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.

Notice 2020-86 provides guidance on sections 102 and 103 of the Setting Every Community Up for Retirement Enhancement Act of 2019 with respect to safe harbor plans. 

Notice 2020-86 will be in IRB: 2020-53, dated 12/28/2020.

WASHINGTON — The Internal Revenue Service today issued Notice 2020-86 addressing certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) affecting safe harbor plans, including safe harbor 401(k) plans and certain 403(b) plans.

A safe harbor 401(k) plan is similar to a traditional 401(k) plan but is structured in a way that certain compliance testing can be avoided. Among other things, a safe harbor 401(k) plan must provide for employer contributions that are fully vested when made. These contributions may be employer matching contributions, limited to employees who defer, or employer contributions made on behalf of all eligible employees, regardless of whether they make elective deferrals.

Notice 2020-86 is written in the form of questions and answers to assist small businesses and other employers that maintain safe harbor plans comply with the SECURE Act.

The SECURE Act generally increases from 10 percent to 15 percent the maximum automatic elective deferral under an automatic enrollment safe harbor plan. It also eliminates certain safe harbor notice requirements for plans that provide safe harbor nonelective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans. 

The notice provides initial guidance on these provisions of the SECURE Act and impacts certain safe harbor 401(k) and 401(m) plans (including 403(b) plans that apply the 401(m) safe harbor).

Notice 2020-86 is intended to assist taxpayers by providing guidance on particular issues while the Treasury Department and the IRS develop regulations to fully implement these provisions of the SECURE Act.

For more information about this and other tax information, visit IRS.gov.

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

This is the third 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 now to make tax filing easier in 2021.

This year, there are some key items to consider involving credits, deductions and refunds:

Recovery Rebate Credit/Economic Impact Payment. Taxpayers who received an Economic Impact Payment, should keep Notice 1444, Your Economic Impact Payment, with their 2020 tax records. They may be eligible to claim the Recovery Rebate Credit on their tax year 2020 federal income tax return if:

If a taxpayer didn’t receive the full amount of the Economic Impact Payment for which they were eligible, they may be able to claim the Recovery Rebate Credit when they file in 2021. Individuals do not need to complete information about the Recovery Rebate Credit on tax year 2020 Form 1040 or 1040-SR when filing in 2021, unless eligible to claim an additional credit amount.

Interest on refunds taxable. Taxpayers who received a federal tax refund in 2020 may have been paid interest. Refund interest payments are taxable and must be reported on federal income tax returns. In January 2021, the IRS will send Form 1099-INT to anyone who received interest totaling $10 or more.

Charitable deduction changes. New this year, taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, read Publication 526, Charitable Contributions.

Refunds. The IRS always cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and processing may take longer. For example, the IRS, along with its partners in the tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud. Just like last year, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit, cannot be issued before mid-February. This applies to the entire refund, even the portion not associated with these credits.

The IRS reminds taxpayers that the fastest and safest way to receive a refund is to combine direct deposit with electronic filing including the IRS FreeFile program. Taxpayers can track their refund using the Where’s My Refund? tool.

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

IRS YouTube Video:

New Security Measures Help Protect Against Tax-Related Identity Theft  English

WASHINGTON – The IRS, state tax agencies and the tax industry marked the final day of National Tax Security Awareness Week with a warning to all tax professionals that they face additional challenges from cybercriminals seeking to exploit COVID-19 fears.

The partners, working together as the Security Summit, today closed a week-long effort to heighten awareness about identity theft and data security measures among taxpayers, businesses and tax practitioners. This was the fifth annual National Tax Security Awareness Week.

“When the Security Summit formed five years ago to fight identity thieves it was clear that the IRS, the state and industry could not be successful without the help of taxpayers and tax professionals. Everyone has a role to play in protecting sensitive financial data,” said IRS Commissioner Chuck Rettig. “We’ve made tremendous progress in the past five years, but we still have work to do. The coronavirus and the increase in teleworking creates new ways for these sophisticated cybercriminals to scam people out of their money or their sensitive tax and financial information.”

As the IRS and Security Summit partners took important steps to strengthen defenses against cybercriminals, identity thieves increasingly turned to tax professionals, targeting their offices and systems. Data thefts from tax professionals can provide valuable information to thieves trying to file fraudulent tax returns.

The Summit partners remind all tax professionals to review their security measures. IRS Publication 4557, Safeguarding Taxpayer Data, provides practitioners with a starting point for basic steps to protect clients.

The Security Summit also created the “Taxes-Security-Together” Checklist to help tax practitioners identify the basic steps they should take. As more tax preparers work from home or remote locations because of COVID-19, these measures are even more critical for securing tax data.

Basic protections - the ‘Security Six’ measures
These easy steps can make a big difference, both for tax pros and taxpayers:

Use multi-factor authentication to protect tax accounts
In 2021, all online tax preparation products for tax professionals will include an option for using multi-factor authentication. The Security Summit urges all tax professionals to use this option. Multi-factor authentication may not be available on all over the counter, hard-disk products.

Of the numerous data thefts reported to the IRS from tax professional offices this year, most could have been avoided had the practitioner used multi-factor authentication to protect tax software accounts.

Practitioners can download to their mobile phones readily available authentication apps offered through Google Play or the Apple Store. These apps will generate a security code. Codes also may be sent to practitioner's email or text but the IRS notes those are not as secure as the authentication apps. Use a search engine for "Authentication apps" to learn more.

Virtual private networks to protect remote sites
A VPN provides a secure, encrypted tunnel to transmit data between a remote user via the Internet and the company network. As teleworking or working from home continues during COVID-19, VPNs are critical to protecting and securing internet connections.

Failing to use VPNs can add risks to remote takeovers by cyberthieves, giving criminals access to the tax professional's entire office network simply by accessing an employee's remote internet.

Tax professionals should seek out cybersecurity experts whenever possible. Practitioners can also search for "Best VPNs" to find a legitimate vendor, or major technology sites often provide lists of top services. Remember, never click on a "pop-up" ad that’s marketing a security product. Those generally are scams.

Phishing scams, including COVID-19 and Economic Impact Payments
Phishing emails generally have an urgent message, such as “your account password expired.” They direct you to an official-looking link or attachment. But the link may take you to a fake site made to appear like a trusted source, where it requests your username and password. Or, the attachment may contain malware, which secretly downloads software that tracks keystrokes and allows thieves to eventually steal all the tax pro's passwords.

The Department of Homeland Security's Cybersecurity and Infrastructure Security Agency (CISA) recently issued a warning to all organizations to educate employees, especially those teleworking, about increased activity related to phishing scams.

The IRS often sees thieves posing as potential clients, trying to trick tax pros into opening an embedded link or attachment. Scams involving COVID-19 and the Economic Impact Payments also have been prevalent.

Protect yourself: The need for a security plan and data theft plan
The IRS and Security Summit partners remind tax professionals that federal law requires them to have a written information security plan. Federal law gives the Federal Trade Commission enforcement authority over this provision. Practitioners can learn more about the FTC’s “Safeguards Rule” from IRS Publication 4557.

In addition to the required information security plan, tax pros also should consider an emergency response plan should they experience a breach and data theft. This time-saving step should include contact information for the IRS Stakeholder Liaisons who are the first point of contact for data theft reporting to the IRS and to the states.

IRS Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov, including the reporting processes.

The IRS, state tax agencies, the private sector tax industry, including tax professionals, work in partnership as the Security Summit to help protect taxpayers from identity theft and refund fraud. This is the last of a week-long series of tips to raise awareness about identity theft. See IRS.gov/securitysummit for more details.

The latest IRS executive column, “A Closer Look,” features information about how the IRS continues to focus on ensuring integrity and fairness in our nation’s voluntary tax system despite the challenges  of COVID-19. “Taxpayers who exercise their best efforts to file their tax returns and pay their taxes, or enter into agreements to pay their taxes, deserve to know that the IRS is pursuing others who have failed to satisfy their filing and payment obligations,” explains Eric Hylton, Commissioner, Small Business Self-Employed. Continue reading 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.

Revenue Ruling 2020-28 provides the interest rates for the first quarter of 2021. The rates for interest determined under Section 6621 of the code for the calendar quarter beginning January 1, 2021, will be 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments, and 5 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 0.5 percent.

Revenue Ruling 2020-28 will be in IRB: 2020-52, dated December 21, 2020.