WASHINGTON — The IRS has set forth the information that taxpayers will be required to include for a research credit claim for refund to be considered valid. Existing Treasury Regulations require that for a refund claim to be valid, it must set forth sufficient facts to apprise IRS of the basis of the claim. The Chief Counsel memorandum will be used to improve tax administration with clearer instructions for eligible taxpayers to claim the credit while reducing the number of disputes over such claims.

Effective tax administration entails ensuring taxpayers understand what is required to support the claim for the research and experimentation (R&E) credit. Each year, the IRS receives thousands of R&E claims for credits in the hundreds of millions of dollars from corporations, businesses, and individual taxpayers. Claims for research credit under IRC Section 41 are currently examined in a substantial number of cases and consume significant resources for both the IRS and taxpayers. 

The Chief Counsel legal advice released today is the result of ongoing efforts to manage research credit issues and resources in the most effective and efficient manner. By requiring taxpayers to provide the information referenced below, the IRS will be better able to determine upfront if an R&E credit claim for refund should be paid immediately or whether further review is needed. 

Specifically, theopinion provides that for aSection 41 research credit claim for refund to be considered a valid claim, taxpayers are required to provide the following information at the time the refund claim is filed with the IRS: 

The IRS will provide a grace period [until January 10, 2022] before requiring the inclusion of this information with timely filed Section 41 research credit claims for refund. Upon the expiration of the grace period, there will be a one-year transition period during which taxpayers will have 30 days to perfect a research credit claim for refund prior to the IRS’ final determination on the claim. Further details will be forthcoming; however, taxpayers may begin immediately providing this information. 

The IRS plans to continue engaging with stakeholders on research credit issues. Comments may be sent to IRS.Feedback.RECredit.Claims@irs.gov.

WASHINGTON – Today, the Internal Revenue Service is updating its process for certain frequently asked questions (FAQs) on newly enacted tax legislation. The IRS is updating this process to address concerns regarding transparency and the potential impact on taxpayers when these FAQs are updated or revised. At the same time, the IRS is also addressing concerns regarding the potential application of penalties to taxpayers who rely on FAQs by providing clarity to taxpayers as to their ability to rely on FAQs for penalty protection. 

Significant FAQs on newly enacted tax legislation, as well as any later updates or revisions to these FAQs, will now be announced in a news release and posted on IRS.gov in a separate Fact Sheet. These Fact Sheet FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of Fact Sheet FAQs will be maintained on IRS.gov to ensure that, if a Fact Sheet FAQ is later changed, taxpayers can locate the version they relied on if they later need to do so. In addition to significant FAQs on new legislation, the IRS may apply this updated process in other contexts, such as when FAQs address emerging issues. 

To address concerns about the potential application of penalties to taxpayers who rely on an FAQ, the IRS is today releasing a statement clarifying that if a taxpayer relies on any FAQ (including FAQs released before today) in good faith and that reliance is reasonable, the taxpayer will have a “reasonable cause” defense against any negligence penalty or other accuracy-related penalty if it turns out the FAQ is not a correct statement of the law as applied to the taxpayer’s particular facts. For more information on taxpayer reliance, see the General Overview of Taxpayer Reliance on Guidance Published in the Internal Revenue Bulletin and FAQs. 

As part of today’s revision of the FAQ process, the following legend will be added to Fact Sheet FAQs:                                                                                                                

These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so. 

General Overview of Taxpayer Reliance on
Guidance Published in the Internal Revenue Bulletin and FAQs

Guidance Published in the Internal Revenue Bulletin 

The Internal Revenue Bulletin (Bulletin) is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. 

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. 

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. 

Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Rulings not published in the Bulletin will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. 

FAQs 

FAQs are a valuable alternative to guidance published in the Bulletin because they allow the IRS to more quickly communicate information to the public on topics of frequent inquiry and general applicability. FAQs typically provide responses to general inquiries rather than applying the law to taxpayer-specific facts and may not reflect various special rules or exceptions that could apply in any particular case. FAQs that have not been published in the Bulletin will not be relied on, used or cited as precedents by Service personnel in the disposition of cases. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. Only guidance that is published in the Bulletin has precedential value. 

Notwithstanding the non-precedential nature of FAQs, a taxpayer’s reasonable reliance on an FAQ (even one that is subsequently updated or modified) is relevant and will be considered in determining whether certain penalties apply. Taxpayers who show that they relied in good faith on an FAQ and that their reliance was reasonable based on all the facts and circumstances will have a valid reasonable cause defense and will not be subject to a negligence penalty or other accuracy-related penalty to the extent that reliance results in an underpayment of tax. See Treas. Reg. § 1.6664-4(b) for more information. In addition, FAQs that are published in a Fact Sheet that is linked to an IRS news release are considered authority for purposes of the exception to accuracy-related penalties that applies when there is substantial authority for the treatment of an item on a return. See Treas. Reg. § 1.6662-4(d) for more information.

WASHINGTON — The Internal Revenue Service and the Treasury Department announced today that millions of American families are now receiving their advance Child Tax Credit (CTC) payment for the month of October.

This fourth batch of advance monthly payments, totaling about $15 billion, is reaching about 36 million families today across the country. The majority of payments will be issued by direct deposit. 

Under the American Rescue Plan, most eligible families received payments dated July 15, Aug. 13 and Sept. 15. Future payments are scheduled for Nov. 15 and Dec. 15. For these 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. The vast majority will be issued by direct deposit. 

Here are more details on those payments:

• • Families will see the direct deposit payments in their accounts starting Oct. 15. Like the prior payments, the vast majority of families will receive them by direct deposit.
  • For those receiving payments by paper check, be sure to allow extra time, through the end of October, for delivery by mail. Those wishing to receive future payments by direct deposit can make this change using the Child Tax Credit Update Portal, available only on IRS.gov. To access the portal or to get a new step-by-step guide for using it, visit IRS.gov/childtaxcredit2021.
  • Payments went to eligible families who filed a 2019 or 2020 income tax return. Returns processed by Oct. 4 are reflected in these payments. This includes people who don’t typically file a return but during 2020 successfully registered for Economic Impact Payments using the IRS Non-Filers tool on IRS.gov or in 2021 successfully used the Non-filer Sign-up Tool for advance CTC, also available only on IRS.gov.
  • Payments are automatic. Aside from filing a tax return, including a simplified return from the Non-filer Sign-up Tool, families don’t have to do anything if they are eligible to receive monthly payments.
• Families who did not get a July, August or September payment and are getting their first monthly payment this month will still receive their total advance payment for the year. This means that the total payment will be spread over three months, rather than six, making each monthly payment larger.

The IRS is currently sending letters to some Americans reminding them it is not too late for families who haven't filed a 2020 income tax return — including those who are not normally required to file because their incomes are too low — to sign up for advance CTC payments. Most low-income families can get these monthly payments. The IRS urges families who normally aren't required to file a tax return to visit IRS.gov for more information on how to file a return and receive their credit.

Update on Sept. advance Child Tax Credit payments

In September, the IRS successfully delivered a third monthly round of approximately 36 million Child Tax Credit payments, totaling more than $15 billion. Given the new components of this program, the IRS continues to work hard to make improvements and deliver payments timely. 

After the September payment was issued, the IRS resolved a technical issue, which the agency estimates caused fewer than 2% of CTC recipients not to receive their September payment on the scheduled payment date. Payments have since gone out to affected individuals. 

The impacted group primarily included taxpayers who recently made an update to their bank account or address information using the IRS Child Tax Credit Update Portal. In particular, the issue affected payments to married taxpayers filing jointly where only one spouse made a bank account or address change, which usually results in payments being split into two (between the existing account or address and the new account or address).

In some of these cases, the split payment caused a delay in making payments, and further caused individuals to receive slightly more than the correct payment in September. To address this, the payment that each spouse receives in October, November and December will be reduced slightly to adjust for the overpayment. For each taxpayer receiving a payment, the typical overpayment was $31.25 per child between 6 and 17 years old and $37.50 per child under 6 years old. This will result in about a $10 to $13 reduction per child in the three remaining monthly payments. 

The IRS will send letters to affected individuals with this information. The IRS continues to closely monitor this program and the agency appreciates the patience of those whose payments were affected. 

The IRS encourages partners and community groups to share information and use available online tools and toolkits to help non-filers, low-income families and other underserved groups sign up to receive these benefits. 

Links to online tools, a step-by-step guide to using the Non-filer Sign-up Tool, answers to frequently asked questions and other helpful resources are available on the IRS’ special advance CTC 2021 page. It’s at IRS.gov/childtaxcredit2021.

Notice 2021-59  announces that the Department of the Treasury and the Internal Revenue Service intend to amend the regulations under section 987 to defer the applicability date of the final regulations under section 987, as well as certain related final regulations, by one additional year.  The applicability date of these regulations has been deferred under prior notices to taxable years beginning after December 7, 2021.  The Treasury Department and the IRS intend to amend §§1.861-9T, 1.985-5, 1.987-11, 1.988-1, 1.988-4, and 1.989(a)-1 of the 2016 final regulations and §§1.987-2 and 1.987-4 of the 2019 final regulations (the related 2019 final regulations) to provide that the 2016 final regulations and the related 2019 final regulations apply to taxable years beginning after December 7, 2022.  The Notice also states that taxpayers may rely on certain related proposed regulations that cross-reference temporary regulations which have expired.

Notice 2021-57 provides guidance to multiemployer defined benefit pension plan sponsors and actuaries on the application of funding relief under IRC § 431 and elections under IRC § 432 in accordance with §§ 9701, 9702 and 9703 of the American Rescue Plan Act of 2021, which provide relief for losses incurred on account of the COVID-19 pandemic.   

WASHINGTON – The Internal Revenue Service recently awarded over $41 million in Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) grants to organizations that provide free federal tax return preparation.

This year, the IRS awarded grants to 34 TCE and 300 VITA applicants. The IRS received 379 applications requesting over $70 million.

The TCE program, established in 1978, provides free tax counseling and federal return preparation to individuals who are age 60 or older. Volunteers receive training and technical assistance to provide assistance at community locations across the nation.

The VITA program, created in 1969, assists underserved communities, such as low- and moderate-income individuals and limited English proficient taxpayers. VITA grant recipients provide free federal tax return preparation and electronic filing. The grant program helps to expand VITA services to underserved populations.

The IRS forms partnerships with a wide variety of organizations across the country to develop VITA and TCE programs. Community partners include non-profit agencies, faith-based organizations, community centers and large employers. The IRS provides tax law training, certification and oversight to these organizations assisting their efforts to prepare accurate returns.

For information on applying for the TCE or VITA programs along with a list of current grant recipients, visit the TCE webpage or the VITA Grant webpage. For details on becoming a TCE or VITA volunteer, visit IRS Tax Volunteers.

WASHINGTON — The Internal Revenue Service reminds taxpayers today that the last quarter of 2021 is a good time to check withholding.

Life brings constant changes to individual financial situations. Events like marriage, divorce, a new child or home purchase can all be reasons to adjust withholding.

The convenient Tax Withholding Estimator, also available in Spanish, will help taxpayers determine if they have too much withheld and how to make an adjustment to put more cash into their own pocket now. In other cases, it will help taxpayers see that they should withhold more or make an estimated tax payment to avoid a tax bill when they file their tax return next year.

Items that may affect 2021 taxes

Things to consider when adjusting withholding for 2021 are:

• Coronavirus tax relief - Tax help for taxpayers, businesses, tax-exempt organizations and others – including health plans – affected by coronavirus (COVID-19).
• Disasters such as wildfires and hurricanes – Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area.
• Job loss – IRS Publication 4128, Tax Impact of Job Loss (.pdf), explains how this unfortunate circumstance can create new tax issues.
• Workers moving into the gig economy due to the pandemic – IRS advises people earning income in the gig economy to consider estimated tax payments to avoid a balance or penalties when they file.
• Life changes such as marriage or childbirth – Getting married or having a child are just a couple of life events that can affect your refund or how much you owe.

Pay as you go

Taxes are generally paid throughout the year whether from salary withholding, quarterly estimated tax payments or a combination of both. About 70% of taxpayers, however, over withhold their taxes every year, which typically results in a refund. The average refund in 2021 was more than $2,700.

Taxpayers can pay online, by phone or from the IRS2Go app. They can schedule payments for future dates, which can be useful during filing season, for payment plan payments or for estimated tax payments.

Taxpayers can also log into their IRS.gov/account to view the amount they owe, their payment plan details and options, their payment history (up to 5 years), any scheduled or pending payments, and key tax return information from their most recent tax return.

Tax Withholding Estimator

The IRS Tax Withholding Estimator makes it easier for everyone to have the right amount of tax withheld. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year, or whose jobs or tax circumstances have changed during the year.

The tool offers workers, as well as retirees, self-employed individuals and other taxpayers, a user-friendly, step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.

For more information about taxes, estimated taxes and tax withholding, see Tax Withholding at IRS.gov.

Notice 2021-58 clarifies the application of the extension of timeframes by the Joint Notice (85 FR 26351, May 4, 2020) and EBSA Disaster Notice 2021-01 (Feb. 26, 2021) (Emergency Relief Notices) to elections and payments of COBRA premiums during the COVID-19 National Emergency. This notice clarifies that the disregarded period for an individual to elect COBRA continuation coverage and the disregarded period for the individual to make initial and subsequent COBRA premium payments generally run concurrently. This notice also addresses the interaction of these rules with the ARP COBRA premium assistance and Notice 2021-31, 2021-23 IRB 1173 (June 7, 2021).

This notice provides timelines and examples for calculating when individuals will need to elect and make their initial COBRA payments, based upon when these individuals elected COBRA under the Emergency Relief Notices.

Notice 2021-58 will be in IRB: 2021-43, dated 10/25/2021.

WASHINGTON — The Internal Revenue Service announced today that Free File remains available through Oct. 15 for those taxpayers who still need to file their 2020 tax returns.

Free File is the IRS’ public-private partnership with tax preparation software industry leaders to provide their brand-name products for free.

Free File provides two ways for taxpayers to prepare and file their federal income tax online for free:

• Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites. Taxpayers whose adjusted gross income (AGI) is $72,000 or less qualify for any IRS Free File partner offers.
• For taxpayers whose income (AGI) is greater than $72,000, there’s the Free File Fillable Forms option. It provides electronic federal tax forms that can be filled out and filed online for free. To use this option taxpayers should know how to prepare their own tax return.

Always start at IRS.gov:

• From the homepage select "Free File: Do your Federal Taxes for Free”
• Pick an option based on income
• Follow links to the chosen Free File provider’s website

Taxpayers who requested the six-month filing extension should complete their tax returns and file on or before the Oct. 15 deadline.

Only current year tax returns can be filed using IRS Free File. The IRS does not allow electronic filing for prior year returns through self-preparation websites.

Prior year returns can only be filed electronically by registered tax preparers for the two previous tax years. Otherwise, taxpayers must print, sign and mail prior year returns.

The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications lists qualified local preparers.

Tax pros: 2021 self-study seminars now available for continuing education credit

WASHINGTON — The Internal Revenue Service today announced that 18 new self-study seminars are available through the IRS Nationwide Tax Forums Online. 

Tax professionals – CPAs, enrolled agents, Annual Filing Season Program participants and others – can earn continuing education for $29 per credit. 

The new seminars were recorded in July and August at the 2021 IRS Nationwide Tax Forum. 

2021 Nationwide Tax Forums Online course listing 

1.    Advocating for Taxpayers in Order to Avoid Abusive Tax Schemes

2.    Be Tax Ready – Understanding Rules for Due Diligence and the Child Tax Credit and Earned Income Tax Credit Under the American Rescue Plan Act of 2021

3.    Charities & Tax-Exempt Organizations Update

4.    Closer Look at the IRS Independent Office of Appeals

5.    Collection Flexibilities During Difficult Economic Times

6.    Common Issues Presented to OPR and Best Practices to Address Them

7.    Determining an Individual’s Tax Residency Status

8.    e-Services and You

9.    Gig Economy

10. Helping You and Your Clients Steer Clear of Fraud and Scams

11. Key Enforcement Issues

12. Keynote Address

13. Keys to Mastering Due Diligence Requirements and What to Expect During a Due Diligence Audit

14. Overview of Taxpayer Civil Rights

15. Professional Responsibility Obligations when Practicing before the IRS: OPR and Circular 230

16. Retirement Plans - IRS Compliance Initiatives

17. Tax Law Changes from a Forms Perspective

18. Virtual Currency

These 18 courses are now available in addition to 37 sessions from previous years that are also available for credit.  

Information on continuing education credits 

The Nationwide Tax Forums Online is a qualified sponsor of continuing education registered with the IRS Return Preparer Office (RPO) and the National Association of State Boards of Accountancy (NASBA). 

To earn credit, tax pros need to create an account, answer review questions throughout the seminar and pass a short test. 

The online seminars can be reviewed for free. Individuals who choose this option will not have access to the review questions or final examination and will not receive credit. 

For more information, visit www.irstaxforumsonline.com.