WASHINGTON – The Internal Revenue Service recently issued guidance addressing improper forgiveness of a Paycheck Protection Program loan (PPP loan).

The guidance confirms that, when a taxpayer’s loan is forgiven based upon misrepresentations or omissions, the taxpayer is not eligible to exclude the forgiveness from income and must include in income the portion of the loan proceeds that were forgiven based upon misrepresentations or omissions. Taxpayers who inappropriately received forgiveness of their PPP loans are encouraged to take steps to come into compliance by, for example, filing amended returns that include forgiven loan proceed amounts in income.

“This action underscores the Internal Revenue Service’s commitment to ensuring that all taxpayers are paying their fair share of taxes,” said IRS Commissioner Chuck Rettig. “We want to make sure that those who are abusing such programs are held accountable, and we will be considering all available treatment and penalty streams to address the abuses.”

Many PPP loan recipients who received loan forgiveness were qualified and used the loan proceeds properly to pay eligible expenses. However, the IRS has discovered that some recipients who received loan forgiveness did not meet one or more eligibility conditions. These recipients received forgiveness of their PPP loan through misrepresentation or omission and either did not qualify to receive a PPP loan or misused the loan proceeds.

The PPP loan program was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act) to assist small US businesses that were adversely affected by the COVID-19 pandemic in paying certain expenses. The PPP loan program was further extended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act.

Under the terms of the PPP loan program, lenders can forgive the full amount of the loan if the loan recipient meets three conditions. 

1 - The loan recipient was eligible to receive the PPP loan.  An eligible loan recipient:

2 - The loan proceeds had to be used to pay eligible expenses, such as payroll costs, rent, interest on the business’ mortgage, and utilities.

3 - The loan recipient had to apply for loan forgiveness. The loan forgiveness application required a loan recipient to attest to eligibility, verify certain financial information, and meet other legal qualifications.

If the 3 conditions above are met, then under the PPP loan program the forgiven portion is excluded from income.  If the conditions are not met, then the amount of the loan proceeds that were forgiven but do not meet the conditions must be included in income and any additional income tax must be paid.

To report tax-related illegal activities relating to PPP loans, submit Form 3949-A, Information Referral. You should also report instances of IRS-related phishing attempts and fraud to the Treasury Inspector General for Tax Administration at 800-366-4484.

WASHINGTON — Hurricane Fiona victims in all 78 Puerto Rican municipalities now have until Feb. 15, 2023, to file various federal individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

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 anywhere in the Commonwealth of Puerto Rico qualify for tax relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Sept. 17, 2022. As a result, affected individuals and businesses will have until Feb. 15, 2023, to file returns and pay any taxes that were originally due during this period.

This means individuals who had a valid extension to file their 2021 return due to run out on Oct. 17, 2022, will now have until Feb. 15, 2023, to file. The IRS noted, however, that because tax payments related to these 2021 returns were due on April 18, 2022, those payments are not eligible for this relief. 

The Feb. 15, 2023, deadline also applies to quarterly estimated income tax payments due on Jan. 17, 2023, and the quarterly payroll and excise tax returns normally due on Oct. 31, 2022 and Jan. 31, 2023. Businesses with an original or extended due date also have the additional time including, among others, calendar-year corporations whose 2021 extensions run out on Oct. 17, 2022. Similarly, tax-exempt organizations also have the additional time, including for 2021 calendar-year returns with extensions due to run out on Nov. 15, 2022.    

In addition, penalties on payroll and excise tax deposits due after Sept. 17, 2022 and before Oct. 3, 2022, will be abated as long as the deposits are made by Oct. 3, 2022.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

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 the 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 (in this instance, the 2022 return normally filed next year), or the return for the prior year (2021). Be sure to write the FEMA declaration number – DR-3583-EM − on any return claiming a loss. See Publication 547 for details.

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

WASHINGTON – The Internal Revenue Service has selected eight new members for the Electronic Tax Administration Advisory Committee (ETAAC).

“These eight new members bring diverse and important perspectives to a committee focused on the electronic side of tax administration,” said IRS Commissioner Chuck Rettig. “Their recommendations will inform IRS decision makers as they address critical issues like identify theft and refund fraud and further map out our digital strategy.”

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

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

The following individuals have been appointed to serve three-year terms on the committee beginning in September 2022:

• Austin Emeagwai, CPA, Ph.D., Collierville, Tennessee – Dr. Emeagwai is an Associate Professor of Accounting at LeMoyne-Owen College, Memphis. He is the president of ABC Accounting and Tax Services, P.C., a full-service CPA firm. His research interests include small business and community development by Historically Black Colleges and Universities (HBCUs). Dr. Emeagwai is a member of the American Institute of Certified Public Accountants, Tennessee Society of Certified Public Accountants, National Society of Accountants, and is a Volunteer Income Tax Assistance (VITA) volunteer.
• Jerry Gaddis, EA, MBA, Winter Haven, Florida – Gaddis is the founder and Chief Executive Officer of Tropical Tax Solutions, a boutique firm headquartered in Florida providing tax consultation, preparation and representation solutions for individuals and small businesses. He began his 20-year tax career at the VITA/Tax Counseling for the Elderly clinic in the Key Largo public library. He is a former H&R Block Franchisee, a former Dave Ramsey ELP and a graduate of the National Tax Practice Institute. Gaddis served on the board of directors for the National Association of Enrolled Agents for seven years including three years as an officer and one year as President/CEO. He is an Enrolled Agent.
• Nikia Gainey, Orlando, Florida – Gainey founded Carriers Choice Logistics, LLC in central Florida this year. Carriers Choice Logistics helps the low-income community by providing advice on how to start a business, provides financial literacy assistance, offers first time home buyers program information, aids with applying for Supplemental Nutrition Assistance Program (SNAP) benefits (also known as food stamps) and offers free notary services for the surrounding community.
• Robert Gettemy, Marion, Iowa – Gettemy is a full-time instructor at the University of Iowa where he teaches both undergraduate and graduate courses in entrepreneurship. In addition, he consults in the tax software industry. Prior to teaching, Gettemy spent seven years at TaxAct where he was Chief Operating Officer. During his tenure at TaxAct, Gettemy was responsible for all back-office operations, government relations and competitive intelligence. While at TaxAct, he served as Vice Chair of the American Coalition of Taxpayer Rights, was on the board of directors for the Council of Electronic Revenue Communication Advancement and was an industry co-lead in the IRS Security Summit initiative which was formed to combat stolen identity refund fraud. Gettemy was also active in IRS free file.
• Argi O’Leary, Voorheesville, New York – O’Leary is a Principal in the Advocacy Practice at Ryan, LLC in New York, where she provides tax strategy and audit assistance, including tax issue negotiations and resolution, policy advice and advocacy for all tax types. Before joining Ryan, O’Leary was a Deputy Commissioner with the New York State Department of Taxation and Finance, leading the Department’s Civil Enforcement Division and Office of Professional Responsibility, and also served as an Assistant Deputy Commissioner, leading the Department’s litigation strategy in tax controversy matters.
• Hallie Parchman, Austin, Texas – Parchman is currently Amazon’s Senior Manager of Product Management within the Corporate Tax function focusing on the end-to-end customer experience as it relates to tax information reporting and withholding, including tax operations, tax compliance and product delivery and design. Before joining Amazon, Parchman was a Tax Analyst at Apple Inc. focused on information reporting and a Federal Tax Associate at KPMG. She is a licensed CPA in Texas.
• RaeAnn Pilarski, Tuscon, Arizona – Pilarski is Senior Manager at Code for America, where she scales and supports VITA partners that participate in the GetYourRefund program. Before joining Code for America, she oversaw the VITA program at the United Way of Tucson and Southern Arizona. During her tenure there, she worked closely with Code for America as one of the original partners in the GetYourRefund pilot and led the development of Valet VITA, a model that allowed clients’ documents to be scanned and securely uploaded to a system through which volunteers would access the information needed to prepare the return.
• Keith Richardson, Philadephia, Pennsylvania – Richardson has over 15 years of tax administration experience. He is Deputy Chief Financial Officer and Tax Commissioner for the District of Columbia. As the CFO, he contributed to the development of its new modernized tax system, including working with IDTTRF-ISAC and establishing strategic plans for its customer service for taxpayers. Richardson previously worked for the Commonwealth of Pennsylvania as the Bureau of Compliance Director and was responsible for tax compliance initiatives, clearances and creating the Gaming Control Clearance Division to oversee all tax clearances for owners, vendors, employees and winners. He has also served as Revenue Commissioner for the City of Philadelphia.

Committee Leadership for 2022 – 2023

• Jared Ballew, Government/Industry Liaison with Drake Software, will serve as chair of the ETAAC.
• Vernon Barnett, Commissioner of the Alabama Department of Revenue, will serve as co-vice chair of the ETAAC.
• Timur Taluy, CEO and co-owner of FileYourTaxes.com, will serve as co-vice chair of the ETAAC.

Notice 2022-40 sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for September 2022 used under § 417(e)(3)(D), the 24-month average segment rates applicable for September 2022, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv). 

Notice 2022-40  will be in IRB:   2022-40, dated October 3, 2022.

Notice 2022-42 addresses the application of the noncompulsory payment rules in the foreign tax credit regulations to amended tax decrees between MNEs and the Puerto Rico tax authority.  The Notice assures taxpayers and their affiliates that the amendment of an existing decree prior to 12/31/2022 that results in the imposition of Puerto Rico taxes at rates lower than those that would apply in the absence of a decree will not be viewed as resulting in noncompulsory payments even if the taxpayer and its affiliates may have paid less with respect to one or more levies under their prior tax decree.  The relief is intended to provide certainty and aid Puerto Rico’s transition away from the excise tax and modified ECI tax, which will no longer be creditable beginning next year. 

Revenue Ruling 2022-18 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274. 

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

WASHINGTON — The Internal Revenue Service announced today the opening of the application period for the 2023 Compliance Assurance Process (CAP) program. The application period runs from September 15 to November 15, 2022 . The IRS will inform applicants if they’re accepted into the program in February 2023.

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

To be eligible to participate in CAP, taxpayers must adhere to CAP program limits on the number of open years.

General program information and the 2023 application details are available on the CAP webpage. 

Revenue Procedure 2022-36 provides the domestic asset/liability percentages and domestic investment yields needed by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) of the Internal Revenue Code for taxable years beginning after December 31, 2020.

Notice 2022-39 provides rules that claimants must follow to make a one-time claim for the credit and payment allowable under §§ 6426(d) and 6427(e) of the Internal Revenue Code for alternative fuels sold or used during the first, second, and third calendar quarters of 2022.  The rules are prescribed pursuant to § 13201(g) of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act.  Notice 2022-39 also provides instructions for how a taxpayer’s liability for the excise tax imposed by § 4081 may be reduced by claiming the alternative fuel mixture credit allowable under § 6426(e) for the first and second calendar quarters of 2022.   

Today, the IRS published the latest executive column, “A Closer Look,” which features Sunita Lough, Commissioner, Tax Exempt/Government Entities Division, discussing the past, present and future of the Form 1023-EZ, which was launched in 2014 to help small charitable organizations seeking federal tax-exempt status.

 “Form 1023-EZ has reduced the burden on the smallest organizations applying for tax-exempt status and increased the efficiency of the Exempt Organization division’s operations,” said Lough. “In TE/GE, we are committed to succeeding in our mission to provide our customers with top quality service by helping them understand and comply with tax laws and to protect the public interest by applying the tax law with integrity and fairness to all.” Read more here. Read the Spanish version here. 

“A Closer Look” is a column from IRS executives that covers a variety of timely issues of interest to taxpayers and the tax community. It also provides a detailed look at key issues affecting everything from IRS operations and employees to issues involving taxpayers and tax professionals.