WASHINGTON -  The IRS today provided further details on additional transition relief for certain domestic partnerships and S corporations preparing the new schedules K-2 and K-3 to further ease the change to these new schedules. Those eligible for the relief will not have to file the new schedules for tax year 2021.

The new schedules K-2 and K-3 improve reporting by standardizing international tax information to partners and flow-through investors, making it easier for them to report these items on their tax returns. In addition, the changes ease flow-through return preparation compliance by clarifying obligations and standardizing the format for reporting. 

Notice 2021-39 provides penalty relief for good-faith efforts to adopt the new schedules. Today’s transition relief, appearing in new frequently asked questions (FAQs) on Schedules K-2 and K-3, allows an additional exception for tax year 2021 filing requirements by certain domestic partnerships and S corporations.

The IRS is providing an additional exception for tax year 2021 to filing the Schedules K-2 and K-3 for certain domestic partnerships and S corporations. To qualify for this exception, the following must be met:

If a partnership or S corporation qualifies for this exception, the domestic partnership or S corporation does not need to file Schedules K-2 and K-3 with the IRS or with its partners or shareholders.  However, if the partnership or S corporation is subsequently notified by a partner or shareholder that all or part of the information contained on Schedule K-3 is needed to complete their tax return, then the partnership or S corporation must provide the information to the partner or shareholder. If a partner or shareholder notifies the partnership or S corporation before the partnership or S corporation files its return, the conditions for the exception are not met and the partnership or S corporation must provide the Schedule K-3 to the partner or shareholder and file the Schedules K-2 and K-3 with the IRS.

The IRS welcomes additional comments on Schedules K-2 and K-3. This feedback and inquiries can be sent to lbi.passthrough.international.form.changes@irs.gov.

WASHINGTON — The Internal Revenue Service today announced it is seeking civic-minded volunteers to serve on the Taxpayer Advocacy Panel (TAP). Applications will be accepted through April 8.

What is the Taxpayer Advocacy Panel?

The TAP is a federal advisory committee that serves a vital role in tax administration. TAP members volunteer their time and energy to improve IRS services and taxpayer satisfaction by listening to taxpayers, identifying significant taxpayer concerns and making recommendations to address those concerns. The TAP is a diverse group of ordinary citizens who possess a sense of civic duty, patriotism and belief in an effective and well-regarded tax system The TAP makes a difference and by joining it you can too.

TAP successes in 2021

Each year, the TAP submits dozens of recommendations to the IRS. In 2021 alone, the TAP made 193 recommendations to the IRS, many of which have already been implemented. Because of the TAP’s recommendations in 2021, the IRS has improved many of its tax forms, instructions and publications, and clarified the information in several frequently-used IRS letters.

When the IRS closed one of its processing centers in 2021, the TAP worked with the IRS to ensure news releases and other messaging was issued to alert impacted taxpayers in several states. The TAP effectively advocated to have the IRS partner with volunteer tax preparation organizations to spread the message even further.

Martha J. Lewis, 2022 National TAP Chair, recently stated, “If we look at the past and all that TAP has accomplished, it’s truly amazing. We still have a lot of work to do, especially in the area of taxpayers understanding what we do and how we can help them.”

Who can apply

To the extent possible, the TAP includes members from all 50 states, the District of Columbia and Puerto Rico, as well as one member to represent U.S. citizens living and working abroad. Each member is appointed to represent the interests of taxpayers in their geographic location as well as taxpayers overall.

Federal advisory committees are required to have a balanced representation of different viewpoints. Therefore, applicants from under-represented groups, such as Native Americans and non-tax professionals, are particularly encouraged to apply. TAP is currently seeking candidates in the following states: Alabama, Arkansas, Arizona, California, Colorado, Florida, Iowa, Idaho, Illinois, Indiana, Kentucky, Massachusetts, Maine, Missouri, Mississippi, Montana, North Carolina, North Dakota, New Hampshire, New Mexico, Nevada, New York, Ohio, Oklahoma, Oregon, Puerto Rico, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Wisconsin and West Virginia. However, candidates residing in all the listed locations are encouraged to apply, and all timely applications will be considered. 

TAP members must be U.S. citizens who are current with their federal tax obligations and able to commit 200 to 300 volunteer hours during the year. TAP members must also pass a Federal Bureau of Investigation criminal background check. Members cannot be federally registered lobbyists. Current Department of the Treasury or IRS employees cannot serve on the panel. Former Department of the Treasury or IRS employees and former TAP members can be considered for appointment three years after their employment or previous TAP membership has ended. Tax practitioner applicants must be in good standing with the IRS (meaning not currently under suspension or disbarment).

New TAP members will serve a three-year term starting in December 2022. Applicants chosen as alternate members will be considered to fill any vacancies in their areas during the next three years.

More information

For additional information about the TAP and to start the application process, visit www.improveirs.org or call toll-free at 888-912-1227 and select prompt number five. Callers outside the U.S. may call 214-413-6523 (not a toll-free number) or email the TAP staff at tap.recruitment@irs.gov. A video is also available with more information about the TAP and about how to contribute to this dynamic group of volunteers.

WASHINGTON – With tax season in full swing, the Internal Revenue Service, state tax agencies and tax industry today warned tax professionals of new email scams that attempt to steal their tax software preparation credentials.

The Security Summit partners warned these  scams serve as a reminder that tax professionals remain prime targets for thieves. These thieves try to steal client data and tax preparers' identities in an attempt to file fraudulent tax returns for refunds.

The latest phishing email uses the IRS logo and a variety of subject lines such as "Action Required: Your account has now been put on hold.” The IRS has observed similar bogus emails that claim to be from a “tax preparation application provider.” One such variation offers an “unusual activity report” and a solution link for the recipient to restore their account.

“Scams continue to evolve, and this one is especially sinister since it threatens tax professional’s accounts,” said IRS Commissioner Chuck Rettig. “Tax professionals must remain vigilant in identifying and staying clear of these IRS impersonation emails. A little extra care can protect the tax professionals and their clients.”

Emails claiming “Your account has been put on hold” are scams
The IRS has observed similar bogus emails that claim to be from tax software providers. The scam email will send users to a website that shows the logos of several popular tax software preparation providers. Clicking on one of these logos requests tax preparer account credentials.

The IRS warns tax pros not to respond or take any of the steps outlined in the email. Similar emails include malicious links or attachments that are set up to steal information or to download malware onto the tax professional's computer.

In this case, if recipients enter their credentials into the pop up window, thieves can use this information to file fraudulent returns by using credentials that were provided by the tax professional.

An example of this type of bogus email states:
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Your account has now been put on hold

ALL preparers are required to apply security feature to their Tax Pro account towards 2021 Tax Returns processing.
You have failed to apply new update before expiry date
You are restore and update your acc|ount immediately.
Please Click Here to update your acc|ount now.
Important
Failure to update your account within the next 24hours will lead to you account being terminated and be barred from filing tax returns  claims for 2021 tax season Your access will be restored once you have updated your details.

Sincerely,
IRS.gov eServices
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Tax professionals who clicked on one of the URLs and then entered in their account information should contact their tax software preparation provider’s support hotline.

Tax professionals who get a scam email should save the email as a file and then send it as an attachment to phishing@irs.gov. They should also notify the Treasury Inspector General for Tax Administration at www.tigta.gov to report the IRS impersonation scam. Both TIGTA and the IRS Criminal Investigation division are aware of this scam.

The IRS, state tax agencies and the nation’s tax industry – working together in the Security Summit initiative – have taken numerous steps since 2015 to protect taxpayers, businesses and the tax system from identity thieves. Summit partners continue to warn people to watch out for common scams and schemes this tax season.

For additional information and help, tax professionals should review Publication 4557, Safeguarding Taxpayer Data and Identity Theft Information for Tax Professionals.

WASHINGTON — With phone volumes continuing at historic levels, the Internal Revenue Service reminds taxpayers IRS.gov, should be the first stop for taxpayers seeking information and help with their federal taxes.

Available around the clock, IRS.gov has a variety of online tools, applications, and resources available to help people prepare and file their taxes or help with refund tracking. Research tools like the Interactive Tax Assistant and answers for Frequently Asked Questions provide in-depth answers on many tax subjects.

Prepare and file taxes online for free
Taxpayers can use IRS Free File to prepare and electronically file their returns. They can also set up direct deposit for their refunds, which is the fastest way to get their money.

IRS Free File software products are part of a 20-year partnership with leading tax software providers who make their online tax preparation products available for free with the IRS. Free File is available to any person or family who earned $73,000 or less in 2021. This represents about 70% of taxpayers.

IRS Free File is free when eligible taxpayers go through IRS.gov/freefile. In addition, Free File Fillable Forms, the electronic version of paper IRS tax forms, are available to all taxpayers earning any income amount. They’re most useful for those who are comfortable preparing and filing their own taxes online.

MilTax is also available for members of the military and qualifying veterans. This Department of Defense program generally offers free online tax preparation and e-filing software for federal returns and up to three state returns. Users can also set up direct deposit for their refunds.

Find answers with the Interactive Tax Assistant
The Interactive Tax Assistant answers general tax law questions, including helping to determine if a type of income is taxable or if someone is eligible to claim certain credits and deductions. With changes to income and other life events for many in 2021, tax credits and deductions can mean more money in a taxpayer's pocket.

Get an Identity Protection PIN
An Identity Protection PIN (IP PIN) is a six-digit number that prevents criminals from filing a fraudulent tax return using another taxpayer's Social Security number. The IP PIN is known only to the taxpayer and the IRS, and helps the IRS verify the taxpayer's identity when they file their electronic or paper tax return.

Locate local free tax preparation
The IRS's Volunteer Income Tax Assistance (VITA) program offers free basic tax return preparation, electronic filing, and direct deposit of refunds to qualified taxpayers. The program is free for:

The Tax Counseling for the Elderly (TCE) program also offers free tax help for taxpayers, particularly those age 60 and older. The VITA/TCE Site Locator can help eligible taxpayers find the nearest community-based VITA/TCE site staffed by IRS-trained and certified volunteers.

Find a local tax professional
IRS.gov offers a searchable directory that helps taxpayers find qualified local tax professionals in their area. The list can be sorted by credentials and qualifications. IRS tips for choosing a tax preparer and how to avoid unethical "ghost" return preparers are important starting points before hiring a tax professional.

Online Account can help
Taxpayers can securely access their individual Online Account to view important information they can use to file an accurate return. This includes:

Make a tax payment
Taxpayers can make a payment from their bank account through their Online Account or with IRS Direct Pay. In Online Account, they can view up to 5 years of their payment history and any pending or scheduled payments. Taxpayers can see their different payment options on IRS.gov which include: Electronic Funds Withdrawal (during e-filing), credit or debit card, check or money order, or cash at a participating retail store.

Set up a payment plan
Taxpayers can meet their tax obligation in monthly installments by setting up a payment plan on IRS.gov/paymentplan in a matter of minutes. Setup fees may apply for some types of plans. An offer in compromise is a way for a taxpayer to settle their tax debt for less than the full amount. A pre-qualifier tool is available online. If the IRS determines a taxpayer is unable to pay, it may temporarily delay collection until the taxpayer's financial condition improves.

Track refunds with 'Where's My Refund?'
Taxpayers can receive the most up-to-date information about their tax refund using the "Where's My Refund?" tool on IRS.gov and on the official IRS mobile app, IRS2Go.

The IRS2Go app offers great mobile features
Users can check the status of an income tax refund within 24 hours after the IRS accepts their electronically filed return, or about four weeks after mailing a paper return.

The IRS2Go app also provides easy access to mobile-friendly payment options like IRS Direct Pay, offering a free, secure way to pay directly from a bank account. It can locate free tax help, connect to IRS social media accounts and can generate login security codes for certain IRS online services, allowing the retrieval of codes through IRS2Go instead of using text messages.

IRS Outreach Connection
The Outreach Connection page provides information for groups inside and outside the tax community. Subscribers to Outreach Connection can keep clients, employees, customers, constituents, partners and even families connected to tax-related useful information and materials for tax topics and issues that affect them.

This release is part of the Tax Time Guide, a series of news releases designed to help taxpayers get the information they need to file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, on IRS.gov.

Revenue Ruling 2022-04 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.

Revenue Ruling 2022-04 will be in IRB: 2022-10, dated March 7, 2022.

WASHINGTON — The Internal Revenue Service today updated its frequently asked questions (FAQs) on Higher Education Emergency Grants.

This updated FAQ adds questions 8 and 9 in (FS-2022-11) PDF.

In IR-2021-70, Emergency aid granted to students due to COVID is not taxable, the IRS issued FAQs on how students and higher education institutions should report pandemic-related emergency financial aid grants. These FAQs were subsequently updated on May 18, 2021.

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

More information about reliance is available.

IRS-FAQ

WASHINGTON –The Internal Revenue Service announced today that Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, has been revised, including expanding a section on reporting virtual currency. Form 14457 permits taxpayers who may face criminal prosecution for willful violation of tax law to voluntarily disclose information to the IRS that they failed to previously disclose.

Updates and additions to this form include:

The updates reflect input from practitioners and stakeholders and take into account trends in the type of financial asset that taxpayers hold.

“This is an important form and process for people who recognize it’s better to step forward and address their tax situations head-on, before facing IRS enforcement action,” said Doug O'Donnell, Deputy Commissioner Services and Enforcement. “The revised form includes a number of updates, and we encourage people to review the guidelines and consult a trusted tax professional.”

Thousands of taxpayers have used the Voluntary Disclosure Practice since its inception. It serves as a compliance option for taxpayers who have potential criminal exposure and wish to come into compliance with the tax laws. Those making such disclosure are still subject to civil examination and the payment of all applicable taxes, interest and penalties.

Taxpayers who did not commit any tax or tax-related crimes and wish to correct mistakes or file delinquent returns should consider other options available to comply with their tax and reporting obligations. The IRS encourages taxpayers to consult with professional tax or legal advisors in determining which option is the most appropriate.

A taxpayer’s voluntary disclosure must be timely, accurate and complete. The taxpayer must also cooperate with the IRS in determining the correct tax liability, and make full payment of the tax, interest and any applicable penalties.

Cooperation includes full payment of all tax, interest and penalties. A taxpayer who is unable to make full payment may request that the IRS consider other payment arrangements. If a taxpayer anticipates they cannot pay the total amount of tax, interest and penalties required, they must disclose this and submit a proposed payment arrangement and a completed, and executed, Collection Information Statement (Form 433-A). The burden is on the taxpayer to establish inability to pay, to the satisfaction of the IRS, based on full disclosure of all assets and income, domestic and foreign, under the taxpayer’s control.

For more information on the Voluntary Disclosure Practice, as well as other options to come into compliance with the law please visit:

WASHINGTON –To help taxpayers and tax professionals, the Internal Revenue Service today announced a special new page on IRS.gov to provide the latest details and information affecting the 2022 filing season and ongoing efforts by the agency to address the inventory of previously filed tax returns.

During this tax season, taxpayers face a number of issues due to critical tax law changes that took place in 2021 and ongoing challenges related to the pandemic. To raise awareness about these issues and provide people with the latest timely information, the IRS has created a special tax season web page. This page will provide people with a quick overview of information to help people filing tax returns as well as those who have previous year tax returns awaiting processing by the IRS.

“The IRS is taking numerous steps to keep this tax season going smoothly while also taking additional action to address the inventory of tax returns filed last year,” said IRS Commissioner Chuck Rettig. “We’re off to a good start processing tax returns and issuing refunds. But we want people to have an easy way to see the latest information. This new page provides a one-stop shop for the latest key information people and the tax community may need.”

The “special tax season alerts” page will be available through the IRS.gov home page and shared through social media and other channels.

The page will include the latest filing season updates. The IRS began tax season on Jan. 24, and in less than two weeks more than 4 million tax refunds have gone out worth nearly $10 billon. Millions more will go out in the weeks ahead as the IRS enters an important period of the tax season.

The page also includes links to important information related to ongoing efforts by the IRS to address the inventory of unprocessed tax returns filed before this year. This includes steps to stop more than a dozen common letters to taxpayers, and updates on IRS operations and the number of unprocessed tax returns.

“The combination of the pandemic, new tax laws and numerous other factors led to an unprecedented amount of unprocessed tax returns and correspondence remaining in the IRS inventory during 2021,” Rettig said. “We must continue pursuing innovative strategies while supporting the hard work and dedication of our employees to fulfill our commitment to return inventories to a healthy level before entering the 2023 filing season. These steps are making a difference. Refunds for tax returns and amended tax returns in the inventory continue to flow out to taxpayers.”

The IRS continues to urge taxpayers to carefully review their tax filings for accuracy and file electronically with direct deposit to speed refunds. Special tips are available in several places on IRS.gov, including these top 5 tips; basics on the 2022 tax season and IRS Tax Time Guide.

WASHINGTON – As part of ongoing efforts to provide additional help for people during this period, the IRS announced today the suspension of more than a dozen additional letters, including the mailing of automated collection notices normally issued when a taxpayer owes additional tax, and the IRS has no record of a taxpayer filing a tax return.

These mailings include balance due notices and unfiled tax return notices. The IRS entered this filing season with several million original and amended returns filed by individuals and businesses that have not been processed due to challenges of the historic pandemic and is taking this step to help avoid confusion for taxpayers and tax professionals.

“IRS employees are committed to doing everything possible with our limited resources to help people during this period,” said IRS Commissioner Chuck Rettig. “We are working hard, long hours pushing creative paths forward in an effort to be part of the solution, rather than the problem. Our employees continue to expend every effort to balance a confluence of multiple, unprecedented demands − including successfully starting the filing season, working our inventory of unprocessed tax returns as well as looking for additional ways to minimize burden for taxpayers, tax professionals and businesses.

“Our efforts are not limited to suspension of these additional letters and the possibility of similar actions going forward. We have redeployed and reallocated resources throughout the IRS and have implemented innovative strategies in an ongoing effort to provide a meaningful reduction in our inventories,” Rettig said.

These automatic notices have been temporarily stopped until the backlog is worked through. The IRS will continue to assess the inventory of prior year returns to determine the appropriate time to resume the notices.

Some taxpayers and tax professionals may still receive these notices during the next few weeks. Generally, there is no need to call or respond to the notice as the IRS continues to process prior year tax returns as quickly as possible.

However, if a taxpayer or tax professional believes a notice is accurate, they should act to rectify the situation for the well-being of the taxpayer. For example, the IRS cautions people with a balance due that interest and penalties can continue to accrue. In addition, IRS employees may in select circumstances issue notices to particular taxpayers to resolve specific compliance issues.

The IRS does not have the authority to stop all notices as many are legally required to be issued within a certain timeframe. The IRS will continue to assess other changes and system modifications that the IRS may be able to implement to assist taxpayers on an array of issues. The IRS will continue to make information available to taxpayers throughout the filing season.

The IRS encourages those who have a filing requirement and have yet to file a prior year tax return or to pay any tax due to promptly do so as interest and penalties will continue to accrue. Visit IRS.gov for payment options.

The suspended notices include:

WASHINGTON — The Internal Revenue Service's Low Income Taxpayer Clinic (LITC) Program office today announced highlights from its 2021 annual report. The report describes how LITCs provide representation, education and advocacy for individual taxpayers who are low-income or speak English as a second language (ESL).

The LITC Program is a federal grant program administered by the Taxpayer Advocate Service, led by National Taxpayer Advocate Erin M. Collins. LITCs represent individuals whose incomes are generally at or below 250% of the federal poverty guideline and who are seeking to resolve tax problems with the IRS, such as audits, appeals and tax collection disputes. LITCs can represent taxpayers in court as well as before the IRS. They also can provide information about taxpayer rights and responsibilities in different languages for ESL taxpayers. LITCs provide services for free or a small fee. They receive IRS grants but work independently to assist and advocate for taxpayers.

Thousands of taxpayers assisted
During 2020, LITCs represented nearly 20,000 taxpayers dealing with an IRS tax controversy and provided consultations or advice to another 18,000 taxpayers. They helped taxpayers secure more than $5.8 million in tax refunds and reduced or corrected taxpayers' liabilities by over $116 million. They also brought more than 2,900 taxpayers back into payment compliance.

Through outreach and education activities, LITCs strived to ensure individuals understood their rights as U.S. taxpayers by conducting more than 1,000 educational activities that were attended by nearly 134,000 individuals. Some 1,500 volunteers contributed to the success of LITCs by volunteering over 42,000 hours of their time. Nearly 65% of the volunteers were attorneys, certified public accountants or enrolled agents.

LITCs used a variety of approaches to successfully advocate for taxpayers. These included utilizing collection alternatives to resolve issues administratively within the IRS, litigating cases in the United States Tax Court and other federal courts, and elevating systemic issues through the Taxpayer Advocate Service's Systemic Advocacy Management System.

One success story among many
Here is one example of how an LITC assisted a taxpayer in need: A low-income taxpayer was working in a local grocery store making minimum wage. She was the sole breadwinner for her family of four and had never filed a federal income tax return.

The IRS sent her Statutory Notices of Deficiency for four tax years, asserting that she owed several thousands of dollars based on unreported income. Unsure what she could do to resolve the issue, the taxpayer sought help from an LITC.

The LITC evaluated the case and explained that she needed to contest the notices in the U.S. Tax Court. The LITC helped her file a Tax Court petition and argued that the taxpayer did not owe tax but instead was due refunds, as she was eligible for the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

The LITC’s advocacy on the taxpayer’s behalf was a success. She ultimately received over $16,000 in refunds, providing the taxpayer with a valuable financial lifeline. In addition to helping the taxpayer resolve her tax issue, the LITC educated her about tax administration and the tax law, including how to have future tax returns prepared and filed for free at a local Volunteer Income Tax Assistance site, and the availability of anti-poverty tax benefits such as the EITC and the CTC.

The full report contains extensive details about the LITC Program and more stories about the extraordinary results that LITCs achieved on behalf of their clients.

How to Become an LITC
Through the LITC Program, the IRS awards matching grants of up to $100,000 per year to qualifying organizations. If anyone is interested in learning more about the LITC Grant Program, they should contact Karen Tober at Karen.Tober@irs.gov or review Publication 3319, Grant Application and Guidelines.