IRS Notice | TaxConnections

29 Jan 2021

IRS Offers Guidance To Taxpayers On Identity Theft Involving Unemployment Benefits

The Internal Revenue Service today urged taxpayers who receive Forms 1099-G for unemployment benefits they did not actually get because of identity theft to contact their appropriate state agency for a corrected form.

States issue Forms 1099-G to the taxpayer and to the IRS to report what taxable income, such as refunds or unemployment benefits, were issued by state agencies.

During 2020, millions of taxpayers were impacted by the COVID-19 pandemic through job loss or reduced work hours. Some taxpayers who faced unemployment or reduced work hours applied for and received unemployment compensation from their state. Under federal law, unemployment benefits are taxable income.

Written by IRS | Posted in IRS Notice

08 Jan 2021

Treasury Issues Millions Of Second Economic Impact Payments By Debit Card

Starting this week, the Treasury Department and the Internal Revenue Service are sending approximately 8 million second Economic Impact Payments (EIPs) by prepaid debit card.

These EIP Cards follow the millions of payments already made by direct deposit and the ongoing mailing of paper checks that are delivering the second round of Economic Impact Payments as rapidly as possible.

For those who don’t receive a direct deposit, they should watch their mail for either a paper check or a prepaid debit card. To speed delivery of the payments to reach as many people as soon as possible the Treasury’s Bureau of Fiscal Service is sending payments out by prepaid debit card.

Written by IRS | Posted in Economic Impact Payments • IRS Notice • TaxConnections

07 Jan 2021

Eligible Paycheck Protection Program Expenses Now Deductible

The Treasury Department and the Internal Revenue Service issued guidance PDF today allowing deductions for the payments of eligible expenses when such payments would result (or be expected to result) in the forgiveness of a loan (covered loan) under the Paycheck Protection Program (PPP).

Today’s guidance, Revenue Ruling 2021-02 PDF, reflects changes to law contained in the COVID-related Tax Relief Act of 2020, enacted as part of the Consolidated Appropriations Act, 2021 (Act), Public Law 116-260, which was signed into law on December 27, 2020.

The COVID-related Tax Relief Act of 2020 amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.

Written by IRS | Posted in Deductible Expenses • Eligible Paycheck Protection Expenses • IRS Notice

05 Jan 2021

IRS: Economic Impact Payments On Their Way

The Internal Revenue Service urged people to visit IRS.gov for the most current information on the second round of Economic Impact Payments rather than calling the agency or their financial institutions or tax software providers. IRS phone assistors do not have additional information beyond what’s available on IRS.gov.

The IRS and the Treasury Department began issuing a second round of Economic Impact Payments, often referred to as stimulus payments, last week.

The direct deposit payments may take several days to post to individual accounts. Some Americans may have seen the direct deposit payments as pending or as provisional payments in their accounts before the scheduled payment date of January 4, 2021, which is the official date funds are available.

Written by IRS | Posted in Economic Impact Payments • IRS Notice

15 Dec 2020

IRS Provides Guidance On Legislation That Increases Automatic Enrollment Cap Percentage And Eases Burdens For Certain Safe Harbor Plans

The Internal Revenue Service today issued Notice 2020-86 PDF 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.

Written by IRS | Posted in 401K Plans • IRS Notice • Safe Harbor Plans

04 Dec 2020

How The IRS Prioritizes Compliance Work On High Income Non-Filers Through National And International Efforts

“Our pursuit of these high income non-filers provides an important service and shows respect to the majority of Americans who pay their taxes.”

Like many at the IRS, I’ve dedicated my career here at the agency for more than 30 years to support fairness and integrity in our nation’s voluntary tax system.

I’ve done this through many different roles at the IRS, including my work for many years in Criminal Investigation and now as Commissioner of the IRS Small Business/Self-Employed division.

Even in a challenging year like this, when the IRS has provided assistance and help for those affected by COVID-19 through Economic Impact Payments and various tax relief efforts, people should understand we haven’t lost focus on identifying and pursuing high income non-filers who live here in the United States and abroad.

Written by IRS | Posted in IRS Notice

17 Nov 2020

Here’s Who Qualifies For The Employee Business Expense Deduction

Employee business expenses can be deducted as an adjustment to income only for specific employment categories and eligible educators.

Taxpayers can no longer claim unreimbursed employee expenses as miscellaneous itemized deductions, unless they are a qualified employee or an eligible educator. They must complete Form 2106, Employee Business Expenses to take the deduction.

If someone falls into one of these employment categories, they are considered a qualified employee:

Armed Forces reservists
Qualified performing artists
Fee-basis state or local government officials
Employees with impairment-related work expenses

No other type of employee is eligible to claim a deduction for unreimbursed employee expenses.

Written by IRS | Posted in Employee Business Expense Deduction • IRS Notice

14 Oct 2020

IRS Extends Economic Impact Payment Registration Deadline For Non-Filers To Nov. 21

The deadline to register for an Economic Impact Payment using the Non-Filers tool is extended to November 21, 2020.

The IRS urges people who don’t typically file a tax return – and haven’t received an Economic Impact Payment – to register as quickly as possible using the Non-Filers: Enter Info Here tool on IRS.gov. The tool will not be available after November 21.

This additional time is solely for those who haven’t registered or received their EIP and don’t normally file a tax return. For taxpayers who requested an extension of time to file their 2019 tax return, that deadline is Thursday, October 15.

Written by IRS | Posted in IRS Notice

06 Oct 2020

IRS Issues Final Regulations For Achieving A Better Life Experience Accounts

The Internal Revenue Service posted to IRS.gov final regulations today for Achieving a Better Life Experience (ABLE) accounts.

The regulations issued today finalize two previously issued proposed regulations. The first proposed regulation was published in 2015 after the enactment of the ABLE Act. The second proposed regulation was published in 2019 in response to the Tax Cuts and Jobs Act, which made significant changes to ABLE accounts.

Eligible individuals may now put more money into their ABLE account and roll money from their qualified tuition programs (529 plans) into their ABLE accounts. Also, certain contributions made to ABLE accounts by low- and moderate-income workers may now qualify for the Saver’s Credit.

Written by IRS | Posted in Achieving A Better Life Experience(ABLE) • IRS Notice

02 Oct 2020

IRS Expands Enforcement Focus On Abusive Micro-Captive Insurance Schemes; Taxpayers Urged To Consult Tax Advisor

With the Oct. 15 deadline quickly approaching, the Internal Revenue Service encouraged taxpayers to consult an independent tax advisor if they participated in a micro-captive insurance transaction.

The IRS encourages any taxpayer who has continued to engage in an abusive micro-captive insurance transaction to not anticipate being able to settle its transaction with the IRS or Chief Counsel on terms more favorable than previously announced settlement offers and that any potential future settlement initiative that the IRS may consider will require additional concessions by the taxpayer.

With this in mind, the IRS encourages taxpayers to consult an independent tax advisor if they participated in a micro-captive insurance transaction. These taxpayers should seriously consider exiting the transaction and not reporting deductions associated with abusive micro-captive insurance transactions, like many other taxpayers did who were contacted by the IRS in March and July 2020. For those taxpayers that do not exit the transaction and continue taking such deductions, the IRS will disallow tax benefits from transactions that are determined to be abusive and may also require domestic captives to include premium payments in income and assert a withholding liability for foreign captives. The IRS will also assert penalties, as appropriate, including the strict liability penalty that applies to transactions that lack economic substance. The IRS Office of Chief Counsel is well prepared to defend these positions in Tax Court.

Written by IRS | Posted in IRS Notice • Micro-Captive Insurance Schemes

22 Sep 2020

IRS Finalizes Regulations For 100 percent Bonus Depreciation

The Treasury Department and the Internal Revenue Service 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.

Written by IRS | Posted in IRS Notice

17 Sep 2020

IRS Reminds Taxpayers And Practitioners Of Expedited Letter Ruling Procedures

The Internal Revenue Service continues to look for ways to assist taxpayers affected by the COVID-19 pandemic. As part of that effort, the IRS reminds taxpayers and tax practitioners of the procedures for requesting expedited handling of requests for letter rulings under Rev. Proc. 2020-1, 2020-1 I.R.B. 1 (Jan. 2, 2020).

As set forth in Rev. Proc. 2020-1, the IRS ordinarily processes requests for letter rulings in the order that they were received. A taxpayer with a compelling need to have a request processed more quickly may request expedited handling. The request for expedited handling must be made in writing, preferably in a separate letter submitted with the letter ruling request. Requests for expedited handling are granted at the discretion of the IRS and typically involve a factor outside of the taxpayer’s control that creates a real business need to obtain a letter ruling before a certain date in order to avoid serious business consequences. Requests for expedited handling should be submitted as promptly as possible after the taxpayer has become aware of the deadline or compelling business need.

Written by IRS | Posted in IRS Notice • Letter Ruling Procedures