WASHINGTON — The Internal Revenue Service announced today that Free File remains available through Oct. 15 for those taxpayers who still need to file their 2020 tax returns.

Free File is the IRS’ public-private partnership with tax preparation software industry leaders to provide their brand-name products for free.

Free File provides two ways for taxpayers to prepare and file their federal income tax online for free:

• Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites. Taxpayers whose adjusted gross income (AGI) is $72,000 or less qualify for any IRS Free File partner offers.
• For taxpayers whose income (AGI) is greater than $72,000, there’s the Free File Fillable Forms option. It provides electronic federal tax forms that can be filled out and filed online for free. To use this option taxpayers should know how to prepare their own tax return.

Always start at IRS.gov:

• From the homepage select "Free File: Do your Federal Taxes for Free”
• Pick an option based on income
• Follow links to the chosen Free File provider’s website

Taxpayers who requested the six-month filing extension should complete their tax returns and file on or before the Oct. 15 deadline.

Only current year tax returns can be filed using IRS Free File. The IRS does not allow electronic filing for prior year returns through self-preparation websites.

Prior year returns can only be filed electronically by registered tax preparers for the two previous tax years. Otherwise, taxpayers must print, sign and mail prior year returns.

The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications lists qualified local preparers.

Tax pros: 2021 self-study seminars now available for continuing education credit

WASHINGTON — The Internal Revenue Service today announced that 18 new self-study seminars are available through the IRS Nationwide Tax Forums Online. 

Tax professionals – CPAs, enrolled agents, Annual Filing Season Program participants and others – can earn continuing education for $29 per credit. 

The new seminars were recorded in July and August at the 2021 IRS Nationwide Tax Forum. 

2021 Nationwide Tax Forums Online course listing 

1.    Advocating for Taxpayers in Order to Avoid Abusive Tax Schemes

2.    Be Tax Ready – Understanding Rules for Due Diligence and the Child Tax Credit and Earned Income Tax Credit Under the American Rescue Plan Act of 2021

3.    Charities & Tax-Exempt Organizations Update

4.    Closer Look at the IRS Independent Office of Appeals

5.    Collection Flexibilities During Difficult Economic Times

6.    Common Issues Presented to OPR and Best Practices to Address Them

7.    Determining an Individual’s Tax Residency Status

8.    e-Services and You

9.    Gig Economy

10. Helping You and Your Clients Steer Clear of Fraud and Scams

11. Key Enforcement Issues

12. Keynote Address

13. Keys to Mastering Due Diligence Requirements and What to Expect During a Due Diligence Audit

14. Overview of Taxpayer Civil Rights

15. Professional Responsibility Obligations when Practicing before the IRS: OPR and Circular 230

16. Retirement Plans - IRS Compliance Initiatives

17. Tax Law Changes from a Forms Perspective

18. Virtual Currency

These 18 courses are now available in addition to 37 sessions from previous years that are also available for credit.  

Information on continuing education credits 

The Nationwide Tax Forums Online is a qualified sponsor of continuing education registered with the IRS Return Preparer Office (RPO) and the National Association of State Boards of Accountancy (NASBA). 

To earn credit, tax pros need to create an account, answer review questions throughout the seminar and pass a short test. 

The online seminars can be reviewed for free. Individuals who choose this option will not have access to the review questions or final examination and will not receive credit. 

For more information, visit www.irstaxforumsonline.com.

WASHINGTON — The Internal Revenue Service reminds U.S. citizens, resident aliens and any domestic legal entity that the extension deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR) is Oct. 15, 2021.

Filers missing the April 15 annual due date earlier this year received an automatic extension until Oct. 15, 2021, to file the FBAR. They did not need to request the extension.

Filers affected by a natural disaster may have their FBAR due date further extended. It’s important filers review relevant FBAR Relief Notices for complete information.

Who needs to file?

The Bank Secrecy Act requires U.S. persons to file an FBAR if they have:

Because of this threshold, the IRS encourages U.S. persons or entities with foreign accounts, even relatively small ones, to check if this filing requirement applies to them. A U.S. person is a citizen or resident of the United States or any domestic legal entity such as a partnership, corporation, limited liability company, estate or trust.

How to file

Filers do not file the FBAR with their federal income tax return. The 2020 FBAR must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) and is only available through the BSA E-Filing System website. Those who are unable to e-file their FBAR must call FinCEN at 800-949-2732, or from outside the U.S. at 703-905-3975.

Avoid penalties

Those who don't file an FBAR when required may be subject to significant civil and criminal penalties that can result in a fine and/or prison. The IRS will not penalize those who properly reported a foreign account on a late-filed FBAR if the IRS determines there was reasonable cause for late filing.

FBAR resources on IRS.gov:

• How to report foreign bank and financial accounts
• International Taxpayers
• IRS FBAR Reference Guide (.pdf)
• FAQs About International Individual Tax Matters
• FinCEN's website Reporting Maximum Account Value

To help avoid delays with tax refunds, taxpayers living abroad should visit Helpful Tips for Effectively Receiving a Tax Refund for Taxpayers Living Abroad on IRS.gov.

WASHINGTON — The Internal Revenue Service has selected seven new members for the Electronic Tax Administration Advisory Committee (ETAAC). 

Established by statute in 1998, the ETAAC is a public forum for the discussion of issues in electronic tax administration. The committee’s primary goal is to promote paperless filing of tax and information returns. ETAAC members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and the nation's tax industry to fight identity theft and refund fraud. 

Committee members include state tax officials, consumer advocates, cybersecurity and information security specialists, tax preparers, tax software developers and representatives of the payroll and financial communities. 

The following individuals, grouped by the communities they represent, have been appointed to serve three-year terms on the committee beginning in September 2021: 

Payroll Industry 

• James Paille, Ann Arbor, Michigan – Paille works for Thomson Reuters and has over 40 years of experience in the payroll industry, including front line, treasury and management experience. Paille is a member of the board of directors of the American Payroll Association and the Independent Payroll Providers Association. He is also an active member of the National Automated Clearinghouse Association, National Association of Computerized Tax Processors and the IRS Reporting Agents Forum.

Tax Professionals 

• Jihan Jude, Orlando, Florida – Jude is an attorney and counselor at law with the Davey Law Group in Maitland, Fla. She previously worked with ComplyRight, where she focused on business employment tax compliance, information return reporting requirements from the IRS and Social Security Administration and labor law legal issues. Jude also reviewed company guidance for business clients who used ComplyRight’s tax solutions (paper and electronic filing of tax and information returns and proprietary tax filing software).

State Government 

• Peter Barca, Kenosha, Wisconsin – Barca is Secretary of the Wisconsin Department of Revenue and an active member and officer of the Federation of Tax Administrators Board of Trustees. Barca has served in the Wisconsin State Assembly, the United States House of Representatives and the United States Small Business Administration. He was also a business owner and President of Aurora Associates International.
• Vernon Barnett, Pike Road, Alabama – Barnett began his service as Commissioner of the Alabama Department of Revenue in May 2017. He has worked in state government for 25 years and served as a Deputy Solicitor General, Legal Advisor to the Governor, Deputy Commissioner of the Department of Corrections and Executive Counsel of the Department of Environmental Management. Barnett is current Chair of the Multistate Tax Commission and a member of the Federation of Tax Administrators Board of Trustees.
• Mark Godfrey, Jefferson City, Missouri – Prior to joining Ernst & Young's Digital Tax Administration - Government Services practice, Godfrey served as Taxation Division Director at the Missouri Department of Revenue. During that time, the Taxation Division team implemented an integrated tax system and underwent a reorganization to capitalize on processing efficiencies. Godfrey is an attorney and a certified public accountant.
• Jonathan Lunardini, Loomis, California – Lunardini is Section Manager of the California Franchise Tax Board’s (FTB) Identity Theft/Fraud Program. He has been a member of the Security Summit since its inception in 2015, and has participated in its Information Sharing, Authentication and Financial Services working groups. Lunardini engages with the ISAC as a participating member of the metrics sub-team and also participates in the National Automated Clearinghouse Association and the National Association of Computerized Tax Processors. In his role with the FTB, Lunardini has partnered with the IRS, other states and industry partners on nationwide anti-fraud efforts.
• Terri Steenblock, Forest Lake, Minnesota – Steenblock is Compliance Director at the Federation of Tax Administrators. She supports state revenue agencies across the United States by providing compliance outreach, education and support to tax administrators focused on audit, collections, criminal investigations, fraud and electronic filing. Prior to working at FTA, she spent 15 years at the Minnesota Department of Revenue where she held various roles including serving as an Assistant Commissioner.

Committee Leadership for 2021-2022 

• Courtney Kay-Decker, Of Counsel with Lane & Waterman LLP, will serve as chair of the ETAAC. 
• Jared Ballew, Government/Industry Liaison with Drake Software, will serve as vice chair.

Revenue Procedure 2021-32 adds one country, Chile, to the current published list of countries with which the United States has in force an information exchange agreement, such that interest paid to residents of such countries must be reported by payors to the extent required under Treas. Reg. §§ 1.6049-4(b)(5) and 1.6049-8(a). It also adds the Dominican Republic and Singapore to the current published list of countries with which Treasury and the IRS have determined it is appropriate to have an automatic exchange relationship with respect to the information collected under Treas. Reg. §§1.6049-4(b)(5) and 1.6049-8(a). 

Today, the IRS published the latest executive column “A Closer Look,” which features De Lon Harris, Commissioner, Small Business Self-Employed, Exam, discussing the tax implications for the rapidly growing cannabis/marijuana industry. “I see it as my responsibility to make sure my organization helps taxpayers navigate complex issues and provides the tools that we have available for them to be successful and compliant business owners,” said Harris. Read more here. Read the Spanish version here.

“A Closer Look” is a column from IRS executives that covers a variety of timely issues of interest to taxpayers and the tax community. It also provides a detailed look at key issues affecting everything from IRS operations and employees to issues involving taxpayers and tax professionals.

Check here for prior posts and new updates.

WASHINGTON – The Internal Revenue Service announced today that starting Oct. 28, a new $67 user fee will apply to any estate that requests a closing letter for its federal estate tax return.

The new user fee was authorized under final regulations, TD 9957, available today in the Federal Register. Closing letter requests must be made using Pay.gov. The IRS will provide further procedural details before the user fee goes into effect.

By law, federal agencies are required to charge a user fee to cover the cost of providing certain services to the public that confer a special benefit to the recipient. Moreover, agencies must review these fees every two years to determine whether they are recovering the cost of these services.

Under the final regulations, the IRS has determined that issuing closing letters is a service that confers a special benefit warranting a user fee. That’s because, though obtaining a closing letter from the IRS can be helpful to an executor of an estate, it is not required by law. Moreover, the estate has the option of obtaining from the IRS, free of charge, an account transcript, showing certain information from the estate tax return, comparable to that found in a closing letter. As noted in the final regulations, account transcripts can be used to confirm that an estate tax return examination has been completed and the IRS file has been closed, which is the reason most often cited for requesting a closing letter.

WASHINGTON − Farmers and ranchers who were forced to sell livestock due to drought may have an additional year to replace the livestock and defer tax on any gains from the forced sales, according to the Internal Revenue Service.

To qualify for relief, farmers or ranchers must have sold livestock on account of drought conditions in an applicable region. This is a county or other jurisdiction designated as eligible for federal assistance plus counties contiguous to it. Notice 2021-55, posted today on IRS.gov, lists applicable regions in 36 states and one U.S. territory.

The relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry, are not eligible.

The sales must be solely due to drought, causing an area to be designated as eligible for federal assistance. Livestock generally must be replaced within a four-year period, instead of the usual two-year period. The IRS is authorized to further extend this replacement period if the drought continues.

The one-year extension, announced in the notice, gives eligible farmers and ranchers until the end of their first tax year after the first drought-free year to replace the sold livestock. Details, including an example of how this provision works, can be found in Notice 2006-82, available on IRS.gov.

The IRS provides this extension to eligible farmers and ranchers who sold livestock on account of drought conditions in an applicable region that qualified for the four-year replacement period, if the applicable region is listed as suffering exceptional, extreme or severe drought conditions during any week between Sept. 1, 2020, and Aug. 31, 2021. This determination is made by the National Drought Mitigation Center.

As a result, eligible farmers and ranchers whose drought-sale replacement period was scheduled to expire on Dec. 31, 2021, in most cases now have until the end of their next tax year to replace the sold livestock. Because the normal drought-sale replacement period is four years, this extension impacts drought sales that occurred during 2017. The replacement periods for some drought sales before 2017 are also affected due to previous drought-related extensions affecting some of these localities.

More information on reporting drought sales and other farm-related tax issues can be found in Publication 225, Farmer’s Tax Guide, available on IRS.gov.

Notice 2021-55 explains the circumstances under which the four-year replacement period under section 1033(e)(2) is extended for livestock sold on account of drought. The Appendix to this notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions during the 12-month period ending August 31, 2021. Taxpayers may use this list to determine if an extension is available. 

Notice 2021-55 will be in IRB: 2021-41, dated October 12, 2021.

WASHINGTON – The IRS today introduced a new webpage that provides information to taxpayers whose large refunds are subject to further review by the Joint Committee on Taxation (JCT or Joint Committee).

By law, when taxpayers claim a federal tax refund or credit of more than $2 million ($5 million for a C corporation), the IRS must review the refund or credit and provide a report to the JCT, a non-partisan committee of the U.S. Congress. Refunds subject to this review are known as “Joint Committee Refund Cases.”

Taxpayers can now find answers to most questions about Joint Committee case reviews and links to additional resources at Large Tax Refunds and Credits Subject to Review by the Joint Committee on Taxation – What to Expect.

The new webpage covers the following topics:

A Joint Committee Refund Case may arise from the following:

The IRS estimates the new webpage will help hundreds of taxpayers. The agency notifies taxpayers who have Joint Committee Refund Cases that are subject to review. Taxpayers who have been contacted by an IRS agent should work with the agent assigned to their Joint Committee Refund Case.