for the new school year, the IRS reminds schoolteachers that the maximum deduction for classroom expenses in 2024 remains at $300. 

This deduction allows educators to offset the cost of supplies, materials and other classroom essentials, providing some financial relief for those who spend their own money to improve their students' learning experience. 

Under federal law, this $300 cap is unchanged from 2023, continuing the adjustment for inflation that began in 2022 when the limit was raised from $250. 

Who qualifies for educator expense deductions?

This deduction is available for teachers, instructors, counselors, principals and aides who work at least 900 hours a school year in a school providing elementary or secondary education. Educators filing jointly can claim up to $600 if both spouses are eligible, but no more than $300 per person. Educators can claim this deduction even if they take the standard deduction, and both public and private school educators qualify. 

What's deductible?

Educators can claim deductions for out-of-pocket expenses on classroom items like books, supplies, equipment (including computers and software) and COVID-19 safety measures such as masks, disinfectants and air purifiers. They may also deduct costs for professional development courses relevant to their teaching, though it could be more advantageous to use other educational tax benefits like the lifetime learning credit (refer to Publication 970, Tax Benefits for Education, Chapter 3). 

Expenses for homeschooling or nonathletic supplies for health or physical education are not eligible. The IRS recommends educators maintain detailed records, such as receipts and canceled checks, to substantiate their deductions. 

Use E-file to claim educator expenses

For educators who have been granted a tax filing extension or qualify for a disaster extension, or for any other pertinent reason are still in the process of completing their 2023 tax return, the rules for claiming deductions remain consistent for the 2024 tax year. The filing extension deadline is Oct. 15, 2024. However, submitting a return before this date can aid in averting processing delays. 

The IRS advises taxpayers to file electronically for a smoother process, whether they use tax software or a professional. Choose direct deposit for faster refunds. For more details, visit E-file options to file your return. 

Individuals who owe taxes should consider using IRS Direct Pay or other electronic payment options available at IRS’ Make a payment page for convenience.

The Internal Revenue Service is continuing to expand the features within Business Tax Account (BTA), an online self-service tool for business taxpayers that now allows them to view and make balance-due payments.

Launched last fall, BTA is a key part of the agency’s service improvement initiative funded under the Inflation Reduction Act (IRA). When fully developed, BTA will allow many types of business taxpayers to check their tax history, make payments, view notices, authorize powers of attorney and conduct other business with the IRS.

With the latest expansion, an eligible business taxpayer can now use BTA to pay Federal Tax Deposits (FTDs) and see and make a payment on their full balance due – all in one place. The account is also now accessible in Spanish with more translations planned. 

BTA is a key part of the agency’s ongoing work to transform and modernize service at the IRS by offering a seamless and convenient digital experience. It’s also an important part of a wide-ranging initiative to reduce paper-based processes that hamper the IRS and frustrate taxpayers.

Who can use BTA now?

Business taxpayers who can activate and use their IRS business tax account include:

• A sole proprietor who has an Employer Identification Number (EIN) issued by the IRS.
• An individual partner or individual shareholder with both:
• • A Social Security number or an individual tax ID number (ITIN).
  • A Schedule K-1 on file (for partners, from 2012-2023; for shareholders, from 2006-2023).

Currently, a limited liability company that reports business income on a Schedule C can’t access Business Tax Account. Future access will be available for these businesses, as well as other entities including tax-exempt organizations, government agencies, partnerships, C corporations and S corporations.

What can business taxpayers do now?

Within BTA, business taxpayers can now:

• View and make a payment toward a balance due by using a bank account. This includes a payment on a return filed for the current year as well as late payments for past tax years and Federal Tax Deposits.

• Schedule a payment for any business day for up to a year and cancel a scheduled payment.
• View recently processed payments, including payments made through the Electronic Federal Tax Payment System (EFTPS) online, wire transfers, checks or money orders, and see if any payments were returned or refused.
• Store multiple bank accounts in their online “wallet” to manage tax payments.

• Request a tax compliance check.
• View the business name and address on file.
• Give account access to employees of the business.
• Register for clean energy credits (if eligible).
• View and download transcripts for various payroll, income and excise tax returns.
• Sole proprietors can now download business entity transcripts from their BTA account. The transcript shows entity information like business name, mailing address, location address and more for the Employer Identification Number on file.
• View and download select digital notices including:
• • CP080: Reminder - We Have Not Received Your Return, Credits May be on Your Account.
  • CP136: Annual Notification of Federal Tax Deposit (FTD) Requirements (Forms: 941, 941-SS).
  • CP216F: Application for Extension of Time to File an Employee Plan Return – Approved.

What new features will be added to BTA in the future?

Future capabilities made available through funding from the IRA will enable access by all business and organizational entities and help the business tax account become a robust online self-service tool.

To set up a new business tax account, or for more information visit Business Tax Account.

WASHINGTON – The Internal Revenue Service today reminded taxpayers that summer day camp expenses may count towards the Child and Dependent Care tax credit.

Many working parents arrange for care of their younger children under age 13 during the summer. A popular solution is a day camp program, which can sometimes also lead to a tax benefit. Taxpayers who pay for the care of a child, or other qualifying person, so they could work or look for work may be able to take the credit for child and dependent care expenses.

Unlike overnight camps, the cost of day camp may count as an expense towards the Child and Dependent Care credit.

How it works

Taxpayers must have earned income to claim this credit. The credit is calculated based on income and a percentage of expenses incurred for the care of qualifying people to enable taxpayers to work, look for work or attend school.

• Depending on income, taxpayers can get a credit worth up to 35% of their qualifying childcare expenses. At minimum, it’s 20% of those expenses. For 2024, the maximum eligible expense for this credit is $3,000 for one qualifying person and $6,000 for two or more.
• Reimbursed expenses, such as from a state social services agency, must first be deducted as work-related expenses used to calculate the amount of the credit.
• The amount of work-related expenses used to figure the credit generally cannot be more than earned income for the year if single, or the smaller of a spouse’s income, if married.
• Taxpayers who claim it must list the name and address of the day camp on their return, along with the taxpayer identification number unless an exception applies.

IRS Publication 503, Child and Dependent Care Expenses, explains all the rules, the tests needed to claim the credit and describes an exception for certain taxpayers living apart from their spouse and meeting other requirements. Taxpayers can also use the Interactive Tax Assistant on IRS.gov to determine if they can claim this credit.

Additional information

• Tax Topic No. 602, Child and dependent care credit
• Form 2441, Child and Dependent Care Expenses

1. IRS, states, tax industry announce new joint effort to combat growing scams and schemes
2. New Written Information Security Plan protects tax professionals, their businesses and clients
3. IRS reopens Employee Retention Credit Voluntary Disclosure Program through Nov. 22
4. Tax pros: Special information available to provide information to clients on Employee Retention Credit Voluntary Disclosure Program
5. Tax relief available for disaster victims in Minnesota, Vermont
6. IRS accepting 2025 Compliance Assurance Process (CAP) applications 
7. Impending tax deadline for truckers Sept. 3
8. Taxpayers can use new option to request relief for certain late-filed international documents
9. Upcoming webinar for tax practitioners
10. Technical Guidance

1.  IRS, states, tax industry announce new joint effort to combat growing scams and schemes

A coalition representing the Internal Revenue Service, state tax agencies and the nation’s tax industry today announced a new joint effort to combat the growth of scams and schemes threatening taxpayers and tax systems. The new combined effort follows a variety of increased scams and schemes that intensified during the past filing season that aimed to exploit vulnerable taxpayers while enriching fraudsters and promoters.

Convened at the request of IRS Commissioner Danny Werfel, the coalition of federal and state tax agencies, software and financial companies and key national tax professional associations agreed to a three-pronged approach. They will work to expand outreach and education about emerging scams, develop new approaches to identify potentially fraudulent returns at the point of filing and create infrastructure improvements to protect taxpayers as well as federal, state and industry tax systems.

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2.  New Written Information Security Plan protects tax professionals, their businesses and clients

In the sixth installment of the “Protect Your Clients; Protect Yourself” special series, the IRS and its Security Summit partners informed tax professionals of a new, updated Written Information Security Plan (WISP) designed to help safeguard tax professionals from identity theft and data breaches. After a year-long endeavor, the new WISP is an easily comprehensible document created by and for tax and industry professionals to protect client and business data. Tax pros are required to have a security plan under federal law. 

“Tax professionals play a vital role in the nation’s tax system, and they hold a vast amount of taxpayer information that can be a treasure trove to identity thieves,” said IRS Commissioner Danny Werfel. “The newly updated Written Information Security Plan provides a helpful road map for tax pros to help protect their clients and themselves from the constant threat of data breaches. The IRS and the Security Summit partners urge tax pros to stay on top of these evolving threats, and this updated plan is an important part of that effort.”

Tax professionals may do the following to report stolen data:

• Share information with the appropriate state tax agency by visiting Report a Data Breach;
• Review and understand the FTC data breach response requirements as part of their overall information and data security plan; and
• Report the incident to their local IRS stakeholder liaison.

Visit the Data Theft information for tax professionals webpage to learn more. 

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3.  IRS reopens Employee Retention Credit Voluntary Disclosure Program through Nov. 22

The IRS has announced the reopening of the Voluntary Disclosure Program to assist businesses in correcting erroneous received Employee Retention Credit (ERC) claims.

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4.  Tax pros: Special information available to provide information to clients on Employee Retention Credit Voluntary Disclosure Program

For businesses and clients with questions on the ERC Voluntary Disclosure Program, the IRS has created special information that will help provide information on the new program. The second Employee Retention Credit Voluntary Disclosure Program (VDP) is available for businesses to settle inaccurate claims without incurring penalties or interest. The second ERC-Voluntary Disclosure Program will run through Nov. 22, and allows businesses to correct improper payments at a 15% discount and avoid future consequences. The IRS continues to urge businesses to review the eligibility requirements given aggressive marketing around the pandemic-era credit. 

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5.  Tax relief available for disaster victims in Minnesota, Vermont

Disaster-area taxpayers in Minnesota and Vermont now have until Feb. 3, 2025, to file various federal individual and business tax returns and make required payments. The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA), and the same relief will be available to any other counties added later to the disaster areas. The current list of eligible localities is always available on the Tax relief in disaster situations page on IRS.gov.

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6.  IRS accepting 2025 Compliance Assurance Process (CAP) applications 

The IRS announced the opening of the application period for the 2025 Compliance Assurance Process (CAP) program, which will run from Sept. 4 to Oct. 31. Applicants will be informed of acceptance into the program in February 2025.

For more information, visit the CAP webpage.

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7.  Impending tax deadline for truckers Sept. 3

The IRS reminds drivers who operate large buses and trucks that, for vehicles used in July 2024, the deadline for filing Form 2290, Heavy Highway Vehicle Use Tax Return is Sept. 3.

For additional information, visit the Trucking Tax Center on IRS.gov.

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8.  Taxpayers can use new option to request relief for certain late-filed international documents

The IRS reminded taxpayers of the capability to submit electronic requests for relief for certain late-filed international documents. Requests can be submitted via eFax at 855-582-4842. Guidance for making each request can be found on IRS.gov using the following links:

• Relief for gain recognition agreements
• Late filing relief for dual consolidated losses
• Relief for partnership gain deferral contributions

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9.  Upcoming webinar for tax practitioners

The IRS offers the upcoming live webinar to the tax practitioner community:

In the know with RPO: An update from the Return Preparer Office on August 22, at 2 p.m. ET. Earn up to 1 CE credit (Federal Tax). Certificates of completion are being offered.

For more information or to register, visit Webinars for tax practitioners webpage.

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10.  Technical Guidance

Announcement 2024-30 announces a second Voluntary Disclosure Program for taxpayers to resolve refunds or credits for erroneous Employee Retention Credit (ERC) claims. It explains taxpayer eligibility criteria, terms, and procedures for taxpayers electing to participate in the second Voluntary Disclosure Program.

Revenue Ruling 2024-17 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 section 1274. 

Notice 2024-62 sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for July 2024 used under § 417(e)(3)(D), the 24-month average segment rates applicable for August 2024, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).  

Notice 2024-62 will be in IRB: 2024-35, dated August 26, 2024.

WASHINGTON — A coalition representing the Internal Revenue Service, state tax agencies and the spectrum of the nation’s tax industry today announced a new joint effort to combat the growth of scams and schemes threatening taxpayers and tax systems. 

The new combined effort follows a variety of increased scams and schemes that intensified during the past filing season that aimed to exploit vulnerable taxpayers while enriching fraudsters and promoters. 

Convened at the request of IRS Commissioner Danny Werfel, the coalition of federal and state tax agencies along with software and financial companies as well as key national tax professional associations agreed to a three-pronged approach. They will work to expand outreach and education about emerging scams, develop new approaches to identify potentially fraudulent returns at the point of filing and create infrastructure improvements to protect taxpayers as well as federal, state and industry tax systems. 

The new task force will be called the Coalition Against Scam and Scheme Threats (CASST). 

“Across the spectrum of the tax system, we’ve seen a rising tide of scams and schemes that try to exploit taxpayers and find gaps in government and industry defenses,” Werfel said. “This new collaborative approach will allow the private and public sectors to throw our combined weight against this threat. We will do more to work closely together, share information faster, respond quickly to threats and quickly alert the public to new and emerging threats. Our goal is to have a mass effect on this expanding problem that’s spread on social media and through bad actors.” 

The new CASST project has wide support across the nation’s tax community. In addition to the IRS, other participants include state tax agencies represented by the Federation of Tax Administrators as well as the leading software and financial industries working in the tax space and key national tax professional organizations. The Council for Electronic Revenue Communication Advancement, the National Association of Computerized Tax Processors and the American Coalition for Taxpayer Rights are among those that have signed on to support the initiative. In all, more than 60 different groups from the private sector have signed on to the initiative, either individually or as part of a group. 

“The FTA membership is dedicated to protecting taxpayers from fraudulent attacks on the country’s tax ecosystem,” said Federation of Tax Administrators Executive Director Sharonne Bonardi. “We are committed to continuing our collaborative efforts by working with the IRS, industry and other stakeholders to implement strategies that allow for proactive detection, prevention and mitigation of scams and schemes deployed by bad actors intending to defraud tax agencies.” 

The new coalition is an outgrowth of the Security Summit effort, and while the new collaborative effort will not replace the Summit, the scams coalition will be closely modeled on the Summit. The Security Summit was launched in 2015 by the same groups to stem the growth in tax-related identity theft. The combined effort improved information sharing between the groups, identified common approaches to combat tax-related identity theft, improved internal tax system defenses and conducted extensive public awareness campaigns for taxpayers and tax professionals. While tax-related identity theft remains a concern, the improved protections have protected millions of taxpayers and prevented billions of dollars of fraudulent payments. 

For this new project targeting scams, the CASST task force has agreed to high-level principles. The purpose of the group will be to better protect taxpayers from falling prey to unscrupulous actors by leveraging multilateral relationships across the tax ecosystem to minimize the filing of fraudulent tax returns. 

"CERCA is pleased to work with the IRS and the states to combat the proliferation of ‘scams and schemes’ that are victimizing millions of Americans,” said Shannon Bond, chair of the Council for Electronic Revenue Communication Advancement. CERCA represents companies in the tax software and preparation industries as well as financial service groups and others in the tax community. “Continuing our long partnership with the IRS, CERCA stands shoulder to shoulder with both the federal government and the states to reduce first-party fraud, which threatens the viability of tax systems and imperils vulnerable taxpayers."

During the past tax season, there has been increased activity involving a variety of scams and schemes harming taxpayers, including the Fuel Tax Credit, household employment taxes and the Sick and Family Leave Credit. The IRS has seen hundreds of thousands of dubious claims come in where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims. 

Numerous other scams and schemes continue to be seen circulating on social media and are highlighted through efforts including the annual IRS Dirty Dozen list and alerts from the Security Summit partners. The new approach will increase collaborative efforts to raise awareness and education about schemes, not just during tax season but throughout the year. 

With the new scam and scheme initiatives, the IRS, states and the private sector will work to put in place new protections by filing season 2025. The combined effort is particularly important because the group has seen instances where scammers look for weak points in government systems and the private sector to exploit. The combined effort will improve defenses across both the private and public sector with a goal of making it more difficult for scammers to slip improper or false tax returns through the system.           

The group will also work to make long-term structural changes to fundamentally improve the ability to identify and stop scams. This includes working to improve EFIN and PTIN validation and new steps to combat “ghost preparers,” who prepare tax returns for a fee and do not in any way sign a tax return or disclose their role on the tax return as the preparer. In many cases, these are inflated tax refunds that lead to millions in revenue loss and add risk for taxpayers who file potentially improper claims with only the individual’s name associated with the tax return.

WASHINGTON —The Internal Revenue Service announced today a limited time reopening of the Voluntary Disclosure Program to help businesses fix incorrect Employee Retention Credit claims as the agency continues compliance work. 

The Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP) will run through November 22 and allow businesses a chance to correct improper payments at a 15% discount and avoid future audits, penalties and interest. During the first disclosure program that ended in March, there were more than 2,600 applications from ERC recipients that disclosed $1.09 billion worth of credits. 

To underscore the importance of participating in the Voluntary Disclosure Program, the IRS also announced it plans to mail up to 30,000 new letters to reverse or recapture potentially more than $1 billion in improper ERC claims. Thousands more mailings on additional questionable payments will be made in the fall. 

“The limited reopening of the Voluntary Disclosure Program provides an opportunity for those with improper claims to come in ahead of IRS compliance work and get a discount on repayments,” said IRS Commissioner Danny Werfel. “This is especially important given increasing IRS compliance actions involving bad claims, many of them are the result of aggressive marketing tactics to lure unsuspecting businesses into claiming the complex credit. This provides a final window of opportunity for those misled businesses to make adjustments and avoid future compliance action by the IRS.” 

“The push by promoters flooded the IRS with questionable ERC claims, which clogged our systems and slowed work,” Werfel added. “We recognize well-meaning businesses are caught up in this, and we are taking important steps to help them. This includes reopening the Voluntary Disclosure Program as well as getting more payments out to qualifying businesses.” 

Last week, the IRS announced it was taking additional steps to move forward with ERC, including updates on the processing moratorium, compliance actions and upcoming payments. In recent weeks, the IRS separately sent out 28,000 disallowance letters to businesses whose pending claims showed a high risk of being incorrect. The IRS estimates that these disallowances will prevent up to $5 billion in improper payments. The IRS has also identified 50,000 valid ERC claims and is quickly moving them into the pipeline for payment processing in coming weeks. These payments are part of a low-risk group of claims. 

The ERC program began as an effort to help businesses during the pandemic, but as time went on, the program increasingly became the target of aggressive marketing – and potentially predatory in some cases – well after the pandemic ended. For example, some promoter groups called the credit by another name, such as a grant, business stimulus payment or government relief besides ERC or the Employee Retention Tax Credit (ERTC) to increase claims. The IRS continues compliance work on questionable ERC claims on multiple fronts, with thousands of audits underway and 460 criminal cases initiated. 

ERC Voluntary Disclosure Program reopens; special discount available through November 22 

Today’s announcement features a special reopening of the ERC Voluntary Disclosure Program (VDP) through November 22 to help businesses that received questionable payments to self-correct and repay the credit they received after filing ERC claims in error. The IRS urged businesses with claims that show warning sign indicators to review eligibility requirements and talk to a trusted tax professional to see if the disclosure program is a good option for them. 

As the IRS continues intensifying its compliance work involving improper ERC claims, the disclosure program protects businesses from more costly future compliance action. The second VDP offers a 15% discount for businesses repaying credits for tax periods in 2021, a slightly reduced rate from the first program’s 20% discount that ended in March. 

Businesses should act soon to resolve incorrect claims and avoid potential future issues such as audits, full repayment, penalties and interest. Full details are available in IRS Announcement 2024-30, also released today, with highlights outlined in another IRS news release, IR-2024-213, IRS provides details of second Employee Retention Credit Voluntary Disclosure Program; program for improper claims open through Nov. 22. 

Thousands of new recapture letters going out for improper ERC claims made for Tax Year 2021, some Tax Year 2020 

As part of ongoing compliance work, the IRS announced today plans to mail thousands of additional letters reversing or recapturing improperly paid ERC claims. The IRS currently anticipates this round of mailings could reach up to 30,000 letters this fall. These “clawback” notices potentially represent more than $1 billion in claims from Tax Year 2021 and some additional, later-filed Tax Year 2020 claims. These letters notify taxpayers that the IRS is reversing or recapturing their previous credit. Several thousand of the letters have been mailed, with more coming in upcoming weeks and into the fall.  

The IRS notes that those who receive these recapture letters will be ineligible to participate in the Voluntary Disclosure Program for the calendar quarter the letter covers.

This is the second round of these letters. Previously, the IRS determined that more than 12,000 entities filed claims that were improper for Tax Year 2020, resulting in $572 million in assessments.

The latest letters generally involve larger claims than earlier letters regarding 2020 because Congress increased the maximum ERC in 2021. Congress increased the maximum ERC from $5,000 per employee per year in 2020 to $7,000 per employee for each quarter of the year in 2021. 

When the IRS identifies an employer that has received excessive or erroneous ERC, the agency will reclaim that ERC through normal tax assessment and collection procedures.

"This new round of letters serves as another incentive for businesses that believe they received an erroneous Employee Retention Credit payment to come forward and participate in the disclosure program and resolve the matter on more favorable terms," Werfel said. “The disclosure program provides a limited, unique opportunity to avoid future IRS compliance problems as well as sidestep a significant repayment fee with penalties and interest.”

Separate ERC Claim Withdrawal Program remains available for those with pending claims 

The IRS also continues to urge employers with pending, unpaid ERC claims to consider a separate ERC Claim Withdrawal Program that allows them to remove a pending ERC claim – one that the IRS has not processed yet. They can withdraw the claim and pay no interest or penalty. Already, the claim withdrawal process for those with unprocessed ERC claims has led to more than 7,300 entities withdrawing $677 million. 

ERC compliance work continues 

The IRS continues analyzing ERC claims, intensifying audits and pursing promoter and criminal investigations. Beyond the disallowance letters, current initiatives results include:  

• Criminal investigations: As of July 1, 2024, IRS Criminal Investigation has initiated 460 criminal cases, with potentially fraudulent claims worth nearly $7 billion. In all, 37 investigations have resulted in federal charges so far, with 17 investigations resulting in convictions and nine sentencings with an average sentence of 20 months. 

• Promoter investigations: The IRS is gathering information about suspected abusive tax promoters and preparers improperly promoting the ability to claim the ERC. The IRS’s Office of Promoter Investigations has received hundreds of referrals from internal and external sources. The IRS will continue civil and criminal enforcement efforts of these unscrupulous promoters and preparers. 

• Audits: The IRS has thousands of ERC claims currently under audit.