WASHINGTON – The Internal Revenue Service today provided answers regarding Coronavirus State and Local Fiscal Recovery Funds (SLFR Funds). These funds give eligible state and local governments a substantial infusion of  resources to meet pandemic response needs.

The answers are in FAQs (FS-2021-16) and detail the tax consequences for   individual recipients and the reporting requirements for the states and local governments and employers, as applicable.

Some SLFR Fund recipients may have to report certain payments as income and may owe tax depending on the purpose of the payment. Today’s FAQs also provide answers regarding payments used to assist with childcare or other basic needs.

States and local government administrators will find answers regarding their filing requirements, including when Forms 1099 need to be filed.

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 — Victims of Hurricane Ida throughout Mississippi now have additional time--until Jan. 3, 2022--to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

Following the recent decision by the Federal Emergency Management Agency (FEMA) to add 63 counties to its Oct. 22 disaster declaration, the IRS is offering this expanded relief to these newly-designated localities, as well as the 19 counties listed in the original FEMA declaration.

Previously, the IRS relief period for the 63 newly-designated counties had ended on Nov. 1. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The updated relief, now covering the entire state of Mississippi, postpones various tax filing and payment deadlines that occurred starting on Aug. 28, 2021. As a result, affected individuals and businesses will have until Jan. 3, 2022, 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 2020 return that ran out on Oct. 15, 2021, will now have until Jan. 3, 2022, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The Jan. 3, 2022 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2021, and the quarterly payroll and excise tax returns normally due on Nov. 1, 2021. Businesses with an original or extended due date also have the additional time including, among others, calendar-year partnerships and S corporations whose 2020 extensions ran out on Sept. 15, 2021 and calendar-year corporations whose 2020 extensions ran out on Oct. 15, 2021. It also applies to calendar-year tax-exempt organizations whose 2020 extensions ran out on Nov. 15, 2021.

In addition, penalties on payroll and excise tax deposits due on or after Aug. 28, 2021 and before Sept. 13, will be abated as long as the deposits were made by Sept. 13, 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). Be sure to write the FEMA declaration number – EM-3569 associated with the earlier relief or EM-4626 for the new relief−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 Ida and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

WASHINGTON — The Internal Revenue Service today unveiled a new how-to video series enabling taxpayers to avoid potential scams by considering and applying for an Offer in Compromise (OIC) themselves and avoid paying excessive fees to companies advertising outlandish claims.

"We encourage eligible taxpayers in real financial distress to consider looking into an Offer in Compromise to resolve their tax issues," said IRS Commissioner Chuck Rettig. "People also need to use caution with the program. Some companies routinely overstate how they can help with this program and clear up people’s back taxes for pennies on the dollar. A quick visit to IRS.gov can provide important information to help people with this program."

An Offer in Compromise allows you to settle your tax debt for less than the full amount you owe if you qualify. It may be a legitimate option if you can't pay your full tax liability or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances when making that determination. The OIC program serves an important purpose for a select group of taxpayers.

The IRS periodically warns against hiring and paying needless fees to these "Offer in Compromise mills" that contort the IRS program into something it's not and mislead people who have no chance of meeting the requirements while charging excessive fees, often thousands of dollars. OIC mills were listed in the last two annual IRS Dirty Dozen lists of tax scams to avoid.

"I encourage taxpayers who may qualify for an Offer in Compromise to watch these videos and review information on IRS.gov to help them determine if the program is right for them," Rettig said. "Don't go to costly promoters advertising on television or radio who can make overstated claims or suggestions that the IRS will accept an OIC without even reviewing your situation first."

The video playlist marks another improvement for IRS online educational videos by breaking the videos’ information out into easy-to-navigate chapters and sections that coincide with the layout of the OIC booklet and forms. It also offers taxpayers the ability to bookmark information they’d like to revisit later. This new OIC video playlist provides:

The vast majority of tax professionals are honest and don't make false claims about getting taxpayers special deals that only they can get. Taxpayers should consult a trusted reputable tax professional when needed. The videos and web materials make it easier for taxpayers to navigate the OIC process on their own.

IRS.gov contains complete information on the collection process and payment options. Publication 594, The IRS Collection Process, also provides helpful information on the options available to taxpayers. Form 656 Booklet provides detailed instructions for submitting an OIC and includes all of the necessary financial forms.

Some taxpayers may not be required to pay the $205 OIC application fee or the required payments, depending on their income and the basis of their offer. Taxpayers can determine if they qualify for the waiver of fees and payment(s) by consulting the Low-Income Guidelines in Form 656. The low-income guideline exception applies only to individuals.

All publications and forms are on IRS.gov or taxpayers may order copies by calling 1-800-829-3676. All publications and forms are available for free. Taxpayers may feel they need the assistance of a qualified tax professional to prepare and submit an OIC. Taxpayers may contact local or state tax professional associations for enrolled agents, CPAs or attorneys to locate someone who has the education and experience to assist them.

WASHINGTON – The Internal Revenue Service today announced the launch of an improved identity verification and sign-in process that enables more people to securely access and use IRS online tools and applications.

Taxpayers using the new mobile-friendly verification procedure can gain entry to existing IRS online services such as the Child Tax Credit Update Portal, Online Account, Get Transcript Online, Get an Identity Protection PIN (IP PIN) and Online Payment Agreement. Additional IRS applications will transition to the new method over the next year.

“Identity verification is critical to protect taxpayers and their information. The IRS has been working hard to make improvements in this area, and this new verification process is designed to make IRS online applications as secure as possible for people,” said IRS Commissioner Chuck Rettig. “To help taxpayers and the tax community, we are improving the accessibility of online tools that help families manage their Child Tax Credit, check on their IRS accounts and securely perform other routine tasks online.”

The new process can reach more people through the expanded use of identity documents and increased help desk assistance for taxpayers who encounter a problem when attempting to verify their identity online. Developed under the Secure Access Digital Identity initiative (SADI), the new process complies with a federal mandate.

To provide verification services, the IRS is using ID.me, a trusted technology provider. The new process is one more step the IRS is taking to ensure that taxpayer information is provided only to the person who legally has a right to the data.

The IRS also integrated this new account-creation process into some applications used by tax professionals, including those used to request powers of attorney or tax information authorizations online using Tax Pro Account or to submit Forms 2848 and 8821 online. 

Accessing IRS tools

When accessing the tools listed above, taxpayers will be asked to sign in with an ID.me account. People who already have IRS usernames may continue to use their credentials from the old system to sign-in until summer 2022, but are prompted to create an ID.me account as soon as possible. Anyone with an existing ID.me account from the Child Tax Credit Update Portal, or from another government agency, can sign in with their existing credentials.

To verify their identity with ID.me, taxpayers need to provide a photo of an identity document such as a driver’s license, state ID or passport. They’ll also need to take a selfie with a smartphone or a computer with a webcam. Once their identity has been verified, they can securely access IRS online services.

Taxpayers who need help verifying their identity or submitting a support ticket can visit the ID.me IRS Help Site.

WASHINGTON — The Internal Revenue Service Advisory Council today issued its annual report for 2021, including recommendations to the IRS on new and continuing issues in tax administration.
 
The IRSAC is a federal advisory committee that provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public. IRSAC members offer constructive observations regarding current or proposed IRS policies, programs and procedures.

The 2021 Public Report includes recommendations on 24 issues, which cover a broad range of topics including:

The IRSAC is administered under the Federal Advisory Committee Act by the Office of National Public Liaison, part of IRS Communications and Liaison, and draws its members from the taxpaying public, the tax professional community, representatives of the low-income community, small and large businesses, tax-exempt and government entities, the payroll industry and academia. Five subgroups report to the parent IRSAC: Information Reporting, Large Business & International, Small Business/Self-Employed, Tax Exempt/Government Entities and Wage & Investment.

Commissioner Chuck Rettig and IRS executives thanked members of the council whose terms end this year:

• Alexandra Cruz – Cruz served as Chair of the Information Reporting Subgroup
• Ben Deneka – Deneka served as Chair of the IRSAC
• Deborah Fox – Fox served on the Information Reporting Subgroup
• April Goff – Goff served as Chair of the Tax Exempt/Government Entities Subgroup
• Antonio Gonzalez – Gonzalez served on the Wage & Investment Subgroup
• Martin Rule – Rule served on the Wage & Investment Subgroup
• Dan Welytok – Welytok served on the Tax Exempt/Government Entities Subgroup
• Mary Jo Werner – Werner served on the Small Business/Self-Employed Subgroup
• Charles Yovino – Yovino served on the Tax Exempt/Government Entities Subgroup

The full 2021 IRSAC Public Report (.pdf) is available at IRS.gov.

WASHINGTON – The Internal Revenue Service today announced that, effective Nov. 15, 2021, tax professionals are able to order up to 30 Transcript Delivery System (TDS) transcripts per client through the Practitioner Priority Service® line. This is an increase from the previous 10 transcripts per client limit.

“Increasing the number of transcripts a caller can receive addresses the concerns the IRS has received from PPS callers. This is another example of addressing concerns from our partners and stakeholders,” said Ken Corbin, the Wage and Investment Commissioner and the IRS  Taxpayer Experience Officer.

Through PPS, tax professionals can order a variety of transcripts. Practitioners can receive transcripts for up to five clients per call. There’s no change to the number of clients.

Transcripts available under this newly-expanded limit include the:

Transcripts not listed above continue to be limited to 10 per client and count toward the total of 30 transcripts per client.

Tax professionals will continue to receive TDS transcripts in their e-Services Secure Object Repository mailboxes. The change also applies to other IRS toll-free lines.

Ordering transcripts online

Tax practitioners can continue to order TDS transcripts using the Transcript Delivery System application on IRS.gov. Individual taxpayers can request their own TDS transcripts using Get Transcript. These tools remain the fastest way to receive transcripts.

More information is available at Transcript Types and Ways to Order Them on IRS.gov.

WASHINGTON – The Internal Revenue Service today issued Notice 2021-63 to make clear how the temporary 100% business deduction for food or beverages from restaurants applies to taxpayers properly applying the rules of Revenue Procedure 2019-48 for using per diem rates.

Previously, the IRS issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020, which added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants, as long as the expense is paid or incurred in 2021 or 2022.

For a taxpayer properly applying the rules of Revenue Procedure 2019-48, Notice 2021-63 provides a special rule that allows the taxpayer to treat the full meal portion of a per diem rate or allowance as being attributable to food or beverages from a restaurant beginning Jan. 1, 2021, through Dec. 31, 2022.

Taxpayers should refer to section 6.05 of Revenue Procedure 2019-48 to determine the meal portion of a per diem rate or allowance paid or incurred.

More information for businesses seeking coronavirus-related tax relief can be found at IRS.gov.

Notice 2021-63 provides guidance regarding the temporary 100-percent deduction for expenses that are paid or incurred after December 31, 2020, and before January 1, 2023, for food or beverages provided by a restaurant for purposes of § 274(n)(2)(D) of the Internal Revenue Code. In particular, the notice sets forth a special rule that allows a taxpayer to treat the meal portion of a per diem rate or allowance as being attributable to food or beverages provided by a restaurant.

Notice 2021-63 will be in IRB: 2021-49, dated December 6, 2021.

WASHINGTON — Wildfire victims in parts of California now have until Jan. 3, 2022, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today. Under relief provided in August, these extensions were generally due to run out on Nov. 15. 

The IRS is providing this additional relief, based on the recent Federal Emergency Management Agency (FEMA) decision to end the incident period for this disaster declaration on Oct. 25. By law, the IRS must provide disaster relief until at least 60 days after the end of the FEMA-designated incident period.

Accordingly, the IRS is now providing more time to any area of California designated by FEMA for either individual or public assistance. Currently, this includes Lassen, Nevada, Placer, Plumas, Tehama and Trinity counties. Any jurisdiction added to the FEMA declaration will automatically receive the IRS relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

This relief postpones various tax filing and payment deadlines that occurred starting on July 14, 2021. As a result, affected individuals and businesses will have until Jan. 3, 2022, 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 2020 return that ran out on Oct. 15, 2021, will now have until Jan. 3, 2022, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The Jan. 3, 2022 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2021, and the quarterly payroll and excise tax returns normally due on Aug. 2 and Nov. 1, 2021. Businesses with an original or extended due date also have the additional time including, among others, calendar-year partnerships and S corporations whose 2020 extensions ran out on Sept. 15, 2021 and calendar-year corporations whose 2020 extensions ran out on Oct. 15, 2021. It also applies to calendar-year tax-exempt organizations whose 2020 extensions run out on Nov. 15, 2021.

In addition, penalties on payroll and excise tax deposits due on or after July 14, 2021 and before July 29, will be abated as long as the deposits were made by July 29, 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). Be sure to write the FEMA declaration number – DR-4610 −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 wildfires and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Revenue Ruling 2021-23 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 2021-23 will be in IRB:  2021-49, dated December 6, 2021.