Tax Updates November 30

New Tool for U.S. Withholding Agents

The IRS has launched a new online tool designed to help withholding agents comply with their responsibilities with respect to Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. Agents such as insurance companies, universities, entertainment venues, and banks and other financial institutions must file an information return on Form 1042-S to report payments made from U.S. sources to foreign persons. A tutorial is also available. 

Per Diem Rates Guidance Provided

The IRS has issued guidance to make clear how the temporary 100% business deduction for food and beverages from restaurants applies to taxpayers who follow Revenue Procedure 2019-48 for using per diem rates. The temporary exception to the 50% limit was provided by the Taxpayer Certainty and Disaster Relief Act of 2020. The exception allows the taxpayer to treat the full meal portion of a per diem allowance as being attributable to food or beverages from a restaurant beginning January 1, 2021, through December 31, 2022.

New Online Identity Verification

The IRS has announced the launch of an improved online identity verification and sign-in process for those using online tools and applications. Using the new mobile-friendly verification procedure allows access to The Child Tax Credit Update Portal, Identity Protection PIN, Online Payment Agreement, and other services. The IRS is using ID.me to provide verification services. 

SLFR Funds Answers

The IRS has provided a FAQ regarding Coronavirus State and Local Fiscal Recovery (SLFR) Funds. These funds give eligible state and local governments substantial resources to meet pandemic response needs, and the answers (in FS-2021-16) detail the tax consequences for individual recipients and reporting requirements for employers and state and local governments. Some recipients may have to report payments as income and may owe tax.