Notice 2021-43 provides transition relief for employers that hire or hired certain individuals residing in empowerment zones and who begin work on or after January 1, 2021, and before the date that is 60 days from the date of publication of the notice. Section 51 of the Code provides employers with a work opportunity credit for hiring certain individuals certified by a Designated Local Agency (DLA) to be a member of a targeted group listed in section 51(d). Employers must receive, on or before the day on which such individual begins work for the employer, a certification from a DLA that such individual is a member of a targeted group or must request certification that the individual is a member of a targeted group by submitting Form 8850 (Pre-Screening Notification and Certification Request for the Work Opportunity Credit) to a DLA within 28 days of that individual beginning work. The certification of an individual as a Designated Community Resident, under section 51(d)(5), or as a Qualified Summer Youth Employee, under section 51(d)(7), requires that the individual reside within an empowerment zone. Empowerment zone designations under section 1391 of the Code were not in effect after December 31, 2020. However, in accordance with an automatic procedure for a state or local government in which an empowerment zone is located to extend the empowerment zone designation made under section 1391(a) of the Code, if the state or local government did not opt out of an empowerment designation by May 25, 2021, the designation was deemed to be extended until December 31, 2025. Employers, therefore, could not timely request certification for employees otherwise satisfying the criteria for these two targeted groups until empowerment zone designations were renewed. This notice allows employers additional time beyond the 28-day requirement to request certification for individuals in these two targeted groups.

Notice 2021-43 will appear in IRB 2021-35, dated Aug. 30, 2021.

WASHINGTON – The Internal Revenue Service today announced it is providing transition relief to certain employers claiming the Work Opportunity Tax Credit (WOTC).  The WOTC is a federal income tax credit available to employers that hire certified members of certain groups specified in the Internal Revenue Code who face significant barriers to employment, including Designated Community Residents or Qualified Summer Youth Employees.

The IRS today issued Notice 2021-43, which extends the 28-day deadline for employers to submit a request to a designated local agency (DLA) to certify that an employee hired between January 1 and October 8 of this year is a Designated Community Resident or a Qualified Summer Youth Employee. To be certified as a Designated Community Resident or a Qualified Summer Youth Employee under the WOTC, an employee must have a principal place of residence within an Empowerment Zone where the employee continuously resides.

Empowerment Zone designations terminated on Dec. 31, 2020, but the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division EE of the Consolidated Appropriations Act, 2021, permitted the designations to be extended through 2025.  On May 26, 2021, all Empowerment Zone designations were extended from Dec. 31, 2020 to Dec. 31, 2025. The transition relief under this notice allows employers to submit Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit) for these employees until Nov. 8, 2021.

The notice also provides guidance to certain employers who submitted a Form 8850 to a DLA for these employees during the period of transition relief and received a denial due to the termination of Empowerment Zone designations on Dec. 31, 2020, or who received a certification before Empowerment Zone designations were extended.

The WOTC has been subject to several legislative extensions and modifications since its enactment by the Small Business Job Protection Act of 1996. The amount of the tax credit under WOTC equals a percentage of qualified wages paid in a given tax year to an employee certified by the DLA as being a member of the one of the groups specified in the law.

Revenue Procedure 2021-33 provides a safe harbor that permits a taxpayer to exclude certain items from “gross receipts” under §§ 448(c) and 6033 of the Internal Revenue Code (Code), as applicable, solely for purposes of determining eligibility to claim the employee retention credit under section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as amended by sections 206 and 207 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division EE of the Consolidated Appropriations Act, 2021 (CAA), and under section 3134 of the Code as enacted by section 9651 of the American Rescue Plan Act of 2021 (the ARP).  The items covered by the safe harbor are: (1) the amount of the forgiveness of a Paycheck Protection Program loan under section 7(a)(37) or 7A of the Small Business Act, (2) a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, enacted as Title III of Division N of the CAA, and (3) a restaurant revitalization grant under section 5003 of the ARP.

Revenue Procedure 2021-33 will appear in IRB 2021-34, dated Aug. 23, 2021.

WASHINGTON – The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) today issued a safe harbor allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC).

Revenue Procedure 2021-33 provides a safe harbor permitting employers to exclude certain amounts from gross receipts solely for determining eligibility for the ERC. These amounts are:

An employer elects to apply the safe harbor by excluding these amounts solely for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return.

Revenue Procedure 2021-33 requires employers to apply the safe harbor consistently for determining eligibility for the ERC. The employer must exclude the amounts from their gross receipts for each calendar quarter in which gross receipts are relevant to determining eligibility to claim the ERC. The employer claiming the credit must also apply the safe harbor to all employers treated as a single employer under the aggregation rules.

An employer is not required to apply this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.

Employers claim the ERC on their employment tax return, generally Form 941, Employers Quarterly Federal Tax Return, or adjusted employment tax return, generally Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

Revenue Procedure 2021-33, updates and amplifies guidance provided in Notice 2021-20, which addressed the ERC as it applies to qualified wages paid after March 12, 2020, and before January 1, 2021, Notice 2021-23, which addressed the ERC as it applies to qualified wages paid after December 31, 2020 and before July 1, 2021, and Notice 2021-49, which addressed the ERC as it applies to qualified wages paid after June 30, 2021 and before January 1, 2022.

Treasury and the IRS continue to closely monitor pending legislation related to the ERC and will provide additional information as needed.

WASHINGTON – In a continuing twist on a common scam, the Internal Revenue Service, state tax agencies and tax industry today warned tax professionals to beware of evolving phishing scams that use various pandemic-related themes to steal client data.

The Security Summit partners continue to see instances where tax professionals, especially those who engage in remote transactions, have been vulnerable this year to identity thieves posing as potential clients. The criminals then trick practitioners into opening email links or attachments that infect computer systems.

Avoiding phishing emails is the fourth in a five-part series sponsored by the IRS, state tax agencies and the nation’s tax community – working together as the Security Summit – highlighting critical steps tax professionals can take to protect client data. This year’s theme “Boost Security Immunity: Fight Against Identity Theft,” is an effort to urge tax professionals to work to strengthen their systems and protect client data during this pandemic and its aftermath.

“Identity thieves have been relentless in exploiting the pandemic and the resulting economic pain to trick taxpayers and tax professionals to disclose sensitive information,” said IRS Commissioner Chuck Rettig. “Fighting back against phishing scams requires constant vigilance, and we urge tax pros to take some basic steps to help protect their clients and themselves.”

Phishing emails or SMS/texts (known as “smishing”) attempt to trick the person receiving the message into disclosing personal information such as passwords, bank account numbers, credit card numbers or Social Security numbers. Tax pros are a common target.

Scams may differ in themes, but they generally have two traits:

A specific kind of phishing email is called spear phishing. Rather than the scattershot nature of general phishing emails, scammers take time to identify their victim and craft a more enticing phishing email known as a lure. Scammers often use spear phishing to target tax professionals.

In a reoccurring and very successful scam this year, criminals posed as potential clients, exchanging several emails with tax professionals before following up with an attachment that they claimed was their tax information. This scam was popular as many tax professionals worked remotely and communicated with clients over email versus in-person or over the telephone because of COVID.

Once the tax pro clicks on the URL and/or opens the attachment, malware secretly downloads onto their computers, giving thieves access to passwords to client accounts or remote access to the computers themselves.

Thieves then use this malware known as a remote access trojan (RAT) to take over the tax professional’s office computer systems, identify pending tax returns, complete them and e-file them, changing only the bank account information to steal the refund.

In recent months, international criminals have used a ransomware attack to shut down a variety of companies. Criminals use similar, smaller scale tactics against tax pros. When the unsuspecting tax professional opens a link or attachment, malware attacks the tax pro’s computer system to encrypt files and hold the data for ransom.

These scams highlight the importance of the basic security steps recommended by the Security Summit to protect data.

For example, using the two-factor (2FA) or the multi-factor authentication (MFA) option offered by tax preparation providers or storage providers would protect client accounts even if passwords were inadvertently disclosed. Keeping anti-virus software automatically updated helps prevent scams that target software vulnerabilities. Using drive encryption and regularly backing up files helps stop theft and ransomware attacks.

For tax professionals, securing their network to protect taxpayer data is their responsibility as a tax preparer.

To help tax professionals guard against phishing scams and better protect taxpayer information, the IRS recently updated Publication 4557, Safeguarding Taxpayer Data. The July 2021 version contains some of the latest suggestions such as using the multi-factor authentication option offered by tax software products and helping clients get an Identity Protection Pin.

Additional resources
In addition to reviewing the recently revised IRS Publication 4557, Safeguarding Taxpayer Data, tax professionals can also get help with security recommendations by reviewing Small Business Information Security: The Fundamentals by the National Institute of Standards and Technology. The IRS Identity Theft Central pages for tax pros, individuals and businesses have important details as well.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.

For more information, see Boost Security Immunity: Fight Against Identity Theft.

Revenue Procedure 2021-31 provides: (1) two tables of limitations on depreciation deductions for owners of passenger automobiles placed in service by the taxpayer during calendar year 2021; and (2) a table of dollar amounts that must be used to determine income inclusions by lessees of passenger automobiles with a lease term beginning in calendar year 2021. The tables detailing these depreciation limitations and amounts used to determine lessee income inclusions reflect the automobile price inflation adjustments required by section 280F(d)(7). For purposes of this revenue procedure, the term “passenger automobiles” includes trucks and vans.

Revenue Procedure 2021-31 will appear in IRB 2021-34, dated Aug. 23, 2021

Notice 2021-49 provides guidance on the employee retention credit provided under section 3134 of the Internal Revenue Code (the Code), as added by section 9651 of the American Rescue Plan Act (ARP), applicable to qualified wages paid after June 30, 2021, and before January 1, 2022. Notice 2021-49 also provides guidance on several issues that arise under both section 2301 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) and section 3134 of the Code. The miscellaneous issues addressed in this notice respond to various questions that the Treasury Department and the Internal Revenue Service have received about the employee retention credit applicable to both section 2301 of the CARES Act and section 3134 of the Code for qualified wages paid after March 12, 2020 and before January 1, 2022. Notice 2021-49 amplifies Notice 2021-20 and Notice 2021-23.

Notice 2021-49 will appear in IRB 2021-34, dated Aug. 23, 2021

WASHINGTON – The Treasury Department and the Internal Revenue Service today issued further guidance on the employee retention credit, including guidance for employers who pay qualified wages after June 30, 2021, and before January 1, 2022, and additional guidance on miscellaneous issues that apply to the employee retention credit in both 2020 and 2021. Notice 2021-49 amplifies prior guidance regarding the employee retention credit provided in Notice 2021-20 and Notice 2021-23.

Notice 2021-49 addresses changes made by the American Rescue Plan Act of 2021 (ARP) to the employee retention credit that are applicable to the third and fourth quarters of 2021.

Those changes include, among other things, (1) making the credit available to eligible employers that pay qualified wages after June 30, 2021, and before January 1, 2022, (2) expanding the definition of eligible employer to include “recovery startup businesses”, (3) modifying the definition of qualified wages for “severely financially distressed employers”, and (4) providing that the employee retention credit does not apply to qualified wages taken into account as payroll costs in connection with a shuttered venue grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or a restaurant revitalization grant under section 5003 of the ARP.

Notice 2021-49 also provides guidance on several miscellaneous issues with respect to the employee retention credit for both 2020 and 2021. This guidance responds to various questions that the Treasury Department and the IRS have been asked about the employee retention credit, including:

Reporting

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their employment tax returns (generally, Form 941) for the applicable period. If a reduction in the employer's employment tax deposits is not sufficient to cover the credit, certain employers may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Where can I find more information on the employee retention credit and other COVID-19 economic relief efforts?

Treasury and the IRS continue to closely monitor pending legislation related to the employee retention credit and will provide additional information as needed.

Updates on the implementation of this employee retention credit, Frequently Asked Questions on Tax Credits for Required Paid Leave  and other information can be found on the Coronavirus page of IRS.gov.

IRS YouTube Video:
Truckers: Mark Your Calendars To File Form 2290

WASHINGTON — The Internal Revenue Service reminds those who have registered, or are required to register, large trucks and buses that it’s time to file Tax Year 2021 Form 2290, Heavy Highway Vehicle Use Tax Return. The deadline to file and pay is Aug. 31, 2021, for vehicles used on the road during July 2021.

The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. Taxpayers unsure if they must file can use the IRS online tool, “Do I Need to Pay the Heavy Highway Vehicle Use Tax?” The question-and-answer format helps owners determine if they are required to pay the highway use tax. The “Understanding Form 2290 – Heavy Highway Vehicle Use Tax” recorded webinar is also available.

Ready to file?

Gather information

How to file

How to Pay

Vehicle registration date

The filing deadline is not tied to the vehicle registration date. Regardless of the vehicle’s registration renewal date, taxpayers must file Form 2290 by the last day of the month following the month in which the taxpayer first used the vehicle on a public highway during the taxable period.

For more information, visit the Trucking Tax Center at IRS.gov/trucker (also available in Spanish). Need more help? Call the Form 2290 Call Site, weekdays between 8 a.m. and 6 p.m. Eastern time. From the U.S., 866-699-4096 (toll-free), from Canada or Mexico, 859-320-3581 (not toll-free).

For more information, see Frequently Asked Questions for Truckers who e-file (also available in Spanish) and Frequently Asked Questions for Indian Tribal Governments Regarding Highway Use Tax.

WASHINGTON — Internal Revenue Service Security Summit partners today outlined for tax professionals how they can assist clients who were victims of unemployment compensation fraud schemes that targeted state workforce agencies in 2020 and 2021.

The IRS, state tax agencies and the tax industry – working together as the Security Summit – reported that unemployment compensation fraud was one of the more common identity theft schemes that emerged in 2020 as criminals exploited the COVID-19 pandemic and the resulting economic impact.

Addressing unemployment compensation fraud is the third in a five-part series sponsored by the Summit partners to highlight critical steps tax professionals can take to protect client data. This year's theme "Boost Security Immunity: Fight Against Identity Theft," is an effort to urge tax professionals to try harder to secure their systems and protect client data during the pandemic and its aftermath.

"Identity thieves always look for opportunities, and the unemployment surge presented a new opportunity to exploit the pain and financial hardships faced by Americans," said IRS Commissioner Chuck Rettig. "This particular scam is especially egregious because 23 million Americans were jobless or underemployed last year and desperately needed these benefits."

The U.S. Department of Labor's Inspector General estimated approximately $89 billion in unemployment compensation was lost in 2020 due to fraud.

Unemployment compensation is taxable income on federal taxes, although Congress waived the tax for 2020 for many people. States report compensation to the individual and to the IRS by using the Form 1099-G. Because of fraud and identity theft, many taxpayers received Forms 1099-G for compensation they did not receive. Some taxpayers received forms from multiple states.

This scam could affect 2021 returns next year as well as 2020 returns this year. Here are a few steps tax professionals should take to assist clients who are victims of the unemployment compensation fraud scheme:

Although unemployment compensation is taxable, the American Rescue Plan Act of 2021 allows an exclusion of unemployment compensation of up to $10,200 for individuals for taxable year 2020. In the case of married individuals filing a joint Form 1040 or 1040-SR, this exclusion is up to $10,200 per spouse.

To qualify for this exclusion, adjusted gross income (AGI) must be less than $150,000. This threshold applies to all filing statuses.

The exclusion may ease the burden on many fraud victims. However, victims who received Forms 1099-G from multiple states may have fraud claims that exceed that exclusion amount. Clients should retain any records of fraud reports to states.

Additional resources

Tax professionals can also get help with security recommendations by reviewing the recently revised IRS Publication 4557, Safeguarding Taxpayer Data PDF, and Small Business Information Security: The Fundamentals PDF  by the National Institute of Standards and Technology. The IRS Identity Theft Central pages for tax pros, individuals and businesses have important details as well.

Publication 5293, Data Security Resource Guide for Tax Professionals PDF, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.

For more information, see Boost Security Immunity: Fight Against Identity Theft.