WASHINGTON – The Internal Revenue Service reminds taxpayers that estimated tax payments for tax year 2020, originally due April 15 and June 15, are now due July 15. This means that any individual or corporation that has a quarterly estimated tax payment due has until July 15 to make that payment without penalty. 

In response to the COVID-19 outbreak, the Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses. This relief applies to federal income tax returns and tax payments (including tax on self-employment income) otherwise due April 15, 2020. This relief does not apply to state tax payments or deposits or payments of any other type of federal tax.

Who needs to pay quarterly?

Most often, self-employed people, including many involved in the sharing economy, need to pay quarterly installments of estimated tax. Similarly, investors, retirees and others often need to make these payments. That's because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income.

Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year.

Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2020 that means making payments of at least 90% of the tax expected on their 2020 return.

Taxes are pay-as-you-go

This means taxpayers need to pay most of their taxes owed during the year as income is received. There are two ways to do that:

Tax Withholding Estimator

If a taxpayer receives salaries and wages, they can avoid having to pay estimated tax by asking their employer to withhold more tax from their earnings. To do this, they would file a new Form W-4.

If a taxpayer receives a paycheck, the new and improved Tax Withholding Estimator can help them make sure they have the right amount of tax withheld from their pay. The tool is now more mobile friendly and replaces the Withholding Calculator on IRS.gov. The Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers a clear, step-by-step method for effectively checking their withholding to protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.

How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. IRS offers two free electronic payment options where taxpayers can schedule their estimated federal tax payments up to 30 days in advance with Direct Pay or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).

IRS.gov assistance 24/7

Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, and Tax Trails to get answers to common questions.

More COVID-19 information

The IRS will post frequently asked questions on IRS.gov/coronavirus and will provide updates as soon as they are available.

WASHINGTON – The Internal Revenue Service today released proposed regulations addressing the treatment of certain medical care arrangements under section 213 of the Internal Revenue Code.
 
Section 213 of the Code allows individuals to take an itemized deduction for expenses for medical care, including insurance for medical care, to the extent the expenses exceed 7.5% of adjusted gross income. 
 
The proposed regulations address direct primary care (DPC) arrangements and health care sharing ministry (HCSM) memberships, and provide the following guidance:

The proposed regulations respond to Executive Order 13877, which directs the Secretary of the Treasury, to the extent consistent with law, to “propose regulations to treat expenses related to certain types of arrangements, potentially including direct primary care arrangements and healthcare sharing ministries, as eligible medical expenses under Section 213(d)” of the Code.

Notice 2020-44 provides that the adjusted applicable dollar amount that applies for determining the PCORTF fee for policy years and plan years ending on or after October 1, 2019 and before October 1, 2020 is equal to $2.54. This adjusted applicable dollar amount has been determined using the percentage increase in the projected per capita amount of the National Health Expenditures published by HHS in February 2019.  Sections 4375 and 4376, added to the Code by the Affordable Care Act, impose a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Trust Fund (PCORTF). This notice addresses the recent extension of the fee by the Further Consolidated Appropriations Act, 2020, Public Law 116-94, and provides relief for calculating the average number of lives for policy years and plan years that end on or after October 1, 2019, and before October 1, 2020.

Notice 2020-44 will be in IRB:  2020-26, dated 6/22/20.

WASHINGTON – The Internal Revenue Service today reminded taxpayers to guard against tax fraud and other related financial scams related to COVID-19.

In the last few months, the IRS Criminal Investigation division (CI) has seen a variety of Economic Impact Payment (EIP) scams and other financial schemes looking to take advantage of unsuspecting taxpayers. CI continues to work with law enforcement agencies domestically and abroad to educate taxpayers about these scams and investigate the criminals perpetrating them during this challenging time.

"Criminals seize on every opportunity to exploit bad situations, and this pandemic is no exception," said IRS Commissioner Chuck Rettig. "The IRS is fully focused on protecting Americans while delivering Economic Impact Payments in record time. The pursuit of those who participate in COVID-19 related scams, intentionally abusing the programs intended to help millions of Americans during these uncertain times, will long remain a significant priority of both the IRS and IRS-CI.”

Criminals are continuing to use the COVID-19 Economic Impact Payments as cover for schemes to steal personal information and money. Scams related to COVID-19 are not limited to stealing EIPs from taxpayers, however. CI has already seen scams related to the organized selling of fake at-home test kits, offers to sell fake cures, vaccines, pills and advice on unproven treatments for COVID-19. Other scams purport to sell large quantities of medical supplies through the creation of fake shops, websites, social media accounts and email addresses where the criminal fails to deliver promised supplies after receiving funds.
 
“Criminals try to take advantage of our most vulnerable times and our most vulnerable populations.  But because we have seen many of these criminals and schemes before, we know how to find them and we know how to expose them," said Don Fort, Chief of IRS Criminal Investigation. “And because COVID-19 is a global problem, it requires a global solution. Not only are we leveraging our financial investigative expertise domestically, we are working hand-in-hand with our J5 partners on those COVID-19 cases that cross borders. There truly is no place for criminals to hide.”

Other COVID-19 related scams involve setting up fake charities soliciting donations for individuals, groups and areas affected by the disease. Some criminals are offering opportunities to invest early in companies working on a vaccine for the disease promising that the “company” will dramatically increase in value as a result. These promotions are often styled as “research reports,” make predictions of a specific “target price,” and relate to microcap stocks, or low-priced stocks issued by the smallest of companies with limited publicly available information.

Finally, CI has also seen a tremendous increase in phishing schemes utilizing emails, letters, texts and links. These phishing schemes are using keywords such as “Corona Virus,” “COVID-19”, and “Stimulus” in varying ways. These schemes are blasted to large numbers of people known by the bad actors in an effort to get personally identifying information or financial account information to include account numbers and passwords. Most of these new schemes are actively playing on the fear and unknown of the virus and the stimulus payments.

Coronavirus-related (COVID-19) scams should be reported to the National Center for Disaster Fraud (NCDF) Hotline at 1-866-720-5721 or submitted through the NCDF Web Complaint Form. The NCDF is a national coordinating agency within the Department of Justice’s Criminal Division dedicated to improving the detection, prevention, investigation and prosecution of criminal conduct related to natural and man-made disasters and other emergencies, such as the coronavirus (COVID-19). Hotline staff will obtain information regarding your complaint, which will then be reviewed by law enforcement officials.
Taxpayers can also report fraud or theft of their Economic Impact Payments to the Treasury Inspector General for Tax Administration (TIGTA). Reports can be made online at TIPS.TIGTA.GOV. TIGTA investigates external attempts to corruptly interfere with federal tax administration, including IRS-related coronavirus scams.

Also, taxpayers can always report phishing attempts to the IRS. Those who receive unsolicited emails or social media attempts to gather information that appear to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), should forward it to phishing@irs.gov. Taxpayers are encouraged not to engage potential scammers online or on the phone.

Learn more by going to the Report Phishing and Online Scams page on IRS.gov. Official IRS information about the COVID-19 pandemic and economic impact payments can be found on the Coronavirus Tax Relief page on IRS.gov, which is updated frequently.

Notice 2020-43 to seek public comment on a proposed requirement for partnerships to use only one of two alternative methods to satisfy the Tax Capital Reporting Requirement with respect to partnership taxable years that end on or after December 31, 2020.  Comments received in response to this notice will help inform the development of the instructions to be included in Form 1065, U.S. Return of Partnership Income (to which the instructions for Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, refer), and Partner’s Instructions for Schedule K-1 (Form 1065), for taxable year 2020. Partnerships and certain other persons report partner capital accounts in Box L on the Schedule K-1 (Form 1065) or in Box F on the Schedule K-1 (Form 8865), each as they currently appear on the 2019 forms (Tax Capital Reporting Requirement).  

Notice 2020-43 will be in IRB:    2020-27, dated 6/29/2020.

WASHINGTON – The Internal Revenue Service today provided guidance for Qualified Opportunity Funds (QOFs) and their investors in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic.

Notice 2020-39 answers questions regarding relief from certain requirements under section 1400Z-2 of the Internal Revenue Code (Code) and the implementing regulations.  Additionally, the IRS has updated the Qualified Opportunity Zones frequently asked questions.

Taxpayers who sold property for an eligible gain and who would have had 180 days to invest in a QOF to defer that gain, may have additional time.  Notice 2020-39 provides that if a taxpayer’s 180th day to invest in a QOF would have fallen on or after April 1, 2020, and before December 31, 2020, the taxpayer now has until December 31, 2020 to invest that gain into a QOF. (The 180th day for some of these taxpayers was already postponed through July 15, 2020, under Notice 2020-23.)  In addition, the notice provides that the period between April 1, 2020, and December 31, 2020, is suspended for purposes of the 30-month period during which property may be substantially improved.

The guidance also provides that, due to the COVID-19 pandemic, a QOF’s failure to hold less than the 90% of its assets in Qualified Opportunity Zone Property on any semi-annual testing dates from April 1, 2020, through Dec. 31, 2020, is due to reasonable cause under section 1400Z-2(f)(3) and such failure does not prevent qualification of an entity as a QOF or an investment in a QOF from being a qualifying investment.  As such, the QOF will not be liable for the statutory penalty under section 1400Z-2(f) due to such a failure during this period.

For Qualified Opportunity Zone Business projects that meet the requirements of the 31-month working capital safe harbor under the final regulations, the notice reminds taxpayers that due to the COVID-19 pandemic these projects have up to an additional 24 months in which to expend their working capital. 

Similarly, the notice reminds taxpayers that due to the COVID-19 pandemic, QOFs that received distributions of QOF stock or partnership interests as a return of capital or realized proceeds from a sale of that stock, partnership interest or qualified opportunity zone property have an additional 12 months in which to reinvest those amounts in the manner intended before the COVID-19 pandemic.

For more information about tax relief resulting from the COVID-19 pandemic, go to the Coronavirus Tax Relief and Economic Impact Payments page on IRS.gov. 

WASHINGTON – The Internal Revenue Service today announced that interest rates will decrease for the calendar quarter beginning July 1, 2020.  The rates will be:  

• three (3) percent for overpayments [two (2) percent in the case of a corporation];
• one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000;
• three (3) percent for underpayments; and
• five (5) percent for large corporate underpayments. 

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. 

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during April 2020 to take effect May 1, 2020, based on daily compounding.

Revenue Ruling 2020-13, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2020-26, dated June 22, 2020.

WASHINGTON – The Internal Revenue Service Office of Chief Counsel is expanding its Virtual Settlement Days program after the tremendous success achieved by three offices that took Settlement Days events virtual in May 2020.

Settlement Days events are coordinated efforts to resolve cases in the United States Tax Court (Tax Court) by providing taxpayers not represented by counsel the opportunity to receive free tax advice from Low Income Taxpayer Clinics (LITCs), American Bar Association (ABA) volunteer attorneys and other pro bono organizations. Taxpayers can also discuss their Tax Court cases and resolve related tax issues with members of the IRS Office of Chief Counsel, the Independent Office of Appeals and Collection. By doing so, unrepresented taxpayers are often able to amicably settle their tax disputes without a trial.

In response to office closures and social distancing requirements, the Office of Chief Counsel quickly shifted its Settlement Days event to a virtual environment. Settlement Days events have traditionally been held in-person, requiring LITC staffers, pro bono attorneys and taxpayers to travel to a designated meeting location. Virtual Settlement Days events take advantage of WebEx audio-visual conferencing software to allow taxpayers to join events from any location, including their homes.

The Office of Chief Counsel first announced its shift to Virtual Settlement Days on May 5, 2020. (See IR-2020-87.) As part of that, Virtual Settlement Days events were held on May 9 in Detroit in conjunction with the University of Michigan Law School LITC, and on May 21 in Atlanta in conjunction with the North Georgia Low Income Taxpayer Clinic.

“The response to these programs has been overwhelming, and it encouraged us to expand this initiative to help more people,” said IRS Chief Counsel Mike Desmond.

The Detroit office expanded its event to eight days. The Atlanta office expanded to two events, one in May and one in June. Between them, the Detroit and Atlanta offices resolved the cases of more than 50 taxpayers. Now, the Office of Chief Counsel is expanding Virtual Settlement Days to other offices and hosting events more frequently.

“Virtual settlement days represent a continuing effort by the IRS to deliver meaningful resolution options to taxpayers, especially during these difficult times,” IRS Commissioner Chuck Rettig said. “Virtual options represent an addition to traditional methods of communication and resolution, not a replacement. The IRS strives to assist every taxpayer, including many who do not have the ability to interact in a virtual environment. The IRS is open to innovative approaches like the virtual settlement days to help people. We welcome comments from taxpayers and others regarding additional methods by which the IRS can ease the burdens on people of our country facing tax issues.”

The Office of Chief Counsel’s Los Angeles office held its first Virtual Settlement Day on May 26, and now also has events scheduled for June 5, 9, 19 and 23, as well as July 7, 17 and 21. The Los Angeles office is working with six different LITCs to support these events. The Atlanta office also has additional events scheduled for June 16 and 17.

The Office of Chief Counsel’s Washington, D.C., office is inviting more than 60 unrepresented taxpayers to participate in its first Virtual Settlement Day on June 20, in conjunction with Catholic University Law Columbus Community Legal Services Low-Income Tax Clinic,  American University Law Janet R. Spragens Federal Tax Clinic, and Morgan Lewis Center for Public Interest Tax Law and Legal Services of Northern Virginia.

“The success of Virtual Settlement Days is only possible thanks to the strong partnership between the Office of Chief Counsel, LITCs and pro bono attorneys,” Desmond said.

The Office of Chief Counsel looks forward to organizing more Virtual Settlement Days in the coming weeks. The IRS encourages unrepresented taxpayers with active Tax Court cases to contact the assigned Chief Counsel attorney or paralegal about participating in a Virtual Settlement Days event. If a taxpayer’s case is currently under consideration by the IRS Independent Office of Appeals, the taxpayer should contact the assigned Appeals Officer to discuss case resolution.

Notice 2020-42 provides participants, beneficiaries, and administrators of qualified retirement plans and other tax-favored retirement arrangements with temporary relief from the physical presence requirement in § 1.401(a)-21(d)(6) for any participant election (1) witnessed by a notary public in a state that permits remote notarization, or (2) witnessed by a plan representative using certain safeguards. The guidance accommodates local shutdowns and social distancing practices and is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as permitted by CARES Act.

Notice 2020-42 will be in IRB: 2020-26, dated June 22, 2020

WASHINGTON – With 159 million Economic Impact Payments processed, the Internal Revenue Service reminds many low-income Americans who don’t usually file tax returns to register for a payment by Oct. 15.

Millions of low-income people and others who aren’t required to file a tax return may be eligible for an Economic Impact Payment and can easily register for a payment by using the free Non-Filers tool, available only on IRS.gov.

“IRS employees worked around the clock to deliver the Economic Impact Payments and new tools to help taxpayers in record time,” said IRS Commissioner Chuck Rettig. “Even with these unprecedented steps, there remain people eligible for these payments who need to take action. Registering to receive the payments is easy, and millions of non-filers have already taken this step. We urge everyone to share this information widely to help more people receive these payments.”

In the past two months, more than 159 million Americans have received Economic Impact Payments totaling almost $267 billion. Of the payments, 120 million were sent to Americans by direct deposit, 35 million by check and 4 million payments were made in the form of a pre-paid debit card. This includes payments sent to those who usually do not have to file a tax return but receive retirement, survivor or disability benefits under various programs administered by the Social Security Administration as well as the Department of Veterans Affairs and the Railroad Retirement Board who qualify. These individuals can use Get My Payment to check on their payment status.

Non-Filers tool on IRS.gov helps millions; special feature remains available through Oct. 15

To help people who aren’t normally required to file a tax return, the IRS created the Non-Filers tool, available in English and Spanish, in partnership with the Free File Alliance. The Non-Filers tool is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles. This includes couples and individuals who are homeless. People can qualify, even if they do not have earned income or work. Usually, married couples qualify to receive a $2,400 payment while others normally qualify to get $1,200. People with qualifying children under 17 can get up to an additional $500 for each child. Anyone who already filed either a 2018 or 2019 return does not qualify to use this tool.

The Non-Filers tool will remain available through the summer and fall, though many eligible people without a filing obligation have already received an Economic Impact Payment. The IRS urges every other eligible non-filer to register soon to quickly receive their payment. Anyone who registers by Oct. 15 will receive their payment by the end of the year.

To help reach these non-filers, over the next few months the IRS will be conducting an extensive outreach and education effort to partner groups who serve homeless individuals, underserved communities, limited English households and others. As part of this effort, the agency has created an Economic Impact Payment partner page, and materials are available in multiple languages.

The IRS cautions that some people who need to file a tax return have been mistakenly using the Non-Filers tool to try to get an Economic Impact Payment.

For more Information on the Economic Impact Payment, including answers to frequently-asked questions and other resources, visit IRS.gov/coronavirus.