Revenue Procedure 2021-32 adds one country, Chile, to the current published list of countries with which the United States has in force an information exchange agreement, such that interest paid to residents of such countries must be reported by payors to the extent required under Treas. Reg. §§ 1.6049-4(b)(5) and 1.6049-8(a). It also adds the Dominican Republic and Singapore to the current published list of countries with which Treasury and the IRS have determined it is appropriate to have an automatic exchange relationship with respect to the information collected under Treas. Reg. §§1.6049-4(b)(5) and 1.6049-8(a). 

Today, the IRS published the latest executive column “A Closer Look,” which features De Lon Harris, Commissioner, Small Business Self-Employed, Exam, discussing the tax implications for the rapidly growing cannabis/marijuana industry. “I see it as my responsibility to make sure my organization helps taxpayers navigate complex issues and provides the tools that we have available for them to be successful and compliant business owners,” said Harris. 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.

WASHINGTON – The Internal Revenue Service announced today that starting Oct. 28, a new $67 user fee will apply to any estate that requests a closing letter for its federal estate tax return.

The new user fee was authorized under final regulations, TD 9957, available today in the Federal Register. Closing letter requests must be made using Pay.gov. The IRS will provide further procedural details before the user fee goes into effect.

By law, federal agencies are required to charge a user fee to cover the cost of providing certain services to the public that confer a special benefit to the recipient. Moreover, agencies must review these fees every two years to determine whether they are recovering the cost of these services.

Under the final regulations, the IRS has determined that issuing closing letters is a service that confers a special benefit warranting a user fee. That’s because, though obtaining a closing letter from the IRS can be helpful to an executor of an estate, it is not required by law. Moreover, the estate has the option of obtaining from the IRS, free of charge, an account transcript, showing certain information from the estate tax return, comparable to that found in a closing letter. As noted in the final regulations, account transcripts can be used to confirm that an estate tax return examination has been completed and the IRS file has been closed, which is the reason most often cited for requesting a closing letter.

WASHINGTON − Farmers and ranchers who were forced to sell livestock due to drought may have an additional year to replace the livestock and defer tax on any gains from the forced sales, according to the Internal Revenue Service.

To qualify for relief, farmers or ranchers must have sold livestock on account of drought conditions in an applicable region. This is a county or other jurisdiction designated as eligible for federal assistance plus counties contiguous to it. Notice 2021-55, posted today on IRS.gov, lists applicable regions in 36 states and one U.S. territory.

The relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry, are not eligible.

The sales must be solely due to drought, causing an area to be designated as eligible for federal assistance. Livestock generally must be replaced within a four-year period, instead of the usual two-year period. The IRS is authorized to further extend this replacement period if the drought continues.

The one-year extension, announced in the notice, gives eligible farmers and ranchers until the end of their first tax year after the first drought-free year to replace the sold livestock. Details, including an example of how this provision works, can be found in Notice 2006-82, available on IRS.gov.

The IRS provides this extension to eligible farmers and ranchers who sold livestock on account of drought conditions in an applicable region that qualified for the four-year replacement period, if the applicable region is listed as suffering exceptional, extreme or severe drought conditions during any week between Sept. 1, 2020, and Aug. 31, 2021. This determination is made by the National Drought Mitigation Center.

As a result, eligible farmers and ranchers whose drought-sale replacement period was scheduled to expire on Dec. 31, 2021, in most cases now have until the end of their next tax year to replace the sold livestock. Because the normal drought-sale replacement period is four years, this extension impacts drought sales that occurred during 2017. The replacement periods for some drought sales before 2017 are also affected due to previous drought-related extensions affecting some of these localities.

More information on reporting drought sales and other farm-related tax issues can be found in Publication 225, Farmer’s Tax Guide, available on IRS.gov.

Notice 2021-55 explains the circumstances under which the four-year replacement period under section 1033(e)(2) is extended for livestock sold on account of drought. The Appendix to this notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions during the 12-month period ending August 31, 2021. Taxpayers may use this list to determine if an extension is available. 

Notice 2021-55 will be in IRB: 2021-41, dated October 12, 2021.

WASHINGTON – The IRS today introduced a new webpage that provides information to taxpayers whose large refunds are subject to further review by the Joint Committee on Taxation (JCT or Joint Committee).

By law, when taxpayers claim a federal tax refund or credit of more than $2 million ($5 million for a C corporation), the IRS must review the refund or credit and provide a report to the JCT, a non-partisan committee of the U.S. Congress. Refunds subject to this review are known as “Joint Committee Refund Cases.”

Taxpayers can now find answers to most questions about Joint Committee case reviews and links to additional resources at Large Tax Refunds and Credits Subject to Review by the Joint Committee on Taxation – What to Expect.

The new webpage covers the following topics:

A Joint Committee Refund Case may arise from the following:

The IRS estimates the new webpage will help hundreds of taxpayers. The agency notifies taxpayers who have Joint Committee Refund Cases that are subject to review. Taxpayers who have been contacted by an IRS agent should work with the agent assigned to their Joint Committee Refund Case.

WASHINGTON — The Internal Revenue Service has awarded new contracts to three private-sector collection agencies for collection of overdue tax debts. The new contracts begin Thursday following today’s expiration of the old contracts.

Beginning Thursday, Sept. 23, 2021, taxpayers with unpaid tax bills may be contacted by one of the following three agencies:

 
Notification by IRS and the private collection agencies
The IRS will always notify a taxpayer before transferring their account to a private collection agency (PCA).

How it works
The private collectors will identify themselves as contractors collecting taxes on behalf of the IRS. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act, and like IRS employees, must be courteous and must respect taxpayer rights.

Private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy.

Payment options
The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made directly to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. To find out more about available payment options, visit IRS.gov/Payments.

More information
The IRS established the Private Debt Collection program in 2016, as authorized under federal law, and contracted with several agencies to collect certain unpaid tax debts on the government’s behalf. To learn more about the private debt collection program, visit the Private Debt Collection page on IRS.gov. Additional information can be found at the following links:

Notice 2021-54 sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for September 2021 used under § 417(e)(3)(D), the 24-month average segment rates applicable for September 2021, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).

Notice 2021-54 will be in IRB: 2021-41, dated October 12, 2021.

WASHINGTON – The Internal Revenue Service today explained how expanded tax benefits can help both individuals and businesses give to charity before the end of this year.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, provides several provisions to help individuals and businesses who give to charity. The new law generally extends through the end of 2021 four temporary tax changes originally enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here is a rundown of these changes.

Deduction for individuals who don’t itemize; cash donations up to $600 qualify

Ordinarily, individuals who elect to take the standard deduction cannot claim a deduction for their charitable contributions. The law now permits these individuals to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to certain qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify to claim a limited deduction for cash contributions.

These individuals, 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 to most charitable organizations qualify. However, cash contributions made either to supporting organizations or to establish or maintain a donor advised fund do not qualify. Cash contributions carried forward from prior years do not qualify, nor do cash 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 being a donor, 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. See Publication 526 for more information on the types of organizations that qualify.

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 the individual’s volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items or other property.

100% limit on eligible cash contributions made by itemizers in 2021

Subject to certain limits, individuals who itemize may generally claim a deduction for charitable contributions made to qualifying charitable organizations. These limits typically range from 20% to 60% of adjusted gross income (AGI) and vary by the type of contribution and type of charitable organization. For example, a cash contribution made by an individual to a qualifying public charity is generally limited to 60% of the individual’s AGI. Excess contributions may be carried forward for up to five tax years.

The law now permits electing individuals to apply an increased limit (“Increased Individual Limit”), up to 100% of their AGI, for qualified contributions made during calendar-year 2021. Qualified contributions are contributions made in cash to qualifying charitable organizations.

As with the new limited deduction for nonitemizers, cash contributions to most charitable organizations qualify, but, cash contributions made either to supporting organizations or to establish or maintain a donor advised fund, do not. Nor do cash contributions to private foundations and most cash contributions to charitable remainder trusts

Unless an individual makes the election for any given qualified cash contribution, the usual percentage limit applies. Keep in mind that an individual’s other allowed charitable contribution deductions reduce the maximum amount allowed under this election. Eligible individuals must make their elections with their 2021 Form 1040 or Form 1040-SR.

Corporate limit increased to 25% of taxable income

The law now permits C corporations to apply an increased limit (Increased Corporate Limit) of 25% of taxable income for charitable contributions of cash they make to eligible charities during calendar-year 2021. Normally, the maximum allowable deduction is limited to 10% of a corporation’s taxable income.

Again, the Increased Corporate Limit does not automatically apply. C corporations must elect the Increased Corporate Limit on a contribution-by-contribution basis.

Increased limits on amounts deductible by businesses for certain donated food inventory

Businesses donating food inventory that are eligible for the existing enhanced deduction (for contributions for the care of the ill, needy and infants) may qualify for increased deduction limits. For contributions made in 2021, the limit for these contribution deductions is increased from 15% to 25%. For C corporations, the 25% limit is based on their taxable income. For other businesses, including sole proprietorships, partnerships, and S corporations, the limit is based on their aggregate net income for the year from all trades or businesses from which the contributions are made. A special method for computing the enhanced deduction continues to apply, as do food quality standards and other requirements.

Keep good records

The IRS reminds individuals and businesses that 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 donations of property, additional recordkeeping rules apply, and may include filing a Form 8283 and obtaining a qualified appraisal in some instances.

For details on how to apply the percentage limits and a description of the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.

The IRS also encourages employers to help get the word out about the advanced payments of the Child Tax Credit because they have direct access to many employees and individuals who receive this credit. More information on the Advanced Child Tax Credit is available on IRS.gov.

For more information about other Coronavirus-related tax relief, visit IRS.gov/Coronavirus.

WASHINGTON – The Internal Revenue Service today reminds taxpayers about the upcoming Oct. 15 due date to file 2020 tax returns. People who asked for an extension should file on or before the extension deadline to avoid the penalty for filing late. Electronic filing options, such as IRS Free File, are still available.

Although Oct. 15 is the last day for most people to file, some taxpayers may have more time. They include:

There is usually no penalty for failure to file if the taxpayer is due a refund. However, people who wait too long to file and claim a refund, risk losing it altogether. Those who have yet to file a 2020 tax return, owe tax, and did not request an extension can generally avoid additional penalties and interest by filing the return as soon as possible and paying any taxes owed.

Schedule federal tax payments electronically

Taxpayers can file now and schedule their federal tax payments up to the Oct. 15 due date. They can pay online, by phone or with their mobile device and the IRS2Go app. When paying federal taxes electronically taxpayers should remember:

View tax account online

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. This includes:

Additionally, taxpayers can view the:

Choose direct deposit for refunds

The safest and fastest way for people to get a refund is to file electronically and have their refund electronically deposited into their bank or other financial account. Taxpayers can use direct deposit to deposit their refund into one, two or even three accounts. They can also purchase U.S. Savings Bonds.

People who don’t have a bank account can go to the FDIC website or the National Credit Union Association to use their Credit Union Locator Tool for information on where to open an online bank or credit union account. Veterans can use the Veterans Benefits Banking Program (VBBP) for access to financial services at participating banks.

Monthly advance Child Tax Credit payments

Millions of American families currently receive monthly advance Child Tax Credit payments either through direct deposit or paper check. These payments represent half of the increased Child Tax Credit from the American Rescue Plan and will continue through the end of the year.

For those eligible and on extension for their 2020 tax returns, the IRS is using previous year tax information, 2019 for most, to determine the credit amount. The IRS urges people who requested an extension to file as soon as possible if they experienced a major change such as the birth of a child in 2020. Once that return is processed, the IRS can calculate the credit based on the 2020 return and pay it out in full over the remaining months in 2021.

Those who file and have their 2020 return processed on or before Nov. 1, may be eligible for two payments of half the credit in 2021. Similarly, people who file and have their return processed on or before Nov. 29, may be eligible for one payment.

To speed the processing of returns and to avoid delays, the IRS urges everyone to file electronically.

Complete information on the advance Child Tax Credit is available on IRS.gov.

Act soon to claim missing stimulus payments

For anyone who missed out on the first two rounds of stimulus payments, it’s not too late. People who didn't get a first and second Economic Impact Payment or got less than the full amounts can get that missing money if they’re eligible for it, but they need to act soon.

When it comes to missing stimulus payments, it’s critical that eligible people file a 2020 tax return or use the Child Tax Credit Non-filer Sign-up Tool soon even if they don’t usually file to provide information the IRS needs to send the payments. The IRS will also automatically evaluate the taxpayer’s eligibility for the third economic impact payment when the 2020 return is processed.

The IRS will continue to issue eligible taxpayers their third economic impact payment and plus-up payments through the end of 2021. File a 2020 tax return electronically as soon as possible to give the IRS time to process and issue the payments before the end of 2021.

IRS.gov assistance

Taxpayers will find answers to many questions using the Interactive Tax Assistant (ITA), a tax law resource that works using a series of questions and responses. Additionally, the IRS provides payment options at IRS.gov/payments and tax information is available in several languages by clicking on the “English” tab on the front page of IRS.gov.