Today, the IRS published the latest executive column “A Closer Look,” which features Commissioner Charles Rettig, discussing how the IRS had to pause and modify operations during the pandemic. He also provides a glimpse of what the IRS is doing to help struggling taxpayers and to get caught up during this unprecedented time. “We have done the best we could under the circumstances, and we will continue to do our best as we face the current challenges,” said Rettig. Read more 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 – With many businesses facing a tight job market, the Internal Revenue Service reminds employers to check out a valuable tax credit available to them for hiring long-term unemployment recipients and other groups of workers facing significant barriers to employment.

During National Small Business Week, the IRS is highlighting tax benefits and resources designed to help new and existing small businesses. For any business now hiring, the Work Opportunity Tax Credit (WOTC) may help.

Legislation enacted in December extended the WOTC through the end of 2025. This long-standing tax benefit encourages employers to hire workers certified as members of any of ten targeted groups facing barriers to employment. With millions of Americans out of work at one time or another since the pandemic began, the IRS noted that one of these targeted groups is long-term unemployment recipients who have been unemployed for at least 27 consecutive weeks and have received state or federal unemployment benefits during part or all of that time.

The other groups include certain veterans and recipients of various kinds of public assistance, among others. Specifically, the 10 groups are:

To qualify for the credit, an employer must first request certification by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency (SWA). Do not submit this form to the IRS.

Normally, Form 8850 must be submitted to the SWA within 28 days after the eligible worker begins work. But under a special relief provision, a Nov. 8, 2021, submission deadline applies to two groups of new hires—qualified summer youth employees living in Empowerment Zones and designated community residents living in Empowerment Zones.

To qualify for the Nov. 8 submission deadline, eligible employees must start work on or after Jan. 1, 2021, and before Oct. 9, 2021. Other requirements and further details can be found in Notice 2021-43 and the instructions (.pdf) to Form 8850.

Eligible businesses claim the WOTC on their federal income tax return. It is generally based on wages paid to eligible workers during the first year of employment.

The credit is first figured on Form 5884, Work Opportunity Credit, and then is claimed on Form 3800, General Business Credit.

Though the credit is not available to tax-exempt organizations for most groups of new hires, a special rule allows them to claim the WOTC for hiring qualified veterans. These organizations claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations.

For more information about the Work Opportunity Tax Credit, visit IRS.gov/WOTC.

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.

WASHINGTON — Victims of Hurricane Ida in parts of Pennsylvania now have until Jan. 3, 2022, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today. The IRS has also provided relief to Ida victims in Louisiana, Mississippi, New Jersey and New York.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance. Currently, this includes Bucks, Chester, Delaware, Montgomery, Philadelphia and York counties, but taxpayers in Ida-impacted localities in other parts of Pennsylvania, subsequently designated by FEMA, will automatically receive the same filing and payment relief. The current list of eligible localities is available on the disaster relief page on IRS.gov.

“During this difficult time, the IRS stands ready to help victims of Hurricane Ida,” said IRS Commissioner Chuck Rettig. “We want people affected by this devastating hurricane focused on their safety and recovery for themselves and their families. To provide assistance now and in the weeks ahead, we have a variety of different types of relief available to help people and businesses affected by this disaster.”

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 31, 2021. As a result, affected individuals and businesses will have until Jan. 3, 2022, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return due to run out on Oct. 15, 2021, will now have until Jan. 3, 2022, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The Jan. 3, 2022 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2021, and the quarterly payroll and excise tax returns normally due on Nov. 1, 2021. It also applies to tax-exempt organizations, operating on a calendar-year basis, that had a valid extension due to run out on Nov. 15, 2021. Businesses with an original or extended due date also have the additional time including, among others, calendar-year partnerships and S corporations whose 2020 extensions run out on Sept. 15, 2021 and calendar-year corporations whose 2020 extensions run out on Oct. 15, 2021.

In addition, penalties on payroll and excise tax deposits due on or after Aug. 31 and before Sept. 15, will be abated as long as the deposits are made by Sept. 15, 2021.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or the return for the prior year (2020). Be sure to write the FEMA declaration number – DR-4618 for Pennsylvania  − on any return claiming a loss. See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by Hurricane Ida and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Revenue Procedure 2021-41 provides the domestic asset/liability percentages and domestic investment yields needed by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) of the Internal Revenue Code for taxable years beginning after December 31, 2019.

Revenue Procedure 2021-41 will appear in IRB 2021-39, dated Sept. 27, 2021.

WASHINGTON — During National Small Business Week, the Internal Revenue Service wants small business owners to know that information and resources to help them understand and meet their tax obligations are available free at IRS.gov.

Small businesses play a pivotal role in our nation’s economy. The IRS has a variety of resources available to help employers meet their tax responsibilities as well as help their employees.

IRS online resources can also help employers with things like how to determine if workers should be classified as employees or independent contractors, when employment taxes are due and what forms they need to file.

Employer Identification Number

An Employer Identification Number , also known as a Federal Tax Identification Number is a must-have for a business. Applying for an EIN can be done online for free using an interview style application offered by the IRS. Five Things to Know about the EIN is a video that helps explain why it is critical the IRS has accurate and current information related to EINs or business accounts. 

Employment taxes
It's important a small business understand employment taxes such as federal income tax, Social Security and Medicare taxes as well as Federal Unemployment (FUTA) Tax. Employers must regularly report wages, tips and other compensation paid to an employee by filing the required form(s) to the IRS.

Most employers use Form 941, Employer's Quarterly Federal Tax Return to report federal income tax withheld and both the employer and employee Social Security and Medicare taxes. The smallest employers (those whose annual liability for Social Security, Medicare and withheld federal income taxes is $1,000 or less) file Form 944, Employer’s Annual Federal Tax Return, and agricultural employers file Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Only the employer pays FUTA tax; it is not withheld from the employee's wages. Employers report their FUTA taxes by filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.

If businesses compensate non-employees for services, or pay rent, commissions, the fees of attorneys and other professionals, or make certain other payments, businesses must obtain the Taxpayer Identification Number (TIN) of the payee before making the payment. If businesses don’t have the payee’s TIN at the time payment is made, businesses must withhold 24% from the payment as backup withholding. A payer is liable for backup withholding even if the tax is not deducted from the payment. Payers may use Form W-9 to request the payee’s TIN. Payers use Form 945, Annual Return of Withheld Income Tax, to report backup withholding.

There are two deposit schedules for employment taxes withheld and the employer’s match − monthly and semi-weekly. Before the beginning of each calendar year, employers must determine which of the two deposit schedules they’re required to use. To determine the businesses’ payment schedule, review Publication 15 for Forms 941, 944 and 945, or Publication 51 for Form 943. Deposits for FUTA Tax (Form 940) are required for the quarter within which the tax due exceeds $500. The tax must be deposited by the end of the month following the end of the quarter.  Small business taxpayers must use electronic funds transfer (EFTPS) to make all federal tax deposits. See the Employment Tax Due Dates page for information on when deposits are due.

Estimated tax payments
Taxes are pay-as-you-go. This means taxpayers need to pay most of their tax during the year, as they receive income, rather than paying at the end of the year.

Small business owners, sole proprietors, partners and S corporation shareholders who don’t have tax withheld from their earnings need to make estimated tax payments, usually quarterly. Anyone who pays too little tax (.pdf) or does not pay on-time, may owe a penalty.

Hiring others to prepare payroll
To meet payroll and employment tax responsibilities, many businesses hire a payroll and payroll tax company. Most of these businesses provide quality service, however, sometimes a payroll service provider doesn't submit their client's payroll taxes and closes abruptly. The client remains legally responsible for paying the taxes due even if they sent funds for deposits or payments to the payroll service provider. The IRS urges employers to choose carefully when selecting a payroll provider. The IRS also encourages employers to enroll in the Electronic Federal Tax Payment System (EFTPS). It's free and when deposits are made under their EIN, it lets them monitor that their payroll service provider is making their tax deposits.

Small businesses can share the word with employees about Child Tax Credit
Due to the COVID-19 pandemic, new legislation was enacted to aid not only struggling business owners, but also individuals. Employers have direct access to people who may be eligible for advance Child Tax Credit payments. As part of its ongoing effort to help eligible people access advance Child Tax Credit payments and the increased Child Tax Credit for the 2021 tax year; IRS will be encouraging employers to help spread the word during National Small Business Week 2021.

Materials for employers and others who can help are available on the IRS website at 2021 Child Tax Credit and Advance Child Tax Credit Payments: Resources and Guidance. This is part of a larger effort underway at the IRS to reach people eligible for the payments and other credits. Individuals can check their eligibility for the advance payments by using the Advance Child Tax Credit Eligibility Assistant.

More information
Online IRS resources available to small businesses to learn their employer tax responsibilities include:

WASHINGTON – The Internal Revenue Service reminds taxpayers today that the cost of home testing for COVID-19 is an eligible medical expense that can be paid or reimbursed under health flexible spending arrangements (health FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs), or Archer medical savings accounts (Archer MSAs). That is because the cost to diagnose COVID-19 is an eligible medical expense for tax purposes.

The IRS also reminds taxpayers that the costs of personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19 are eligible medical expenses that can be paid or reimbursed under health FSAs, HSAs, HRAs, or Archer MSAs. Additional information is available on IRS.gov.

For more information regarding details and requirements on deductibility of medical expenses, taxpayers can review Can I Deduct My Medical and Dental Expenses? and Publication 502, Medical and Dental Expenses.

WASHINGTON — Victims of Hurricane Ida in parts of Mississippi now have until Nov. 1, 2021, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance. Currently, individuals and households affected by Hurricane Ida that reside or have a business in all 82 counties and the Mississippi Choctaw Indian Reservation qualify for tax relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

“The IRS stands ready to help people and businesses affected by Hurricane Ida, now and in the weeks ahead,” said IRS Commissioner Chuck Rettig.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 28, 2021. As a result, affected individuals and businesses will have until Nov. 1, 2021, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return due to run out on Oct. 15, 2021, will now have until Nov. 1, 2021, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The Nov. 1, 2021 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2021, and the quarterly payroll and excise tax returns normally due on Nov. 1, 2021. Businesses with an original or extended due date also have the additional time including, among others, calendar-year partnerships and S corporations whose 2020 extensions run out on Sept. 15, 2021 and calendar-year corporations whose 2020 extensions run out on Oct. 15, 2021.    

In addition, penalties on payroll and excise tax deposits due on or after Aug. 28, 2021 and before Sept. 13, will be abated as long as the deposits are made by Sept. 13, 2021.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or the return for the prior year (2020). Be sure to write the FEMA declaration number – EM-3569 − on any return claiming a loss. See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by Hurricane Ida and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

WASHINGTON — In support of National Small Business Week, the Internal Revenue Service will issue numerous online materials that focus on getting small business owners the information they need to comply with filing and paying requirements.

The IRS also reminds employers of the tax benefits available to them.

Here are some of the covered topics:

During Small Business Week, the IRS also encourages employers to help get the word out about the advanced payments of the Child Tax Credit. Employers have direct access to their employees, 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 help spread the word.

Below are some helpful resources for small businesses and the self-employed:

Today, the IRS published the latest executive column “A Closer Look,” which features Darren Guillot, SB/SE Commissioner, Collection, and De Lon Harris, SB/SE Commissioner, Examination, discussing how the IRS is committed to assisting small businesses and self-employed individuals meet their tax obligations. “We will continue to work diligently to provide guidance and information on relief and tools for the small business community and ensure fairness in the tax system for all,” said Guillot. 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 — Victims of Hurricane Ida in parts of New York and New Jersey now have until Jan. 3, 2022, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today. This is comparable to relief provided last week to Ida victims in Louisiana.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance. In New York, this currently includes Bronx, Kings, New York, Queens, Richmond and Westchester counties, and in New Jersey, it includes Bergen, Gloucester, Hunterdon, Middlesex, Passaic and Somerset counties. Taxpayers in Ida-impacted localities subsequently designated by FEMA in other parts of these states will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

“During this difficult time, the IRS stands ready to help victims of Hurricane Ida,” said IRS Commissioner Chuck Rettig. “We want people affected by this devastating hurricane focused on their safety and recovery for themselves and their families. To provide assistance now and in the weeks ahead, we have a variety of different types of relief available to help people and businesses affected by this disaster.”

The tax relief postpones various tax filing and payment deadlines that occurred starting on Sept. 1, 2021. As a result, affected individuals and businesses will have until Jan. 3, 2022, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return due to run out on Oct. 15, 2021, will now have until Jan. 3, 2022, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The Jan. 3, 2022 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2021, and the quarterly payroll and excise tax returns normally due on Nov. 1, 2021. It also applies to tax-exempt organizations, operating on a calendar-year basis, that had a valid extension due to run out on Nov. 15, 2021. Businesses with an original or extended due date also have the additional time including, among others, calendar-year partnerships and S corporations whose 2020 extensions run out on Sept. 15, 2021 and calendar-year corporations whose 2020 extensions run out on Oct. 15, 2021.

In addition, penalties on payroll and excise tax deposits due on or after Sept. 1 and before Sept. 16, will be abated as long as the deposits are made by Sept. 16, 2021.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or the return for the prior year (2020). Be sure to write the FEMA declaration number – 4614 for New Jersey or 4615 for New York or − on any return claiming a loss. See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by Hurricane Ida and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.