Revenue Ruling 2021-06 provides the rates for interest determined under Section 6621 of the code for the calendar quarter beginning April 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 2021-06 will be  in IRB:  2021-12, dated March 22, 2021.

WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning April 1, 2021. The rates will be: 

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 3 percentage points. 

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 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 2021 to take effect Feb. 1, 2021, based on daily compounding.

Revenue Ruling 2021-6, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2021-12, dated March 22, 2021.

WASHINGTON – The Internal Revenue Service reminds first-time filers and those who usually don’t have a federal filing requirement to consider filing a 2020 tax return. They may be eligible to claim the  Recovery Rebate Credit, a new refundable credit, authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-related Tax Relief Act.

Most individuals eligible for the Recovery Rebate Credit have already received the full amount in two rounds of payments, known as Economic Impact Payments. All legally permitted first and second Economic Impact Payments have been issued.

Individuals who were eligible but did not receive the first or second Economic Impact Payment or received less than the full amounts may be eligible to claim the Recovery Rebate Credit and must file a 2020 federal tax return, even if they do not usually file a tax return. The IRS offers free options to prepare and file a return.

Taxpayers who received the full amounts of both Economic Impact Payments won’t claim the Recovery Rebate Credit or include any information about the payments on their 2020 tax return because the IRS already issued their Recovery Rebate Credit in advance as Economic Impact Payments.

Didn’t get an Economic Impact Payment or got less than the full amount?
People who didn’t get an Economic Impact Payment or got less than the full amounts may be eligible to claim the Recovery Rebate Credit and must file a 2020 tax return, even if they don’t usually file.

The first Economic Impact Payment was based on an individual’s 2019 tax year information or 2018 if the 2019 tax return information was not available. The second Economic Impact Payment was based on an individual’s 2019 tax year information. The Recovery Rebate Credit is similar except that the eligibility and the amount are based on 2020 information on the tax return. The Recovery Rebate Credit is reduced by any Economic Impact Payments issued.

People who were not eligible for either or both of the Economic Impact Payments may still be eligible for the Recovery Rebate Credit since it’s based on their 2020 tax return information. Those with lower income in 2020 or who were claimed as a dependent on someone else’s tax return in 2018 or 2019, but who cannot be claimed as a dependent on someone else’s return in 2020, may now be eligible for the Recovery Rebate Credit.

People eligible to claim the Recovery Rebate Credit based on their 2020 tax information must file a 2020 federal tax return. For more information about the Recovery Rebate Credit, see Frequently Asked Questions at IRS.gov.

Filing a 2020 tax return
To avoid refund delays, file a complete and accurate tax return. The best way to file a complete and accurate 2020 tax return is to file electronically. The tax software will ask questions about income, credits and deductions and help taxpayers figure their Recovery Rebate Credit. The Form 1040 and Form 1040-SR instructions includes a worksheet that can also help.

Individuals will need to know the amount of their Economic Impact Payments to claim the Recovery Rebate Credit. Those who don’t have their Economic Impact Payment notices can view the amounts of their first and second Economic Impact Payments through their individual online account. For married filing joint individuals, each spouse will need to log into his or her own account.

The Recovery Rebate Credit will be included in any tax refund. It will not be issued separately. For those due a refund (which would include the Recovery Rebate Credit), combining electronic filing with direct deposit is the safest and fastest way to get their refund.

IRS Free File
Taxpayers with incomes of$72,000 or less, an use brand-name software to prepare and file their federal tax returns electronically for free with IRS Free File. IRS Free File is a great option for people who are only filing a tax return to claim the Recovery Rebate Credit. Free File Fillable Forms is the only IRS Free File option available for most taxpayers whose adjusted gross income is greater than $72,000.

Taxpayers who have no taxable income but are filing a return to receive the Recovery Rebate Credit should look for several of the Free File products that have no minimum income for eligibility. Simply go to IRS.gov/Free File, select “Choose an IRS Free File Offer” and then select “Browse All Offers” to find a Free File product with no minimum income as part of its offer.

Free online tax help for military service members, families 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.

Free tax preparation in local communities
First-time filers and those who usually don’t have a filing requirement may also qualify for free assistance from IRS Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs in their community. These programs offer free basic tax return preparation to qualified individuals.

The VITA program has operated for over 50 years, offering free tax help to:

In addition to VITA, the TCE program offers free tax help, particularly for those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors.

This year, some VITA/TCE sites are not operating at full capacity and others are not opening. Check the VITA/TCE locator tool to search for nearby available sites.

Help at IRS.gov
IRS.gov has online resources to answer tax questions immediately. The Interactive Tax Assistant is a tool that provides answers to several tax-law questions specific to a taxpayer’s individual circumstances.

Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in the local community or finding a trusted tax professional.

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.