IRS Tax News

  • 27 Aug 2020 2:24 PM | Anonymous

    Facts about opportunity zones

    The Tax Cuts and Jobs Act included changes for businesses and individuals. One of these is the creation of the Opportunity Zones tax incentive, an economic development tool that allows people to invest in distressed areas.

    This incentive’s purpose is to spur economic development and job creation in distressed communities by providing tax benefits to investors. Low income communities and certain contiguous communities qualify as Opportunity Zones if a state, the District of Columbia or a U.S. territory nominated them for that designation and the U.S. Treasury certified that nomination. Following the nomination process, 8,764 communities in all 50 states, the District of Columbia and five U.S. territories were certified as Qualified Opportunity Zones (QOZs). Congress later designated each low-income community in Puerto Rico as a QOZ effective Dec. 22, 2017. The list of each QOZ can be found in IRS Notices 2018-48 and 2019-42.  Further, a visual map of the census tracts designated as QOZs may be found at Opportunity Zones Resources.

    Benefits of investing in opportunity zones

    Opportunity Zones offer tax benefits to business or individual investors who can elect to temporarily defer tax on capital gains if they timely invest those gain amounts in a Qualified Opportunity Fund (QOF). Investors can defer tax on the invested gain amounts until the date they sell or exchange the QOF investment, or Dec. 31, 2026, whichever is earlier. 

    The length of time the taxpayer holds the QOF investment determines the tax benefits they receive.

    • If the investor holds the QOF investment for at least five years, the basis of the QOF investment increases by 10% of the deferred gain.

    • If the investor holds the QOF investment for at least seven years, the basis of the QOF investment increases to 15% of the deferred gain. 

    • If the investor holds the investment in the QOF for at least 10 years, the investor is eligible to elect to adjust the basis of the QOF investment to its fair market value on the date that the QOF investment is sold or exchanged.  

    Deferral of Eligible Gain

    • Gains that may be deferred are called “eligible gains.” They include both capital gains and qualified 1231 gains, but only gains that would be recognized for federal income tax purposes before Jan. 1, 2027, and that aren’t from a transaction with a related person. To obtain this deferral, the amount of the eligible gain must be timely invested in a QOF in exchange for an equity interest in the QOF (qualifying investment). Once this is done, taxpayers can claim the deferral on their federal income tax return for the taxable year in which the gain would have been recognized if they had not deferred it.

    Taxpayers may make an election to defer the gain, in whole or in part. For additional information, see How To Report an Election To Defer Tax on Eligible Gain Invested in a QOF in the Form 8949 instructions.

    Qualified opportunity funds

    A QOF is an investment vehicle that files either a partnership or corporate federal income tax return and is organized for the purpose of investing in QOZ property. To become a QOF, an eligible corporation or partnership self-certifies by annually filing Form 8996 with its federal income tax return. See Form 8996 instructions. The return with the Form 8996 must be filed timely, taking extensions into account. An LLC that chooses to be treated either as a partnership or corporation for federal income tax purposes can organize as a QOF.

    Qualified opportunity zone property

    QOZ property is a QOF’s qualifying ownership interest in a corporation or partnership that operates a QOZ business in a QOZ or certain tangible property of the QOF that is used in a business in the QOZ. To be a qualifying ownership interest in a corporation or partnership, (1) the interest must be acquired after Dec. 31, 2017, solely in exchange for cash; (2) the corporation or partnership must be a QOZ business; and (3) for 90% of the holding period of that interest, the corporation or partnership was a QOZ business. See Form 8996 instructions.

    Qualified opportunity zone business property

    QOZ business property is tangible property that a QOF acquired by purchase after 2017 and uses in a trade or business and:

     • the original use of the property in the QOZ commenced with the QOF or QOZ business OR the property was substantially improved by the QOF or QOZ business; and

    • during 90% of the time the QOF or QOZ business held the property, substantially all (generally at least 70 percent) of the use of the property was in a QOZ.

    Leased property may also qualify as QOZ business property. To qualify, the lease must be a market rate lease entered into after Dec. 31, 2017.

    Qualified opportunity zone business

    Each taxable year, a QOZ business must earn at least 50% of its gross income from business activities within a QOZ. The regulations provide three safe harbors that a business may use to meet this test. These safe harbors take into account any of the following--

    • Whether at least half of the aggregate hours of services received by the business were performed in a QOZ;

    • Whether at least half of the aggregate amounts that the business paid for services were for services performed in a QOZ; or

    • Whether necessary tangible property and necessary business functions to earn the income were located in a QOZ.

    Resources:

    • Opportunity Zone FAQs
    • Opportunity Zone Website
    • TD 9889, OZ Final Regulation
    • Proposed regulation 115420-18
    • Proposed regulation 120186-18
    • Revenue Procedure 2018-16
    • Revenue Ruling 2018-29  
    • Form 8949, Sale and Other Dispositions of Capital Assets
    • Form 8996, Qualified Opportunity Fund
    • Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments
    • Publication 544, Sales and Dispositions of Assets

  • 27 Aug 2020 11:18 AM | Anonymous

    WASHINGTON — The Internal Revenue Service announced today the opening of the application period for the 2021 Compliance Assurance Process program. The application period runs Sept. 1 to Nov. 13, 2020. The IRS will inform applicants if they’re accepted into the program in February 2021.

    Launched in 2005, CAP employs real-time issue resolution, through transparent and cooperative interaction between taxpayers and the IRS, to improve federal tax compliance by resolving issues prior to the filing of a tax return.

    To be eligible to apply for CAP, new applicants must:

    • Have assets of $10 million or more,
    • Be a U.S. publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q, and 8-K, and
    • Not be under investigation by, or in litigation with, any government agency that would limit the IRS’s access to current tax records.

    To be eligible to participate in CAP, taxpayers must adhere to CAP program limits on the number of open years. For 2021, the IRS modified the open-year criteria, updated its requirements for the Tax Control Framework Questionaire and established a limit on the duration of the Bridge phase.

    Program details are available on the CAP webpage. A draft of the 2021 CAP Memorandum of Understanding has also been posted on the CAP webpage, and stakeholders can offer any feedback on the MOU by sending it to the CAP Mailbox at lbi.irs.cap.program@IRS.gov by November 13, 2020.

  • 25 Aug 2020 4:15 PM | Anonymous

    WASHINGTON – The Internal Revenue Service will soon send catch-up Economic Impact Payment checks to about 50,000 individuals whose portion of the EIP was diverted to pay their spouse’s past-due child support.

    These catch-up payments are due to be issued in early-to-mid-September. They will be mailed as checks to any eligible spouse who submitted Form 8379, Injured Spouse Allocation, along with their 2019 federal income tax return, or in some cases, their 2018 return. These spouses do not need to take any action to get their money. The IRS will automatically issue the portion of the EIP that was applied to the other spouse's debt.

    The IRS is aware that some individuals did not file a Form 8379, Injured Spouse Allocation, and did not receive their portion of the EIP for the same reason above. These individuals also do not need to take any action and do not need to submit a Form 8379. The IRS does not yet have a timeframe but will automatically issue the portion of the EIP that was applied to the other spouse’s debt at a later date. 

    Affected taxpayers can check the status of their Payment by using the Get My Payment tool, available only on IRS.gov.

    For more information, see the Receiving My Payment section of the Frequently Asked Questions in the  Economic Payment Information Center on IRS.gov.

  • 25 Aug 2020 8:15 AM | Anonymous

    WASHINGTON — Victims of the California wildfires that began Aug. 14 now have until Dec. 15, 2020 to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today. 

    The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties in California, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

    The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 14, 2020. As a result, affected individuals and businesses will have until Dec. 15, 2020, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2019 return due to run out on Oct. 15, 2020, will now have until Dec. 15, 2020, to file. The IRS noted, however, that because tax payments related to these 2019 returns were due on July 15, 2020, those payments are not eligible for this relief. 

    The Dec. 15, 2020 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2020, and the quarterly payroll and excise tax returns normally due on Oct. 31, 2020. It also applies to tax-exempt organizations, operating on a calendar-year basis, that had a valid extension due to run out on Nov. 15, 2020. Businesses with extensions also have the additional time including, among others, calendar-year corporations whose 2019 extensions run out on Oct. 15, 2020.    

    In addition, penalties on payroll and excise tax deposits due after Aug. 14 and before Aug. 31, will be abated as long as the deposits are made by Aug. 31, 2020.

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

    The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

    In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227 . This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

    Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2020 return normally filed next year), or the return for the prior year (2019). Be sure to write the FEMA declaration number – 4558 − for California on any return claiming a loss. See Publication 547 for details.

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

  • 25 Aug 2020 8:14 AM | Anonymous

    WASHINGTON — Victims of the Aug. 10 derecho storm that affected parts of Iowa now have until Dec. 15, 2020, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today. 

    The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Linn County in Iowa, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. 

    The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 10, 2020. As a result, affected individuals and businesses will have until Dec. 15, 2020, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2019 return due to run out on Oct. 15, 2020, will now have until Dec. 15, 2020, to file. The IRS noted, however, that because tax payments related to these 2019 returns were due on July 15, 2020, those payments are not eligible for this relief. 

    The Dec. 15, 2020 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2020, and the quarterly payroll and excise tax returns normally due on Oct. 31, 2020. It also applies to tax-exempt organizations, operating on a calendar-year basis, that had a valid extension due to run out on Nov. 15, 2020. Businesses with extensions also have the additional time including, among others, calendar-year corporations whose 2019 extensions run out on Oct. 15, 2020.    

    In addition, penalties on payroll and excise tax deposits due after Aug. 10 and before Aug. 25, will be abated as long as the deposits are made by Aug. 25, 2020.

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

    The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

    In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227 . This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

    Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2020 return normally filed next year), or the return for the prior year (2019). Be sure to write the FEMA declaration number – 4557 for Iowa − on any return claiming a loss. See Publication 547 for details.

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

  • 25 Aug 2020 8:13 AM | Anonymous

    WASHINGTON —The Internal Revenue Service reminds people to create or maintain an emergency preparedness plan. A well-thought-out plan is a critical component for surviving natural disasters. Taxpayers, whether individuals, organizations or businesses, should take time now to create or update their emergency plans. 

    A solid plan includes securing and duplicating essential documents, creating lists of property and knowing where to find information once a disaster has occurred. 

    Secure key documents and make copies 

    Taxpayers should place original documents such as tax returns, birth certificates, deeds, titles and insurance policies inside waterproof containers in a secure space. Duplicates of these documents should be kept with a trusted person outside the area of the taxpayer. Scanning them for backup storage on electronic media such as a flash drive is another option that provides security and portability. 

    Document valuables and equipment 

    Current photos or videos of a home or business’s contents can help support claims for insurance or tax benefits after a disaster. All property, especially expensive and high value items, should be recorded. The IRS disaster-loss workbooks in Publication 584 can help individuals and businesses compile lists of belongings or business equipment. 

    Employers should check fiduciary bonds 

    Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. The IRS reminds employers to carefully choose their payroll service providers

    Rebuilding documents 

    Reconstructing records after a disaster may be required for tax purposes, getting federal assistance or insurance reimbursement. Those who have lost some or all their records during a disaster can visit IRS’s Reconstructing Records webpage as one of their first steps. 

    IRS stands ready 

    Taxpayers whose address of record is identified by the IRS as qualifying for disaster tax relief will automatically receive an extension to file and interest and payment relief for most tax returns and there is no need to call the IRS to request this relief. The IRS lists the relief available and areas qualifying for relief on the Around the Nation website. Taxpayers impacted by a disaster with tax-related questions can contact the IRS at 866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues. 

    A taxpayer impacted by a disaster outside of a federally declared disaster area may qualify for disaster relief. This includes taxpayers who are not physically located in a disaster area, but whose records necessary to meet a filing or payment deadline postponed during the relief period are in a covered disaster area. Taxpayers located outside of a federally declared disaster area must self-identify to receive relief by calling 866-562-5227 . 

    Find complete disaster assistance and emergency relief details for both individuals and businesses on IRS.gov. 

    Related items:

    For more information about National Preparedness Month, visit Ready.gov/September.

  • 24 Aug 2020 1:29 PM | Anonymous

    WASHINGTON — The Internal Revenue Service today issued a memorandum that provides interim guidance to the agency’s compliance staff on requests to designate issues for litigation.

    Designation of issues for litigation, a decision that is made with the Office of Chief Counsel, limits a taxpayer’s opportunity to administratively resolve their case with the IRS Independent Office of Appeals. Disputes between the IRS and taxpayers over designated issues must be resolved through litigation. The IRS took this step to update and clarify its designation procedures as part of its implementation of the Taxpayer First Act (TFA) enacted in July 2019.

    The IRS’s approach of judiciously designating issues for litigation balances the need to soundly administer the tax law while recognizing the important role of Appeals in resolving tax controversies without litigation.  The designation of issues for litigation has been and remains infrequent. The IRS recently submitted its first TFA annual report indicating that no issues have been designated for litigation.  For perspective, the Office of Chief Counsel annually litigates between 25,000 and 30,000 cases in the United States Tax Court, many of them involving small dollar amounts and pro se litigants. 

    The process of designating an issue is exhaustive. It involves several written notices and opportunities for the taxpayer to avoid designation and is subject to the highest level of oversight within the IRS and Chief Counsel. It also includes the opportunity to personally meet with the Chief Counsel to make a case against designation. The TFA codifies this framework and high level of oversight. It also sets forth the specific elements for the written notice required to be provided to the taxpayer and grants taxpayers the right to administratively appeal designation determinations.

    The designation procedures set out in the memorandum will be incorporated into the Internal Revenue Manual, and corresponding changes will be made to the Chief Counsel Directive Manual.  This ensures that IRS and Chief Counsel employees adhere to the designation procedures and comply with the TFA provisions.  As part of the IRS’s ongoing implementation of the TFA with public input, comments on today’s release may be sent to TFAO@irs.gov.

  • 24 Aug 2020 12:17 PM | Anonymous

    WASHINGTON — The Internal Revenue Service today reminds IRA owners, beneficiaries or workplace retirement plan participants who received a Required Minimum Distribution (RMD) this year that they have until Aug. 31 to rollover or repay the distribution to avoid paying taxes.

    The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, waives RMDs during 2020 for IRAs and retirement plans, including for beneficiaries with inherited accounts. This waiver includes RMDs for individuals who turned age 70 ½ in 2019 and took their first RMD in 2020. Roth IRAs don’t require withdrawals until after the death of the owner. 

    Individuals who took RMDs in 2020, including those who turned 70 ½ during 2019, have the option of returning the distribution to their account or other qualified plan.

    Since the RMD rule is suspended, RMDs taken in 2020 are considered eligible for rollover. Therefore, RMDs can be rolled over to another IRA, another qualified retirement plan, or returned to the original plan by Aug. 31, to avoid paying taxes on that distribution.

    IRS Notice 2020-51 also provides that the one rollover per 12-month period limitation and the restriction on rollovers to inherited IRAs don’t apply to this repayment.

    The CARES Act provisions apply to most retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans and other defined contribution plans. The RMD suspension doesn’t apply to qualified defined benefit plans.

    Where can I find more information?

    More information on the CARES Act and retirement plans, including FAQs, can be found on the Coronavirus-related relief for retirement plans and IRAs questions and answers page.

  • 19 Aug 2020 1:29 PM | Anonymous

    Using a reputable firm or group can protect employers from fraud; options include PSPs, RAs and CPEOs

    WASHINGTON — The IRS reminded employers today to carefully choose their payroll service providers following continuing concerns that some disreputable organizations can fail to deposit employment taxes, leaving businesses vulnerable to unpaid bills.

    Many employers outsource their payroll and related tax duties to third parties. This streamlines business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.

    “A business doing everything else right can suddenly find its future in doubt if it falls victim to an unscrupulous third party that fails to make the required payroll and withholding deposits,” said IRS Commissioner Chuck Rettig. “We want to encourage all employers to understand their obligations and choose wisely when it comes to selecting a trusted payroll service to carry out this critical function. This is especially important right now as businesses face unique challenges because of the pandemic.”

    Though most of these businesses provide quality service, there are, unfortunately, some who do not have their clients’ best interests at heart. Each year, a few of these third parties fail to remit the payroll taxes entrusted to them and close their doors abruptly. The damage hits their unsuspecting clients hard.

    “Most third-party payroll services do a good job helping small businesses meet their deadlines and payroll obligations,” said Eric Hylton, Commissioner, Small Business/Self Employed Division. “But each year some employers fall prey to unscrupulous third-parties that fail to send the IRS the taxes entrusted to them. We are vigilant in pursuing these third parties, but too often their clients – the employers − are left on the hook. The IRS wants all employers to take the necessary steps to protect themselves.”

    Like employers who handle their own payroll duties, employers who outsource this function are in most instances still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee shares of Social Security and Medicare taxes. This is true even if the employer forwards tax amounts to the third party to make the required deposits or payments.

    One third-party arrangement that can reduce this risk is the certified professional employer organization (CPEO). Unlike other third parties, in most circumstances, the CPEO is solely liable for paying the customer's employment taxes, filing returns and making deposits and payments for the taxes reported with regard to wages and other compensation it pays to its employees. More information on CPEOs can be found on IRS.gov.

    Other third parties, such as payroll service providers (PSPs) and reporting agents (RAs) may also be right for many employers. A reporting agent is a PSP that has informed IRS of its relationship with its client (via Form 8655, Reporting Agent Authorization, which is signed by the client). A reporting agent is required to deposit its client’s taxes via the Electronic Federal Tax Payment System and is authorized to exchange information with IRS on behalf of its client, such as to resolve an issue.

    For an overview of how the roles and obligations of PSPs, reporting agents and CPEOs differ from one to another, see the Third Party Arrangement Chart on IRS.gov.

    “Employers should remember to watch out and do due diligence to help safeguard themselves – and their employees − from a payroll service provider failing to do what the law requires,” Rettig said.

    “IRS Criminal Investigation is committed to investigating all tax criminals, especially professionals who have fiduciary responsibilities and violate the trust of their clients,” said Don Fort, Chief of IRS Criminal Investigation. “Those parties who do violate that trust may go to jail, but the defrauded employers’ problems are just beginning. There is no substitute for continued diligence in ensuring something so important is done right. Your employees are counting on you.”

    The IRS urges employers to take a number of steps to protect themselves from unscrupulous third parties.

    • Enroll in the Electronic Federal Tax Payment System and make sure the PSP or Reporting Agent uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their PSP or RA is properly carrying out its tax deposit responsibilities. It also gives them the option of making any missed deposits themselves, as well as paying other individual and business taxes electronically, either online or by phone. To enroll or for more information, call toll-free 800-555-4477or visit www.eftps.gov.
    • Reporting Agents are required to deposit clients’ taxes via EFTPS and, with limited exception, electronically file the tax returns. They are also required to provide clients a written statement reminding the employer that it, not the reporting agent, is ultimately responsible for the timely filing of returns and payment of taxes. This statement must be provided upon entering into a contract with the employer and at least quarterly after that. See Reporting Agents File on IRS.gov for more information.
    • Refrain from substituting the third party’s address for the employer’s address. Though employers are allowed to make or agree to such a change, the IRS recommends that an employer continue to use its own address as the address on record with the tax agency. Doing so ensures that the employer will continue to receive bills, notices, and other account-related correspondence from the IRS. It also gives employers a way to monitor the third party and easily spot any improper diversion of funds.
    • Contact the IRS about any bills or notices and do so as soon as possible. This is especially important if it involves a payment that the employer believes was made or should have been made by a third party. Call the number on the bill, write to the IRS office that sent the bill, contact the IRS business tax hotline at 800-829-4933, or visit a local IRS office. See Notices for Past Due Tax Returns on IRS.gov for more information.
  • 18 Aug 2020 3:51 PM | Anonymous

    WASHINGTON – With millions of Americans now receiving taxable unemployment compensation, many of them for the first time, the Internal Revenue Service today reminded people receiving unemployment compensation that they can have tax withheld from their benefits now to help avoid owing taxes on this income when they file their federal income tax return next year.

    By law, unemployment compensation is taxable and must be reported on a 2020 federal income tax return. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted this spring.

    Withholding is voluntary. Federal law allows any recipient to choose to have a flat 10% withheld from their benefits to cover part or all of their tax liability. To do that, fill out  Form W-4V, Voluntary Withholding Request (PDF), and give it to the agency paying the benefits. Don’t send it to the IRS. If the payor has its own withholding request form, use it instead.

    If a recipient doesn’t choose withholding, or if withholding is not enough, they can make quarterly estimated tax payments instead. The payment for the first two quarters of 2020 was due on July 15. Third and fourth quarter payments are due on Sept. 15, 2020, and Jan. 15, 2021, respectively. For more information, including some helpful worksheets, see Form 1040-ES and Publication 505, available on IRS.gov.

    Here are some types of payments taxpayers should check their withholding on:

    • Unemployment compensation includes: Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
    • Railroad unemployment compensation benefits
    • Disability benefits paid as a substitute for unemployment compensation
    • Trade readjustment allowances under the Trade Act of 1974
    • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974, and
    • Unemployment assistance under the Airline Deregulation Act of 1978 Program

    Recipients who return to work before the end of the year can use the IRS Tax Withholding Estimator to make sure they are having enough tax taken out of their pay. Available only on IRS.gov, this online tool can help any worker or pension recipient avoid or lessen their year-end tax bill or estimate the refund they want.

    In January 2021, unemployment benefit recipients should receive a Form 1099-G, Certain Government Payments (PDF) from the agency paying the benefits. The form will show the amount of unemployment compensation they received during 2020 in Box 1, and any federal income tax withheld in Box 4. Taxpayers report this information, along with their W-2 income, on their 2020 federal tax return. For more information on unemployment, see Unemployment Benefits in Publication 525.

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