Notice 2021-20 provides guidance on the employee retention credit provided under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act, as amended by section 206 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, for qualified wages paid after March 12, 2020, and before January 1, 2021. This notice is to provide employers with information about how to determine their eligibility to receive the employee retention credit, largely incorporating the concepts set forth in the Frequently Asked Questions (FAQs) posted on the IRS website and answering additional questions related to changes made by the Relief Act not addressed in the FAQs.

Notice 2021-20 will appear in IRB 2021-11, dated March 15, 2021.

WASHINGTON – The Internal Revenue Service today issued guidance for employers claiming the employee retention credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), for calendar quarters in 2020. The guidance in Notice 2021-20 is similar to the information in the employee retention credit FAQs, but includes clarifications and describes retroactive changes under the new law applicable to 2020, primarily relating to expanded eligibility for the credit. 

For 2020, the employee retention credit can be claimed by employers who paid qualified wages after March 12, 2020, and before January 1, 2021, and who experienced a full or partial suspension of their operations or a significant decline in gross receipts. The credit is equal to 50 percent of qualified wages paid, including qualified health plan expenses, for up to $10,000 per employee in 2020.  The maximum credit available for each employee is $5,000 in 2020.
 
A significant change for 2020 made by the Relief Act permits eligible employers that received a Paycheck Protection Program (PPP) loan to claim the employee retention credit, although the same wages cannot be counted both for seeking forgiveness of the PPP loan and calculating the employee retention credit.  Notice 2021-20 explains when and how employers that received a PPP loan can claim the employee retention credit for 2020.

Notice 2021-20 also provides answers to questions such as: who are eligible employers; what constitutes full or partial suspension of trade or business operations; what is a significant decline in gross receipts; how much is the maximum amount of an eligible employer’s employee retention credit; what are qualified wages; how does an eligible employer claim the employee retention credit; and how does an eligible employer substantiate the claim for the credit.

While the Relief Act also extended and modified the employee retention credit for the first two calendar quarters in 2021, Notice 2021-20 addresses only the rules applicable to 2020.  The IRS plans to release additional guidance soon addressing the changes for 2021.

A page on IRS.gov is devoted to providing information to businesses on all aspects of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

WASHINGTON — The Internal Revenue Service today reminds businesses of their responsibility to file Form 8300, Report of Cash Payments Over $10,000, and encourages e-filing to help them file accurate, complete forms.

Although many cash transactions are legitimate, information reported on Form 8300 can help stop those who evade taxes, profit from drug trading, engage in terrorist financing and conduct other criminal activities. The government can often trace money from these illegal activities through payments reported on complete, accurate forms. 

To help businesses prepare and file reports, the IRS created a video on How to Complete Form 8300 – Part I, Part II. The short video points out sections of Form 8300 for which the IRS commonly finds mistakes and explains how to accurately complete those sections.

Also, the IRS encourages businesses to electronically file completed forms. Although they have the option of filing Form 8300 on paper, electronic filing is more accurate and reduces the need for follow-up correspondence with the IRS.

Many businesses have already found the free and secure e-filing system is a more convenient and cost-effective way to meet the reporting deadline of 15 days after a transaction. They get free, automatic acknowledgment of receipt when they file. And, businesses can batch file their reports, which is especially helpful to those required to file many forms.

To file Form 8300 electronically, a business must set up an account with the Financial Crimes Enforcement Network’s BSA E-Filing System. For more information, interested businesses can call the Bank Secrecy Act E-Filing Help Desk at 866-346-9478 or email them at BSAEFilingHelp@fincen.gov. The help desk is available Monday through Friday from 8 a.m. to 6 p.m. Eastern time.

For more information about the reporting requirement, see FS-2021-3 available on IRS.gov.

Notice 2021-18 provides for adjustments to the limitation on housing expenses for purposed of section 911 of the Internal Revenue Code.  These adjustments are made on the basis of geographic differences in housing costs relative to housing costs in the United States.  Further, if the limitation on housing expenses is higher for taxable year 2021 than the adjusted limitations on housing expenses provided in Notice 2020-13, qualified taxpayers may apply the adjusted limitations for taxable year 2021 to their 2020 taxable year.  

Notice 2021-18 will be in IRB: 2021-18, dated March 15, 2021.

WASHINGTON – The Internal Revenue Service today reminded taxpayers to choose a tax return preparer with care. Even though the vast majority of tax return preparers provide honest, quality service, some cause great harm through fraud, identity theft and other scams every year.

People value good tax return preparers for helping them through a complicated tax situation or for being available when they don’t have time to prepare their own tax return. Paid tax return preparers completed more than half of the tax returns submitted to the IRS in tax-year 2018.

It’s very important to select the right tax professional. After all, people trust them with their most sensitive personal and financial information. No matter who prepares it, the accuracy of a tax return is ultimately the responsibility of the taxpayer. The IRS protects taxpayers by assessing significant civil penalties against dishonest return preparers and working with the Justice Department to end scams and prosecute the criminals behind them.

What to look for

The Choosing a Tax Professional page on IRS.gov has information about tax return preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

By law, anyone who is paid to prepare or assists in preparing most federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.

Well-intentioned taxpayers can be deceived by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to claim. Fraudulent preparers often do this to increase their fee. Here are more tips to consider:

Start early; ask for phone or virtual help

It is advisable to start searching for a tax return preparer as soon possible. This allows for more time to do research and get recommendations. Remember, taxpayers must pay any taxes due by April 15, even if an extension is necessary.

Be sure to check with the tax return preparer to see if there are any restrictions or additions to the services they provide because of the COVID-19 pandemic. Some may offer phone or virtual assistance options in addition to their usual in-person services. Customers may be asked, for example, to mail documents to them or scan and e-mail documents through a secure internet connection.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed, at home, at work or on the go.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

Today, the IRS published the latest executive column, “A Closer Look,” which features Michael Beebe, director of Return Integrity and Compliance Services, discussing how the IRS and partners battle identity thieves. “Whether or not you’ve heard of the “Security Summit,” you’ve benefitted from the work this group does. The Security Summit is a partnership between the Internal Revenue Service, state tax agencies and the private-sector tax industry. Together they work to combat a common enemy – identity thieves,” said Beebe. 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 – IRS officials issued an alert today concerning amended returns and claims for the Domestic Production Activities Deduction. This provision of tax law was repealed as part of the Tax Cuts and Jobs Act for taxable years after Dec. 31, 2017. In the wake of the repeal, the IRS has received a wave of questionable amended returns and claims for tax benefits in the billions of dollars.

“We have no qualms with taxpayers claiming benefits allowed by law,” said Doug O’Donnell, Commissioner, Large Business and International Division. “But a very high percentage of the claims for the now repealed Domestic Production Activities Deduction are not properly supported by those claiming it.”

A large majority of the filings involve taxpayers who are claiming DPAD for the first time based on studies conducted after the fact, which contain unreasonable assumptions of facts and law.

In September of 2018, LB&I announced a campaign to risk assess claims or amended returns under the repealed section of the law.  The IRS will continue to audit this issue even though the section was repealed.

Examiners are auditing these claims with the support of Chief Counsel, engineer specialists, and the Corporate Income and Losses Practice Network. In July 2020, the IRS issued a GLAM addressing examples of meritless section 199 online software activity. In many examination cases, once challenged, taxpayers have conceded 100% of the claim. And, the IRS continues to litigate section 199 issues.

Examiners have been advised to consider Section 6676, Erroneous Claim for Refund or Credit, penalties, other applicable penalties, and referrals to the Office of Professional Responsibility (OPR), when appropriate. Taxpayers and their advisors should ensure they have documentation to support their position and should expect that the IRS may impose appropriate penalties unless taxpayers establish that they have reasonable cause. A study does not necessarily provide reasonable cause.

“Meritless claims are harmful to tax administration and voluntary compliance. Any corporate taxpayer who is considering filing such a claim should reconsider. Taxpayers who have already filed can withdraw prior to IRS audit contact to avoid penalties,” said O’Donnell.

IRS YouTube Videos:
Free Help Preparing Your Tax Return -- English | Spanish | ASL
Do-It-Yourself Free Tax Preparation -- English | Spanish
Do Your Taxes for Free With Free File – English | Spanish | ASL

WASHINGTON –– During this tax season when many people are trying to stay safe at home, the Internal Revenue Service reminds taxpayers about ways to do their taxes for free online or with help from volunteers.

Free File is easy, fast, safe and secure

Taxpayers who want to prepare and file their tax returns electronically can use IRS Free File. IRS Free File offers brand-name tax software for taxpayers with an income of $72,000 or less in 2020. Taxpayers who earned more can use Free File Fillable Forms, the electronic version of IRS paper forms. Taxpayers can get started at IRS.gov/FreeFile. IRS Free File also lets taxpayers get an automatic extension of time to file if they need it.

Free File is also a way to get a refund fast. Filing electronically and using direct deposit is the fastest and most accurate way to file and get a refund. The IRS issues nine out of 10 refunds in 21 days or less. Taxpayers filing on paper can also choose direct deposit, but paper returns take longer to process.
Free File and e-file also help taxpayers who owe. When filing electronically, taxpayers can pay with electronic funds withdrawal for free. Another option is to pay with their bank account using Direct Pay. In addition to paying online, taxpayers who owe taxes can pay using the IRS2Go mobile app on a smartphone or other mobile device. Information about all payment options is available at IRS.gov/payments.

Free options for the military and some veterans

MilTax, Military OneSource’s tax service, provides online software for eligible individuals to electronically file a federal return and up to three state returns for free.

Military OneSource is a program funded by the Department of Defense that provides a range of free resources for military members, veterans and their families.

More information about OneSource is available at MilitaryOneSource.mil.

Get free tax help from volunteers in the community

The Volunteer Income Tax Assistance (VITA) program offers free tax help to individuals who generally make $57,000 or less, persons with disabilities, the elderly and individuals with limited English proficiency who need assistance in preparing their taxes. The Tax Counseling for the Elderly (TCE) program also offers free tax help to taxpayers, particularly those age 60 and older.

For over 50 years, volunteers have prepared tax returns in communities across the country. Each filing season, tens of thousands of dedicated VITA/TCE volunteers prepare millions of federal and state returns. Last year, for example, over 70,000 volunteers prepared over 2.5 million federal tax returns. 

And this tax season, due to the ongoing pandemic, some volunteer sites will offer virtual help to taxpayers in place of face-to-face assistance. This allows volunteers to help taxpayers over the phone or online to complete their returns. While virtual tax prep will be an option this tax season, some VITA/TCE sites will still offer in-person free tax help. However, safety and social distancing will be emphasized.

IRS-certified VITA and TCE volunteers are trained to help taxpayers claim the tax credits they are entitled to such as the Earned Income Tax Credit and the Child Tax Credit and Credit for Other Dependents.

The Earned Income Tax Credit (EITC) is a significant tax credit for workers who earned $56,844 or less in 2020. The IRS estimates four out of five eligible taxpayers claim and get the EITC. Nationwide in 2020, around 25 million taxpayers received over $62 billion in EITC. The average EITC amount received was $2,461 per return. The EITC is worth as much as $6,660 for a family with three or more children or up to $538 for taxpayers who do not have a qualifying child.

New this tax season, taxpayers can use their 2019 earned income to figure their 2020 EITC and the Additional Child Tax Credit if their 2019 earned income was more than their 2020 earned income. To qualify for EITC, people must have earned income, so this option may help workers who earned less in 2020, or received unemployment income instead of their regular wages, get bigger tax credits and larger refunds in the coming year.

Also, any Economic Impact Payments received are not taxable or counted as income for purposes of claiming the EITC. Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 tax return. See IRS.gov/rrc for more information.

The VITA and TCE programs can help answer many EITC questions and help taxpayers claim the credit if they qualify. Taxpayers may also use the IRS.gov EITC Assistant to help them determine their eligibility.

To find the nearest VITA or TCE site, taxpayers can use the VITA and TCE locator tool available on IRS.gov, download the IRS mobile app IRS2GO, or call 800-906-9887. Help in other languages – Chinese, Cantonese, Hindi, Korean, Mandarin, Russian, Spanish, Tagalog and Vietnamese – is also available at select locations across the country. The locator tool indicates where these services are offered. Please note that some VITA/TCE sites are not operating at full capacity this year and others are not opening. But the locator tool is updated throughout the tax season, so taxpayers can check back if they don’t see a nearby site listed.

Get more help

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. No appointment required and no waiting on hold.

This is part of a series called the Tax Time Guide, focused on helping people file a federal tax return accurately and efficiently. Additional help is available in Publication 17, Your Federal Income Tax.

WASHINGTON – Victims of this month’s winter storms in Texas will have until June 15, 2021, 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 the entire state of Texas. But taxpayers in other states impacted by these winter storms that receive similar FEMA disaster declarations will automatically receive the same filing and payment relief. 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 Feb. 11. As a result, affected individuals and businesses will have until June 15, 2021, to file returns and pay any taxes that were originally due during this period. This includes 2020 individual and business returns normally due on April 15, as well as various 2020 business returns due on March 15. Among other things, this also means that affected taxpayers will have until June 15 to make 2020 IRA contributions.

The June 15 deadline also applies to quarterly estimated income tax payments due on April 15 and the quarterly payroll and excise tax returns normally due on April 30. It also applies to tax-exempt organizations, operating on a calendar-year basis, that have a 2020 return due on May 17.  

In addition, penalties on payroll and excise tax deposits due on or after Feb. 11 and before Feb. 26 will be abated as long as the deposits are made by Feb. 26.

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. This means that taxpayers can, if they choose, claim these losses on the 2020 return they are filling out this tax season. Be sure to write the FEMA declaration number – 4586 − 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.

Forms 2848 and 8821 can now be submitted online. Tax professionals must have a Secure Access username and password or create an account. The tool is protected by Secure Access authentication. Previously tax professionals could mail or fax authorization forms to the IRS. That process is still available. But mailed or faxed forms must be hand-signed – electronic signatures are not allowed.  More information can be found here.