WASHINGTON — The Internal Revenue Service and the Treasury Department announced today that millions of American families will soon receive their final advance Child Tax Credit (CTC) payment for the month of December. Eligible families who did not receive advance payments can claim the Child Tax Credit on their 2021 federal tax return to receive missed payments and the other half of the credit.

This final batch of advance monthly payments for 2021, totaling about $16 billion, will reach more than 36 million families across the country. Most payments are being made by direct deposit.

Under the American Rescue Plan, eligible families have received more than 200 million payments totaling more than $93 billion. Most eligible families received payments dated July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec 15. For eligible families, each payment is up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6 through 17.

Here are more details on the December payments:

Claim the full Child Tax Credit on the 2021 tax return

Eligible families who did not receive any advance Child Tax Credit payments can claim the full amount of the Child Tax Credit on their 2021 federal tax return, filed in 2022. This includes families who don’t normally need to file a return.

Families who received advance payments will need to file a 2021 tax return and compare the advance Child Tax Credit payments they received in 2021 with the amount of the Child Tax Credit they can properly claim on their 2021 tax return.

To help taxpayers reconcile the advance payments, the IRS will send Letter 6419 in January 2022 with the total amount of advance Child Tax Credit payments taxpayers received in 2021 and the number of qualifying children used to calculate the advance payments. People should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.

See Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return for more information.

Links to online tools, answers to frequently asked questions and other helpful resources are available on the IRS’s special advance CTC 2021 page.

Announcement 2021-18 revokes Announcement 2001-33, 2001-17 IRB 1137.  Announcement 2001-33 provided tax-exempt organizations with reasonable cause for purposes of relief from the penalty imposed under § 6652(c)(1)(A)(ii) of the Internal Revenue Code if they reported compensation on their annual information returns in the manner described in Announcement 2001-33 instead of in accordance with certain form instructions.  The Announcement instructs affected tax-exempt organizations to follow the specific instructions to the Form 990, Form 990-EZ, and Form 990-PF, effective for annual information returns required for taxable years beginning on or after January 1, 2022 (the earliest of which will be filed in May 2023).

Announcement 2021-18 will be in IRB: 2021-52, dated 12/27/2021.

Notice 2021-66 provides guidance under the Infrastructure Investment and Jobs Act (IIJA), Public Law 117-58, 135 Stat. 429 (November 15, 2021), which reinstates the excise taxes imposed by sections 4661 and 4671 (the Superfund chemical taxes), effective July 1, 2022.  Section 80201(c)(3) of the IIJA and requires the Treasury Department and IRS to publish an initial list of taxable substances under section 4672(a) not later than January 1, 2022.  This notice provides that initial list.

The notice also addresses the registration requirements imposed by section 4662(b)(10)(C) and (c)(2)(B) to exempt certain sales and uses of taxable chemicals from tax, and provides the procedural rules that apply to taxpayers subject to the reinstated Superfund chemical taxes.  In addition, pending further guidance, the notice suspends Notice 89-61, 1989-1 C.B. 717, as modified by Notice 95-39, 1995-1 C.B. 312, which prescribed the former process for certain persons to request that certain substances be added to or removed from the list of taxable substances under section 4672(a)(3) as previously in effect.  Finally, the notice requests comments on whether any issues related to the reinstated Superfund chemical taxes require clarification or additional guidance.

Notice 2021-66 will be in IRB: 2021-52, dated 12/27/2021.

WASHINGTON – Victims of this weekend’s tornadoes in Kentucky will have until May 16, 2022, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

Following the recent disaster declaration issued by the Federal Emergency Management Agency (FEMA), the IRS is providing this relief to taxpayers affected by storms, tornadoes and flooding that took place starting on Dec. 10 in parts of Kentucky. Currently, relief is available to affected taxpayers who live or have a business in Caldwell, Fulton, Graves, Hopkins, Marshall, Muhlenberg, Taylor and Warren counties. But the IRS will provide the same relief to any other localities designated by FEMA in Kentucky or neighboring states. 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 Dec. 10. As a result, affected individuals and businesses will have until May 16 to file returns and pay any taxes that were originally due during this period. This includes 2021 individual income tax returns due on April 18, as well as various 2021 business returns normally due on March 15 and April 18. Among other things, this means that affected taxpayers will have until May 16 to make 2021 IRA contributions.

In addition, farmers who choose to forgo making estimated tax payments and normally file their returns by March 1 will now have until May 16, 2022 to file their 2021 return and pay any tax due.

The May 16 deadline also applies to quarterly estimated income tax payments due on Jan. 18 and April 18. Among other things, this means that individual taxpayers can skip making the fourth quarter estimated tax payment, normally due Jan. 18, 2022, and instead include it with the 2021 return they file, on or before May 16. In addition, the quarterly payroll and excise tax returns normally due on Jan. 31 and May 2, 2022 are also now due on May 16.    

In addition, penalties on payroll and excise tax deposits due on or after Dec. 10 and before Dec. 27 will be abated as long as the deposits are made by Dec. 27, 2021.

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 2021 return normally filed next year), or the return for the prior year, 2020 in this instance. Be sure to write the FEMA declaration number – 4630DR − 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 these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Special rule helps most people get a deduction of up to $600 for gifts to charity; National Council of Nonprofits and Independent Sector highlight how donations can help the nation’s charitable community

WASHINGTON — The Internal Revenue Service joined today with several leading nonprofit groups to highlight a special tax provision that allows more people to deduct donations to qualifying charities on their 2021 federal income tax return.

The Independent Sector and National Council of Nonprofits joined with the IRS to highlight this pandemic-related provision where married couples filing jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations.

Under the temporary law, taxpayers don’t need to itemize deductions on their tax returns to take advantage of this, which creates tax-favorable donation options not normally available to about 90 percent of tax filers. Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But this special provision permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations by year’s end, Dec. 31, 2021.

At a time when many charitable groups are struggling during the pandemic, the IRS highlights the new provision and urges people to make sure they donate to a qualifying charity. The special Tax Exempt Organization Search tool on IRS.gov can help people make sure they donate to a qualified charity.

“The pandemic has created unique challenges for tax-exempt organizations, and we want to make sure people don’t overlook this special tax deduction that’s available this year,” said Sunita Lough, IRS Commissioner of the Tax Exempt and Government Entities division.  “Donations to qualifying charities can reduce people’s tax bill when they file in 2022.”

Leaders from the National Council of Nonprofits and the Independent Sector, two prominent organizations representing the nation’s charitable groups, highlighted that the special tax provision can provide additional assistance to organizations hit hard by the pandemic. Some groups have seen reduced charitable donations and others have seen increased demand for their services during this unprecedented period.

“At a time when nonprofits continue to see immense demand for services, are facing significant challenges hiring and retaining staff to deliver those services--every donation counts," said David L. Thompson, Vice President of Public Policy at National Council of Nonprofits. "We’re thankful that the universal (or non-itemizer) deduction is available through the end of the year to encourage every taxpayer give a little bit more to the missions they care about.”

“Over the past two years, charities have helped America confront generational health, economic and social crises. They have answered the call to serve their communities despite facing lost revenue, disrupted operations and dramatically increased need,” said Daniel J. Cardinali, president and CEO of Independent Sector. “Congress has sent a powerful message that everyone – not just those who itemize on their taxes – has a role to play in helping meet this moment, and we know people in America will respond in kind. We hope charitable contributions and deductions will increase in the coming years.”

Included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, a more limited version of this temporary tax benefit originally only applied to tax-year 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extended it through the end of 2021.

Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify. Under this provision, tax year 2021 individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.

Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. Cash contributions don't include the value of volunteer services, securities, household items or other property.

The IRS reminds taxpayers that to receive a deduction, they must donate to a qualified charity. To check the status of a charity, they can use the IRS Tax Exempt Organization Search tool.

Cash contributions to most charitable organizations qualify for a deduction. But contributions made either to supporting organizations or to establish or maintain a donor advised fund do not. Contributions carried forward from prior years do not qualify, nor do contributions to most private foundations and most cash contributions to charitable remainder trusts.

In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of their donor status, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.

The IRS encourages all donors to be wary of scams masked as charitable solicitations. Criminals create fake charities to take advantage of the public’s generosity. Fake charities once again made the IRS's Dirty Dozen list of tax scams for 2021. In October, the IRS also joined international organizations and other regulators in highlighting the fight against charity fraud.

Keep good records

Special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash.

For details on the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.

Revenue Procedure 2021-54 prescribes discount factors for the 2021 accident year for insurance companies to compute discounted unpaid losses under § 846 of the Internal Revenue Code and discounted estimated salvage recoverable under § 832. 

Revenue Procedure 2021-54 will be in IRB:  2021-52, dated 12/27/2021.

Today, the IRS published the latest executive column “A Closer Look,” which features Sunita Lough, Commissioner, Tax Exempt and Government Entities Division, providing information for taxpayers on charitable giving. “We are committed to ensuring that taxpayers who generously make a difference through their charitable support are aware of the relief the government provides for them,” said Lough. 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.

Check here for prior posts and new updates.

Today, the IRS published the latest executive column “A Closer Look,” which features Fred Schindler, Director, Collection, Small Business/Self-Employed, discussing how the IRS’s Collection organization has taken a number of actions to help taxpayers since the onset of COVID-19, including some policy changes that will continue beyond the pandemic. “The IRS’s Collection organization has played an important role in efforts to implement economic relief measures passed by Congress,” said Schindler. “We will continue to carry out our mission of collecting delinquent taxes and securing delinquent tax returns through the fair and equitable application of the tax laws while respecting taxpayer rights.” 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.

Check here for prior posts and new updates.

In the summer, the Treasury Department and the IRS finalized Schedules K-2 and K-3 for Forms 1065, 1120-S, and 8865 for tax year 2021. The schedules are designed to provide greater clarity for partners and shareholders on how to compute their U.S. income tax liability with respect to items of international tax relevance, including claiming deductions and credits. The Treasury Department and the IRS also finalized instructions associated with the Schedules K-2 and K-3. However, the tax year 2021 Forms, to which Schedules K-2 and K-3 must be attached, have not yet been finalized. Questions have arisen whether the Schedules K-2 and K-3 must be attached to tax year 2020 Forms for partnerships or S corporations with 2021 short tax years; or, in the case of Form 8865, filers of Form 8865 with 2021 short tax years. New FAQs address questions concerning Schedules K-2 and K-3 with respect to 2021 short tax years for pass-through entities and filers of Form 8865.

WASHINGTON — The Internal Revenue Service today reminded retirement plan participants and individual retirement account owners that payments, called required minimum distributions, must usually be taken by Dec. 31.

Required minimum distributions (RMDs) generally are minimum amounts that retirement plan account owners must withdraw annually starting with the year they reach 72 or, if later, the year they retire. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 72, even if they’re still working. RMD amounts not timely withdrawn from accounts may be subject to penalties.

Individuals who reached 70 ½ in 2019, (70th birthday was June 30, 2019 or earlier) did not have an RMD due for 2020, but will have to take one by Dec. 31, 2021.

Individuals who reach 72 in 2021 (and their 70th birthday was July 1, 2019 or later) have their first RMD due by April 1, 2022.

The required distribution rules apply to:

Roth IRAs do not require distributions while the original owner is alive.

An IRA trustee, or plan administrator, must report the amount of the RMD to the IRA owner. An IRA owner, or trustee, must calculate the RMD separately for each IRA owned. However, they can choose to withdraw the total amount from one or more of the IRAs. In contrast, RMDs required from workplace retirement plans must be taken separately from each plan. Not taking a required distribution, or not withdrawing enough, could mean a 50% excise tax on the amount not distributed.

The RMD is based on the taxpayer’s life expectancy and their account balance. Often, a trustee will use Form 5498, IRA Contribution Information, to report the RMD to the recipient. For most taxpayers, life expectancy used to calculate the RMD is based on Uniform Lifetime Table III in Publication 590-B, Distributions from IRAs. Individuals can use online worksheets on IRS.gov to figure the RMD.

2020 RMDs
An IRA owner or beneficiary who received an RMD in 2020 had the option of returning it to their account or other qualified plan to avoid paying taxes on that distribution. A 2020 RMD that qualified as a coronavirus-related distribution may be repaid over a 3-year period or have the taxes due on the distribution spread over three years. A 2020 withdrawal from an inherited IRA could not be repaid to the inherited IRA but may be spread over three years for income inclusion.

IRS online tools and publications can help
Taxpayers can find frequently asked questions, forms and instructions and easy-to-use tools at IRS.gov.

• FAQs regarding Required Minimum Distributions
• Individual Retirement Arrangements (IRAs)

Coronavirus Relief for Retirement Plans and IRAs