Deadlines and Disaster Extensions
The IRS is reminding people that third quarter estimated tax payments are due on September 15, 2021. This applies primarily to those who don’t have their taxes deducted from their paychecks by their employers. Self-employed, retirees, some investors, landlords, and others not subject to withholding fall into this category. Those impacted by recent disasters, like Hurricane Ida, in areas of New York and New Jersey, and Pennsylvania have until January 3, 2022 to pay their quarterly estimated taxes. Individuals and organizations who had valid extensions on their return will have the same January due date. Those affected by the same storm in Mississippi have until November 1, 2021 as their extension. Up-to-date disaster relief is always available on the IRS’ disaster relief page.
Guidance on Sick and Family Leave Wages
The IRS has issued guidance to employers about reporting the amount of qualified sick and family leave wages paid to employers for leave taken in 2021. Employers are required to report these amounts in Box 14 of Form W-2, or in a separate statement provided with the Form. The self-employed may also determine the amount of any sick and family leave equivalent credits they may claim.
Home COVID-19 Testing Expenses Eligible
The IRS is reminding taxpayers that the cost of home testing for COVID-19 is an eligible medical expense that can be paid for under health flexible spending arrangements (Health FSAs), health savings accounts (HSAs), and other similar arrangements. Other personal protective equipment such as masks and hand sanitizer used to prevent the spread of COVID-19 are also eligible.
Tax Credit for Employers Hiring
The IRS reminds employers that there is a valuable tax credit available to them for hiring certain workers. The Work Opportunity Tax Credit (WOTC) may be available to businesses that hire those who have been employed for at least 27 consecutive weeks – as long as they have received state or federal benefits during that time. Other qualified hires would be those formerly incarcerated, unemployed or disabled veterans, those receiving Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program, or Supplemental Security Income. A complete list of the designated groups and deadline information is available at the link.
Advance Child Tax Payments Begin
The first batch of advance monthly child tax payments, totaling about $15 billion, went out on July 15. The vast majority were sent by direct deposit. Payments will continue monthly through the end of the year, and the IRS continues to “urge people who normally aren’t required to file a tax return” to sign up for these payments as well as Economic Impact Payments and other credits they may be eligible to receive. The IRS is even holding weekend events in cities around the nation to “support eligible families.” The events are hosted by the IRS and partner groups, and employees and volunteers assist individuals and families to file tax returns and register for the advance payments. Additionally, the IRS has launched a new Spanish language version of its online Child Tax Credit Eligibility Assistant tool, and urges community groups to help share this and other benefit information.
Unemployment Tax Refunds Continue
The IRS continues to issue refunds to taxpayers who overpaid their taxes on employment compensation received last year. Up to $10,200 in 2020 unemployment payments were excluded from taxable income calculations, but this exclusion didn’t happen until the American Rescue Plan Act was passed in March, so many taxpayers had already filed and paid taxes under the old rules. Most taxpayers need not take any action, unless they need to amend their 2020 return.
Protect Against Identity Theft
The IRS is spreading the word about their IP PIN Opt-In Program. An Identity Protection PIN is available to anyone who can verify their identity, and prevents someone else from filing a tax return using the taxpayer’s Social Security number. Tax professionals cannot obtain an IP PIN on behalf of clients, but clients should share their IP PIN only with their trusted tax preparer. The program is voluntary and the IRS will never call, email, or text a request for the IP PIN, which can be obtained at the online tool.
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.
Tax Court Cases Resolved
Virtual Settlement Days, first announced in May 2020, help taxpayers resolve their cases and avoid taking their chances in court. Building on that, March was National Virtual Settlement month, which saw Virtual Settlement Days events held in all 50 states and the District of Columbia. Nearly 240 taxpayers met with Chief Council employees and pro bono organizations to help them with free advice and to understand their cases; 148 cases were settled. Taxpayers with cases before the court are encouraged to contact their assigned Chief Counsel attorney or paralegal to inquire about participating in future events.
Avoid Common Return Errors
The IRS is reminding taxpayers to check their tax returns for common errors that could delay their processing and refunds. As the May 17 due date approaches, taxpayers are encouraged to:
- Use electronic filing
- Report all taxable income
- Double check names and social security numbers
- Check filing status accuracy (use the Interactive Tax Assistant)
- Correctly answer virtual currency question
- Use correct routing and account numbers if receiving a refund
- Sign and date your return
- If mailing a paper return, double check address
- Keep a copy for your records
- Request an extension if needed – avoid late filing penalties
American Rescue Plan Tax Credits
A new fact sheet outlines the details of tax credits available to small businesses, including paid leave for employees receiving COVID-19 vaccinations. Eligible employers, which may include businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers can receive a tax credit for providing paid time off for each employee receiving the vaccine who needs time to recover from the jab. Self-employed individuals may claim comparable credits.
Economic Impact Payments Continue
The sixth batch of Economic Impact Payments (EIPs) from the American Rescue Plan is disbursing another two million payments, for a total of approximately 161 million payments. This totals $379 billion since payments began rolling out on March 12. More than $1.3 billion went to individuals for whom the IRS previously did not have information to issue an EIP, but who recently filed a tax return. This batch also includes “additional ongoing supplemental payments” for people who received an EIP earlier this year based on their 2019 return, but became eligible for more after their 2020 return was processed. Another 600,000 payments went to Social Security beneficiaries and Supplemental Security Income recipients, including those with foreign addresses. The IRS will continue to make EIPs on a weekly basis.