Week 1 of “Protect Your Clients; Protect Yourself” series focuses on new and old scams, schemes

WASHINGTON – The Internal Revenue Service and the Security Summit renewed a warning today to tax professionals to be on the lookout for a variety of new and evolving schemes aimed at stealing business and taxpayer information. 

Identity thieves are taking numerous approaches to steal sensitive information from tax professionals. This includes posing as new clients; using phishing emails to trick people into sharing Central Authorization File information as well elaborate schemes involving calling and texting. Tax professionals need to be on the lookout to avoid falling prey to these attacks, which threaten not just their clients but their businesses. 

“As the Security Summit partners have continued to improve our defenses against identity theft, thieves have upped their game by targeting tax professionals to get valuable information needed to file authentic-looking tax returns,” IRS Commissioner Danny Werfel said. “Tax professionals need to watch out for deviously clever scams that can masquerade as new clients as well as communications from the IRS or others in the tax community. We continue to see tax professionals bombarded by these scams, and people shouldn’t let their defenses down.” 

The alert comes as part of an annual education effort by the Security Summit partners, a coalition of tax professionals, industry partners, state tax groups and the IRS. Started in 2015, the public-private partnership works to protect the tax system against tax-related identity theft and fraud. 

This marks the opening week of a special Security Summit summer news release series called “Protect Your Clients; Protect Yourself.” The campaign is aimed at increasing awareness among tax professionals on ways to shield themselves and their clients from identity theft and security threats. 

Now in its ninth year, the “Protect Your Clients; Protect Yourself” series will feature news releases each Tuesday for eight weeks. The series coincides with the Nationwide Tax Forum, a three-day seminar starting today in Chicago and continues with sessions the week of July 30 in Orlando, August 13 in Baltimore, August 20 in Dallas and September 10 in San Diego. The IRS reminds tax pros that registration deadlines are quickly approaching for several of the forums, and Chicago and Orlando are already sold out. 

The IRS 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 the Salve Regina University’s Pell Center from Rhode Island. The entire news release series will be available in Spanish as well. 

As part of this effort, the IRS and Security Summit partners are warning against the most recent wave of activity coming from tax scammers. Here are some trending examples that tax professionals should watch out for: 

Beware of the “new client” scheme 

In this form of so-called spear phishing, fraudsters pretend to be real taxpayers seeking tax pros’ help with their taxes. They use emails to try to get sensitive information or gain access to a practitioner’s client data. In these fake “new client” schemes, the fraudster can send a malicious attachment or include a link to a site that the tax professional thinks they need to access to obtain the supposed new client’s tax information. But in reality, the site is collecting information from the tax pro, such as their email and password, or loading malware onto the tax pro’s computer to gain access to their computer or system. 

While not a fresh scam, the IRS continues seeing activity this year. It remains an ongoing threat that can be alluring to a tax professional or a practice’s employees seeking new business. And while this fake outreach can peak around tax season, this sort of scam remains a threat year-round. 

Look out for multiple phishing scams involving EFINs, PTINs, CAF numbers 

Another scam circulating on a large scale this year involves phishing attempts by scammers trying to obtain various identification numbers used by tax professionals, including their Electronic Filing Identification Number or EFIN; EFIN documents; their Preparer Tax Identification Number or PTIN; and their Centralized Authorized File or CAF number. 

Obtaining these digits helps a bad actor obtain information and file a fraudulent return that looks legitimate. Scammers are trying to get these sensitive identification numbers by sending emails or texts that appear to be from the IRS. The scammers tell tax pros they need to confirm this information by entering it into a form that was hosted on what appears to be a real IRS website, but in reality is a fake website designed to mimic the real thing. 

For example, a fraudster with a compromised CAF number in hand can use it to obtain tax transcripts and other sensitive taxpayer personally identifiable information (PII) to commit identity theft refund fraud and other crimes. In many cases, the fraudster has not only obtained a practitioner’s CAF number but also has the tax professional’s sensitive personal information. 

Watch and listen for phone, text and correspondence schemes 

Tax professionals should also be aware of another wave of scams hitting taxpayers with frequency, with identity thieves using phone calls and text messages to get Social Security numbers, birth dates and banking information from victims. Several of these schemes are common right now that can target not just taxpayers, but potentially tax professionals and their clients, including: 

• Artificial intelligence or AI scams used for false correspondence, with AI being used to create fake IRS letters that are mailed to victims.
• The so-called Zero Tax program, in which callers promise to wipe out tax debt for people who owe back taxes. The callers request people’s Social Security numbers as part of their pitch, which they use for nefarious purposes. Tax professionals should watch out for clients reporting this scheme.
• Social media scams circulating inaccurate or misleading tax information that can involve creating common tax documents that are false like a Form W-2 or claiming credits to which the taxpayer is not entitled like the Fuel Tax Credit, Sick and Family Leave Credit and household employment credits.
• Scammers reaching out by phone or text message to dupe people into handing over sensitive financial information in exchange for a false promise of IRS money for them. 

Ways to avoid and report scams 

People that receive scams by email should send the email to phishing@irs.gov. As a reminder, people can forward the message, but IRS cybersecurity experts prefer to see the full email header to help them identify the scheme. 

For tax professionals who discover they are victims of a security breach, they should contact their IRS Stakeholder Liaison to report a theft. The local IRS Stakeholder Liaison will ensure the appropriate IRS offices are alerted. If incidents are reported quickly, the IRS can take steps to block fraudulent returns in the 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 Federal Trade Commissioner data breach response requirements as part of their overall information and data security plan. The new Written Information Security Plan, or WISP, that tax pros are required to have also notes there’s a new requirement to report an incident to the FTC when 500 or more people are affected within 30 days of the incident.

The Internal Revenue Service issued alert IR-2024-139 about a series of scams and inaccurate social media advice. Social media schemes led to thousands of inflated refund claims during the past tax season. The IRS has increased its compliance efforts related to false and/or questionable credits. 

These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. 

Background

The IRS warns taxpayers not to fall for these scams centered around the Fuel Tax Credit, the Sick and Family Leave Credit, household employment taxes and overstated withholding. The IRS has seen 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. 

The IRS continues to urge taxpayers to avoid these scams as myths continue to persist that these are ways to obtain a huge refund. Many of these scams were highlighted during this spring’s annual Dirty Dozen series, including the Fuel Tax Credit scam, bad social media advice and “ghost preparers.” 

The IRS reminds taxpayers to keep these important points in mind: 

• Social media can connect people and information from all over the globe. Unfortunately, sometimes people provide bad tax advice that can lure good taxpayers into trouble.
• The IRS warns taxpayers to be wary of trusting internet advice, whether it’s a fraudulent tactic promoted by scammers or a deliberately false tax-related scheme trending across popular social media platforms.
• The IRS is aware of various filing season hashtags and social media topics related to this fraudulent information. These generally involve people trying to use legitimate tax forms for the wrong reason. 

General information 

Q1. What happens when the IRS identifies suspicious refund claims? 

A1. Some taxpayers may receive a letter 5747C and/or 4883C/5071C with instructions to verify their identity and tax return information so we can continue processing their tax return. Even after this verification, questionable refunds will continue to be held until credit eligibility is verified. Examples of frequently abused claims include: 

• Fuel Tax Credit (Form 4136).
• Sick and Family Leave Credit for Self Employed Individuals (Form 7202).
• Overstated withholding.
• Schedule H, Household Employment Taxes including Qualified Sick Leave Wages. 

Q2. What should you do if you receive one of these letters from the IRS, identifying your tax return as requiring authentication and/or being potentially frivolous? 

• 3176C Frivolous Correspondence Response.
• 5747C Potential Identity Theft during Original Processing – TAC.
• 5071C Potential Identity Theft during Original Processing with Online Option.
• 4883C Potential Identity Theft During Original Processing. 

A2. Taxpayers in receipt of a 3176C letter should follow the directions on the correspondence. Taxpayers receiving these letters may have previously received a 5747C letter, 5071C letter or 4883C letter. In this instance, disregard the 5747C, 5071C or 4883C. Do not visit a Taxpayer Assistance Center (TAC) or try to authenticate online or over the phone. Instead, follow the directions in the 3176C letter.  

Q3. What actions are needed to avoid legal consequences? 

A3.

• File a complete and accurate return within 30 days of receiving the IRS letter or notice. This may include submitting an amended tax return for each taxable period where an inappropriate claim was filed.
• If applicable, attach the IRS letter received (such as, 3176C) to your corrected return and mail it to the address listed on the correspondence. 

Q4. What are the legal consequences for filing a frivolous return? 

A4.

• Penalties
• • Claims and filings that are based upon a position identified as frivolous by the IRS -or- reflect a desire to delay or impede tax administration are subject to the Internal Revenue Code (IRC) 6702(a) penalty. This penalty is $5,000 for each return (or copy of return) claiming an improper credit as defined above. The penalty is assessed against each spouse on a married filing joint return. (Notice 2010-33)
• Compliance audit
• • Uncorrected frivolous claims may be subject to a compliance audit. Taxpayers may be contacted by an Examination Function and asked to provide documentation related to the claim. The taxpayer will be required to verify eligibility for the credit under the law.
• Criminal prosecution
• • Individuals or preparers who knowingly file false income tax returns may face fines and be subject to criminal prosecution and imprisonment. 

Q5. What is the Fuel Tax Credit? 

A5. The Fuel Tax Credit is a tax credit claimed for various non-taxable use of fuel. It is meant for off-highway business, farming, aviation and commercial fishing use. As such, it is not available to most taxpayers. Taxpayers may be asked to provide specific documentation on their occupation and fuel receipts to verify eligibility. 

Q6. What happens if you fall victim to a Fuel Tax Credit scam? 

A6. If you claim an amount of Fuel Tax Credit that is disproportionate to the income reported on the return or file a claim reflecting an impossible quantity of fuel for the occupation reported, you are subject to an IRC 6702(a) penalty of $5,000 for each return claiming an improper credit. For additional information, refer to Instructions for Form 4136. 

Q7. What is the Sick and Family Leave Credit for self-employed individuals? 

A7. The Sick and Family Leave Credit was enacted in March 2020, the Families First Coronavirus Response Act (FFRCA) intended to help the United States combat COVID-19 by providing small and midsize employers refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. The FFCRA also created equivalent refundable sick and family leave credits for self-employed individuals based on the individual’s average daily self-employment income and a specified number of days during the tax year that an individual was unable to perform services as a self-employed individual due to reasons related to COVID-19. 

To be eligible, taxpayers must: 

• Have a trade or business as defined in IRC 1402. Generally, self-employment income is a result of the performance of personal services that cannot be classified as wages because an employer-employee relationship does not exist between the payer and the payee.
• Claim only the eligible number of days or wages, but no more than the amount allowed by law.
• Claim the credit based on qualifying self-employed income, but no more than allowable by law. 

Q8. What are the two primary variations of the Sick and Family Leave Credit scheme? 

A8.

• Fraudulent Form 7202: Taxpayers use the Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on income earned as an employee and not as a self-employed individual. These credits were available for self-employed individuals to claim on 2020 and 2021 tax year returns during the pandemic. They are not available to claim on the 2022 or 2023 tax year return.
• Fraudulent Schedule H: Taxpayers “invent” fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid. 

Q9. What is the Overstated Withholding scam? 

A9. The Overstated Withholding scam is a recent scheme circulating on social media encouraging people to use tax software to manually fill out a Form W-2, Wage and Tax Statement, or other information returns, for example Form 1099-NEC or other Form 1099s listed below, to include false income and withholding information. In this Overstated Withholding scheme, scam artists suggest people make up large income and withholding amounts as well as the fictional employer supplying those amounts. Scam artists then instruct people to file the bogus tax return electronically, in hopes of getting a substantial refund due to the large amount of fraudulent withholding. 

The IRS verifies the withholding claimed on tax returns. If the IRS cannot verify the wages, income or withholding credits entered on the tax return, the tax refund will be held pending further review. Taxpayers should always file a complete and accurate tax return. Utilize legitimate information returns, such as Form W-2 issued from an employer, to complete returns correctly. 

There are multiple variations of the overstated withholding credit scheme, including but not limited to the following forms or schedules:

Form W-2	Form 1099-R	Alaskan Dividend Fund
Form W-2G	Form-1099-NEC	Schedule K-1 with Withholding Reported
	Form-1099-DIV Form-1099-OID	Unspecified Source of Withholding Credit Claimed
	Form 1099-B

 

Additional details on these Frequently Asked Questions 

Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. 

Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so.

Inside This Issue

1. Security Summit partners urge continued vigilance against evolving threats by identity thieves
2. 2024 IRS Nationwide Tax Forum kicks off next week
3. IRS warns of new scam targeting clean energy tax credit
4. Reminder: July 15 filing, payment deadline nears; others face due dates later this summer
5. Upcoming webinar for tax practitioners
6. Technical Guidance

1.  Security Summit partners urge continued vigilance against evolving threats by identity thieves

With new and evolving scams emerging, the IRS and its Security Summit partners announced the start of a special summer Protect Your Clients; Protect Yourself campaign to help tax professionals protect themselves against new and ongoing threats involving tax-related identity theft. Summit partners will work to raise awareness among tax pros about the importance of maintaining strong security, and what to do if a security incident occurs.

This summer’s effort is anchored around a series of eight news releases that will run for consecutive weeks each Tuesday, coinciding with the start of the IRS Nationwide Tax Forum on July 9 in Chicago. The news release series and the summer Tax Forum will provide important information to help protect sensitive taxpayer data that tax professionals hold while also protecting their business from identity thieves.

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2.  2024 IRS Nationwide Tax Forum kicks off next week

The IRS Nationwide Tax Forum begins its five-city summer program in sold-out Chicago on July 9-11, followed by sold-out Orlando on July 30- Aug. 2. Tax pros can still secure a spot at one of the following locations:

• Baltimore: Aug. 13-15
• Dallas: Aug. 20-22
• San Diego: Sept. 10-12

The IRS Nationwide Tax Forum provides continuing education credit for enrolled agents, certified public accountants, Annual Filing Season Program participants and California Tax Education Council participants. Attendees can earn up to 19 CE credits this year, participate in a series of special events, see the latest industry offerings in the Expo Hall, make an appointment with the popular Case Resolution Room, and network with fellow tax professionals. To register, visit the IRS Nationwide Tax Forum website.

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3.  IRS warns of new scam targeting clean energy tax credit

The IRS warned taxpayers not to fall victim to a new emerging scam involving buying clean energy tax credits. In this latest scam, the IRS is seeing instances where unscrupulous tax return preparers are misrepresenting the rules for claiming the credits under the Inflation Reduction Act (IRA). The transferability provisions of the IRA enable the purchase of eligible federal income tax credits from investments in clean energy to offset a buyer’s tax liability. The IRS has seen taxpayers file returns using unscrupulous return preparers who are claiming purchased clean energy credits that the taxpayer is ultimately unable to benefit from. The scam is generally targeting individuals who file Form 1040. Visit IRS.gov for information on how to report fraud.

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4.  Reminder: July 15 filing, payment deadline nears; others face due dates later this summer

The 2023 federal income tax returns and tax payments for individuals and businesses in parts of Alaska, Maine and Rhode Island are due on Monday, July 15, 2024. The IRS normally provides relief, including postponing various tax filing and payment deadlines, for any area designated by the Federal Emergency Management Agency (FEMA). As long as their address of record is in a disaster-area locality, individual and business taxpayers automatically get the extra time without having to request it. In addition, individuals and businesses in three other states face deadlines later this summer for filing their 2023 returns and paying any taxes due. This includes:

• July 31 for two counties in Massachusetts: Bristol and Worcester.
• Aug. 7 for two counties in Hawaii: Hawaii and Maui.
• Sept. 3 for 11 counties in Ohio: Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland and Union.

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5.  Upcoming webinar for tax practitioners

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

• Understanding Form 2290 - Heavy Highway Vehicle Use Tax on July 18, at 2 p.m. ET. Earn up to 2 CE credits (Federal tax). Certificates of completion are being offered.

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

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6.  Technical Guidance

Notice 2024-56 provides transition relief with respect to the reporting of information and backup withholding on digital assets by brokers under section 6045.

Notice 2024-57 provides that brokers are not required to report certain identified digital asset transactions under section 6045 until further notice.

Revenue Procedure 2024-28, subject to certain requirements, generally permits taxpayers to rely on any reasonable allocation of units unattached basis to a wallet or account that holds the same number of remaining digital asset units based on the taxpayer’s records of such unattached basis and remaining units.

Revenue Procedure 2024-30 modifies Rev. Proc. 2024-23, 2024-23 I.R.B. 1334, to provide procedures under section 446 of the Internal Revenue Code and section 1.446-1(e) of the Income Tax Regulations for obtaining automatic consent of the Commissioner of Internal Revenue to change methods of accounting to the Allowance Charge-off Method described in proposed regulations under section 166.

WASHINGTON – The Internal Revenue Service today warned taxpayers not to fall victim to a new emerging scam involving buying clean energy tax credits. 

In this latest scam, the IRS is seeing instances where unscrupulous tax return preparers are misrepresenting the rules for claiming clean energy tax credits under the Inflation Reduction Act (IRA).

The transferability provisions of the IRA enable the purchase of eligible federal income tax credits from investments in clean energy to offset a buyer’s tax liability. The IRS has seen taxpayers file returns using unscrupulous return preparers who are claiming purchased clean energy credits that the taxpayer is ultimately unable to benefit from. 

The scam is generally targeting individuals who file Form 1040. The preparers file returns that have individuals improperly claiming IRA credits that offset income tax from sources such as wages, Social Security and retirement account withdrawals. 

Individuals purchasing tax credits under the IRA are subject to the passive activity rules for any purchased credits. Generally, this means they can only use purchased credits to offset income tax from a passive activity. Most taxpayers do not have passive income and a passive income tax liability. Most investment activities are not considered passive. 

“This is another example where scammers are trying to use the complexity of the tax law to entice people into claiming credits they’re not entitled to,” said IRS Commissioner Danny Werfel. Taxpayers should be wary of promoters pushing dubious credits like this and others. The IRS is watching out for this scam, and we urge people to use a reputable tax professional before claiming complex credits like clean energy.” 

The IRS noted individual taxpayers claiming inappropriate credits risk future compliance action by the IRS and are responsible for repaying the inflated credit, plus interest and possible penalties. 

Individual taxpayers considering purchasing clean energy credits under the IRA should consult a trusted tax professional for advice on whether they are eligible to purchase credits and claim the tax benefits. They should also understand how the limitations under the passive activity rules, and other portions of the tax code, may apply to their particular tax situation. 

More information about clean energy can be found on the Inflation Reduction Act of 2022 page on IRS.gov. 

The IRS continues to warn taxpayers about other scams it continues to see that are misleading taxpayers into filing inappropriate claims for other tax credits. The IRS has warned taxpayers not to fall for scams centered around the Fuel Tax Credit, the Sick and Family Leave Credit and household employment taxes. Fueled by misleading social media advice and promoters, the IRS has seen thousands of dubious claims come in earlier this year 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. 

Report fraud 

The IRS is committed to investigating paid tax return preparers who act improperly. To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242 – Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed Form 14242 and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations. 

Mail:             

Internal Revenue Service Lead Development Center

Stop MS5040

24000 Avila Road

Laguna Niguel, California 92677 3405

Fax: 877 477 9135 

Taxpayers and tax professionals can also submit this information to the IRS Whistleblower Office, where they may be eligible for a monetary award. For details, refer to Abusive tax schemes and abusive tax return preparers on IRS.gov.

WASHINGTON — The Internal Revenue Service today reminded individuals and businesses in parts of Alaska, Maine and Rhode Island that their 2023 federal income tax returns and tax payments are due on Monday, July 15, 2024. 

The IRS normally provides relief, including postponing various tax filing and payment deadlines, for any area designated by the Federal Emergency Management Agency (FEMA). As long as their address of record is in a disaster-area locality, individual and business taxpayers automatically get the extra time, without having to ask for it. 

What areas qualify for the July 15 deadline? 

The July 15 deadline applies to taxpayers affected by disaster declarations in three states. These include: 

• The Wrangell Cooperative Association of Alaska Tribal Nation.
• Eight counties in Maine: Cumberland, Hancock, Knox, Lincoln, Sagadahoc, Waldo, Washington and York.
• Four counties in Rhode Island: Kent, Newport, Providence and Washington. 

The current list of eligible localities is always available on the Tax relief in disaster situations page on IRS.gov. 

What returns and payments qualify for the July 15 deadline? 

Eligible returns and payments include: 

• Calendar-year 2023 partnership and S corporation returns normally due on March 15.
• 2023 individual income tax returns and payments normally due on April 15.
• Quarterly estimated tax payments normally due on April 15 and June 17.
• Calendar-year 2023 corporate and fiduciary income tax returns and payments normally due on April 15.

• Calendar-year 2023 returns filed by tax-exempt organizations normally due on May 15. 

Other returns, payments and time-sensitive tax-related actions also qualify for the extra time. See the Disaster assistance and emergency relief for individuals and businesses page for details. 

Further extensions available 

Affected individual taxpayers who need more time to file beyond the July 15 deadline must file their extension requests on paper using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. That’s because e-file options for requesting an extension are not available after April 15. 

By filing this form, disaster-area taxpayers will have until Oct. 15 to file, though tax payments are still due by July 15. Visit IRS.gov/extensions for details. 

Other relief 

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within 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 with relief activities who are affiliated with a recognized government or philanthropic organization. 

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 or the return for the prior year. See Publication 547, Casualties, Disasters, and Thefts, for details. 

Reminder for other disaster-area taxpayers 

In addition, individuals and businesses in three other states face deadlines, later this summer, for filing their 2023 returns and paying any taxes due. This includes: 

• July 31 for two counties in Massachusetts: Bristol and Worcester.
• Aug. 7 for two counties in Hawaii: Hawaii and Maui.
• Eleven counties in Ohio: Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland and Union. 

Special relief for terrorist attacks in Israel 

Taxpayers who live or have a business in Israel, Gaza or the West Bank, and certain other taxpayers affected by the terrorist attacks in the State of Israel, have until Oct. 7, 2024, to file and pay.

Revenue Procedure 2024-30 modifies Rev. Proc. 2024-23, 2024-23 I.R.B. 1334, to provide procedures under § 446 of the Internal Revenue Code and § 1.446-1(e) of the Income Tax Regulations for obtaining automatic consent of the Commissioner of Internal Revenue to change methods of accounting to the Allowance Charge-off Method described in proposed regulations under section 166.  See REG-121010-17 (88 FR 89636). 

Revenue Procedure 2024-30 will be in IRB:  2024-30, dated July 22, 2024.

“Protect Your Clients; Protect Yourself” series runs for eight weeks 

WASHINGTON — With new and evolving scams emerging, the Internal Revenue Service and the Security Summit partners today announced the start of the special summer "Protect Your Clients; Protect Yourself" campaign to help tax professionals protect themselves against new and ongoing threats involving tax-related identity theft. 

“Security threats against tax professionals and their sensitive taxpayer information continue to evolve, and it’s critical to stay on top of the latest developments to protect their business and their clients,” said IRS Commissioner Danny Werfel. “The Security Summit effort between the IRS, states and the nation’s tax industry has worked to protect taxpayers and tax returns from identity thieves, and tax professionals form a key part of these security defenses. It's critical that everyone in the tax professional community, including smaller practices, stay current on the latest developments to keep their systems safe and protect their clients." 

Now in its ninth year, the Security Summit partners have worked together to raise awareness about these issues in the tax professional community through the "Protect Your Clients; Protect Yourself" campaign. This is part of the larger effort by the Summit coalition of the IRS, state tax agencies and the nation's tax community to battle tax-related identity theft that has been in place since 2015. 

Security threats against tax professionals remain a daily threat. Through the spring, IRS Stakeholder Liaisons had received reports of nearly 200 tax professional data incidents potentially affecting up to 180,000 clients. 

With this summer’s “Protect Your Clients; Protect Yourself” campaign, the Summit partners will work to raise awareness among tax professionals about the importance of maintaining strong security, and what to do if a security incident occurs. 

“There are special steps that tax professionals need to take to protect themselves from scammers trying to obtain sensitive information in attempts to file fraudulent state and federal tax returns,” said Sharonne Bonardi, executive director of the Federation of Tax Administrators representing state tax agencies and a co-chair of the Summit’s communications team. “Continued vigilance by tax professionals is a critical part of the larger effort needed to protect tax information at the state and federal level.” 

This summer’s effort will be anchored around a series of eight news releases that will run for consecutive weeks each Tuesday, coinciding with the start of the IRS Nationwide Tax Forum on July 9 in Chicago. The news release series and the summer Tax Forums will provide important information to help protect sensitive taxpayer data that tax professionals hold while also protecting their business from identity thieves. 

“As the Security Summit has worked collaboratively to strengthen our internal protections against identity thieves, they have shifted more attention to tax professionals and other businesses in hopes of stealing vital information needed to file a tax return and slip through the tax community’s defense systems,” said Julie Magee, tax policy lead at Block Inc and a co-chair of the Summit’s communications team. “This means tax professionals need to be extra cautious in protecting their data.” 

“We continue to educate tax professionals on security measures to prevent data breaches that expose taxpayers' private information and jeopardize their business,” said Taylor Rodier, legislative affairs director at Taxwell and a co-chair of the Summit communications team. “Staying on top of the latest developments and keeping their security up to date is vital.” 

2024 Nationwide Tax Forums in five cities focus on tax professional security; registration deadlines approaching 

In addition to the series of eight news releases, the tax professional security focus will be featured at this summer's Nationwide Tax Forums. Following the three-day forum in Chicago, the forums will continue on July 30 in Orlando, Aug. 13 in Baltimore, Aug. 20 in Dallas and Sept. 10 in San Diego.  

The IRS reminds tax pros that registration deadlines are quickly approaching for several of the forums, which can sell 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 the Salve Regina University’s Pell Center from Rhode Island. The entire news release series will be available in Spanish as well. 

By taking some basic security steps, tax pros can help protect themselves against the relentless efforts of identity thieves. This summer's effort includes reminders for tax pros to focus on fundamentals and to watch out for emerging vulnerabilities as well as new updates involving multi-factor authentication and the latest on Written Information Security Plan, or WISP, which all tax professionals are required to have. 

Tax professionals are prime targets of criminal syndicates that are both tech- and tax-savvy. These scammers either trick or hack their way into tax professionals' computer systems to access client data. Even when tax pros think they have client data stored in a secure platform, such as the cloud, lack of strong authentication can make this information vulnerable. 

Identity thieves use stolen data to file fraudulent tax returns that make it more difficult for the IRS and the states to detect because the fraudulent returns use real financial information. Other data thieves sell the basic tax preparer or taxpayer information on the web so other fraudsters can try filing fraudulent tax returns. 

The summer Security Summit tax pro campaign will cover key topics that will highlight a series of simple actions that tax professionals can take to better protect their clients and themselves from data theft. Highlights of the summer news release series being issued in upcoming weeks will highlight these topics: 

• Create a security plan. The Written Information Security Plan, or WISP, is an easy-to-understand document developed by and for tax and industry professionals to keep customer and business information safe and secure. Security Summit partners, including tax professionals, software and industry partners, representatives from state tax groups and the IRS developed the WISP. The Summit partnership will highlight these plans at each of the five IRS Nationwide Tax Forums this year.
• New, emerging scams targeting tax pros. The Summit continues to see new scams targeting tax professionals in attempts to gain access to their systems. This news release will highlight new and ongoing schemes targeting the tax community, including new client scams and other elaborate efforts.
• Phishing, Spear phishing and Whaling. These aren't summer activities; these are real cyber schemes that put sensitive information at risk. Tax pros are a common, everyday target of phishing scams designed to trick the recipient into disclosing personal information such as passwords, bank account numbers, credit card numbers or Social Security numbers. Tax professionals, and taxpayers, should be aware of different phishing terms and what the scams might look like. 
• Sign up clients for Identity Protection PINs, IRS Online Account. The IRS now offers IP PINs to all taxpayers who can verify their identities online, on the phone with an IRS employee after filing a Form 15227 or in person. To obtain an IP PIN, the best option is the IRS online tool Get an IP PIN .
• Know the tell-tale signs of identity theft. Many tax professionals who report data theft to the IRS also say they were unaware of signs that a theft had already occurred. There are many signs for which tax pros should watch. These include multiple clients suddenly receiving suspicious IRS letters requesting confirmation that they filed a tax return; tax professionals seeing e-file acknowledgements for far more tax returns than they filed; and tax pros' computer cursors moving seemingly on their own.
• Understand the “Security Six” protections. This includes using anti-virus software, a firewall, multi-factor authentication, drive encryption, virtual private networks or VPN and backing up critical files. 

Related items 

• Publication 5461-D, Tax professionals should review their security protocols
• Publication 5709, How to Create a Written Security Information Plan for Data Safety

Dear IVES Participants, 

The Wage and Investment (W&I) Division has been renamed Taxpayer Services (TS). As a result, the Income Verification Express Service (IVES) Participant Assistance mailbox has changed to ts.ives.participant.assistance@irs.gov.

The IVES team will monitor both mailboxes until August 1, 2024. After this date, the W&I mailbox wi.ives.participant.assistance@irs.gov will be retired and any inquires sent to the retired mailbox will not be addressed.

Moving forward, please email ts.ives.participant.assistance@irs.gov, if you have any questions regarding the IVES program.

 

Thank you,

IRS IVES Team

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law. 

These final regulations reflect consideration of more than 44,000 public comments received last fall on the proposed regulations. They require brokers to report certain sale and exchange transactions that take place beginning in calendar year 2025 and will be reported on the soon-to-be released Form 1099-DA. The regulations implement reporting requirements by the Infrastructure Investment and Jobs Act, enacted in 2021. 

“We reviewed thousands of public comments and believe this new guidance addresses those concerns while striking a balance between industry implementation challenges and closing the tax gap related to digital assets,” said IRS Commissioner Danny Werfel. “These regulations are an important part of the larger effort on high-income individual tax compliance. We need to make sure digital assets are not used to hide taxable income, and these final regulations will improve detection of noncompliance in the high-risk space of digital assets. Our research and experience demonstrate that third-party reporting improves compliance. In addition, these regulations will provide taxpayers with much needed information, which will reduce burden and simplify the process of reporting their digital asset activity.”                                                                                                                                       

“Our work to address potential non-compliance in digital currency is another reason why it is so critical to fully fund IRS operations,” Werfel added. “These new assets expand the complexity of our tax system, and the technology and personnel necessary for the IRS to keep pace with these changes is resource intensive. Ultimately, this IRS funding helps address emerging issues and creates significantly more savings than costs to the government’s bottom line.”     

The final regulations require reporting by brokers who take possession of the digital assets being sold by their customers. These brokers include operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, digital asset kiosks, and certain processors of digital asset payments (PDAPs). The majority of digital asset transactions today occur using these brokers. By focusing first on this group, the IRS intends these regulations to cover the greatest number of taxpayers while allowing the IRS and U.S. Treasury Department more time to consider the nuances of transactions involving non-custodial and decentralized brokers. 

The final regulations do not include reporting requirements for brokers that do not take possession of the digital assets being sold or exchanged. These brokers are commonly called decentralized or non-custodial brokers. The U.S. Treasury Department and the IRS intend to provide rules for these brokers in a different set of final regulations. 

In addition to the broker reporting rules, the regulations provide rules for taxpayers to determine their basis, gain, and loss from digital asset transactions. The regulations also provide backup withholding rules.

The IRS is aware of the challenges that implementing new reporting requirements can pose, which is why the agency is also providing transitional and penalty relief from reporting and backup withholding rules on certain transactions to help phase-in implementation. 

Real estate professionals are also required to report the fair market value of digital assets paid by buyers and received by sellers in real estate transactions with closing dates on or after January 1, 2026.

The final regulations provide for an optional, aggregate reporting method for certain sales of stablecoins and certain non-fungible tokens (NFTs) applicable only after sales of these stablecoins and NFTs exceed de minimis thresholds. For PDAP transactions, the regulations require reporting on a transactional basis only if the customer’s sales are above a de minimis threshold. 

Finally, basis reporting will be required by certain brokers, for transactions occurring on or after January 1, 2026. 

Additional guidance to provide transitional relief regarding digital asset transactions includes: 

Transitional relief Notice 2024-56 provides general transitional relief from reporting penalties and backup withholding for any broker who does not timely and accurately file information returns and furnish payee statements for sales and exchanges of digital assets during calendar year 2025, provided that the broker makes a good faith effort to comply with the reporting obligations. Additionally, the Notice provides more limited relief from backup withholding for certain sales of digital assets during 2026 for brokers using the IRS’s TIN-matching system in place of certified TINs. Finally, the Notice also provides backup withholding relief for exchanges of digital assets in return for specified NFTs and real property and for certain sales effected by PDAPs. 

Delay on information reporting for certain transactions until future guidance is issued Notice 2024-57 informs brokers that until the U.S. Treasury Department and the IRS issue further guidance, brokers will not have to file information returns or furnish payee statements on digital asset sales and exchanges for the following six types of transactions: 

1. Wrapping and unwrapping transactions,
2. Liquidity provider transactions,
3. Staking transactions,
4. Transactions described by digital asset market participants as lending of digital assets,
5. Transactions described by digital asset market participants as short sales of digital assets, and
6. Notional principal contract transactions. 

Transition from universal or multi-wallet approach to allocating basis in digital assets to wallet by wallet or account by account approach. Revenue Procedure 2024-28 generally permits taxpayers to rely on any reasonable allocation of units of unused basis to wallets or accounts that hold the same number of remaining digital asset units based on the taxpayers’ records of unused bases and remaining units in those wallets or accounts. 

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued final regulations that provide taxpayers and tax professionals with guidance on how to report and pay the 1 percent excise tax owed on corporate stock repurchases. 

The Inflation Reduction Act imposed a new excise tax on stock repurchases equal to 1 percent of the aggregate fair market value of stock repurchased by certain corporations during the taxable year, subject to adjustments. The stock repurchase excise tax applies to repurchases after Dec. 31, 2022. 

These final regulations require that the stock repurchase excise tax be reported on Form 720, Quarterly Federal Excise Tax Return, due for the first full calendar quarter after the end of the corporation’s taxable year, with the Form 7208, Excise Tax on Repurchase of Corporate Stock, attached. The Form 7208 is used to figure the amount of stock repurchase excise tax owed. 

Forms 720 and 7208 due for taxable years ending after Dec. 31, 2022, and on or before June 30, 2024, must be filed by the third quarter due date for Form 720, which is Oct. 31, 2024. 

If a corporation has more than one taxable year ending after Dec. 31, 2022, and on or before June 30, 2024, the corporation should file a single Form 720 with two separate Forms 7208 (one for each taxable year) attached by Oct. 31, 2024. 

The final regulations affect publicly traded domestic corporations that repurchase their stock or whose stock is acquired by certain affiliates after Dec. 31, 2022. The regulations also affect certain publicly traded foreign corporations that repurchase their stock or whose stock is acquired by certain affiliates after Dec. 31, 2022. 

More information can be found on the Inflation Reduction Act of 2022 page on IRS.gov.