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.

WASHINGTON — The Internal Revenue Service has awarded new contracts to three private-sector collection agencies for collection of overdue tax debts. The new contracts begin Thursday following today’s expiration of the old contracts.

Beginning Thursday, Sept. 23, 2021, taxpayers with unpaid tax bills may be contacted by one of the following three agencies:

 
Notification by IRS and the private collection agencies
The IRS will always notify a taxpayer before transferring their account to a private collection agency (PCA).

How it works
The private collectors will identify themselves as contractors collecting taxes on behalf of the IRS. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act, and like IRS employees, must be courteous and must respect taxpayer rights.

Private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy.

Payment options
The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made directly to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. To find out more about available payment options, visit IRS.gov/Payments.

More information
The IRS established the Private Debt Collection program in 2016, as authorized under federal law, and contracted with several agencies to collect certain unpaid tax debts on the government’s behalf. To learn more about the private debt collection program, visit the Private Debt Collection page on IRS.gov. Additional information can be found at the following links:

Notice 2021-54 sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for September 2021 used under § 417(e)(3)(D), the 24-month average segment rates applicable for September 2021, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).

Notice 2021-54 will be in IRB: 2021-41, dated October 12, 2021.

WASHINGTON – The Internal Revenue Service today explained how expanded tax benefits can help both individuals and businesses give to charity before the end of this year.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, provides several provisions to help individuals and businesses who give to charity. The new law generally extends through the end of 2021 four temporary tax changes originally enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here is a rundown of these changes.

Deduction for individuals who don’t itemize; cash donations up to $600 qualify

Ordinarily, individuals who elect to take the standard deduction cannot claim a deduction for their charitable contributions. The law now permits these individuals to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to certain qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify to claim a limited deduction for cash contributions.

These individuals, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.

Cash contributions to most charitable organizations qualify. However, cash contributions made either to supporting organizations or to establish or maintain a donor advised fund do not qualify. Cash contributions carried forward from prior years do not qualify, nor do cash contributions to most private foundations and most cash contributions to charitable remainder trusts. In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of being a donor, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities. See Publication 526 for more information on the types of organizations that qualify.

Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with the individual’s volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items or other property.

100% limit on eligible cash contributions made by itemizers in 2021

Subject to certain limits, individuals who itemize may generally claim a deduction for charitable contributions made to qualifying charitable organizations. These limits typically range from 20% to 60% of adjusted gross income (AGI) and vary by the type of contribution and type of charitable organization. For example, a cash contribution made by an individual to a qualifying public charity is generally limited to 60% of the individual’s AGI. Excess contributions may be carried forward for up to five tax years.

The law now permits electing individuals to apply an increased limit (“Increased Individual Limit”), up to 100% of their AGI, for qualified contributions made during calendar-year 2021. Qualified contributions are contributions made in cash to qualifying charitable organizations.

As with the new limited deduction for nonitemizers, cash contributions to most charitable organizations qualify, but, cash contributions made either to supporting organizations or to establish or maintain a donor advised fund, do not. Nor do cash contributions to private foundations and most cash contributions to charitable remainder trusts

Unless an individual makes the election for any given qualified cash contribution, the usual percentage limit applies. Keep in mind that an individual’s other allowed charitable contribution deductions reduce the maximum amount allowed under this election. Eligible individuals must make their elections with their 2021 Form 1040 or Form 1040-SR.

Corporate limit increased to 25% of taxable income

The law now permits C corporations to apply an increased limit (Increased Corporate Limit) of 25% of taxable income for charitable contributions of cash they make to eligible charities during calendar-year 2021. Normally, the maximum allowable deduction is limited to 10% of a corporation’s taxable income.

Again, the Increased Corporate Limit does not automatically apply. C corporations must elect the Increased Corporate Limit on a contribution-by-contribution basis.

Increased limits on amounts deductible by businesses for certain donated food inventory

Businesses donating food inventory that are eligible for the existing enhanced deduction (for contributions for the care of the ill, needy and infants) may qualify for increased deduction limits. For contributions made in 2021, the limit for these contribution deductions is increased from 15% to 25%. For C corporations, the 25% limit is based on their taxable income. For other businesses, including sole proprietorships, partnerships, and S corporations, the limit is based on their aggregate net income for the year from all trades or businesses from which the contributions are made. A special method for computing the enhanced deduction continues to apply, as do food quality standards and other requirements.

Keep good records

The IRS reminds individuals and businesses that special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash. For donations of property, additional recordkeeping rules apply, and may include filing a Form 8283 and obtaining a qualified appraisal in some instances.

For details on how to apply the percentage limits and a description of the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.

The IRS also encourages employers to help get the word out about the advanced payments of the Child Tax Credit because they have direct access to many employees and individuals who receive this credit. More information on the Advanced Child Tax Credit is available on IRS.gov.

For more information about other Coronavirus-related tax relief, visit IRS.gov/Coronavirus.

WASHINGTON – The Internal Revenue Service today reminds taxpayers about the upcoming Oct. 15 due date to file 2020 tax returns. People who asked for an extension should file on or before the extension deadline to avoid the penalty for filing late. Electronic filing options, such as IRS Free File, are still available.

Although Oct. 15 is the last day for most people to file, some taxpayers may have more time. They include:

There is usually no penalty for failure to file if the taxpayer is due a refund. However, people who wait too long to file and claim a refund, risk losing it altogether. Those who have yet to file a 2020 tax return, owe tax, and did not request an extension can generally avoid additional penalties and interest by filing the return as soon as possible and paying any taxes owed.

Schedule federal tax payments electronically

Taxpayers can file now and schedule their federal tax payments up to the Oct. 15 due date. They can pay online, by phone or with their mobile device and the IRS2Go app. When paying federal taxes electronically taxpayers should remember:

View tax account online

Taxpayers can use their online account to securely see important information when preparing to file their tax return or following up on balances or notices. This includes:

Additionally, taxpayers can view the:

Choose direct deposit for refunds

The safest and fastest way for people to get a refund is to file electronically and have their refund electronically deposited into their bank or other financial account. Taxpayers can use direct deposit to deposit their refund into one, two or even three accounts. They can also purchase U.S. Savings Bonds.

People who don’t have a bank account can go to the FDIC website or the National Credit Union Association to use their Credit Union Locator Tool for information on where to open an online bank or credit union account. Veterans can use the Veterans Benefits Banking Program (VBBP) for access to financial services at participating banks.

Monthly advance Child Tax Credit payments

Millions of American families currently receive monthly advance Child Tax Credit payments either through direct deposit or paper check. These payments represent half of the increased Child Tax Credit from the American Rescue Plan and will continue through the end of the year.

For those eligible and on extension for their 2020 tax returns, the IRS is using previous year tax information, 2019 for most, to determine the credit amount. The IRS urges people who requested an extension to file as soon as possible if they experienced a major change such as the birth of a child in 2020. Once that return is processed, the IRS can calculate the credit based on the 2020 return and pay it out in full over the remaining months in 2021.

Those who file and have their 2020 return processed on or before Nov. 1, may be eligible for two payments of half the credit in 2021. Similarly, people who file and have their return processed on or before Nov. 29, may be eligible for one payment.

To speed the processing of returns and to avoid delays, the IRS urges everyone to file electronically.

Complete information on the advance Child Tax Credit is available on IRS.gov.

Act soon to claim missing stimulus payments

For anyone who missed out on the first two rounds of stimulus payments, it’s not too late. People who didn't get a first and second Economic Impact Payment or got less than the full amounts can get that missing money if they’re eligible for it, but they need to act soon.

When it comes to missing stimulus payments, it’s critical that eligible people file a 2020 tax return or use the Child Tax Credit Non-filer Sign-up Tool soon even if they don’t usually file to provide information the IRS needs to send the payments. The IRS will also automatically evaluate the taxpayer’s eligibility for the third economic impact payment when the 2020 return is processed.

The IRS will continue to issue eligible taxpayers their third economic impact payment and plus-up payments through the end of 2021. File a 2020 tax return electronically as soon as possible to give the IRS time to process and issue the payments before the end of 2021.

IRS.gov assistance

Taxpayers will find answers to many questions using the Interactive Tax Assistant (ITA), a tax law resource that works using a series of questions and responses. Additionally, the IRS provides payment options at IRS.gov/payments and tax information is available in several languages by clicking on the “English” tab on the front page of IRS.gov.

Revenue Ruling 2021-18 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274.

It will appear in IRB 2020-40 dated Oct. 4, 2021.

WASHINGTON — The Internal Revenue Service and the Treasury Department announced today that millions of American families are now receiving their advance Child Tax Credit (CTC) payment for the month of September.

This third batch of advance monthly payments, totaling about $15 billion, is reaching about 35 million families today across the country. The majority of payments will be issued by direct deposit. Under the American Rescue Plan, most eligible families received payments dated July 15 and Aug. 13, along with today’s Sept. 15 payment. Future payments are scheduled for Oct. 15, Nov. 15 and Dec. 15. For these families, each payment is up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6 through 17.

Here are further details on these payments:

Still time to sign up; additional details

It’s not too late for families who haven’t filed a 2020 income tax return—including those who are not normally required to file because their incomes are too low—to sign up for advance CTC payments. Most low-income families can get these monthly payments.

The IRS urges families who normally aren’t required to file a tax return to explore the tools available on IRS.gov. These tools can help determine their eligibility or help them file a simplified tax return to sign up for these payments, as well as to be considered automatically for the third round of Economic Impact Payments of up to $1,400 per person and to claim the Recovery Rebate Credit covering any of the first two rounds of Economic Impact Payments they may have missed.

The IRS encourages partners and community groups to share information and use available online tools and toolkits to help non-filers, low-income families and other underserved groups sign up to receive these benefits.

Families can stop payments anytime, even after payments begin. They can do that by using the unenroll feature in the Child Tax Credit Update Portal. Eligible families who make this choice will still receive the rest of their Child Tax Credit as a lump sum when they file their 2021 federal income tax return next year. To stop all payments starting in October and for the rest of 2021, they must unenroll by 11:59 p.m. ET on Oct. 4, 2021.

For married couples, each spouse must unenroll separately. If they each choose to unenroll, they will receive no monthly payments. If only one spouse unenrolls, they will still receive monthly payments, but they will be half the normal amount.

The unenroll feature can also be helpful to any family that no longer qualifies for the CTC or believes they will not qualify when they file their 2021 return in 2022. This could happen if, for example, someone else, such as an ex-spouse or another family member, qualifies to claim their child or children as dependents in 2021.

At the same time, IRS also reminded eligible families who are not getting these payments, especially those who receive little or no income, that the IRS Non-filer Sign-up Tool remains available to use until Oct. 15.

Links to these tools, a step-by-step guide to using the Non-filer Sign-up Tool, answers to frequently asked questions and other helpful resources are available on the IRS’s special advance CTC 2021 page.

WASHINGTON — The Internal Revenue Service, in response to the continued shortages of undyed diesel fuel caused by Hurricanes Ida and Nicholas, will extend the penalty relief provided in IR-2021-176 when dyed diesel fuel is sold or used on the highway.

In IR-2021-176, released Sept. 1, 2021, the IRS announced that due to the impact of Hurricane Ida it would not impose a penalty when dyed diesel fuel is sold for use or used on the highway for the following parishes in the state of Louisiana:  Ascension, Assumption, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Washington, West Baton Rouge and West Feliciana. That relief has been extended and is effective as of Aug. 29, 2021, and will remain in effect through Sept. 30, 2021.

In addition, due to the impact of Hurricanes Ida and Nicholas, the IRS is also providing penalty relief to the parishes of Acadia, Allen, Avoyelles, Beauregard, Calcasieu, Cameron, Evangeline, Jefferson Davis, Lafayette, Rapides, St. Landry, Vermilion, and Vernon. This additional relief is effective as of Aug. 29, 2021 and will remain in effect through Sept. 30, 2021.

This penalty relief is available to any person that sells or uses dyed fuel for highway use. In the case of the operator of the vehicle in which the dyed fuel is used, the relief is available only if the operator or the person selling the fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use. The IRS will not impose penalties for failure to make semimonthly deposits of this tax. IRS Publication 510, Excise Taxes, has information on the proper method for reporting and paying the tax.

Ordinarily, dyed diesel fuel is not taxed, because it is sold for uses exempt from excise tax, such as to farmers for farming purposes, for home heating use and to local governments for buses.

Also, this waiver does not apply to the Internal Revenue Code penalty for using adulterated fuels that do not comply with applicable EPA regulations. Consequently, diesel fuel with sulfur content higher than 15 parts-per-million may not be used in highway vehicles.

The IRS is closely monitoring the situation and will provide additional relief as needed.

WASHINGTON — During National Small Business Week, the Internal Revenue Service reminds business owners that it’s critical to correctly determine whether the individuals providing services are employees or independent contractors.

An employee is generally considered to be anyone who performs services, if the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker’s services are performed. Independent contractors are normally people in an independent trade, business or profession in which they offer their services to the public. Doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers or auctioneers are generally independent contractors.

Independent contractor vs. employee
Whether a worker is an independent contractor or an employee depends on the relationship between the worker and the business. Generally, there are three categories to examine:

Misclassified worker 
Misclassifying workers as independent contractors adversely affects employees because the employer’s share of taxes is not paid, and the employee’s share is not withheld. If a business misclassified an employee without a reasonable basis, it could be held liable for employment taxes for that worker. Generally, an employer must withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes. Workers who believe they have been improperly classified as independent contractors can use IRS Form 8919, Uncollected Social Security and Medicare Tax on Wages (.pdf) to figure and report their share of uncollected Social Security and Medicare taxes due on their compensation.

Voluntary Classification Settlement Program
The Voluntary Classification Settlement Program (VCSP) is an optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future tax periods for employment tax purposes with partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers (or a class or group of workers) as employees. Taxpayers must meet certain eligibility requirements, apply by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.

Who is self-employed?
Generally, someone is self-employed if any of the following apply to them.

Self-employed individuals generally are required to file an annual tax return and pay estimated tax quarterly. They generally must pay self-employment tax (Social Security and Medicare tax) as well as income tax. Self-employed taxpayers may be able to claim the home office deduction if they use part of a home for business. 

What about the gig economy?
The gig economy − also called sharing economy or access economy−is activity where people earn income providing on-demand work, services or goods. Gig economy income must be reported on a tax return, even if the income is: from part-time, temporary or side work; not reported on a Form 1099-K, 1099-MISC, W-2 or other income statement; or paid in any form, including cash, property, goods or virtual currency.

Help spread the word - Advance Child Tax Credit
The IRS  encourages employers to help get the word out about the advanced payments of the Child Tax Credit during Small Business Week. Employers have direct access to many  who may receive this credit. More information on the Advanced Child Tax Credit is available on IRS.gov. The website has tools employers can use to deliver this information, including e-posters, drop-in articles (for paycheck stuffers, newsletters) and social media posts to share. 

For more information and help
The Self-Employed Individuals Tax Center has information for those who are in an independent trade, business or profession in which they offer their services to the general public.
 
Small Business Taxes: The Virtual Workshop is composed of nine interactive lessons designed to help new small business owners learn their tax rights and responsibilities.

The IRS Video Portal contains video and audio presentations on topics of interest to small businesses, individuals and tax professionals.