IRS launches new effort aimed at high-income non-filers; 125,000 cases focused on high earners, including millionaires, who failed to file tax returns with financial activity topping $100 billion

WASHINGTON – In the continuing effort to improve tax compliance and ensure fairness, the Internal Revenue Service announced a new effort today focused on high-income taxpayers who have failed to file federal income tax returns in more than 125,000 instances since 2017.

The new initiative, made possible by Inflation Reduction Act funding, begins with IRS compliance letters going out this week on more than 125,000 cases where tax returns haven’t been filed since 2017. The mailings include more than 25,000 to those with more than $1 million in income, and over 100,000 to people with incomes between $400,000 and $1 million between tax years 2017 and 2021.

These are all cases where IRS has received third-party information – such as through Forms W-2 and 1099s – indicating these people received income in these ranges but failed to file a tax return. Without adequate resources, the IRS non-filer program has only run sporadically since 2016 due to severe budget and staff limitations that didn’t allow these cases to be worked. With new Inflation Reduction Act funding available, the IRS now has the capacity to do this core tax administration work.

“At this time of year when millions of hard-working people are doing the right thing paying their taxes, we cannot tolerate those with higher incomes failing to do a basic civic duty of filing a tax return,” said IRS Commissioner Danny Werfel. “The IRS is taking this step to address this most basic form of non-compliance, which includes many who are engaged in tax evasion. This is one of the clearest examples of the need to have a properly funded IRS. With the Inflation Reduction Act resources, the agency finally has the funding to identify non-filers, ensure they meet this core civic responsibility, and ultimately help ensure fairness for everyone who plays by the rules.”

This week, the IRS will begin mailing these compliance alerts for failure to file a tax return, formally known as the CP-59 Notice. About 20,000 to 40,000 letters will go out each week, beginning with the filers in the highest-income categories. The IRS noted that some of these non-filers have multiple years included in the case count so the number of taxpayers receiving letters will be smaller than the actual number of notices going out.

People receiving these letters should take immediate action to avoid additional follow-up notices, higher penalties as well as increasingly stronger enforcement measures. People in this category should also consult with a trusted tax professional so they can quickly file their late tax returns and pay delinquent tax, interest and penalties. The failure-to-file penalty amounts to 5% of the amount owed every month – up to 25% of the tax bill. There is also special non-filer information on IRS.gov that can assist them.

Since the IRS is not aware of the potential credits and deductions these people may have, the amount of potential revenue to be gained from this effort is uncertain. The third-party information on these taxpayers indicates financial activity of more than $100 billion. Even with a conservative estimate, the IRS believes hundreds of millions of dollars of unpaid taxes are involved in these cases. At the same time, some non-filers may actually be owed a refund.

“If someone hasn’t filed a tax return for previous years, this is the time to review their situation and make it right,” Werfel said. “For those who owe, the risk will just grow over time as will the potential for penalties and interest. These non-filers should review information on IRS.gov that can help and consider talking to a trusted tax professional as soon as possible.”

The new non-filer initiative is part of a larger effort underway with the IRS working to ensure large corporate, large partnership and high-income individual filers pay the taxes they owe. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to shelter or manipulate their income to avoid taxes. The IRS is now taking swift and aggressive action to close this gap.

The IRS has a variety of efforts underway to improve tax compliance in overlooked areas where the agency did not have adequate resources prior to Inflation Reduction Act funding.

For example, the IRS is continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt. The IRS has collected nearly $500 million in ongoing efforts to recoup taxes owed by 1,600 millionaires with work continuing in this area. In other areas, the IRS is pursuing multi-million-dollar partnership balance sheet discrepancies, ramping up audits of more than 75 of the largest partnerships using artificial intelligence (AI) as well as other areas.

The new non-filer effort focused on high-income taxpayers who haven’t submitted a tax return is part of this larger effort to expand IRS compliance work to ensure fairness in the tax system.

High-income non-filers: IRS actions escalate if tax returns aren’t filed

People who don’t respond to the non-filer letter will receive additional notices and other enforcement actions. Ultimately, this can lead to a variety of IRS compliance activity, including collection and audit action as well as potential criminal prosecution. As part of this, the IRS can also take steps to file what’s known as a Substitute for Return (SFR).

If a person repeatedly fails to respond and does not file, the IRS may create a substitute tax return for the taxpayer. The IRS calculates this substitute tax return based on wages and other income reported to the agency by employers, financial institutions and others. The return factors in the tax, penalty and interest owed by the taxpayer.

This tax return might not give the person credit for deductions and exemptions they may be entitled to receive because the IRS does not know each taxpayer’s situation. In this scenario, the IRS will send a Notice of Deficiency CP3219N (a 90-day letter) proposing a tax assessment. The taxpayer will have 90 days to file the past due tax return or file a petition in Tax Court. If the person does neither, the IRS will proceed with the proposed assessment.

If the IRS files a substitute return, it is still in the person’s best interest to file their own tax return to take advantage of any exemptions, credits and deductions they are entitled to receive. The IRS will generally adjust the account to reflect the correct figures.

The tax return the IRS prepares for these taxpayers will likely lead to a tax bill, which, if unpaid, will trigger the collection process. This can include such actions as a levy on wages or a bank account or the filing of a notice of federal tax lien. If a taxpayer repeatedly does not file, they could be subject to additional enforcement measures, such as additional penalties and/or criminal prosecution.

IRS: Spokane area taxpayers impacted by wildfires qualify for tax relief; various deadlines postponed to June 17

WASHINGTON — The Internal Revenue Service announced today tax relief for individuals and businesses in parts of Washington state affected by wildfires that began on Aug. 18, 2023.

These taxpayers now have until June 17, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes Spokane County. Individuals and households that reside or have a business in this locality qualify for tax relief.

The same relief will be available to any other Washington state localities added later to the disaster area. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

Filing and payment relief
The tax relief postpones various tax filing and payment deadlines that occurred from Aug. 18, 2023, through June 17, 2024 (postponement period). As a result, affected individuals and businesses will have until June 17, 2024, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the June 17, 2024, deadline will now apply to:

• Individual income tax returns and payments normally due on April 15, 2024.
• 2023 contributions to IRAs and health savings accounts for eligible taxpayers.
• 2023 quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024, and 2024 estimated tax payments normally due on April 15, 2024.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31 and April 30, 2024.
• Calendar-year partnership and S corporation returns normally due on March 15, 2024.
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2024.
• Calendar-year tax-exempt organization returns normally due on May 15, 2024.

In addition, individuals and businesses that had an extension to file their 2022 returns will also have until June 17, 2024, to file them. However, tax-year 2022 tax payments are not eligible for this relief because they were originally due last spring, before the disaster occurred.

Also, penalties for failing to make payroll and excise tax deposits due on or after Aug. 18, 2023, and before Sept. 5, 2023, will be abated as long as the deposits were made by Sept. 5, 2023.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these kinds of unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for 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.

Reminder about extensions
The IRS urges anyone who needs an additional tax-filing extension, beyond June 17, 2024, for their 2023 federal income tax return to request it electronically by April 15, 2024. Though a disaster-area taxpayer qualifies to request an extension between April 15 and June 17, 2024, a request filed during this period can only be submitted on paper. Whether requested electronically or on paper, the taxpayer will then have until Oct. 15, 2024, to file, though payments are still due on June 17, 2024. Visit IRS.gov/Extensions for details.

Additional tax relief
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 2023 return normally filed this year), or the return for the prior year (2022). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means Oct. 15, 2024. Be sure to write the FEMA declaration number – 4759-DR − on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

The IRS may provide additional disaster relief in the future.

The tax relief is part of a coordinated federal response to the damage caused by these wildfires and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Back to Top

Tax Time Guide: IRS enhances ‘Where’s My Refund?’ tool for 2024 filing season

WASHINGTON — With millions of tax refunds going out each week, the Internal Revenue Service reminded taxpayers today that recent improvements to “Where's My Refund?” on IRS.gov provide more information and remains the best way to check the status of a refund.

The “Where’s My Refund?” tool provides taxpayers with three key pieces of information: IRS confirmation of receiving a federal tax return, approval of the tax refund and issuing date of the approved tax refund. Information for returns from tax years 2023, 2022 and 2021 is available.

During this busy part of filing season, millions of taxpayers are anticipating refunds. In the second of the weekly Tax Time Guide series, the IRS highlights important details about “Where’s My Refund?” that can help taxpayers quickly get the information they need without calling the IRS.

The improvements to the heavily used tool follow Inflation Reduction Act funding, which is providing for a variety of IRS technological advances and upgrades designed to help taxpayers and transform agency operations.

“Where’s My Refund?” enhancements
In filing season 2024, taxpayers will benefit from important updates that reduce the need for many taxpayers to call the IRS and include:

• Messages with detailed refund status in plain language.
• Seamless access on mobile devices and with the IRS2Go app.
• Notifications indicating whether the IRS needs additional information.

How to use “Where’s My Refund?”
To use “Where's My Refund?”, taxpayers must enter their Social Security number or Individual Taxpayer Identification number, filing status and the exact whole dollar amount of their expected refund from the original tax return for the year they're checking.

Once the IRS acknowledges receipt of a return, refund status information is typically available within:

• 24 hours after receipt of a taxpayer's e-filed tax year 2023 return.
• Three to four days after receipt of an e-filed tax year 2022 or 2021 return.
• Four weeks after mailing a paper return.

Taxpayers should note that the IRS updates the tool once a day, usually overnight, so there's no need to check more often. The IRS reminds taxpayers that the fastest way to get a refund is by filing electronically and using direct deposit.

Refund delivery
Many different factors may affect the timing of refund delivery:

• The tax return has errors, requires additional review or is incomplete.
• The return needs a correction to the Earned Income Tax Credit (EITC) or Additional Child Tax Credit.
• The time between the IRS issuing the refund and the bank posting it to an account may vary since processing times fluctuate.

The IRS will contact taxpayers by mail if more information is needed to process a return. IRS phone and walk-in representatives can only research the status of a refund if:

• 21 days or more have passed since a return was filed electronically.
• Six weeks or more have passed since a return was mailed.
• “Where's My Refund?” tells the taxpayer to contact the IRS.

If a taxpayer refund isn't what is expected, it may be due to changes made by the IRS. These changes could include corrections to the Child Tax Credit or EITC amounts or an offset from all or part of the refund amount to pay past-due tax or debts. More information about reduced refunds is available on IRS.gov.

Filing season reminders
Taxpayers should make IRS.gov their first stop to get information on filing a tax return. There is information on Choosing a tax professional, IRS Free File, Answers to tax questions and Tips on filing a return.

Taxpayers who file electronically and choose direct deposit typically get their refund in less than 21 days. Taxpayers who don't have a bank account can find out how to open a bank account at a FDIC-insured bank or the National Credit Union Locator Tool.

Refund information for amended tax returns is not available on “Where’s My Refund?” Use “Where’s My Amended Return?” to get the status of an amended return.

The deadline for most taxpayers to file a tax return, pay any tax due or request an extension to file is Monday, April 15.

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

More resources:

• About "Where's My Refund?"
• Tax season refund FAQs
• Direct deposit

Back to Top

IRS: How to correct an electronically filed return rejected for a missing Form 8962

WASHINGTON – The Internal Revenue Service reminds taxpayers that an electronically filed tax return will be rejected if the taxpayer is required to reconcile advance payments of the premium tax credit (APTC) on Form 8962, Premium Tax Credit (PTC), but does not complete the form in the software and submit it with their tax return.

Taxpayers must file Form 8962 if any family member was enrolled in Marketplace health insurance and IRS records show that APTC was paid to their Marketplace insurance company. Taxpayers use Form 8962 to reconcile their APTC with the PTC they are allowed. This reconciliation is required even when APTC fully subsidizes the cost of Marketplace insurance, and no premiums are paid by the taxpayer.

The IRS has been seeing an increase in the number of taxpayers who are not including the required Form 8962 when using tax software to file their returns.

For more information on how to correct an electronically filed return that is rejected for a missing Form 8962, taxpayers can review How to correct an electronically filed return rejected for a missing Form 8962.

Back to Top

IRS: San Diego area taxpayers impacted by severe storms, flooding qualify for tax relief; various deadlines postponed to June 17

WASHINGTON — The Internal Revenue Service announced today tax relief for individuals and businesses in parts of California affected by severe storms and flooding that began on Jan. 21.

These taxpayers now have until June 17, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes San Diego County. Individuals and households that reside or have a business in this locality qualify for tax relief.

The same relief will be available to any other California localities added later to the disaster area. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

Filing and payment relief
The tax relief postpones various tax filing and payment deadlines that occurred from Jan. 21, 2024, through June 17, 2024 (postponement period). As a result, affected individuals and businesses will have until June 17, 2024, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the June 17, 2024, deadline will now apply to:

• Individual income tax returns and payments normally due on April 15, 2024.
• 2023 contributions to IRAs and health savings accounts for eligible taxpayers.
• 2024 estimated tax payments normally due on April 15, 2024.
• Quarterly payroll and excise tax returns normally due on Jan. 31 and April 30, 2024.
• Calendar-year partnership and S corporation returns normally due on March 15, 2024.
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2024.
• Calendar-year tax-exempt organization returns normally due on May 15, 2024.

Also, penalties for failing to make payroll and excise tax deposits due on or after Jan. 21, 2024, and before Feb. 5, 2024, will be abated as long as the deposits were made by Feb. 5, 2024.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these kinds of unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for 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.

Reminder about extensions
The IRS urges anyone who needs an additional tax-filing extension, beyond June 17, 2024, for their 2023 federal income tax return to request it electronically by April 15, 2024. Though a disaster-area taxpayer qualifies to request an extension between April 15, 2024, and June 17, 2024, a request filed during this period can only be submitted on paper. Whether requested electronically or on paper, the taxpayer will then have until Oct. 15, 2024, to file, though payments are still due on June 17, 2024. Visit IRS.gov/Extensions for details.

Additional tax relief
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 2024 return normally filed next year), or the return for the prior year (2023, normally filed this year). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means Oct. 15, 2025. Be sure to write the FEMA declaration number – 4758-DR − on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

The IRS may provide additional disaster relief in the future.

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.

Back to Top

Low Income Taxpayer Clinic is now taking applications for supplemental grants

Supplemental application period runs from Feb. 26 through April 10

IR-2024-50, Feb. 26, 2024

WASHINGTON — The Internal Revenue Service today announced it will accept supplemental applications from all qualified organizations for Low Income Taxpayer Clinic (LITC) matching grants from Feb. 26 to April 10.

“LITCs help protect taxpayer rights and ensure justice for thousands of taxpayers across the country,” said National Taxpayer Advocate Erin M. Collins. “Some communities that are underserved, or do not have any clinics to help those taxpayers who have nowhere else to turn, need the assistance that a clinic can provide. The supplemental grant period is a chance for eligible organizations to apply for funding that can help make a difference for vulnerable taxpayers and grow the LITC presence in areas with the greatest need.”

The funding and the period of performance for the grant will be July 1 to Dec. 31. Under Internal Revenue Code (IRC) section 7526, the IRS awards matching grants to qualifying organizations to develop, expand or maintain an LITC. For every dollar of funding awarded by the IRS, an LITC must have a dollar of match. An LITC must provide services for free or for no more than a nominal fee (except for reimbursement of actual costs incurred).
LITCs ensure the fairness and integrity of the tax system for taxpayers by:

• Providing pro bono representation to assist low-income taxpayers in resolving tax disputes with the IRS;
• Educating taxpayers for whom English is a second language (ESL taxpayers) about their rights and responsibilities as taxpayers; and
• Identifying and advocating on issues that impact these taxpayers.

To achieve maximum access to justice for low-income and ESL taxpayers, the IRS has expanded the eligibility criteria for a grant by removing the requirement for eligible organizations to provide direct controversy representation. Representation may be provided by referring taxpayers to qualified representatives who have agreed to handle the referred cases on a pro bono basis. In addition, pursuant to the ESL Education Pilot Program started in 2023 and continuing for 2024, a grant may be awarded to an organization to operate a program to inform ESL taxpayers about their rights and responsibilities under the IRC without the requirement to also provide tax controversy representation to low-income taxpayers. See IRS Publication 3319 for examples of what constitutes a “clinic.”

Although the amount and timing of 2024 appropriations is not yet known, the President’s 2024 budget request includes a continuation of LITC funding at $26 million and a $200,000 per award funding cap, and funding bills approved by the House and Senate Appropriations Committees contains similar language. Consistent with the Administration’s budget request and House and Senate action to date, the IRS will allow applicants to request grants up to $200,000. If Congress does not continue the LITC Program's funding at $26 million and/or the increased per award funding cap of $200,000, the IRS will adjust awards to reflect any limitations in place at that time.

Despite the IRS's efforts to foster parity in availability and accessibility when choosing organizations to receive LITC matching grants, there remain communities that are underserved by clinics. Currently, the states of Hawaii, Kansas, Nevada, North Dakota, South Dakota, West Virginia and the territory of Puerto Rico do not have an LITC. The IRS is particularly interested in receiving supplemental applications from organizations that provide services in these underserved geographic areas. Priority will be given to established organizations that can help provide coverage to underserved geographic areas. For the ESL Education Pilot Program, special consideration will be given to established organizations with existing community partnerships that can deliver services to the target audiences.

The LITC Program is administered by the Office of the Taxpayer Advocate at the IRS, led by National Taxpayer Advocate Erin M. Collins. Although LITCs receive partial funding from the IRS, LITCs, their employees and their volunteers operate independently of the IRS.

Supplemental applications must be submitted electronically by 11:59 p.m. Eastern Time on April 10, 2024. The funding number is TREAS-GRANTS-052024-002. Copies of IRS Publication 3319, 2024 Grant Application Package and Guidelines, can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). To assist organizations in applying for funding, a "Reminders and Tips for Completing Form 13424-M" document is available on the LITC grants page. Questions about the LITC Program or the supplemental grant application process can be addressed to the LITC Program Office by email at litcprogramoffice@irs.gov. Alternatively, you may contact Karen Tober by email at karen.tober@irs.gov.

More information about LITCs and the work they do to represent, educate and advocate on behalf of low-income and ESL taxpayers is available in IRS Publication 5066, LITC Program Report. A short video about the LITC Program is also available on the IRS website.

Join the LITC Program Office for one of two optional webinars, where it will provide information about the LITC Program and the supplemental application process. Details on the dates and times of the webinars are available at LITC Grants - Taxpayer Advocate Service.

Back to Top

Administrative Exemption from Requirement to Electronically File Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

Notice 2024-26 announces that the IRS is granting an administrative exemption from the electronic filing requirements for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, set forth in final regulations issued under Internal Revenue Code sections 6011(e), 1461, and 1474 (TD 9972, 88 FR 11754). Notice 2024-26 announces that withholding agents (both U.S. and foreign persons) are administratively exempt from the requirement to electronically file Forms 1042 required to be filed in calendar year 2024 (applicable to Forms 1042 filed in 2024 for taxable year 2023). Additionally, this notice announces that withholding agents that are foreign persons are administratively exempt from the requirements to electronically file Forms 1042 required to be filed in calendar year 2025 (applicable to Forms 1042 filed in 2025 for taxable year 2024).

The administrative exemption from the electronic filing requirements for Form 1042 is automatic, and withholding agents are not required to file a waiver request to utilize this exemption.

Notice 2024-26 will be in IRB: 2024-12, dated 03/18/2024.

Back to Top

Tax Time Guide 2024: What to know before completing a tax return

WASHINGTON — During the busiest time of the tax filing season, the Internal Revenue Service kicked off its 2024 Tax Time Guide series to help remind taxpayers of key items they’ll need to file a 2023 tax return.

As part of its four-part, weekly Tax Time Guide series, the IRS continues to provide new and updated resources to help taxpayers file an accurate tax return. Taxpayers can count on IRS.gov for updated resources and tools along with a special free help page available around the clock. Taxpayers are also encouraged to read Publication 17, Your Federal Income Tax (For Individuals) for additional guidance.

Essentials to filing an accurate tax return
The deadline this tax season for filing Form 1040, U.S. Individual Income Tax Return, or 1040-SR, U.S. Tax Return for Seniors, is April 15, 2024. However, those who live in Maine or Massachusetts will have until April 17, 2024, to file due to official holidays observed in those states.

Taxpayers are advised to wait until they receive all their proper tax documents before filing their tax returns. Filing without all the necessary documents could lead to mistakes and potential delays.

It’s important for taxpayers to carefully review their documents for any inaccuracies or missing information. If any issues are found, taxpayers should contact the payer immediately to request a correction or confirm that the payer has their current mailing or email address on file.

Creating an IRS Online Account can provide taxpayers with secure access to information about their federal tax account, including payment history, tax records and other important information.

Having organized tax records can make the process of preparing a complete and accurate tax return easier and may also help taxpayers identify any overlooked deductions or credits.

Taxpayers who have an Individual Taxpayer Identification Number or ITIN may need to renew it if it has expired and is required for a U.S. federal tax return. If an expiring or expired ITIN is not renewed, the IRS can still accept the tax return, but it may result in processing delays or delays in credits owed.

Changes to credits and deductions for tax year 2023
Standard deduction amount increased. For 2023, the standard deduction amount has been increased for all filers. The amounts are:

— Single or married filing separately — $13,850.

— Head of household — $20,800.

— Married filing jointly or qualifying surviving spouse — $27,700.

Additional child tax credit amount increased. The maximum additional child tax credit amount has increased to $1,600 for each qualifying child.

Child tax credit enhancements. Many changes to the Child tax credit (CTC) that had been implemented by the American Rescue Plan Act of 2021 have expired.

However, the IRS continues to closely monitor legislation being considered by Congress affecting the Child Tax Credit. The IRS reminds taxpayers eligible for the Child Tax Credit that they should not wait to file their 2023 tax return this filing season. If Congress changes the CTC guidelines, the IRS will automatically make adjustments for those who have already filed so no additional action will be needed by those eligible taxpayers.

Under current law, for tax year 2023, the following currently apply:

— The enhanced credit allowed for qualifying children under age 6 and children under age 18 has expired. For 2023, the initial amount of the CTC is $2,000 for each qualifying child. The credit amount begins to phase out where AGI income exceeds $200,000 ($400,000 in the case of a joint return). The amount of the CTC that can be claimed as a refundable credit is limited as it was in 2020 except that the maximum ACTC amount for each qualifying child increased to $1,500.

— The increased age allowance for a qualifying child has expired. A child must be under age 17 at the end of 2023 to be a qualifying child.

Changes to the Earned Income Tax Credit (EITC). The enhancements for taxpayers without a qualifying child implemented by the American Rescue Plan Act of 2021 will not apply for tax year 2023. To claim the EITC without a qualifying child in 2023, taxpayers must be at least age 25 but under age 65 at the end of 2023. If a taxpayer is married filing a joint return, one spouse must be at least age 25 but under age 65 at the end of 2023.

Taxpayers may find more information on Child tax credits in the Instructions for Schedule 8812 (Form 1040).

New Clean Vehicle Credit. The credit for new qualified plug-in electric drive motor vehicles has changed. This credit is now known as the Clean Vehicle Credit. The maximum amount of the credit and some of the requirements to claim the credit have changed. The credit is reported on Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit, and on Form 1040, Schedule 3.

More information on these and other credit and deduction changes for tax year 2023 may be found in the Publication 17, Your Federal Income Tax (For Individuals), taxpayer guide.

1099-K reporting requirements have not changed for tax year 2023
Following feedback from taxpayers, tax professionals and payment processors, and to reduce taxpayer confusion, the IRS recently released Notice 2023-74 announcing a delay of the new $600 reporting threshold for tax year 2023 on Form 1099-K, Payment Card and Third-Party Network Transactions. The previous reporting thresholds will remain in place for 2023.

The IRS has published a Fact Sheet with further information to assist taxpayers concerning changes to 1099-K reporting requirements for tax year 2023.

Form 1099-K reporting requirements
Taxpayers who take direct payment by credit, debit or gift cards for selling goods or providing services by customers or clients should get a Form 1099-K from their payment processor or payment settlement entity no matter how many payments they got or how much they were for.

If they used a payment app or online marketplace and received over $20,000 from over 200 transactions, the payment app or online marketplace is required to send a Form 1099-K. However, they can send a Form 1099-K with lower amounts. Whether or not the taxpayer receives a Form 1099-K, they must still report any income on their tax return.

What’s taxable? It’s the profit from these activities that’s taxable income. The Form 1099-K shows the gross or total amount of payments received. Taxpayers can use it and other records to figure out the actual taxes they owe on any profits. Remember that all income, no matter the amount, is taxable unless the tax law says it isn’t – even if taxpayers don’t get a Form 1099-K.

What’s not taxable? Taxpayers shouldn’t receive a Form 1099-K for personal payments, including money received as a gift and for repayment of shared expenses. That money isn’t taxable. To prevent getting an inaccurate Form 1099-K, note those payments as “personal,” if possible.

Good recordkeeping is key. Be sure to keep good records because it helps when it’s time to file a tax return. It’s a good idea to keep business and personal transactions separate to make it easier to figure out what a taxpayer owes.

For details on what to do if a taxpayer gets a Form 1099-K in error or the information on their form is incorrect, visit irs.gov/1099K or find frequently asked questions at Form 1099-K FAQs.

Direct File pilot program provides a new option this year for some
The IRS launched the Direct File pilot program during the 2024 tax season. The pilot will give eligible taxpayers an option to prepare and electronically file their 2023 tax returns, for free, directly with the IRS.

The Direct File pilot program will be offered to eligible taxpayers in 12 pilot states who have relatively simple tax returns reporting only certain types of income and claiming limited credits and deductions. The 12 states currently participating in the Direct File pilot program are Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington state and Wyoming. Taxpayers can check their eligibility at directfile.irs.gov.

The Direct File pilot is currently in the internal testing phase and will be more widely available in mid-March. Taxpayers can get the latest news about the pilot at Direct File pilot news and sign up to be notified when Direct File is open to new users.

Finally, for comprehensive information on all these and other changes for tax year 2023, taxpayers and tax professionals are encouraged to read the Publication 17, Your Federal Income Tax (For Individuals), taxpayer guide, as well as visit other topics of taxpayer interest on IRS.gov.

Back to Top

IRS begins audits of corporate jet usage; part of larger effort to ensure high-income groups don’t fly under the radar on tax responsibilities

WASHINGTON – Using Inflation Reduction Act funding and as part of ongoing efforts to improve tax compliance in high-income categories, the Internal Revenue Service announced today plans to begin dozens of audits on business aircraft involving personal use.

The audits will be focused on aircraft usage by large corporations, large partnerships and high-income taxpayers and whether for tax purposes the use of jets is being properly allocated between business and personal reasons.

The IRS will be using advanced analytics and resources from the Inflation Reduction Act to more closely examine this area, which has not been closely scrutinized during the past decade as agency resources fell sharply. The number of audits related to aircraft usage could increase in the future following initial results and as the IRS continues hiring additional examiners.

“During tax season, millions of people are doing the right thing by filing and paying their taxes, and they should have confidence that everyone is also following the law,” said IRS Commissioner Danny Werfel. “Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”

Business aircraft are often used for both business and personal reasons by officers, executives, other employees, shareholders and partners. In general, the tax code passed by Congress allows a business deduction for expenses of maintaining an asset, such as a corporate jet, if that asset is utilized for a business purpose. However, the use of a company aircraft must be allocated between business use and personal use. This is a complex area of tax law, and record-keeping can be challenging.

For someone such as an executive using the company jet for personal travel, the amount of personal usage impacts eligibility for certain business deductions. Use of the company jet for personal travel typically results in income inclusion by the individual using the jet for personal travel and could also impact the business’s eligibility to deduct costs related to the personal travel.

The examination of corporate jet usage is part of the IRS Large Business and International division’s “campaign” program. Campaigns apply different compliance streams to help address areas with a high risk of non-compliance. These efforts include issue-focused examinations, taxpayer outreach and education, tax form changes and focusing on particular issues that present a high risk of noncompliance.

The IRS will begin conducting examinations in the near future as part of the agency’s commitment to ensuring fairness in tax administration.

This is part of a larger effort the IRS is taking to ensure large corporate, large partnerships and high-income individual filers pay the taxes they owe. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to shelter or manipulate their income to avoid taxes. The IRS is now taking swift and aggressive action to close this gap.

In addition to work on corporate jets, the IRS has a variety of efforts underway to improve tax compliance in complex, overlooked high-dollar areas where the agency did not have adequate resources prior to Inflation Reduction Act funding.

For example, the IRS is continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt. The IRS has already collected $482 million in ongoing efforts to recoup taxes owed by 1,600 millionaires with action continuing in this area. Elsewhere, the IRS is pursuing multi-million-dollar partnership balance sheet discrepancies, ramping up audits of more than 75 of the largest partnerships using artificial intelligence (AI) as well as other areas.

"The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in the years that predated the Inflation Reduction Act,” Werfel said. “We are adding staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law. The IRS will have more announcements to make in this important area."

Back to Top

Interest rates remain the same for the second quarter of 2024

WASHINGTON — The Internal Revenue Service today announced interest rates will remain the same for the calendar quarter beginning April 1, 2024.

For individuals, the rate for overpayments and underpayments will be 8% per year, compounded daily. Here’s a complete list of the new rates:

• 8% for overpayments (payments made in excess of the amount owed), 7% for corporations.
• 5.5% for the portion of a corporate overpayment exceeding $10,000.
• 8% for underpayments (taxes owed but not fully paid).
• 10% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points and the overpayment rate is the federal short-term rate plus two percentage points. The rate for large corporate underpayments is the federal short-term rate plus five percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during January 2024. See the revenue ruling for details.

Revenue Ruling 2024-6 announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2024-10, dated March 4, 2024.

Back to Top