WASHINGTON —During Small Business Week, the Internal Revenue Service reminds business owners and self-employed individuals of the employer credits available to them during COVID-19.  

These credits were specially created to help small business owners during this unprecedented time. During Small Business Week, the IRS wants to ensure all eligible people know about the relief these credits provide.

Employee Retention Credit

The Employee Retention Credit is designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.

Qualifying employers must fall into one of two categories

Employers will calculate these measures each calendar quarter.

Paid Sick Leave Credit and Family Leave Credit

The Paid Sick Leave Credit is designed to allow business to get a credit for an employee who is unable to work (including telework) because of Coronavirus quarantine, self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee's regular rate of pay up to $511 per day and $5,110 in total.

The employer can also receive the credit for employees who are unable to work due to caring for someone with Coronavirus or caring for a child because the child's school or place of care is closed, or the paid childcare provider is unavailable due to the Coronavirus. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee's regular rate of pay or, up to $200 per day and $2,000 in total.

Employees are also entitled to paid family and medical leave equal to 2/3 of the employee's regular pay, up to $200 per day and $10,000 in total. Up to 10 weeks of qualifying leave can be counted towards the Family Leave Credit.

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees' wages by the amount of the credit.

Eligible employers are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and the employer's share of Medicare tax on the leave, for the period of April 1, 2020, through Dec. 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees.

How will employers receive the credit?

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees' wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer's employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

The IRS has also posted Employee Retention Credit FAQs and Paid Family Leave and Sick Leave FAQs that will help answer questions.

Updates on the implementation of the Employee Retention Credit and other information can be found on the Coronavirus page of IRS.gov.

WASHINGTON — During Small Business Week, Sept. 22-24, the Internal Revenue Service wants individuals to consider taking the home office deduction if they qualify. The benefit may allow taxpayers working from home to deduct certain expenses on their tax return. 

The home office deduction is available to qualifying self-employed taxpayers, independent contractors and those working in the gig economy. However, the Tax Cuts and Jobs Act suspended the business use of home deduction from 2018 through 2025 for employees. Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home.

Qualifying for a deduction

There are two basic requirements to qualify for the deduction. The taxpayer needs to use a portion of the home exclusively for conducting business on a regular basis and the home must be the taxpayer’s principal place of business.

To claim the deduction, a taxpayer must use part of their home for one of the following:

The term "home" for purposes of this deduction:

Qualified expenses

Deductible expenses for business use of home normally include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs. In general, a taxpayer may not deduct expenses for the parts of their home not used for business; for example, expenses for lawn care or painting a room not used for business.

Claiming the deduction

A taxpayer can use either the regular or simplified method to figure the home office deduction.

Using the regular method, qualifying taxpayers compute the business use of home deduction by dividing expenses of operating the home between personal and business use. Self-employed taxpayers filing IRS Schedule C, Profit or Loss from Business (Sole Proprietorship) first figure this deduction on Form 8829, Expenses for Business Use of Your Home.

Using the Simplified Option, qualifying taxpayers use a prescribed rate of $5 per square foot of the portion of the home used for business (up to a maximum of 300 square feet) to figure the business use of home deduction. A taxpayer claims the deduction directly on IRS Schedule C. Revenue Procedure 2013-13 (PDF) provides complete details of this safe harbor method.

Daycare facilities

Taxpayers who use their home on a regular basis for providing daycare may be able to claim a deduction for part of the home even if it is used as the same space for nonbusiness purposes. To qualify, both of the following requirements must be met:

Additional resources

Announcement 2020-12 provides that lenders who make PPP loans that are later forgiven under the CARES Act should not file information returns or furnish payee statements to report the forgiveness. 

Announcement 2020-12 will be in IRB 2020-41, dated 10/13/20.

WASHINGTON − Farmers and ranchers who were forced to sell livestock due to drought may have an additional year to replace the livestock and defer tax on any gains from the forced sales, according to the Internal Revenue Service.

To qualify for relief, the farm or ranch must be in an applicable region. This is a county or other jurisdiction designated as eligible for federal assistance plus counties contiguous to it. Notice 2020-74, posted today on IRS.gov, lists applicable regions in 46 states, the District of Columbia and four U.S. territories.

The relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry, are not eligible.

To qualify, the sales must be solely due to drought, flooding or other severe weather causing the region to be designated as eligible for federal assistance. Livestock generally must be replaced within a four-year period, instead of the usual two-year period. The IRS is also authorized to further extend this replacement period if the drought continues.

The one-year extension, announced in the notice, gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock. Details, including an example of how this provision works, can be found in Notice 2006-82, available on IRS.gov.

The IRS provides this extension to farms and ranches located in the applicable region that qualified for the four-year replacement period if any county that is included in the applicable region is listed as suffering exceptional, extreme or severe drought conditions during any week between Sept. 1, 2019, and Aug. 31, 2020. This determination is made by the National Drought Mitigation Center. All or part of 46 states, plus the District of Columbia and four U.S. territories are listed in the notice.

As a result, qualified farmers and ranchers whose drought-sale replacement period was scheduled to expire at the end of this tax year, Dec. 31, 2020, in most cases, now have until the end of their next tax year. Because the normal drought-sale replacement period is four years, this extension immediately impacts drought sales that occurred during 2016. The replacement periods for some drought sales before 2016 are also affected due to previous drought-related extensions affecting some of these localities.

More information on reporting drought sales and other farm-related tax issues can be found in Publication 225, Farmer’s Tax Guide, available on IRS.gov.

Notice 2020-74 explains the circumstances under which the four-year replacement period under section 1033(e)(2) is extended for livestock sold on account of drought.  The Appendix to this notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions during the 12-month period ending August 31, 2020.  Taxpayers may use this list to determine if an extension is available.

Notice 2020-74 will be in IRB:  2020-41, dated October 5, 2020

WASHINGTON – In support of National Small Business Week – Sept. 22 to 24 – the Internal Revenue Service is emphasizing the many IRS online resources available to help small business owners and self-employed individuals handle the tax aspects of their business.

Resources in multiple languages

The IRS has a long history of providing resources in Spanish and commonly provides products in Chinese, Korean, Vietnamese and Russian, such as the Small Business and Self-Employed Tax Center.

The Small Business and Self-Employed Tax Center features links to a variety of useful tools and common forms with instructions. The Center has information ranging from how to get an employer identification number online to tips about IRS audits.

To help more people, the IRS is translating other tax resources into more languages. In the meantime, the IRS is offering basic tax information in 20 languages, including a section on filing for a business.

Resources for coronavirus tax relief

The IRS has a dedicated page on IRS.gov on Coronavirus Tax Relief for Businesses and Tax-Exempt Entities. Here, business owners can get information about credits that may apply to them, such as employer tax credits, and answers to questions frequently asked about the credits.

Other small business resources

IRS Social Media
On Thursday, September 24 at 2 p.m. Eastern, join a Twitter chat, “IRS Tips for Small Business Owners,” hosted by #IRS (@IRSnews). Get tips to help small businesses navigate the unique challenges brought forth by COVID-19. Follow along using #IRSsmallbiz

Information for small businesses is also available through all IRS social media channels, including tax tips and other resources. Spread these messages by sharing the @IRSsmallbiz, @IRSnews, @IRSTaxPros and @IRSenEspanol tweets.

Self-Employed Individual Tax Center
A resource for sole proprietors and others who are in business for themselves. This Center has many useful tips and references to tax rules a self-employed person may need to know.

Gig Economy Tax Center
A resource for people who earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website.

Online Learning and Educational Products
A page with tools to help taxpayers learn about taxes on their own time and at their own pace. For example, the IRS Tax Calendar for Businesses and Self-Employed has important tax dates for businesses.

IRS YouTube Video Channel
Watch videos for small businesses on the Small Business playlist.

E-News for Small Businesses
A free, electronic mail service that offers tax information for small business owners and self-employed individuals, including reminders, tips and special announcements.

WASHINGTON – The Internal Revenue Service today issued final regulations that provide guidance for decedents’ estates and non-grantor trusts clarifying that certain deductions of such estates and non-grantor trusts are not miscellaneous itemized deductions.

The Tax Cuts and Jobs Acts (TCJA) prohibits individuals, estates, and non-grantor trusts from claiming miscellaneous itemized deductions for any taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2026.

Specifically, the final regulations clarify that the following deductions are allowable in figuring adjusted gross income and are not miscellaneous itemized deductions:

In addition, the final regulations provide guidance on determining the character and amount of, as well as the manner for allocating, excess deductions that beneficiaries succeeding to the property of a terminated estate or non-grantor trust may claim on their individual income tax returns.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

WASHINGTON — The Treasury Department and the Internal Revenue Service today released the last set of final regulations implementing the 100% additional first year depreciation deduction that allows businesses to write off the cost of most depreciable business assets in the year they are placed in service by the business.

The 100% additional first year depreciation deduction was created in 2017 by the Tax Cuts and Jobs Act and generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property (including used property) acquired and placed in service after Sept. 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property.

Additionally, the final regulations provide rules for consolidated groups and rules for components acquired or self-constructed after Sept. 27, 2017, for larger self-constructed property on which production began before Sept. 28, 2017. 

For details on claiming the deduction, see the final regulations and the instructions to Form 4562, Depreciation and Amortization (Including Information on Listed Property).

In addition, the Treasury Department and the Internal Revenue Service plan to issue procedural guidance for taxpayers to opt to apply the final regulations in prior taxable years or to rely on the proposed regulations issued in Sept. 2019.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform

WASHINGTON — Victims of the Oregon wildfires and straight-line winds that began on Sept. 7 now have until Jan. 15, 2021 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  Clackamas, Douglas, Jackson, Klamath, Lane, Lincoln, Linn and Marion counties in Oregon, 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 Sept. 7, 2020. As a result, affected individuals and businesses will have until Jan. 15, 2021, 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 Jan. 15, 2021, 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 Jan. 15, 2021 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 Nov. 2, 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. 16, 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 on or after Sept. 7 and before Sept. 22, will be abated as long as the deposits are made by Sept. 22, 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 – 4562 − for the wildfires in Oregon 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 straight-line winds and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Notice 2020-73 announces that the Department of the Treasury and the Internal Revenue Service intend to amend the regulations under section 987 to defer the applicability date of the final regulations under section 987, as well as certain related final regulations, by one additional year.  The applicability date of these regulations has been deferred under prior notices to taxable years beginning after December 7, 2020.  The Treasury Department and the IRS intend to amend §§1.861-9T, 1.985-5, 1.987-11, 1.988-1, 1.988-4, and 1.989(a)-1 of the 2016 final regulations and §§1.987-2 and 1.987-4 of the 2019 final regulations (the related 2019 final regulations) to provide that the 2016 final regulations and the related 2019 final regulations apply to taxable years beginning after December 7, 2021.  The Notice also states that taxpayers may rely on certain related proposed regulations that cross-reference temporary regulations which have expired.

Notice 2020-73 will be in IRB:  2020-41, dated October 5, 2020.