IRS has easy ways to help taxpayers who need more time or payment options 

WASHINGTON ― The Department of the Treasury and IRS today announced the tax filing and payment deadline of July 15 will not be postponed. Individual taxpayers unable to meet the July 15 due date can request an automatic extension of time to file until Oct. 15.

Due to COVID-19, the original filing deadline and tax payment due date for 2019 was postponed from April 15 to July 15.

The IRS reminds taxpayers filing Form 1040 series returns that they must file Form 4868 by July 15 to obtain the automatic extension to Oct. 15. The extension provides additional time to file the tax return – it is not an extension to pay any taxes due.

The IRS urges people who owe taxes, even if they have a filing extension, to carefully review their situation and pay what they can by July 15 to avoid penalties and interest. For people facing hardships, including those affected by COVID-19, who cannot pay in full, the IRS has several options available to help. To avoid interest and penalties, the IRS encourages them to pay what they can and consider a variety of payment options available for the remaining balance.

“The IRS understands that those affected by the coronavirus may not be able to pay their balances in full by July 15, but we have many payment options to help taxpayers,” said IRS Commissioner Chuck Rettig. “These easy-to-use payment options are available on IRS.gov, and most can be done automatically without reaching out to an IRS representative.”

Automatic Extension of Time to File

Taxpayers who need more time to prepare and file their federal tax return can apply for an extension of time to file until Oct. 15. To get an extension, taxpayers must estimate their tax liability on the extension form and pay any amount due.

Individual taxpayers have several easy ways to file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by the July 15 deadline. Tax software providers have an electronic version available. In addition, all taxpayers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension.

Save a step: Get an extension when you make a payment 

Taxpayers can also get an extension by paying all or part of their tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. When getting an extension by making a payment, taxpayers do not have to file a separate extension form and will receive a confirmation number for their records.

State deadlines may differ

The IRS also reminds taxpayers to check their state filing and payment deadlines, which may differ from the federal July 15 deadline. A list of state tax division websites is available through the Federation of Tax Administrators.

Payment options

Taxpayers who owe taxes can choose from the following payment options:

The IRS recommends that taxpayers who are unable to pay their taxes in full should act as quickly as possible. Tax bills can quickly accumulate more interest and penalties the longer they sit. 

Several payment options are available on IRS.gov/payments to help taxpayers who can’t pay in full and some can offer taxpayers smaller penalties. Though interest and late-payment penalties continue to accrue on any unpaid taxes after July 15, the failure to pay tax penalty rate is cut in half while an installment agreement is in effect. The usual penalty rate of 0.5% per month is reduced to 0.25% For the calendar quarter beginning July 1, 2020, the interest rate for underpayment is 3%.

Most taxpayers who cannot pay in full have the following payment options:

In addition, taxpayers can consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law.

IRS releases new Data Book with redesigned, expanded format to provide more detailed view of service, compliance activities in FY 2019

WASHINGTON – The Internal Revenue Service today unveiled the 2019 IRS Data Book, featuring a redesigned format that provides a different and expanded look at IRS accomplishments during the past year. 

Available now on IRS.gov, the redesigned Fiscal Year 2019 edition of the IRS Data Book provides the annual set of statistical tables summarizing tax filings, revenue collections, taxpayer services, enforcement activities and agency operations. The new Data Book features an updated format with additional tables designed to more accurately reflect the way the IRS does business today. 

“The IRS is changing from many perspectives, and the Data Book reflects that change as well,” IRS Commissioner Chuck Rettig wrote in the Data Book’s introduction. “Along those lines, we’ve redesigned the Data Book for Fiscal Year (FY) 2019 by reorganizing key material and adding new information. This is part of an effort to help the Data Book provide a more complete view of our extensive service and compliance operations in a clear format that is easier to use for taxpayers and the tax community.” 

The Data Book complements the new IRS Progress Update, a new annual report that premiered in January. 

“In presenting this information, our goal is to help everyone understand the scope of our work for the nation,” Rettig added. “The IRS touches more Americans than any other entity, public or private. Our employees take pride in providing top-quality service to taxpayers — helping them meet their tax obligations through clear guidance while ensuring their rights are protected. When citizens can perform their civic duty each year by preparing and filing their taxes and paying only what they should, they help fund critical aspects of the United States, ranging from schools and roads to Social Security payments and the nation’s military.” 

Rettig also notes the IRS response to COVID-19 in the new Data Book. The coronavirus delayed publication of this year’s Data Book. 

As Rettig further noted, “we realize when the public thinks of compliance, they think of audits, but there is so much more to our work to ensure appropriate compliance with the tax law and serve the nation. We’ve created a new section called “Compliance Presence,” so everyone can easily see the many different activities related to enforcement. Beyond traditional examinations, these activities include more than 5 million compliance steps the IRS takes every year to ensure fairness in our tax system.” 

Among the compliance steps, illustrated by statistics in this section, are math error notices, matching tax return entries to information returns filed by employers, banks and other third parties, and casework by IRS Criminal Investigation. 

Recognizing that audits can take several years to complete, for example, new Table 17a takes a long-term view by presenting both audits closed and audits in progress, tied to tax returns for tax-years 2010 through 2018. The new table also presents data based on the taxpayer’s total positive income, excluding losses, the same measure the IRS uses to assign exam codes. 

This year for the first time, the Data Book also shows the number of installment payment agreements set up by individuals and businesses with the IRS. Another addition is the number of Identity Protection Personal Identification Numbers (IP PINs) issued for filing years 2011-2020 to certain victims of tax-related identity theft. 

The new Data Book shows that during FY 2019, the IRS:

To view or download a pdf file of the complete FY 2019 IRS Data Book, Excel files of any of its 34 tables, or Data Books or tables from past years, visit IRS.gov/statistics/soi-tax-stats-irs-data-book.

Notice 2020-52 clarifies the requirements that apply to a mid-year amendment to a safe harbor 401(k) or 401(m) plan that reduces only contributions made on behalf of highly compensated employees.  This notice also provides temporary relief in connection with the ongoing Coronavirus Disease 2019 (COVID-19) pandemic from certain requirements that would otherwise apply to a mid-year amendment to a safe harbor 401(k) or 401(m) plan adopted between March 13, 2020, and August 31, 2020, that reduces or suspends safe harbor contributions.  

Notice 2020-52 will be in IRB:  2020-29, dated 07/13/2020.

National Taxpayer Advocate Erin Collins delivers her first report to Congress; Identifies COVID-19 challenges, CARES Act, and Taxpayer First Act implementation as priority issues for taxpayers

WASHINGTON — National Taxpayer Advocate Erin M. Collins today released her first report to Congress, identifying taxpayer challenges arising from the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the IRS’s implementation of the Taxpayer First Act as priority issues the Taxpayer Advocate Service (TAS) plans to focus on in the coming year. The report also assesses the 2020 filing season, identifies other TAS areas of focus, and includes the IRS’s responses to administrative recommendations proposed in the National Taxpayer Advocate’s 2019 annual report. 

“On March 30, 2020, I had the honor and privilege of being sworn in as the third National Taxpayer Advocate,” Collins wrote. “Starting in the midst of a pandemic and witnessing IRS offices closing one by one was not the way I envisioned my role when I accepted the position, . . . but there also has been a silver lining in this experience: As I have participated in conference calls with members of my leadership team, TAS employees, and the IRS’s COVID-19 response team, I have been extraordinarily impressed by their commitment and focus on the health and safety of all employees during this pandemic, while still doing as much as possible to assist taxpayers.” 

In her preface to the report, Collins expressed appreciation to Nina Olson, who served as the National Taxpayer Advocate from 2001-2019, and Val Oveson, who served as the first National Taxpayer Advocate from 1998-2000. “Over the past 20 years, TAS has successfully assisted more than 4.5 million taxpayers by helping them resolve their tax problems and protecting their rights, and it has made hundreds of administrative recommendations adopted by the IRS and some 45 legislative recommendations enacted by Congress,” Collins wrote. 

Taxpayer Challenges Arising from COVID-19 Pandemic 

The report praises the IRS for acting quickly to postpone over 300 filing, payment, and other time-sensitive deadlines, provide broad relief from compliance actions under its “People First Initiative,” and disburse some 160 million Economic Impact Payments (EIPs) authorized by the CARES Act, enacted on March 27, 2020. 

However, the report says that despite the IRS’s best efforts, there have been notable adverse taxpayer impacts, including: 

Taxpayer Challenges Relating to the CARES Act

The report says the IRS generally did a commendable job implementing the CARES Act, but taxpayer challenges remain, including: 

Implementation of Taxpayer First Act 

The Taxpayer First Act (TFA), enacted one year ago, constitutes the most far-reaching revisions to tax administration since the IRS Restructuring and Reform Act of 1998. The TFA included some 23 provisions recommended by the National Taxpayer Advocate. A centerpiece of the TFA is a requirement that the IRS develop four strategic plans: (i) a comprehensive taxpayer service strategy; (ii) a plan to redesign the IRS’s organizational structure; (iii) a comprehensive employee training strategy that includes training on taxpayer rights and the role of TAS; and (iv) a multi-year plan to meet IRS information technology needs. The TFA required the IRS to submit its comprehensive taxpayer service strategy to Congress by July 1, 2020. Because of disruptions caused by COVID-19, the IRS has been delayed in developing these plans, but it expects to deliver its taxpayer service strategy to Congress by the end of the year.  

The report details some steps the IRS has taken to receive input from taxpayers, practitioners, and TAS, and identifies over two dozen TFA provisions that the IRS has implemented. It expresses concern that the IRS has not properly implemented a provision directing it to establish a single point of contact for identity theft victims and that it may not properly implement a provision directing it to exclude taxpayers with adjusted gross incomes at or below 200 percent of the Federal Poverty Level from assignment to private debt collection agencies by December 31, 2020. 

Collins said, “I have been impressed by many ideas the IRS is considering, and I look forward to working with the leadership as it refines its taxpayer service strategy in the coming months.” 

2020 Filing Season Review

The National Taxpayer Advocate’s mid-year report typically includes an assessment of the filing season that measures performance against the results of prior filing seasons. Because the IRS closed most of its operations in March and postponed many filing and payment deadlines from April 15 to July 15, this filing season cannot fairly be compared with prior years. The disruption caused by COVID-19 and the postponed due date has had – and continues to have – an enormous impact on the 2020 filing season, reflected in the number of returns received, the volume of correspondence received from taxpayers, and the reduction in toll-free telephone service. Among the impacts were: 

Because of the IRS’s limitations and the postponed filing deadline, an assessment of the filing season is necessarily incomplete. The report says TAS may provide a more thorough analysis later. 

Other TAS Areas of Focus for Fiscal Year 2021 

Beyond COVID-19, the CARES Act, and TFA implementation, TAS continues to advocate on a broad range of issues. The report describes ten issues TAS plans to focus on during the upcoming fiscal year. These include working with the IRS to provide taxpayers with limited English proficiency meaningful access to tax products and services; improving the clarity and content of IRS notices and correspondence; improving service to and communication with taxpayers in rural and other communities that lack high-speed internet access; and working with the IRS to refine its screening filters so fewer legitimate returns are flagged as potentially fraudulent and cause refund delays for affected taxpayers. 

IRS Responses to National Taxpayer Advocate Administrative Recommendations

The National Taxpayer Advocate is required by statute to submit a year-end report to Congress that makes administrative recommendations to resolve taxpayer problems. Section 7803(c)(3) of the Internal Revenue Code authorizes the National Taxpayer Advocate to submit administrative recommendations to the Commissioner and requires the IRS to respond within three months. Under this authority, the National Taxpayer Advocate annually transmits to the Commissioner all administrative recommendations proposed in her year-end report for response. 

The Acting National Taxpayer Advocate made 78 administrative recommendations in the 2019 year-end report and then submitted them to the Commissioner for response. Of those, 59 were made in the “Most Serious Problems” section of the report. The IRS has implemented or agreed to implement 41 (or 69 percent). 

The report made 19 administrative recommendations in other sections of the report. The IRS has taken the position that it is not required to respond directly to them and has provided only general narrative responses. The National Taxpayer Advocate believes the IRS is required to provide direct responses. “The intent of the statute is clear,” the report says. “If the National Taxpayer Advocate makes an administrative recommendation to mitigate a taxpayer problem – regardless of whether or where it has appeared in a report – the IRS should evaluate it and respond in writing so that TAS, Congress, and the taxpaying public know whether the IRS plans to implement the recommendation and, if not, why not. General narrative discussions that do not address recommendations directly fail to satisfy this objective.” 

The IRS responses are published in full in an appendix to the report.

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The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury or the Office of Management and Budget. The first report must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report must discuss the ten most serious problems encountered by taxpayers, identify the ten tax issues most frequently litigated in the courts, and make administrative and legislative recommendations to resolve taxpayer problems. 

The National Taxpayer Advocate blogs about key issues in tax administration. Click here to subscribe. Past blogs from the National Taxpayer Advocate can be found here. 

About the Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Your local advocate’s number is in your local directory and at https://taxpayeradvocate.irs.gov/contact-us. You can also call TAS toll-free at 877-777-4778. TAS can help if you need assistance in resolving an IRS problem, if your problem is causing financial difficulty, or if you believe an IRS system or procedure isn’t working as it should. Our service is free. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to https://taxpayeradvocate.irs.gov. You can get updates on tax topics at facebook.com/YourVoiceAtIRS, Twitter.com/YourVoiceatIRS, and YouTube.com/TASNTA.

The Internal Revenue Service updated questions 1,3,4 and 5 of the Deferral of Employment Tax Deposit FAQs to reflect changes by the Paycheck Protection Program Flexibility Act of 2020. 

WASHINGTON ― As the 2019 tax filing and payment deadline approaches, the IRS reminds taxpayers and businesses that 2019 income tax liabilities as well as postponed April 15 and June 15, 2020 estimated tax payments are due July 15, 2020.  This postponement provided temporary tax relief in response to the COVID 19 pandemic.

Taxpayers who owe a 2019 income tax liability, as well as estimated tax for 2020, must make two separate payments on or by July 15, 2020: One for their 2019 income tax liability and one for their 2020 estimated tax payments.  The two estimated tax payments can be combined into a single payment. 

A list of forms due July 15 is on the Coronavirus Tax Relief: Filing and Payment Deadlines page. Electronic payment options are the optimal way to make a tax payment.

Paying electronically:

• Individuals – Taxpayers can use Direct Pay for two payments each day. Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance. They will receive an email confirmation of their payments.
• • Taxpayers attempting to make at least three payments on the same day using Direct Pay will receive a warning of possible duplicate payment, and they will need to select override for those payments to continue.
• Businesses – For businesses or those making large payments, the best payment option is the Electronic Federal Tax Payment System, which allows up to five payments per day. Enrollment is required. Taxpayers can schedule payments up to 365 days in advance and opt in to receive email notifications about their payments. Visit IRS.gov/EFTPS for details. 

Paying by check, money order or cashier’s check:

• 2019 Tax Liability – If paying a 2019 income tax liability without an accompanying 2019 tax return, taxpayers paying by check, money order or cashier’s check should include Form 1040-V, Payment Voucher with the payment.
• For those paying when filing their 2019 income tax return, do not staple or paperclip the payment to the return. For more information, go to Pay by Check or Money Order on IRS.gov.
• 2020 Estimated Tax Payments - Taxpayers making their 2020 estimated tax payment by check, money order or cashier’s check should include the appropriate Form 1040 ES payment voucher. Indicate on the check memo line that this is a 2020 estimated tax payment.

Additional electronic payment options:

Payment options are available at IRS.gov/payments:

• Taxpayers can pay when they file electronically using tax software online. If using a tax preparer, ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account.
• Taxpayers can choose to pay with a credit card, debit card or digital wallet option through a payment processor. Processing fees apply. No part of the card service fee goes to the IRS.
• The IRS2Go app provides mobile-friendly payment options, including Direct Pay and Payment Provider payments on mobile devices.
• Individuals and businesses, preferring to pay in cash, can do so at a participating retail store. Go to IRS.gov/paywithcash for instructions.

For taxpayers paying separately from when they file their tax return, the more secure and quicker way to send a payment to the IRS is by going to IRS.gov/payments and choosing an electronic payment option to submit the payment. Taxpayers should continue to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments.

Reviewing federal tax information online

Individual taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, access their tax records online, review their payment history and view key tax return information for the most recent tax return as originally filed.

We are working hard to return to normal CAF processing operations, reduce our backlog and quickly process your authorization requests. But we need your help.  We are still operating with limited staffing to protect our employees. CAF units at Memphis and Ogden currently are operational. Duplicate requests (sending the same exact request for access to a taxpayers account more than once) make it harder for us to catch up.  Sending in duplicate Forms 2848 (Power of Attorney), and 8821 (Tax Information Authorization), will result in processing delays, as all requests must be researched and reviewed.

Here’s what we would like for you to do:

1. Fax a request once. Faxing forms to the same or multiple IRS numbers will delay processing.
2. Double check forms for accuracy. Missing information delays requests.

Reducing the number of duplicates and increasing the accuracy of forms will help us to process requests faster and help with other improvements that we are implementing. We know this has been a difficult time, but we appreciate your understanding and cooperation.

Thank you for your help!

WASHINGTON — The Internal Revenue Service Office of Chief Counsel announced today a time-limited settlement offer to certain taxpayers with pending docketed Tax Court cases involving syndicated conservation easement transactions. Taxpayers eligible for this offer will be notified by letter with the applicable terms.

The settlement offer would bring finality to these taxpayers with respect to the syndicated conservation easement issues in their docketed U.S. Tax Court cases. The settlement requires a concession of the income tax benefits claimed by the taxpayer and imposes penalties. 

“The IRS will continue to actively identify, audit and litigate these syndicated conservation easement deals as part of its vigorous and relentless effort to combat abusive transactions,” said IRS Commissioner Chuck Rettig. “These abusive transactions undermine the public's trust in private land conservation and defraud the government of revenue. Ending these abusive schemes remains a top priority for the IRS."

The IRS recognizes the important role of conservation easement deductions in incentivizing land preservation for future generations. However, abusive syndicated conservation easement transactions have been of concern to the IRS for several years. In Notice 2017-10, the IRS identified certain syndicated conservation easement transactions as tax avoidance transactions and provided that such transactions (and substantially similar transactions) are listed transactions for purposes of Treasury Regulation § 1.6011-4(b)(2) and §§ 6111 and 6112 of the Internal Revenue Code.  Also, in 2019, the IRS added syndicated conservation easement transactions to its annual “Dirty Dozen” list of tax scams.
 
Taxpayers should note that the U.S. Tax Court has held in the government’s favor in several opinions and orders in syndicated conservation easement cases.  The IRS realizes that some promoters may tell their clients that their transaction is “better” than or “different” from the transactions previously rejected by the Tax Court and that it may be better for the client to litigate than accept this resolution.  When deciding whether to accept the offer, the IRS encourages taxpayers to consult with independent counsel, meaning a qualified advisor who was not involved in promoting the transaction or handpicked by a promoter to defend it.  

In listed syndicated conservation easement structures, promoters syndicate ownership interests in real property through partnerships, using promotional materials to suggest that prospective investors may be entitled to a share of a conservation easement contribution deduction that equals or exceeds two and one-half times the investment amount. The promoters obtain an appraisal that greatly inflates the value of the conservation easement based on a fictional and unrealistic highest and best use of the property before it was encumbered with the easement.  After the investors invest in the partnership, the partnership donates a conservation easement to a land trust.  Investors in the partnership then claim a deduction based on an inflated value. The investors typically claim charitable contribution deductions that grossly multiply their actual investment in the transaction and defy common sense.

The IRS has developed a comprehensive, coordinated enforcement strategy to address abusive syndicated conservation easement transactions and has also been working closely with the U.S. Department of Justice to shut down the promotion of them.  The IRS will continue to disallow the claimed tax benefits, asserting civil penalties to the fullest extent, considering criminal sanctions in appropriate cases, and continuing to pursue litigation of the cases that are not otherwise resolved administratively. This syndicated conservation easement resolution should not be deemed to have any impact on the potential criminal exposure, investigation and/or prosecution of any individual or entity that participated in or assisted or advised others in participating in a syndicated conservation easement transaction in any manner whatsoever.

In addition, part of the IRS’ strategy is the creation of two new offices that are actively investigating these transactions: the Promoter Investigation Coordinator and the Office of Fraud Enforcement. For certain taxpayers involved in syndicated conservation easements, the IRS Office of Chief Counsel has decided, however, to offer taxpayers an opportunity to resolve certain docketed cases on standardized terms. The settlement offer will be sent by mail to those eligible. Among the key terms of the settlement offer:

Taxpayers should not expect to settle their docketed Tax Court cases on better terms. Based on cases the Independent Office of Appeals has encountered to date, and the existing state of the law, taxpayers should not later expect a better result than what is provided in this settlement offer. 

“With this announcement, we encourage taxpayers and their advisors to take a hard, realistic look at their cases. They should carefully review this settlement offer. We believe this is clearly the best option for them to pursue given all of these factors,” said IRS Chief Counsel Michael J. Desmond. “Those who choose not to accept the offer should keep in mind the Office of Chief Counsel will continue to vigorously litigate their cases to the fullest extent possible.”

WASHINGTON — The Electronic Tax Administration Advisory Committee (ETAAC) today released its annual report to Congress, featuring recommendations that focus on the prevention of identity theft and refund fraud.

The ETAAC is a public forum whose members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and the nation’s tax industry that was established in 2015 to fight identity theft-reflated refund fraud and cybercrime.

The 2020 report includes a total of 16 recommendations grouped into four sections: Fund, Modernize and Enable the IRS; Defend and Protect our Tax System; Improve the Taxpayer Experience; and Strengthen the Security Summit and the ISAC.

ETAAC members represent various segments of the tax community, including individual and business taxpayers, tax professionals and preparers, state and local governments, consumer advocates, tax software developers, payroll service providers and the financial industry.

The full report for 2020 is available on IRS.gov.

At today’s annual meeting, IRS Commissioner Chuck Rettig and IRS leaders thanked eight members of the committee whose terms are ending:

WASHINGTON — The Internal Revenue Service today issued final regulations permitting a regulated investment company (RIC) that receives qualified real estate investment trust (REIT) dividends to report dividends the RIC pays to its shareholders as section 199A dividends.

Section 199A, enacted as part the Tax Cuts and Jobs Act (TCJA), allows individual taxpayers and certain trusts and estates to deduct up to 20 percent of certain income (section 199A deduction).

The section 199A deduction is available to eligible taxpayers with qualified business income (QBI) from qualified trades or businesses operated as sole proprietorships or through partnerships, S corporations, trusts, or estates, as well as for qualified REIT dividends and income from publicly traded partnerships.  The section 199A deduction is not available for C corporations.

The regulations issued today provide that a shareholder in a RIC may, subject to limitations, treat a section 199A dividend received from a RIC as a qualified REIT dividend for purposes of determining the section 199A deduction.

The regulations also provide additional guidance on the treatment of previously disallowed losses that are included in QBI in subsequent years and provide guidance for taxpayers who hold interests in split-interest trusts or charitable remainder trusts.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.