Tag Archives: covid emergency aid

IRS Updates End of August

Interest Rates to Increase

The IRS has announced that interest rates will increase again, beginning October 1, 2022. Individuals will see an increase of 1% as compared to the quarter that began in July, with 6% as the rate for underpayments (taxes owed but not yet paid) and overpayments (payments made in excess of the amount owed). Other rates are as follows:

  • 6% for overpayments (5% for corporations). 
  • 3.5% for the portion of a corporate overpayment exceeding $10,000.
  • 6% for underpayments.
  • 8% for large corporate underpayments. 

These interest rates are computed from the federal short-term rate determined during July 2022.

Pandemic-Related Penalty Relief

The IRS has issued a notice which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late. In addition, the IRS will be issuing more than $1.2 billion in refunds and credits to those who already paid these penalties, nearly 1.6 million taxpayers. They say this aims to allow the IRS to focus resources on processing backlogged tax returns and other correspondence before next year’s filing season. The relief will be automatic for those who qualify, so no action is required on the part of businesses or individuals. To qualify for this relief, however, tax returns for those years must be filed on or before September 30, 2022.

Reminder to Extension Filers

The IRS reminds taxpayers who haven’t filed their 2021 tax return to make sure they take advantage of available entitlements and to file electronically as soon as possible. These tax benefits include Earned Income Tax Credit, Child Tax Credit, Child and Dependent Care Credit, Charitable Giving Deduction, and others. Taxpayers will need to have their year-end statements available, as well as the letters issued by the IRS showing advance Child Tax Credit payments and third round Economic Impact Payments.

Input Requested

The IRS is requesting input from both taxpayers and tax professionals regarding its best practices for conducting video conferences with those who have cases pending before Appeals. During the COVID-19 pandemic, video conferences were expanded. These allowed taxpayers to be seen and heard and be able to visually share documents without going in-person to an Appeals office. This garnered positive feedback, so Appeals will continue to offer video conferences as an option. Public input is sought for permanent guidance regarding scheduling and conducting the conferences, procedures for verification, and recommendations for establishing a professional meeting environment. Public comments can be sent to ap.taxpayer.experience@irs.gov by Wednesday, November 16, 2022.

IRS Updates April 12, 2021

Student COVID Emergency Aid Not Taxed

Students who received emergency financial aid grants from a federal agency, state, tribe, higher education institution or scholarship-granting organization because of the COVID-19 pandemic do not have to include these funds in their gross income. They also do not have to reduce their amount of qualified tuition and expenses by the amount of the grant, but may be eligible to claim a tuition and fees deduction or other credit on their 2020 tax return.

Unemployment Taxes To Be Recalculated

The March 11 American Rescue Plan legislation made changes to how 2020 unemployment benefits are taxed for certain taxpayers. Those who filed their tax return before this date and figured their tax based on the full amount of unemployment compensation will have their return adjusted and their tax recalculated by the IRS. For those who overpaid under the new law, refunds are expected to begin in May and will continue into the summer.

Guidance On Food & Beverage Deduction

The Taxpayer Certainty and Disaster Relief Act of 2020 (Relief Act) added a temporary exception to the 50% limit on the amount that businesses may deduct for restaurant food and beverages. The exception allows a 100% deduction beginning January 1, 2021 through December 31, 2022. During this time businesses can claim 100% of their food and beverage expenses paid to a restaurant as long as the business owner or an employee is present, and the expense is not lavish or extravagant. 

Guidance On Employee Retention Credit

The IRS has issued guidance for employers claiming the Employe Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Relief Act for the first two quarters of 2021. The guidance explains the changes, and eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. The American Rescue Plan Act expands this credit through the third and fourth quarters of 2021, with further guidance to become available.