WASHINGTON — The Internal Revenue Service today revised its frequently asked questions (FAQs) on 2020 unemployment compensation exclusion.

This Fact Sheet (FS-2022-21) PDF updates the 2020 unemployment compensation exclusion frequently-asked-questions (FAQs). These updates are:

These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible.

More information about reliance is available.

WASHINGTON ― The Internal Revenue Service today reminded taxpayers who have a tax bill that there are several ways to make payments, and there are options for many people who can't pay their tax bill in full by April tax deadline.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states. Some taxpayers who were victims of a natural disaster have even longer to file their returns.

The IRS reminds people to timely file their tax return and pay whatever they can by the filing deadline to avoid late filing and interest penalties.

Sign in to pay and see payment history
Taxpayers can use their Online Account to securely see important information when preparing to file their tax return or following up on balances or notices. Taxpayers can make a same-day payment for a 2021 tax return balance, an extension to file, or estimated taxes, which are all due by April deadline for most taxpayers. They can also view:

Ways to pay

Check or Money Order: Payments made by check or money order should be made payable to the "United States Treasury." To help ensure that the payment gets credited promptly, taxpayers should also enclose a Form 1040-V payment voucher and print on the front of the check or money order: "2021 Form 1040"; name; address; daytime phone number; and Social Security number.

File by April 18, 2022 for most taxpayers
The most important thing everyone with a tax bill should do is file a return by the April 18 due date, for most taxpayers (even if they can't pay in full). Taxpayers may also request a six-month extension to file by October 17, 2022, to avoid penalties and interest for failing to file on time.

Though automatic tax-filing extensions are available to anyone who wants one, these extensions don't change the payment deadline. It is not an extension to pay. Visit IRS.gov/extensions for details.

Usually anyone who owes tax and waits until after that date to file will be charged a late-filing penalty of 5% per month. So, if a tax return is complete, filing it by April 18 is always less costly, even if the full amount due can't be paid on time.

IRS Free File is an easy, quick way to file that is available to eligible individuals and families who earned $73,000 or less in 2021. IRS Free File is available on IRS.gov.

Pay what you can
Interest, plus the late-payment penalty, will apply to any payments made after April 18. Making a payment, even a partial payment, will help limit penalty and interest charges. The fastest and easiest way to pay a personal tax bill is with Direct Pay, available only on IRS.gov. For a rundown of other payment options, visit IRS.gov/payments.

The IRS urges taxpayers to first consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Normally, the late-payment penalty is one-half-of-one percent (0.5%) per month. The interest rate, adjusted quarterly, is currently 3% per year, compounded daily.

If a loan isn't possible, the IRS can often help.

Online payment plans
Most individual taxpayers qualify to set up an online payment plan with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved. No need to call or write to the IRS. The IRS notes that online payment plans are processed more quickly than requests submitted with electronically-filed tax returns. If a taxpayer just filed their return and knows that they’ll owe a balance, they may be able to set up a payment plan online before they even receive a notice or bill.

There are two main types of online payment plans:

Taxpayers who do not qualify for an online payment agreement may still be able to arrange to pay in installments. See Additional Information on Payment Plans for more information.

Other payment options
Some struggling taxpayers may also consider using these other payment options:

Delayed collection
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest are charged until paid in full. Taxpayers can request a delay by calling the phone number on their notice or 800-829-1040.

Penalty relief
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This can be done on a case-by-case basis, based on reasonable cause. Alternatively, where a taxpayer has a history of compliance, the IRS can typically provide relief under the First Time Abatement program. Visit IRS.gov/penaltyrelief for details.

Offer in Compromise
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an offer in compromise. Though there is typically a $205 non-refundable application fee, it is generally waived for low-income taxpayers and for offers based on doubt as to liability. The Offer in Compromise Pre-Qualifier tool can help determine eligibility for anyone interested in applying.

The IRS reminds taxpayers that they have rights and protections throughout the collection process. For details, see Taxpayer Bill of Rights and Publication 1, Your Rights as a Taxpayer.

For more information about payments, see Topic No. 202, Tax Payment Options, on IRS.gov.

Taxpayers should know before they owe. The IRS encourages all taxpayers to check their withholding with the IRS Tax Withholding Estimator.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

WASHINGTON — The Internal Revenue Service today reminded taxpayers how to avoid common errors on their tax returns. This filing season, the IRS is seeing signs of a number of common errors, including some taxpayers claiming incorrect amounts of the Recovery Rebate Credit and Child Tax Credit.

To avoid errors on these common credits, there are some key steps people should remember. Taxpayers should refer to Letter 6419 for advance Child Tax Credit payments and Letter 6475 for third Economic Impact Payment amounts they received– or their Online Account – to prepare a correct tax return. Claiming incorrect tax credit amounts can not only delay IRS processing, but can also lead to adjusted refund amounts.

Here are other easy ways to avoid common mistakes being seen so far this tax season.

File electronically. Taxpayers can use their computer, smartphone or tablet to file their taxes electronically, whether through IRS Free File or other e-file service providers, to help reduce mistakes. Tax software guides people through each section of their tax return using a question-and-answer format. Enter information carefully. This includes any information needed to calculate credits and deductions. Using tax software should help prevent math errors, but taxpayers should always review their tax return for accuracy.

Use the correct filing status. Tax software, including IRS Free File, also helps prevent mistakes when selecting a tax return filing status. If taxpayers are unsure about their filing status, the Interactive Tax Assistant on IRS.gov can help them choose the correct status, especially if more than one filing status applies.

Answer the virtual currency question. The 2021 Form 1040 and 1040-SR asks whether at any time during 2021, a person received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency. Taxpayers should not leave this field blank but should check either “Yes” or “No.”

Report all taxable income. Underreporting income may lead to penalties and interest. Organized tax records help avoid errors that lead to processing delays and may also help to find overlooked deductions or credits. Taxpayers should have all their income documents on hand before starting their tax return. Examples are Forms W-2, 1099-MISC or 1099-NEC.

Include unemployment compensation. The IRS is seeing situations where people are not including unemployment compensation they received in 2021 on their tax returns. Although a special law allowed taxpayers to exclude unemployment compensation from taxes in 2020, it was only for that year. Unemployment compensation received in 2021 is generally taxable, so taxpayers should include it as income on their tax return.

Double-check name, birth date and Social Security number entries. Taxpayers must correctly list the name, Social Security number (SSN) and date of birth for each person they claim as a dependent on their individual income tax return. Enter each SSN and individual’s name on a tax return exactly as printed on the Social Security card. If a dependent or spouse does not have and is not eligible to get a SSN, list the Individual Tax Identification Number (ITIN) instead of a SSN.

Double check routing and account numbers. Requesting direct deposit of a federal refund into one, two or even three accounts is convenient and allows the taxpayer access to their money faster. Make sure the financial institution routing and account numbers entered on the return are accurate. Incorrect numbers can cause a refund to be delayed or deposited into the wrong account. Taxpayers can also use their refund to purchase U.S. Savings Bonds.

Mail paper returns to the right address. Paper filers should confirm the correct address for where to file on IRS.gov or on form instructions to avoid processing delays. Note that processing paper tax returns could take much longer than usual. Taxpayers and tax professionals are encouraged to file electronically if possible.

Sign and date the return. If filing a joint return, both spouses must sign and date the return. E-filers can sign using a self-selected personal identification number (PIN). Taxpayers should review the special instructions to validate their 2021 electronic tax return if their 2020 return has not yet been processed.

Keep a copy. When ready to file, taxpayers should make a copy of their signed return and all schedules for their records.

Request an extension, if needed. Taxpayers who cannot meet the April 18 deadline can easily request a six-month filing extension to Oct. 17 and prevent late filing penalties. Use Free File or Form 4868. But keep in mind that, while an extension grants additional time to file, tax payments are still due April 18 for most taxpayers.

Revenue Ruling 2022-7 updates Rev. Rul. 2004-53 in accordance with the Taxpayer First Act by explaining that all recipients of returns or return information pursuant to section 6103(c), including government employees, are subject to the disclosure restrictions of section 6103(a). Rev. Rul. 2004-53 modified and superseded.

Revenue Ruling 2022-7 will be in IRB:  2022-14, dated 4/4/2022.

Notice 2022-14  sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for March 2022 used under § 417(e)(3)(D), the 24-month average segment rates applicable for March 2022, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv). 

Notice 2022-14 will be in IRB:   2022-14, dated April 4, 2022.

Understanding Crowdfunding
Crowdfunding is a method of raising money through websites by soliciting contributions from a large number of people. The contributions may be solicited to fund businesses, for charitable donations, or for gifts. In some cases, the money raised through crowdfunding is solicited by crowdfunding organizers on behalf of other people or businesses. In other cases, people establish crowdfunding campaigns to raise money for themselves or their businesses.   

Receipt of a Form 1099-K for Distributions of Money Raised Through Crowdfunding
The crowdfunding website or its payment processor may be required to report distributions of money raised if the amount distributed meets certain reporting thresholds by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS. If Form 1099-K is required to be filed with the IRS, the crowdfunding website or its payment processor must also furnish a copy of that form to the person to whom the distributions are made. The American Rescue Plan Act clarifies that the crowdfunding website or its payment processor is not required to file Form 1099-K with the IRS or furnish it to the person to whom the distributions are made if the contributors to the crowdfunding campaign do not receive goods or services for their contributions. 

Prior to 2022, the threshold for a crowdfunding website or payment processor to file and furnish a Form 1099-K was met if, during a calendar year, the total of all payments distributed to a person exceeded $20,000 in gross payments resulting from more than 200 transactions or donations. 

For calendar years beginning after December 31, 2021, the threshold is lowered and is met if, during a calendar year, the total of all payments distributed to a person exceeds $600 in gross payments, regardless of the number of transactions or donations. 

Accordingly, if a crowdfunding website or its payment processor makes distributions of money raised that meet the reporting threshold, and the contributors to the crowdfunding campaign received goods or services for their contributions, then a Form 1099-K is required to be filed with the IRS. Additionally, if the distributions of the money raised are made to the crowdfunding organizer, a copy of the Form 1099-K must be furnished to the organizer; alternatively, if the distributions of the money raised are made directly to individuals or businesses for whom the organizer solicited funds, the Form 1099-K must be furnished to those individuals or businesses that receive amounts that meet the reporting threshold.   

A person receiving a Form 1099-K for distributions of money raised through crowdfunding may not recognize the filer’s name on the form. Sometimes the payment processor used by the crowdfunding website, rather than the crowdfunding website itself, will issue the Form 1099-K and be included as the filer on the form. If the recipient of a Form 1099-K does not recognize the filer’s name or the amounts included on the Form 1099-K, the recipient can use the filer’s telephone number listed on the form to contact a person knowledgeable about the payments reported.

Box 1 on the Form 1099-K will show the gross amount of the distributions made to a person during the calendar year, but issuance of a Form 1099-K doesn’t automatically mean the amount reported on the form is taxable to the person receiving the form.  As discussed below, the income tax consequences depend on all the facts and circumstances. If the distributions reported on a Form 1099-K are not reported on the tax return of the recipient of the form, the IRS may contact the recipient for more information. The recipient will have the opportunity to explain why the crowdfunding distributions were not reported on the recipient’s tax return. 

Tax Treatment of Money Raised Through Crowdfunding
Under federal tax law, gross income includes all income from whatever source derived unless it is specifically excluded from gross income by law. In most cases, property received as a gift is not includible in the gross income of the person receiving the gift. 

If a crowdfunding organizer solicits contributions on behalf of others, distributions of the money raised to the organizer may not be includible in the organizer’s gross income if the organizer further distributes the money raised to those for whom the crowdfunding campaign was organized. 

If crowdfunding contributions are made as a result of the contributors’ detached and disinterested generosity, and without the contributors receiving or expecting to receive anything in return, the amounts may be gifts and therefore may not be includible in the gross income of those for whom the campaign was organized.  Contributions to crowdfunding campaigns are not necessarily a result of detached and disinterested generosity, and therefore may not be gifts.  Additionally, contributions to crowdfunding campaigns by an employer to, or for the benefit of, an employee are generally includible in the employee’s gross income.

Taxpayers may want to consult a trusted tax professional for information and advice regarding how to treat amounts received from crowdfunding campaigns. 

Recordkeeping for Money Raised Through Crowdfunding
Crowdfunding organizers and any person receiving amounts from crowdfunding should keep complete and accurate records of all facts and circumstances surrounding the fundraising and disposition of funds for at least three years.

Links

• About Form 1099-K, Payment Card and Third Party Network Transactions
• Understanding Your Form 1099-K
• General FAQs on Payment Card and Third Party Network Transactions
• Gig Economy Tax Center

WASHINGTON — The IRS reminds taxpayers that there is a virtual currency question at the top of Form 1040, Form 1040-SR and Form 1040-NR. It asks: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

All taxpayers filing Form 1040, Form 1040-SR or Form 1040-NR must check one box answering either “Yes” or “No” to the virtual currency question. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency in 2021.

When taxpayers can check “No”
Taxpayers who merely owned virtual currency at any time in 2021 can check the “No” box when they have not engaged in any transactions involving virtual currency during the year, or their activities were limited to:

When taxpayers must check “Yes”
The list below covers the most common transactions in virtual currency that require checking the “Yes” box:

If a taxpayer disposed of any virtual currency that was held as a capital asset through a sale, exchange or transfer, they must check “Yes” and use Form 8949 to figure their capital gain or loss and report it on Schedule D (Form 1040).

If a taxpayer received any virtual currency as compensation for services or disposed of any virtual currency that they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040, 1040-SR, or 1040-NR, line 1, or inventory or services from Schedule C on Schedule 1).

For more information, see page 17 of the 2021 Form 1040 Instructions and visit IRS.gov for general information on virtual currency and other related resources.

Revenue Procedure 2022-20 provides guidance regarding the public approval requirement under § 147(f) of the Internal Revenue Code for tax-exempt qualified private activity bonds.  Specifically, this revenue procedure provides that hearings held by teleconference as described in section 4 of this revenue procedure will be treated as held in a location that, based on the facts and circumstances, is convenient for residents of the approving governmental unit for the purpose of § 1.147(f)-1(d)(2) of the Income Tax Regulations.

Revenue Procedure 2022-20 will be in IRB:  2022-14, dated April 4, 2022.

Notice 2022-11 provides an indexing factor for the qualifying payment amount for items and services furnished in 2022 for purposes of sections 9816 and 9817 of the Internal Revenue Code, as added by the No Surprise Act, in the case of a group health plan or group or individual health insurance issuer that does not have sufficient information as of January 31, 2019 to calculate the median of the contracted rates or for new items and services.

Notice 2022-11 will be in IRB:  2022-14, dated 04/04/2022.

FS-2022-19, IRS-CI HIGHLIGHTS