WASHINGTON – The Internal Revenue Service announced today that a new form is available for eligible self-employed individuals to claim sick and family leave tax credits under the Families First Coronavirus Response Act (FFCRA).

Eligible self-employed individuals will determine their qualified sick and family leave equivalent tax credits with the new IRS Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. They’ll claim the tax credits on their 2020 Form 1040 for leave taken between April 1, 2020, and Dec. 31, 2020, and on their 2021 Form 1040 for leave taken between Jan. 1, 2021, and March 31, 2021.

The FFCRA, passed in March 2020, allows eligible self-employed individuals who, due to COVID-19 are unable to work or telework for reasons relating to their own health or to care for a family member to claim refundable tax credits to offset their federal income tax. The credits are equal to either their qualified sick leave or family leave equivalent amount, depending on circumstances. IRS.gov has instructions to help calculate the qualified sick leave equivalent amount and qualified family leave equivalent amount. Certain restrictions apply.

Who may file Form 7202
Eligible self-employed individuals must:

Taxpayers must maintain appropriate documentation establishing their eligibility for the credits as an eligible self-employed individual.

Resources:

WASHINGTON – The Internal Revenue Service reminds taxpayers to avoid “ghost” tax return preparers whose refusal to sign returns can cause a frightening array of problems. It is important to file a valid, accurate tax return because the taxpayer is ultimately responsible for it.

Ghost preparers get their scary name because they don’t sign tax returns they prepare. Like a ghost, they try to be invisible to the fact they’ve prepared the return and will print the return and get the taxpayer to sign and mail it. For e-filed returns, the ghost preparer will prepare but refuse to digitally sign it as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.

Unscrupulous tax return preparers may also:

The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their bank account information onto the returns.

Taxpayers can report preparer misconduct to the IRS using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

WASHINGTON – The Internal Revenue Service today named Heather C. Maloy to the position of director, Taxpayer First Act Office. She will report directly to the IRS Commissioner in her new role.

The IRS continues work on the Taxpayer First Act, part of legislation passed in July 2019. The IRS delivered the Taxpayer First Act Report to Congress earlier this year, providing a comprehensive set of recommendations that will reshape the taxpayer experience, enhance employee training and restructure the organization to increase collaboration and innovation.

“I’m truly pleased to welcome Heather back to the IRS and into this critical role,” said IRS Commissioner Chuck Rettig. “Given Heather’s vast knowledge and leadership experience from both inside and outside the IRS, she will be an important asset to both the IRS and the nation’s taxpayers going forward as we strategically implement the Taxpayer First Act report’s recommendations.”

Maloy replaces Lia Colbert, who will continue in her current role as Deputy Chief of the Independent Office of Appeals. Colbert is a long-time IRS executive who formerly served as both TFA lead and Chief of Staff before moving to Appeals in October 2020.

In her new position, Maloy will provide advice and assistance to the Commissioner in areas such as implementation strategy, management and organizational issues and equitable treatment of taxpayers. She will help set the strategic direction of IRS programs with a focus on a comprehensive taxpayer experience strategy, a holistic training strategy and a modernized IRS organizational structure.

Maloy recently retired from her position as a Principal at Ernst & Young, LLP, where she led a national practice group of specialized tax professionals in serving large, multinational corporations, partnerships, tax-exempt organizations and individuals navigating IRS tax controversies.

In her previous roles at IRS, Maloy served as the Commissioner, Large Business and International Division (LB&I), where she led over 5,000 employees and oversaw tax compliance programs for corporations, subchapter S corporations and partnerships with assets greater than $10 million and incorporated international tax compliance operations into the division. During her tenure, she oversaw the successful expansion of the Compliance Assurance Process, championed the development of new audit procedures to increase transparency and discipline in the LB&I audit process, including the Information Document Request (IDR) procedures and oversaw the issuance and implementation of the Uncertain Tax Position reporting requirements. She also acted as the Deputy Commissioner for Services and Enforcement.

Prior to her selection as the LB&I Commissioner, Maloy held several other prominent IRS positions, including Associate Chief Counsel for both the Income Tax & Accounting and Passthroughs & Special Industries Divisions and Assistant to the Commissioner.

From 2006-2009, she was Counsel at Skadden, Arps, Slate, Meagher & Flom’s Tax Group. Maloy graduated from Emory University, received her law degree from Cornell Law School and an LL.M. in Taxation from the University of Florida School of Law.

Revenue Procedure 2021-15 provides a safe harbor for eligible educators, within the meaning of § 62(d)(1) of the Internal Revenue Code (Code), to treat unreimbursed expenses paid or incurred after March 12, 2020, for personal protective equipment, disinfectant, and other supplies used for the prevention of the spread of COVID–19 in the classroom, as expenses that are described in § 62(a)(2)(D)(ii) and allowable as a deduction under § 62(a)(2)(D) pursuant to section 275 of the COVID-related Tax Relief Act of 2020 (COVID Tax Relief Act), which was enacted as part of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182, 1978 (2020).

Revenue Procedure 2021-15 will appear in Internal Revenue Bulletin IRB-2021-8, dated Feb. 22, 2021.

WASHINGTON – Eligible educators can deduct unreimbursed expenses for COVID-19 protective items to stop the spread of COVID-19 in the classroom. COVID-19 protective items include, but are not limited to: 

Rev. Proc. 2021-15, issued today, provides guidance related to educators and their expenses under the COVID-related Tax Relief Act of 2020, which was enacted as part of the Consolidated Appropriations Act, 2021. The new law clarifies that unreimbursed expenses paid or incurred after March 12, 2020, by eligible educators for protective items to stop the spread of COVID-19 qualify for the educator expense deduction.

The educator expense deduction rules permit eligible educators to deduct up to $250 of qualifying expenses per year ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each).

Eligible educators include any individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

This deduction is for expenses paid or incurred during the tax year. Taxpayers claim the deduction on Form 1040, Form 1040-SR or Form 1040-NR (attach Schedule 1 (Form 1040) ).

For additional information regarding the deduction for certain expenses of an eligible educator, see the Instructions for Form 1040 and Form 1040-SR or the Instructions for Form 1040-NR.

For more information about this, the COVID-related Tax Relief Act of 2020 and other tax changes, visit IRS.gov.

Today, the IRS published the latest executive column, “A Closer Look,” featuring Chief Procurement Officer, Shanna Webbers, discussing procurement activities to transform IRS operations by creating a culture of innovation. This allowed a tool to quickly be developed to streamline processes that best support the mission.  “As a leader, you must be able to manage risk, lead your team in embracing innovation, and take a chance when the opportunity presents itself.  Swing for the fences!” said Webber. 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. 

Please contact newsroom@irs.gov for any questions or requests for interviews.

Announcement 2021-2 notifies lenders who have filed or furnished Forms 1099-MISC, Miscellaneous Information, reporting certain payments on loans subsidized by the Administrator of the U.S. Small Business Administration (SBA) as income of the borrower, that the lenders must file and furnish corrected Forms 1099-MISC that exclude these subsidized loan payments. This accords with section 278(e)(1) of the COVID-related Tax Relief Act, which provides that these payments are not includible in the gross income of the borrowers; and Notice 2021-6, waiving Form 1099-MISC reporting requirements for these payments.

WASHINGTON – The Internal Revenue Service today explained how corporations may qualify for the new 100% limit for disaster relief contributions and offered a temporary waiver of the recordkeeping requirement for corporations otherwise qualifying for the increased limit.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTRA of 2020), enacted Dec. 27, temporarily increased the limit, to up to 100% of a corporation’s taxable income, for contributions paid in cash for relief efforts in qualified disaster areas. 

Under the new law, qualified disaster areas are those in which a major disaster has been declared under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. This does not include any disaster declaration related to COVID-19. Otherwise, it includes any major disaster declaration made by the President during the period beginning on Jan. 1, 2020, and ending on Feb. 25, 2021, as long as it is for an occurrence specified by the Federal Emergency Management Agency as beginning after Dec. 27, 2019, and no later than Dec. 27, 2020. For a list of disaster declarations, visit FEMA.gov.

Qualified contributions must be paid by the corporation during the period beginning on Jan. 1, 2020, and ending on Feb. 25, 2021. Cash contributions to most charitable organizations qualify for this increased limit. Contributions made to a supporting organization or to establish or maintain a donor advised fund do not qualify. 

A corporation elects the increased limit by computing its deductible amount of qualified contributions using the increased limit and by claiming the amount on its return for the tax year in which the contribution was made.

Corporations must meet the usual recordkeeping requirements that apply to charitable contributions, including obtaining a contemporaneous written acknowledgment (CWA) from the charity. The CWA must be obtained before the corporation files its return, but no later than the due date, including extensions, for filing that return. 

The TCDTRA of 2020 added an additional substantiation requirement for qualified contributions. For corporations electing this increased limit, a corporation’s CWA must include a disaster relief statement, stating that the contribution was used, or is to be used, by the eligible charity for relief efforts in one or more qualified disaster areas.

Because of the timing of the new law, the IRS recognizes that some corporations may have obtained a CWA that lacks the disaster relief statement. Accordingly, the agency will not challenge a corporation’s deduction of any qualified contribution made before Feb. 1, 2021, solely on the grounds that the corporation’s CWA does not include the disaster relief statement.

For additional details on the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov. More information about other coronavirus-related relief, can be found at IRS.gov.

WASHINGTON — The Internal Revenue Service today posted updated FAQs about recent legislation that extended and amended tax relief to certain small- and mid-sized employers under the Families First Coronavirus Response Act (FFCRA). The FAQs are available at COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs.

The updates to the FAQs cover how the COVID-related Tax Relief Act of 2020, enacted December 27, 2020, extends the availability of the tax credits created by the FFCRA to eligible employers for paid sick and family leave provided through March 31, 2021, as well as other amendments to the credits. 

The paid sick and family leave credits, which previously were available only until the end of 2020, have been extended for periods of leave taken through March 31, 2021.

The paid sick leave credit is designed to allow qualified businesses – those with fewer than 500 employees and who pay “qualified sick leave wages” – to get a credit for wages or compensation paid to an employee who is unable to work (including telework) because of coronavirus quarantine or self-quarantine or has coronavirus symptoms and is seeking a medical diagnosis. Eligible employers may claim credit for paid sick leave provided to an employee for up to two weeks (up to 80 hours) at the employee's regular rate of pay up to $511 per day and $5,110 in total.

In addition, an eligible employer can receive the paid sick leave credit for employees who are unable to work due to caring for someone with coronavirus or caring for a child because the child's school or place of care is closed, or the paid childcare provider is unavailable due to the coronavirus. Eligible employers may claim the credit for paid sick leave provided to an employee for up to two weeks (up to 80 hours) at 2/3 the employee's regular rate of pay, or up to $200 per day and $2,000 in total.

Employers are also entitled to a paid family leave credit for paid family leave provided to an employee equal to 2/3 of the employee's regular pay, up to $200 per day and $10,000 in total. Up to 10 weeks of qualifying leave can be counted towards the family leave credit.

Eligible employers are entitled to immediately receive a credit in the full amount of the paid sick leave and family leave plus related health plan expenses and the employer's share of Medicare tax on the leave provided through March 31, 2021. The refundable credit is applied against certain employment taxes on wages paid to all employees.

Eligible employers may claim the credits on their federal employment tax returns (e.g., Form 941, Employer's Quarterly Federal Tax Return), but they can benefit more quickly from the credits by reducing their federal employment tax deposits. If there are insufficient federal employment taxes to cover the amount of the credits, an eligible employer may request an advance payment of the credits from the IRS by submitting a Form 7200, Advance Payment of Employer Credits Due to COVID-19.

IRS YouTube Videos:
Earned Income Tax Credit – Get it Right – English | Spanish | ASL

WASHINGTON – The Internal Revenue Service and partners across the nation remind taxpayers about the Earned Income Tax Credit today on “EITC Awareness Day” 2021. The IRS and partners nationwide urge people to check to see if they qualify for this important credit.

“This year marks the 15th annual EITC Awareness Day,” said IRS Commissioner Chuck Rettig. “For more than 45 years, this tax credit has been helping hard-working Americans and their families. We want to thank our partners around the country who help us reach out to those low- and moderate-income people who may qualify and not even know about it.”

The IRS earlier announced that it will begin accepting 2020 tax returns on Feb. 12. In the meanwhile, people can file their taxes electronically using IRS Free File or other name-brand software. Once filing season officially opens, the returns will be electronically submitted for processing. The IRS reminds taxpayers that the quickest way to get a tax refund is by filing electronically and choosing direct deposit for their refund.

New look-back rule
Under the COVID-related Tax Relief Act of 2020, taxpayers can use their 2019 earned income to figure their 2020 EITC if their 2019 earned income was more than their 2020 earned income. To qualify for EITC, people must have earned income, so this option may help workers who earned less in 2020, or received unemployment income instead of their regular wages, get bigger tax credits and larger refunds in the coming year. 

Also, any Economic Impact Payments received are not taxable or counted as income for purposes of claiming the EITC. Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 tax return. See IRS.gov/rrc for more information.

Vital refund boost
The EITC is the federal government’s largest refundable federal income tax credit for low- to moderate-income workers. For those who qualify, and if the credit is larger than the amount of tax they owe, they will receive a refund for the difference. While the majority of those eligible claim EITC every year, IRS estimates that one of five eligible taxpayers do not claim the credit.

Taxpayers earning $56,844 or less can see if they qualify using the EITC Assistant tool at www.irs.gov/eitc. The EITC Assistant, available in English and Spanish, helps users determine if they are eligible, have a qualifying child or children and  estimates the amount of the EITC they may get. If an individual doesn’t qualify for the EITC, the Assistant explains why.

Nationwide in 2020, more than 25 million taxpayers received over $62 billion in EITC. The average EITC amount received was $2,461 per return. The EITC is worth as much as $6,660 for a family with three or more children or up to $538 for taxpayers who do not have a qualifying child.

Refunds
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund − even the portion not associated with EITC or ACTC and the Recovery Rebate Credit if applicable. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud. 
 
'Where’s My Refund?' on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by Feb. 22. Therefore, EITC/ACTC filers will not see an update to their refund status for several days after Feb. 15. The IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return.
 
Workers who can claim the EITC
Workers at risk for overlooking this important credit can include taxpayers:

Life events or changes may make people eligible for certain tax benefits like the EITC. The IRS urges people to use the EITC Assistant to check their eligibility for this valuable credit.
 
How to claim the EITC
To get the EITC, workers must file a tax return and claim the credit. Eligible taxpayers are urged to claim the credit even if their earnings were below the income requirement to file a tax return. Free tax preparation help is available online and through volunteer organizations.

Those eligible for the EITC have these options:

The IRS reminds taxpayers to be sure they have valid Social Security numbers (SSN) for themselves, their spouse, if filing a joint return, and for each qualifying child claimed for the EITC. The SSNs must be issued before the due date of the return, including extensions. There are special rules for those in the military or those out of the country.

Avoid errors
Taxpayers are responsible for the accuracy of their tax return even if someone else prepares it for them. Since the rules claiming the EITC can be complex, the IRS urges taxpayers to understand all of them. People can find help to make sure they are eligible by visiting a free tax return preparation site, or using Free File software or by using a paid tax professional.

Beware of scams
Be sure to choose a tax preparer wisely. Beware of scams that claim to increase the EITC refund. Scams that create fictitious qualifying children or inflate income levels to get the maximum EITC could leave taxpayers with a penalty.

Visit IRS online
IRS.gov is a valuable first stop to help taxpayers get it right this filing season. Information on other tax credits, such as the Child Tax Credit, is also available.

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