The IRS published the latest executive column, “A Closer Look,” featuring Sunita Lough, the Deputy Commissioner for Services and Enforcement of the IRS explaining many tools the agency has to support compliance for all income levels. “When deciding which tool to use, we work to ensure fairness while also being conscious of taxpayer burden. IRS employees work to minimize the burden of our compliance actions, seeking the right touch – all with an eye toward enforcing the nation’s tax laws for the benefit of all taxpayers.”

Read more here. It’s also available in Spanish 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.

Please contact Sarah Maxwell at sarah.k.maxwell@irs.gov or Robyn Walker at robyn.walker@irs.gov for any questions or requests for interviews.

Notice 2021-01 provides that, while subject to a delay, private foundations must electronically file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, as required by section 3101 of the Taxpayer First Act of 2019 (Pub. L. No. 116-25) which amended section 6033 of the Internal Revenue Code.  Until the electronic Form 4720 is made available, private foundations may continue to use the paper form.  Private foundations may no longer rely on Treas. Reg. § 53.6011-1(c), which allowed for certain joint filers of the Form 4720, as a result of this electronic filing mandate.

Notice 2021-01 will be in IRB:  IRB 2021-02, dated January 11, 2021.

WASHINGTON – The Internal Revenue Service today encouraged taxpayers to take necessary actions now to help file federal tax returns timely and accurately in 2021.

This is the fourth in a series of reminders to help taxpayers get ready for the upcoming tax filing season. A special page, updated and available on IRS.gov, outlines steps taxpayers can take to make tax filing easier in 2021.

With continued social distancing, taxpayers can stay home and stay safe with IRS online tools and resources that help them find the information they need. These IRS.gov tools are easy to use and available 24 hours a day. Millions of people use them to find information about their accounts, get answers to tax questions or file and pay taxes.  

Free File
Almost everyone can file electronically for free. The IRS Free File program, available only through IRS.gov or the IRS2Go app, offers brand-name tax preparation software packages at no cost. The software does all the work of finding deductions, credits and exemptions. It‘s free for those who earned $72,000 or less in 2020. Some of the Free File packages also offer free state tax return preparation.

Taxpayers comfortable filling out tax forms electronically, can use Free File Fillable Forms, regardless of income, to file their tax returns either by mail or online.

Choosing a preparer
The IRS has several options for finding a tax preparer. One resource is Choosing a Tax Professional, which offers a wealth of information for selecting a tax professional. The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help taxpayers find preparers in their area who currently hold professional credentials recognized by the IRS, or who hold an Annual Filing Season Program Record of Completion.

Other online help
The Interactive Tax Assistant answers general tax questions, including helping to determine if a type of income is taxable or if someone is eligible to claim certain credits and deductions. With changes to income and other life events for many in 2020, tax credits and deductions can mean more money in a taxpayer’s pocket and thinking about eligibility now can help make tax filing easier next year.
 
Taxpayers may qualify for credits like the Child Tax Credit and Child and Dependent Care Credit. Taxpayers whose dependent does not qualify for the CTC might be able to claim the Credit for Other Dependents. Individuals paying higher education costs for themselves, a spouse or a dependent, may be eligible to save some money with education tax credits or deductions. Additionally, low- to moderate-income taxpayers may qualify for the Earned Income Tax Credit.

Beginning in January 2021, the Interactive Tax Assistant will be updated to include answers to more tax law questions.

Taxpayers can check the status of their refund using the "Where's My Refund?" tool. The status is available within 24 hours after the IRS receives their e-filed tax return or up to four weeks after they mailed a paper return. The “Where’s My Refund?” tool updates once every 24 hours, usually overnight, so taxpayers only need to check once a day.

The best and fastest way for taxpayers to get their tax refund is to have it direct deposited into their financial account. Taxpayers who don’t have a financial account can visit the FDIC website for information to help open an account online.

For more information about planning ahead, see Publication 5348, Get Ready to File, and Publication 5349, Year-Round Tax Planning is for Everyone.

Rev Ruling 2021-01: Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property

Attached for immediate release is Rev Ruling 2021-01, which 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.

It will appear in IRB: 2021-02, dated Jan. 11, 2021.

Notice 2020-88 announces a new round of credits under the § 48A Qualifying Advanced Coal Project Program available for allocation. Section 48A was enacted in 2005 and was modified and provided additional funding in 2008. Various allocation and re-allocation rounds for § 48A credits have been established, most recently in 2015. The Department of the Treasury and the Internal Revenue Service have now determined that $2,041,500,000 of § 48A credits are available for reallocation due to forfeitures of $279,000,000 and $1,442,200,549 of previously allocated § 48A Phase II and Phase III credits, respectively, and $320,399,451 of unallocated §48A Phase III credits. Accordingly, this notice announces the beginning of Round 3 of the § 48A Phase III Program. 

Notice 2020-88 will be in IRB:    2020-53, dated 12/28/20.

Notice 2020-78 provides transition relief for employers that hired certain individuals residing in empowerment zones between January 1, 2018, and December 31, 2020. Section 51 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 § 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 hiring that individual. The certification of an individual as a Designated Community Resident under § 51(d)(5), or as a Qualified Summer Youth Employees under § 51(d)(7), requires that the individual reside within an empowerment zone. Empowerment zone designations under section 1391 expired after December 31, 2017, and were retroactively reauthorized on December 20, 2019, for tax years beginning January 1, 2018, through December 31, 2020. 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 2020-78 will be in IRB: 2020-53, dated 12/28/2020.

IRS YouTube Video:
Volunteer Income Tax Assistance Recruitment − English

WASHINGTON – Safety and social distancing, along with virtual options, will be the emphasis now and for the upcoming tax season as the Internal Revenue Service seeks volunteers to provide free tax return preparation through its Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs.

In response to the coronavirus pandemic, the IRS is rolling out new ways to make volunteering easier and safer.

More help for new volunteers
In preparation for the upcoming tax filing season, to keep everyone safe, potential volunteers can tune in virtually to learn more about the programs, ask questions and find out which volunteer role is right for them.

Also, 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. Other volunteers will conduct a virtual quality review with the taxpayer before e-filing their tax return to the IRS.

While virtual volunteering 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.

Support for new volunteers is always available through more experienced volunteers familiar with the program and tax preparation.

Join a well-established program
For over 50 years, volunteers have prepared tax returns in communities across the country. Each year, thousands of volunteers prepare millions of tax returns through the VITA and TCE programs.

The VITA program offers free tax help to people who make $57,000 or less, persons with disabilities and limited English-speaking taxpayers.

The TCE program offers free tax help to those who are 60 years of age and older. TCE volunteers specialize in questions about pensions and retirement-related issues unique to seniors.

There are many available volunteer roles:

The programs offer free training to help volunteers learn the skills they need. Some roles require tax law training and certification, but other roles do not. There is a spot for everyone who wants to help.

Experienced volunteers
Another recent addition to the VITA/TCE program gives credit for experience. A new Qualified Experienced Volunteer test is shorter than the traditional test, allowing returning VITA and TCE volunteers to devote more of their time to helping taxpayers.

To learn more about volunteering and to sign up, go to IRS.gov/volunteers. Shortly after signing up, interested participants will receive an invite to attend a virtual orientation.

Notice 2020-87 provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code.  In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), as reflected by the application of § 430(h)(2)(C)(iv). 

Notice 2020-87 will be in IRB:  2020-53, dated December 28, 2020.

WASHINGTON — The Treasury Department and Internal Revenue Service issued final regulations on the deduction for qualified transportation fringe and commuting expenses following changes made by the Tax Cuts and Jobs Act (TCJA).

The 2017 TCJA generally disallows deductions for qualified transportation fringe (QTF) expenses and does not allow deductions for certain expenses of transportation and commuting between an employee’s residence and place of employment. 

These final regulations address the disallowance of the deduction for expenses related to QTFs provided to an employee of the taxpayer, including providing guidance and methodologies to determine the amount of QTF parking expenses that is nondeductible.  The final regulations also address the disallowance of the deduction for expenses of transportation and commuting between an employee’s residence and place of employment.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.

WASHINGTON — The Internal Revenue Service has started sending letters to taxpayers that may need to take additional actions related to Qualified Opportunity Funds (QOF).

Taxpayers who attached or indicated they attached a Form 8996 to their return may receive Letter 6250, Self-certifying as Qualified Opportunity Fund (QOF). This letter lets them know that if they intended to self-certify as a QOF they may need to take additional action to meet the annual self-certification requirement.

To correct a  2018 self-certification as a QOF, these taxpayers should file an amended return or an administrative adjustment request (AAR).  If an entity that receives the letter fails to take action to self-certify as a QOF, the IRS may refer its tax account for examination.  Investors who made an election to defer tax on eligible gains invested in that entity may also be subject to examination for an invalid election.

Additionally, taxpayers may receive Letter 6251, Reporting Qualified Opportunity Fund (QOF) Investments, notifying them they may not have properly followed the instructions for Form 8949, Sales and other Dispositions of Capital Assets or do not appear to have an eligible gain that would enable them to make a valid deferral election for gains invested in a QOF.

If these taxpayers intended to make a valid deferral election, they can file an amended return or an AAR.  Failure to act will mean those who received the letter may not have a qualifying investment in a QOF and the IRS may refer their tax accounts for examination.  This may result in letter recipients owing taxes, interest, and penalties on gains that were not properly deferred.

For general information, visit the Opportunity Zones page on irs.gov.