Vaccination and Recovery Paid Leave Credit
Under the American Rescue Plan Act (ARP), the IRS has updated their paid sick and family leave tax credit information. Employers can claim the credits for providing paid leave to employees who accompany a family or household member to obtain a COVID-19 vaccination or to care for them during their recovery from said vaccination. The credits reimburse employers for the cost of the paid sick and family leave for COVID-19 related reasons through September 30, 2021.
Highway Use Deadline for Heavy Vehicle Owners
The IRS reminds those registering large trucks and buses that the deadline to file Tax Year 2021 Form 2290, Heavy Highway Vehicle Use Tax Return is August 31, 2021 for vehicles used on the road during July of this year. The highway use tax applies to vehicles with a taxable gross weight of 55,000 pounds or more. The IRS has an online tool to help owners determine if they are required to file.
Relief and Guidance for Employers
- Employers claiming the Work Opportunity Tax Credit (WOTC) have longer to certify that an employee hired is a Designated Community Resident or Qualified Summer Youth Employee. The WOTC is a tax credit available to employers who hire certified members of specific groups identified in the code who face barriers to employment.
- Guidance has been issued regarding the Employee Retention Credit (ERC). The ARP has made the credit available to eligible employers that pay qualified wages from July through December 2021, and various questions posed to the IRS and treasury have been addressed.
- Certain items may be excluded from gross receipts when determining eligibility for the ERC. This safe harbor applies to Paycheck Protection Program (PPP) Loan forgiveness amounts, as well as shuttered venue and restaurant grants under the ARP.
“Dirty Dozen” Scams Identified
The IRS is alerting taxpayers to beware of specific tax scams with its ongoing “Dirty Dozen” series. Pandemic-related scams like Economic Impact Payment (EIP) theft (whether fraud or mailbox theft) continue to be an issue. Phishing scams persist, which include fake emails, text messages, websites and social media as tools to steal personal information. Phone calls, or “vishing” (voice-related phishing) are on the rise, many using fake tax lien information. Ransomware is also increasing (malicious software designed to block access to computer systems) with the aim of extorting ransom payments to restore access to the victims. Other schemes involve fraudsters targeting seniors or immigrants by impersonating the IRS and fake charities taking advantage of tragedies and disasters, or unscrupulous tax preparers or scammers offering “settlement” promises to people who have trouble paying their taxes. Unemployment insurance fraud continues to be a problem as well. Lastly, be aware of schemes like syndicated conservation easements, abusive micro-captive insurance arrangements and other abusive arrangements like misuse of the US-Malta tax treaty and monetized installment sales designed to defer paying taxes on the sale of appreciated property. Click the links for tips on protecting yourself and your business, choosing a qualified tax professional, legitimate settlement options from the IRS, and how to identify likely scams.
Safe Harbor Extended for Renewable Energy Projects
The IRS and Treasury have issued guidance for taxpayers involved in developing renewable energy projects, addressing delays related to the COVID-19 pandemic. Certain projects may not be placed in service in time to meet the production and investment tax credits, which may significantly impact project financing and development. The updated guidance allows additional time to satisfy the requirements for the Continuity Safe Harbor, and clarifies that if the Continuity Safe Harbor doesn’t apply, the taxpayer may demonstrate that Continuous Construction or Continuous Efforts Tests have been satisfied instead.
Employer Leave-Based Donation Relief
The IRS has extended tax relief for employers whose employees donate their sick, vacation, or personal leave because of the COVID-19 pandemic. The relief, which includes cash payments employers make to charitable organizations that provide relief to victims of the pandemic in exchange for untaken leave, will be extended through the end of the calendar year. Employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the donated leave.
New FAQs For Families And Small Businesses
The IRS has posted two new frequently asked questions (FAQs) to help families and small- and mid-sized employers in claiming credits under the American Rescue Plan (ARP) Act. For families, the child and dependent care credit was increased and expanded under the ARP, and made fully refundable. The paid sick and family leave credits reimburse eligible employers for the paid sick leave provided to employees for COVID-19 related reasons.
Economic Impact Payments Continue
The IRS and Treasury continue to disburse millions of Economic Impact Payments (EIPs). As of June 9, the value of the payments was approximately $395 billion since payments began in March. More than 169 million payments have been made thus far, with plans to continue payments on a weekly basis to those who were previously unknown to the IRS but who have recently filed a tax return.
Letters Begin Re: Advance Child Tax Credits
Letters have been sent to more than 36 million American families who may be eligible to receive monthly Child Tax Credit payments. Families have been identified based on information they included in their recent tax return, or who registered for an Economic Impact Payment. The credit was increased and expanded under the ARP, and eligible families can expect monthly direct deposits or paper checks around the 15th of each month from July through December. A tool will be provided soon which will enable families to unenroll from receiving the advance payments and instead receive the full credit amount when they file their 2021 return next year.
Worried about your stimulus payment?
The IRS announced
that they are resending stimulus funds to accounts that were closed after the last stimulus.
This announcement means that if you received your tax return via a bank account that has been closed, you should receive a check in the mail or a deposit soon although it might not be till the first week of February. You can check your stimulus status at the Get My Payment
Receiving your stimulus through this resending process will still be faster than waiting until the IRS starts issuing tax returns in mid to late February.
For customers who need access to funds earlier than the end of January, we recommend our tax advance through Republic Bank. Bring your W-2 and other tax documents in to file your taxes and you can receive a direct deposit from Republic Bank using your refund as collateral.
Little Giant Tax Service has offered the Early Advance product for years and many of our customers have used it to help navigate tough situations. Whether you wait for the stimulus or get a tax advance now, Little Giant Tax Service is here to help you get your taxes done right!
Tax Relief For Disaster Victims
The IRS has provided tax relief to victims of the Oregon wildfires that began on September 7, as well as those affected by Hurricane Sally on September 14. Taxpayers in these FEMA-designated areas now have until January 15, 2021 to file returns and make any payments that were due after the September 7 or 14 date. This means those who filed extensions to file their 2019 taxes by October 15 now have until the January deadline to file. Updated relief information can always be found at the IRS’ disaster relief page.
100% Depreciation Rules Finalized
The IRS has issued final guidelines regarding the implementation of 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. This deduction was created by the Tax Cuts and Jobs Act (TCJA) in 2017 and applies to depreciable business assets with an expected recovery of 20 years or less, such as computers, machinery, furniture, and appliances. Rules for used equipment and self-constructed components were also included.
Non-Filers: Do You Qualify For Economic Impact Payments?
The IRS has released a state-by-state breakdown of the number of people they’re attempting to contact this month, to encourage them to see if they’re eligible to receive an Economic Impact Payment (EIP) , including more than 350,000 in the Carolinas. Those who do not usually have to file a tax return and haven’t received an EIP can check their eligibility and register to receive the payment. The due date for registration is October 15, 2020. The IRS is attempting to send letters to over 8 million potentially eligible individuals.
IRS Reminds Extension Filers: Due Date Approaches
Taxpayers who were granted an extension on filing their 2019 taxes have until October 15, 2020, to file their tax return. There are convenient electronic filing options available, as well as direct deposit for refunds and multiple options for scheduling and making electronic tax payments.
Interest Rates Remain The Same
The IRS has made the decision to keep the same interest rate for the fourth quarter of 2020. Each quarter, the IRS sets the interest rates charged or paid on over- and underpayment. For taxpayers (other than corporations), the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Other rates are as follows:
- 3% for overpayments (2% in the case of a corporation)
- 5% for the portion of a corporate overpayment exceeding $10,000
- 3% percent for underpayments
- 5% percent for large corporate underpayments
Final BEAT Regulations Issued
The Tax Cuts and Jobs Act (TCJA) added a new tax on large U.S. corporations that make deductible payments to related foreign parties, called the base erosion and anti-abuse tax (BEAT). The IRS has issued final regulations providing detailed guidance regarding how to compute certain BEAT calculations. They also contain rules permitting taxpayers to waive deductions for purposes of the BEAT, and additional guidance regarding partnerships and anti-abuse rules.
Temporary Digital Signatures Allowed
The IRS has released a list of tax forms on which they are allowing digital signatures. This is a temporary measure, in place until December 31, 2020, intended to help protect the health of taxpayers and tax professionals. These forms have to be printed and mailed, but the digital signatures will enable the forms to be filled and filed without contact between taxpayer and tax preparer, and in a timely manner. The IRS will continue to monitor this temporary option and determine if further measures are necessary.
Third Quarter Tax Payments Due September 15
The IRS reminds taxpayers that third quarter tax payments are due September 15. This applies to anyone not subject to payroll tax withholding like self-employed or gig workers, investors, recipients of alimony, retirees, and others. Taxes are “pay as you go,” and there are penalties for late payment or underpayment of taxes. Due dates for disaster victims have been delayed.
Simplified Small Business Accounting Regulations Proposed
The IRS has released proposed regulations to adopt the simplified tax accounting rules for small businesses under the Tax Cuts and Jobs Act (TCJA). For tax years beginning in 2019 and 2020, these simplified tax accounting rules apply to taxpayers having average annual gross receipts of $26 million or less (known as the gross receipts test), and exempted these taxpayers from the uniform capitalization rules. Accounting and inventory methods are addressed, as well as long-term construction contracts. Taxpayers classified as tax shelters may not use the simplified rules.
Rehabilitation Credit Deadlines Extended
Additional pandemic relief has been provided by the IRS for rehabilitation credits. These are projects that satisfy the “substantial rehabilitation test” within a 24- or 60-month period. Any qualified project whose deadline was on or after April 1, 2020 but before March 31, 2021, now has until March 31, 2021 to satisfy the test. Projects usually have to claim the credit over five years, but under a transition rule, some projects may be able to claim the credit in a single year.
Guidance For Business Interest Expense Deduction Limitation
The IRS has issued final regulations regarding TCJA provisions that limit the deduction for business interest expense, including the changes made by basic statutory amendments to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In addition to these final regulations, proposed regulations have been issued for other situations not addressed, including more complex issues related to CARES Act amendments. Written and electronic comments in response to the proposed regulations are encouraged.
Retirement Account Rules Loosened
The IRS reminds taxpayers that CARES Act provisions allow for easier access to retirement funds, for those who qualify. Early distribution of some retirement funds may be made without the usual penalties. Those eligible for coronavirus-related relief may be able to withdraw up to $100,000 before December 31, 2020, from IRAs, 401(k) plans, 403(b) plans, profit-sharing plans and others. Relief includes delayed loan repayments, an increase in loan limits, a waiver of the 10% tax on early distributions, and more.
Refund Myths Addressed
The IRS is debunking some common refund myths circulating among taxpayers.
- The IRS wants taxpayers to know that calling them or a tax professional cannot expedite your refund, nor do they have access to any special information regarding your refund date.
- Ordering a tax transcript doesn’t provide that either.
- A smaller refund doesn’t mean the IRS has a problem: outstanding child support, federal or state taxes, student loans or other debts can cause your refund to be less than expected.
The best way to find out the status of your refund is to use the Where’s My Refund tool, or the IRS2Go app.
Retirement Distributions Waived For 2020
Seniors and retirees do not have to take their usual required minimum distribution (RMD) from their IRA or workplace retirement accounts in 2020, thanks to coronavirus relief measures passed this year. The waiver includes RMDs for individuals who turned 70 ½ in 2019 and took their first RMD in 2020. Those who have already taken their RMD have the option of returning it to their qualified plan. These provisions apply to most retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and others.
Annual “Dirty Dozen” Unveiled
The IRS has published its list of the 12 most common tax scams perpetrated by criminals this year. Taxpayers should be aware and vigilant in regards to spotting and avoiding these scams, especially the ones on the rise in the wake of the pandemic and economic impact payments (EIPs). Scams on the list include phishing emails, fake charities, threatening phone calls, EIP or refund theft, organizations “overselling” Offer In Compromise assistance, payroll scams, ransomware, and more.
Foreign-Taxed Income Guidelines
The IRS has published final regulations on how income from foreign corporations subject to a high rate of foreign tax shall be treated. The final regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their Global Intangible Low Taxed Income (GILTI) computation on an elective basis. The IRS also released proposed regulations regarding that high-tax exception with the GILTI exclusion, and welcomes public comments on the subject.
SSI And VA Recipients To Receive Automatic Payments
The IRS and Treasury, in partnership with the Social Security Administration and Department of Veterans Affairs have announced that recipients of Supplemental Security Income and VA benefits will automatically receive Economic Impact Payments. Most recipients need to take no action to receive payment, however, for those who have dependents age 16 or younger and did not file a tax return for 2018 or 2019, a special tool has been set up to register for the additional dependent payment. May 5 is the deadline to register for the additional payment.
Guidance For Cross-Border Travel Disruptions
The Treasury Department and IRS have issued guidance for individuals and businesses who have been impacted by travel disruptions caused by COVID-19 and the response. The guidance addresses situations where 60 consecutive days of residence would generally indicate tax residency, and explains certain income exclusions which will not be impacted as a result of days spent away from a foreign country.
Guidance For UBTI “Silo” Rules
Guidance has been issued for tax-exempt organizations that are subject to the unrelated business income tax with more than one unrelated trade or business on how to calculate their unrelated business taxable income (UBTI). The Tax Cuts and Jobs Act (TCJA) requires tax-exempt organizations subject to the UBTI tax to compute UBTI separately for each trade or business (referred to as a “silo”).
“Get My Payment” Program Enhanced
The IRS has significantly enhanced the “Get My Payment” online application this weekend. The changes are designed to help taxpayers have an improved and smoother experience, including access to adding direct deposit information. Taxpayers can check the status of their payment and if necessary, can add direct deposit information. Further improvements and enhancements will be ongoing.