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.

WASHINGTON — The Internal Revenue Service urged businesses that have received Employee Retention Credit payments to recheck eligibility requirements and consider the second Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP) to resolve incorrect claims without penalties or interest. 

The second ERC-Voluntary Disclosure Program will run through Nov. 22, 2024, and allow businesses to correct improper payments at a 15% discount and avoid future audits, penalties and interest. 

The reopening of ERC Voluntary Disclosure Program is designed to help businesses with questionable claims to self-correct and repay the credits they received after filing ERC claims in error. Many of these claims were driven by aggressive marketing from unscrupulous promoters. 

To help businesses caught in this situation, the IRS urges businesses to review important warning signsand eligibility requirements, and to talk to a trusted tax professional to see if the VDP is a good option. The IRS’s ERC Eligibility Checklist can also help businesses understand eligibility requirements and suggest next steps.  

As the IRS continues intensifying compliance work involving improper ERC claims, the VDP can protect businesses from potential costly compliance action in the future, such as audits, full repayment, penalties and interest. Full details are available in IRS Announcement 2024-30, also released today. 

The IRS’s claim withdrawal program remains open for businesses whose ERC claims haven’t been paid yet. 

Details about the second ERC Voluntary Disclosure Program 

Interested employers must apply to the second ERC Voluntary Disclosure Program by Nov. 22, 2024. Applicants that the IRS accepts into the program will need to repay only 85% of the credits they received. This second round of the program is open for tax periods in 2021. Employers can’t use the second VDP to disclose and repay ERC money from tax periods in 2020. 

If the IRS paid interest on the employer’s ERC refund claim, the employer doesn’t need to repay that interest. Employers who are unable to repay the required 85% of the credit may be considered for an Installment Agreement on a case-by-case basis, pending submission and review of Form 433-B, Collection Information Statement for Businesses, and all required supporting documentation. Form 433-B is available on IRS.gov. 

The IRS will not charge program participants interest or penalties on any credits they timely repay. However, if an employer can’t repay the required 85% of the credit at the time they sign their closing agreement, they’ll be required to pay penalties and interest in connection with an alternative payment arrangement such as an installment agreement. 

To qualify for this program, employers must provide the IRS with the names, addresses, telephone numbers and details about the services provided by any advisors or tax preparers who advised or assisted them with their claims. 

The IRS has provided a set of Frequently Asked Questions about the second ERC Voluntary Disclosure Program to help employers understand the terms of the program. 

ERC Voluntary Disclosure Program: Who can apply? 

A variety of ERC recipients can apply for the second ERC Voluntary Disclosure Program. Any employer who already received the ERC for a tax period in 2021 for which they weren’t entitled can apply if the following are also true: 

• The employer hasn’t already applied to the first ERC VDP for the same tax periods. The IRS is still processing VDP applications from the first program. Taxpayers should not reapply for the same periods.
• The employer isn’t under criminal investigation.
• The employer isn’t under an IRS employment tax examination for the tax period for which they’re applying to the VDP.
• The employer hasn’t received a Letter 6577-C, Employee Retention Credit (ERC) Recapture, or an IRS notice and demand for repayment of part or all of its ERC claim.
• The employer hasn’t already filed an amended return to eliminate their ERC.
• The IRS hasn’t received information from a third party or directly from an enforcement action that the taxpayer is not in compliance. 

How to apply 

To apply, employers must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, available on IRS.gov, and submit it through the IRS Document Upload Tool. Employers are expected to repay their full ERC, minus the 15% reduction allowed through the VDP. Under certain conditions, employers who aren’t able to pay the amount in full will have the option to set up an installment agreement. 

Employers who outsource their payroll must apply to VDP through the third party 

Many employers outsource their payroll obligations to a third party who reports, collects and pays employment taxes on the employer’s behalf using the third party’s Employer Identification Number. In this situation, the third party, not the employer, must file Form 15434. See the form and its instructions for details. 

Next steps after an application is approved 

Once the employer has applied to the VDP and submitted their Form 15434, an IRS employee will contact them to go over the application and answer any questions. 

If the IRS approves the employer’s application, they will mail the employer a closing agreement. The employer must then repay 85% of the ERC they received, either online or by phone, using the Electronic Federal Tax Payment System (EFTPS). EFTPS is the Treasury Department system that most businesses already use to pay various federal tax obligations. 

VDP participants unable to repay 85% of the ERC they received in full may enter into an installment agreement with the IRS to pay over time. Penalties and interest will apply under the standard installment agreement policy, so the IRS encourages those who can’t pay in full to consider getting a loan from a financial institution to avoid these costs. Once payment has been made, the employer must return the signed closing agreement to the IRS.

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.  It is intended to provide taxpayers an opportunity to efficiently resolve their civil tax liabilities under this second Voluntary Disclosure Program and avoid potential litigation. 

Announcement 2024-30 will be in IRB: 2024-36, dated 09/02/2024.

WASHINGTON – The Internal Revenue Service today announced the opening of the application period for the 2025 Compliance Assurance Process (CAP) program, which will run from Sept. 4 to Oct. 31, 2024. 

The IRS will inform applicants if they’re accepted into the program in February 2025. 

Launched in 2005, CAP employs real-time issue resolution through transparent and cooperative interaction between taxpayers and the IRS to improve federal tax compliance by resolving issues prior to the filing of a tax return. 

To be eligible to apply for CAP, applicants must: 

• Have assets of $10 million or more, 

• Be a U.S. publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q and 8-K or a privately held C-corporation including foreign-owned. Privately held applicants will be required to submit audited financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) or another permissible method, as deemed appropriate by the IRS, specific to the taxpayer applying to the CAP program on an annual basis and unaudited financial statements on a quarterly basis. 

• Not be under investigation by, or in litigation with, any government agency that would limit the IRS’s access to current tax records. 

See highlights and updates for detailed information on revisions to the CAP program for 2025, including updates on Bridge Plus, an expansion of the applicant eligibility criteria, a new eligibility exception and a new form for international issues. General program information and the 2025 application details are available on the CAP webpage. 

WASHINGTON — The Internal Revenue Service strongly urges qualifying businesses, tax-exempt organizations, and state, local and Indian tribal governments to complete the pre-filing registration process now for projects placed in service in 2023 if they plan to claim elective pay.

Taxpayers should file their annual return after completing the pre-filing registration process. A timely filed return (including extensions) is required to make an elective payment election. Electronic return filing, if not required, is strongly encouraged.

Taxpayers who file their return electronically can review information about IRS approved-e-file providers to find a Modernized e-File (MeF) provider, and should confirm that the software chosen supports all necessary forms, such as Form 3800, General Business Credit, and forms required to figure and report each credit.

The Inflation Reduction Act and the CHIPS Act of 2022 allow taxpayers to take advantage of certain manufacturing investment, clean energy investment and production tax credits through elective pay or transfer.

Elective payment and the transfer election create alternative ways for applicable entities and eligible taxpayers who have earned one of the IRA clean energy or the CHIPS credits to get the benefit of the credit even if the taxpayer cannot use the credit to offset their tax liability.

Taxpayers who intend to make an elective payment or credit transfer election must earn the credit, which means they must make a tax credit qualifying investment or undertake tax credit qualifying production activities to earn a credit eligible for an elective payment or transfer election. 

The taxpayer must complete the pre-file registration process to receive a registration number. The registration number must be included on the taxpayer’s annual return as part of making a valid election. Complete and submit the pre-filing registration request no earlier than the beginning of the tax year in which the taxpayer will earn the credit related to an elective payment election or transfer election.

The IRS recommends that taxpayers submit the pre-filing registration at least 120 days prior to when the organization or entity plans to file its tax return on which it will make its election. This should allow time for IRS review, and for the taxpayer to respond if the IRS requires additional information before issuing the registration numbers.

The IRS will share information about the status of a taxpayer’s pre-file registration package exclusively through the IRA/CHIPS Pre-Filing Registration tool. If the taxpayer affirmatively opts in to receive email communications, the IRS will notify the taxpayer by email that the status of a registration package has changed.

Taxpayers are not required to opt in to receiving email notifications. However, if they choose not to opt in to receive email notifications, they are responsible to return to the IRA/CHIPS Pre-Filing Registration tool to monitor the status of the registration packages.

The IRS is hosting office hour sessions to assist organizations with the pre-filing registration process and the IRA/CHIPS Pre-filing Registration Tool for elective payment and transferability of clean energy and CHIPS credits. Subject matter experts from Large Business & International and Tax Exempt/Government Entities are available to answer questions. 

Organizations may register to attend the following sessions.

8/14/2024	1-2:30 p.m. EDT	Register
9/4/2024	1-2:30 p.m. EDT	Register
9/18/2024	1-2:30 p.m. EDT	Register
10/2/2024	1-2:30 p.m. EDT	Register

 

Resources

• Publication 5884, Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool User Guide.
• Publication 5902, Clean Energy Authorization Permission Management User Guide.
• Register for elective payment or transfer of credits.
• Elective pay and transferability | Internal Revenue Service (irs.gov).
• Elective Pay and Transferability Frequently Asked Questions.

WASHINGTON — The Internal Revenue Service announced today tax relief for individuals and businesses in 25 Minnesota counties affected by severe storms and flooding that began on June 16, 2024.

These taxpayers now have until Feb. 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA).

This means that individuals and households that reside or have a business in Blue Earth, Carver, Cass, Cook, Cottonwood, Faribault, Fillmore, Freeborn, Goodhue, Itasca, Jackson, Lake, Le Sueur, Mower, Murray, Nicollet, Nobles, Pipestone, Rice, Rock, St. Louis, Steele, Wabasha, Waseca and Watonwan counties qualify for tax relief.

The same relief will be available to any other counties added later to the disaster area. The current list of eligible localities is always available on the Tax relief in disaster situations page on IRS.gov.

Filing and payment relief

The tax relief postpones various tax filing and payment deadlines that occurred from June 16, 2024, through Feb. 3, 2025 (postponement period). As a result, affected individuals and businesses will have until Feb. 3, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the Feb. 3, 2025, deadline will now apply to:

• Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the storms occurred.
• Quarterly estimated income tax payments normally due on June 17 and Sept. 16, 2024, and Jan. 15, 2025.
• Quarterly payroll and excise tax returns normally due on July 31 and Oct. 31, 2024, and Jan. 31, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after June 16, 2024, and before July 1, 2024, will be abated, as long as the deposits were made by July 1, 2024.

The Disaster assistance and emergency relief for individuals and businesses page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Tax preparers located in the disaster area with clients located outside the disaster area can choose to use theBulk Requests from Practitioners for Disaster Relief option, described on IRS.gov.

Additional tax relief

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the prior year (the 2023 return filed this year). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means Oct. 15, 2025. Be sure to write the FEMA declaration number – 4797-DR − on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

The IRS may provide additional disaster relief in the future.

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Reminder about tax return preparation options

• Eligible individuals or families can get free help preparing their tax return at Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites. To find the closest free tax help site, use the VITA Locator Tool or call 800-906-9887. Note that normally, VITA sites cannot help claim disaster losses.
• To find an AARP Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669.
• Any individual or family whose adjusted gross income (AGI) was $79,000 or less in 2023 can use IRS Free File’s guided tax software at no cost. There are products in English and Spanish.
• Another Free File option is Free File Fillable Forms. These are electronic federal tax forms, equivalent to a paper 1040 and are designed for taxpayers who are comfortable filling out IRS tax forms. Anyone, regardless of income, can use this option.
• MilTax, a Department of Defense program, offers free return preparation software and electronic filing for federal tax returns and up to three state income tax returns. It’s available for all military members and some veterans, with no income limit.

Week 6 of “Protect Your Clients; Protect Yourself” series highlights tips that tax pros can take  

WASHINGTON — The Internal Revenue Service and the Security Summit partners today announced the availability of a new, updated Written Information Security Plan designed to help protect tax professionals against continuing threats from identity thieves and data breaches. 

As part of a special eight-part series, the IRS and Summit partners highlighted the newly updated Publication 5708, Creating a Written Information Security Plan for your Tax & Accounting Practice. This Written Information Security Plan, or WISP, is a 28-page template designed to help tax pros, particularly smaller practices. The WISP has been updated and expanded to make data security planning easier. 

The new WISP, the result of a year-long effort, is an easy-to-understand document developed by and for tax and industry professionals to keep customer and business information safe and secure. Tax pros are required to have a security plan under federal law. 

The new version of the WISP includes several new information updates since the first version came out. This includes highlighting best practices for implementing multi-factor authentication for any individual accessing any information system, unless their qualified individual has approved in writing the use of reasonably equivalent or more secure access controls. 

In addition, tax pros now need to report a security event affecting 500 or more people to the Federal Trade Commission (FTC) as soon as possible, but no later than 30 days from the date of discovery. This is in addition to reporting the incident to an IRS Stakeholder Liaison and state tax authorities. 

“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.” 

This marks the sixth part of a special summer news release series focused on tax professional security. Now in its ninth year, the "Protect Your Clients; Protect Yourself" campaign provides timely tips to help protect sensitive taxpayer data that tax professionals hold while also protecting their own businesses from identity thieves. 

This is part of an annual education effort by the Security Summit, a group that includes tax professionals, industry partners, state tax agencies and the IRS. The public-private partnership has worked since 2015 to protect the tax system against tax-related identity theft and fraud. 

These security tips and the newly updated WISP are a key focus of the Nationwide Tax Forum, being held this summer in five cities throughout the U.S. In addition to the series of eight news releases, the tax professional security component is featured at the three-day continuing education events. The forums continue this week in Baltimore, as well as the weeks of August 19 in Dallas and September 9 in San Diego. The IRS reminds tax pros that registration deadlines are quickly approaching for the Dallas forum, as San Diego has already sold out. 

The forums will feature several specific sessions to help educate the tax professional community on security-related topics. Tax professionals will hear from experts at the IRS, the tax professional community as well as a special session from Salve Regina University’s Pell Center from Rhode Island.  

In the remaining weeks, the news release series and the IRS Tax Forums will provide timely tips to help protect sensitive taxpayer data that tax professionals hold while also protecting their own businesses from identity thieves. 

Tax professionals are required by law to secure their clients’ data, and to help them meet this obligation, the IRS and the Security Summit partners are advising them to use the WISP template designed to make data security planning easier.

Knowing that tax professionals play a critical role in our nation's tax system, the Summit – led by the Tax Professionals Working Group – spent months originally developing two publications: Publication 5708, Creating a Written Information Security Plan for your Tax & Accounting Practice and Publication 5709, How to Create a Written Information Security Plan for Data Safety. Publication 5708 is the WISP, and Publication 5709 is a special summary flyer designed to be shared among the tax professional community. 

“It’s more important than ever for tax pros to protect their data, passwords and other information,” said Kimberly Rogers, director of the IRS Return Preparer Office and co-chair of the Summit's Tax Pro Working Group. “The updated Written Information Security Plan is a result of months of work by tax professionals across the country. The Security Summit members worked together on this plan to make it easier for all tax professionals to develop a plan and an approach that is right for them.” 

As part of legal requirements to implement and maintain a WISP in their practices, tax pros need to have it in a written form that’s accessible. In addition, tax professionals are recommended to review, test and update their WISPs.  

The basics of a WISP   

The WISP, available in Publication 5708, begins with the basics. It walks users through getting started on a plan, including understanding security compliance requirements and professional responsibilities. It continues with an outline for a basic WISP and a sample template. The sample is not intended to be the final word on written security plans, but it is intended to give tax professionals a place to start in understanding and attempting to draft a plan for their business. 

Throughout the process, tax pros are reminded that a security plan should be appropriate to the company’s size, scope of activities, complexity and the sensitivity of the customer data it handles. There is no one-size-fits-all WISP. 

The IRS also reminds tax professionals that a WISP is just one part of what they need to protect their clients and themselves. Given the rapidly evolving nature of threats, the Summit also strongly encourages tax professionals to consult with technical experts to help with security issues and safeguard their systems. 

A good WISP focuses on three areas:  

• Employee management and training;
• Information systems;
• Detecting and managing system failures. 

Tax pros required by law to have a security plan  

There are many aspects to running a successful business in the tax preparation industry, including reviewing tax law changes, learning software updates as well as managing and training staff. One often overlooked but critical component is creating a WISP. However, federal law requires all professional tax preparers to create and implement a data security plan. 

The Gramm-Leach-Bliley Act (GLBA) requires financial institutions to protect customer data. Under this law, tax and accounting professionals are considered financial institutions, regardless of size. In its implementation of this law, the FTC issued measures required to keep customer data safe. One requirement is implementing a WISP. 

As a part of the plan, the FTC requires each firm to:

• Designate one or more employees to coordinate its information security program.
• Identify and assess risks to customer information in each relevant area of the company's operation and evaluate the effectiveness of the current safeguards for controlling these risks.
• Design and implement a safeguards program and regularly monitor and test it.
• Select service providers that can maintain appropriate safeguards by ensuring the contract requires them to maintain safeguards and oversee their handling of customer information. 

Evaluate and adjust the program considering relevant circumstances, including changes in the firm's business or operations, or the results of security testing and monitoring. 

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

As part of a security plan, the IRS also recommends tax professionals create a data theft response plan, which includes contacting their IRS Stakeholder Liaison to report a security incident. 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 when 500 or more people are affected within 30 days of the incident. 

Additional resources  

• 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
• 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, and the IRS' Identity theft information page for tax pros.
• 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. IRS moves forward with Employee Retention Credit claims; expedites work on complex credit; remains vigilant against fraudulent claims
2. Tax relief available for Hurricane Debby victims in four states
3. Security Summit partners urge use of multi-factor authentication to protect against evolving scams to tax professionals, businesses and clients
4. IRS Nationwide Tax Forum: Limited time remaining to register for Baltimore, Dallas
5. IRS revamps draft version of Form 1099-DA, Digital Asset Proceeds from Broker Transactions; requests feedback for 2025
6. Treasury, IRS shares Inflation Reduction Act clean energy statistics
7. Upcoming webinar for tax practitioners
8. Technical Guidance

1.  IRS moves forward with Employee Retention Credit claims; expedites work on complex credit; remains vigilant against fraudulent claims

The IRS takes more steps to support small businesses and stop improper payments in the Employee Retention Credit (ERC) program. These steps include increasing the pace at which payments are made and carrying out compliance work on the intricate pandemic-era credit that saw a surge in claims as a result of deceptive marketing.

“The Employee Retention Credit is one of the most complex tax provisions ever administered by the IRS, and the agency continues working hard to balance our work to protect taxpayers from improper claims while also making payments to qualifying businesses,” said IRS Commissioner Danny Werfel. “It has been a time-consuming process to separate valid claims from invalid ones. During the past year, we maintained a steady cadence of both ERC approvals and disapprovals.”

“The IRS is committed to continuing our work to resolve this program as Congress contemplates further action, both for the good of legitimate businesses and tax administration,” Werfel added.

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2.  Tax relief available for Hurricane Debby victims in four states

Disaster-area taxpayers affected by Hurricane Debbie in South Carolina, North Carolina, Florida and Georgia now have until Feb. 3 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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3.  Security Summit partners urge use of multi-factor authentication to protect against evolving scams to tax professionals, businesses and clients

In the fifth installment of the “Protect Your Clients; Protect Yourself” special series, the IRS and its Security Summit partners informed tax professionals that multi-factor authentication is now required by federal law, in addition to being a crucial security measure for their businesses and their clients. The Federal Trade Commission’s safeguards rule now mandates that all tax professionals use multi-factor authentication, or MFA, to secure sensitive client data.

“Multi-factor authentication is now more than just a good idea for tax professionals; it’s a requirement,” said IRS Commissioner Danny Werfel. “This is an effective way to increase security and protect tax professionals and their clients from a data breach. Multi-factor authentication is a little like a deadbolt on a door; its additional security supplementing the doorknob lock. This is an important step to protect not just tax professionals and their firms, but also the sensitive taxpayer information from their clients.”

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 Publication 5293, Data Security Resource Guide for Tax Professionals;
• Obtain an identity protection PIN or complete Form 14039, Identity Theft Affidavit, if applicable; 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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4.  IRS Nationwide Tax Forum: Limited time remaining to register for Baltimore, Dallas

Last-minute registrants: Space is still available at the upcoming IRS Nationwide Tax Forum in Baltimore, Aug. 13-15, and Dallas, Aug. 20-22. The San Diego Tax Forum, Sept. 10-12, is sold out.

Each IRS Tax Forum offers tax professionals 45 different continuing education seminars. Attendees can earn up to 19 continuing education credits.

Other forum features include the Taxpayer Advocate Service’s Case Resolution Room - where attendees can get assistance on a tough client case – and the Digital Account Services Room, which provides help on IRS Online Accounts, Preparer Tax Identification Numbers (PTINs) and Centralized Authorization File (CAF) issues. Multiple IRS experts will be on hand to answer questions on digital assets, cybersecurity, and scams, while recruiting staff will be interviewing for IRS revenue agent and officer positions.

For a description of the program and to register, visit IRS Nationwide Tax Forum.

You can learn more about this year’s program on the following videos produced independently by Tax Talk Today:

• Tax Talk Today looks at Five Things to Know about the Tax Forum
• Tax Talk Today interviews at the Chicago Tax Forum

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5.  IRS revamps draft version of Form 1099-DA, Digital Asset Proceeds from Broker Transactions; requests feedback for 2025

The IRS published a draft version of Form 1099-DA, Digital Assets, which brokers must use to report specific exchange and sale transactions involving digital assets starting in 2025. Typically, in early 2026, taxpayers and IRS will receive separate copies of these forms. The updated Form 1099-DA draft incorporates the transitional relief outlined in Notice 2024-56, Notice 2024-57 and Revenue Procedure 2024-28 and conforms to the final regulations for custodial broker reporting regulations.

Comments regarding the draft can be submitted to the IRS through the forms and publications comments page on IRS.gov.

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6.  Treasury, IRS shares Inflation Reduction Act clean energy statistics

The Department of Treasury and the IRS released data regarding the clean energy tax credits under the Inflation Reduction Act for the 2023 tax year. Taxpayers can now claim more tax credits for residential and energy efficient homes. More than $6 billion in tax credits have been claimed by taxpayers for home energy investments and more than $2 billion will be used for energy-efficient home improvements thanks to the Inflation Reduction Act.

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7.  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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8.  Technical Guidance

Revenue Procedure 2024-32 updates Rev. Proc. 2017-55 to set forth the procedure by which the sponsor of a defined benefit plan that is subject to the funding requirements of section 430 may request approval from the IRS for the use of plan-specific substitute mortality tables in accordance with section 430(h)(3)(C) and section 1.430(h)(3)-2.

WASHINGTON – The Internal Revenue Service announced today additional actions to help small businesses and prevent improper payments in the Employee Retention Credit program, including accelerating more payments and continuing compliance work on the complex pandemic-era credit that was flooded with claims following misleading marketing. 

The IRS is continuing to work denials of improper ERC claims, intensifying audits and pursuing civil and criminal investigations of potential fraud and abuse. The findings of the IRS review, announced in June, confirmed concerns raised by tax professionals and others that there was an extremely high rate of improper ERC claims in the current inventory of ERC claims. 

In recent weeks, the IRS has sent out 28,000 disallowance letters to businesses whose claims showed a high risk of being incorrect. The IRS estimates that these disallowances will prevent up to $5 billion in improper payments. Thousands of audits are underway, and 460 criminal cases have been initiated. 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. 

Given the complexity of the ERC and to reduce the risk of improper payments, the IRS emphasized it is moving methodically and deliberately on both the disallowances as well as additional payments to balance the needs of businesses with legitimate claims against the promoter-fueled wave of improper claims that came into the agency. 

“The Employee Retention Credit is one of the most complex tax provisions ever administered by the IRS, and the agency continues working hard to balance our work to protect taxpayers from improper claims while also making payments to qualifying businesses,” said IRS Commissioner Danny Werfel. “It has been a time-consuming process to separate valid claims from invalid ones. During the past year, we maintained a steady cadence of both ERC approvals and disapprovals.” 

“The IRS is committed to continuing our work to resolve this program as Congress contemplates further action, both for the good of legitimate businesses and tax administration,” Werfel added. 

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. Some promoter groups called the credit by another name, such as a grant, business stimulus payment, government relief or other names besides ERC or the Employee Retention Tax Credit (ERTC). 

To counter the flood of claims, the IRS announced last fall a moratorium on processing claims submitted after Sept. 14, 2023, to give the agency time to digitize information on the large study group of ERC claims, which are made on amended paper tax returns. The subsequent analysis of the results during this period helped the IRS evaluate next steps, providing the agency valuable information to improve the accuracy of ERC claims processing going forward. 

The detailed review during the moratorium allowed the IRS to move into this new stage of the program with more payments and disallowances. In addition, the IRS will remain in close contact with the tax professional community to help navigate through the complex landscape. 

“This has been a resource-intensive credit for IRS teams to evaluate,” Werfel said.  “Unfortunately, the situation was compounded by misleading marketing flooding businesses to claim these credits, creating a perfect storm that added risk of improper payments for taxpayers and the government while complicating processing for the IRS and slowing claims to legitimate businesses.” 

Work continues on improper claims as IRS closely monitors feedback; appeals process available for denied claims 

With the recent issuance of 28,000 disallowance letters, the IRS is aware of concerns raised by tax professionals about potential errors. While we are still evaluating the results of this first significant wave of disallowances in 2024, early indications indicate errors are relatively isolated and that more than 90% of disallowance notices were validly issued. 

The IRS will continue to remain in contact with the tax community and monitor the situation and make any adjustments to minimize burden on businesses and their  representatives. Specifically, the IRS will adjust its processes and filters for determining invalid claims following each wave of disallowances. While the IRS is still evaluating the results of this first significant wave of disallowances in 2024, early indications indicate errors are isolated. 

The IRS also noted that in limited cases where claims can be proven to have been improperly denied, the agency will work with taxpayers to get it right. 

The IRS also reminds businesses that when they receive a denial of an ERC claim they have options available to file an administrative appeal by responding back to the address on the denial letter. IRS.gov also has additional information on administrative appeals with the IRS independent Office of Appeals. 

The IRS learned that some of the recent early mailings have inadvertently omitted a paragraph highlighting the process for filing an appeal to the IRS or District Court, and the agency is taking steps to ensure this language is mailed to all relevant taxpayers. Regardless of the language in the notice, the IRS emphasizes taxpayers have administrative appeals rights available to them and reminds all taxpayers that details on the process for filing an appeal or otherwise challenging an IRS determination can be found throughout the agency’s literature and on IRS.gov. 

Additional payments for 50,000 valid claims moving into processing; more in the fall 

In the latest step, the IRS announced today that low-risk ERC claims will be paid out quickly. The IRS is moving 50,000 of these claims. After processing is complete, the claims will be paid out to taxpayers. The IRS projects payments will begin in September with additional payments going out in subsequent weeks. The IRS anticipates adding another large block of additional low-risk claims for processing and payment in the fall. 

The IRS also noted that it is a making a shift in the moratorium period on new claims now that it has additional information. Previously, the agency was not processing claims filed after Sept. 14, 2023. As the agency moves forward, it will now start judiciously processing claims filed between Sept. 14, 2023, and Jan. 31, 2024. Like the rest of the ERC inventory, work will focus on the highest and lowest risk claims at the top and bottom end of the spectrum. This means there will be instances where the agency will start taking actions on claims submitted in this time period when the agency has seen a sound basis to pay or deny a refund claim. 

As the IRS begins to process additional claims, the agency reminds businesses that they may receive payments for some valid tax periods – generally quarters – while the IRS continues to review other periods for eligibility. ERC eligibility can vary from one tax period to another if, for example, government orders were no longer in place or a business’s gross receipts increased. Alternatively, qualified wages may vary due to a forgiven Paycheck Protection Program loan or because an employer already claimed the maximum amount of qualified wages in an earlier tax period. 

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:  

• ERC Claim Withdrawal Program: The claim withdrawal process for unprocessed ERC claims has led to more than 7,300 entities withdrawing $677 million.
• ERC Voluntary Disclosure Program: During the VDP, which ended in March, the IRS received more than 2,600 applications from ERC recipients that disclosed $1.09 billion worth of credits.
• 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. 

Additional information 

• Warning sign indicators about potentially improper claims.
• ERC Claim Withdrawal Program.