WASHINGTON – The Internal Revenue Service today encouraged taxpayers to take necessary actions in the final weeks of the year to help file federal tax returns timely and accurately in 2021.

This is the third in a series of reminders to help taxpayers get ready for the upcoming tax filing season. A special page, updated and available on IRS.gov, outlines steps taxpayers can take now to make tax filing easier in 2021.

This year, there are some key items to consider involving credits, deductions and refunds:

Recovery Rebate Credit/Economic Impact Payment. Taxpayers who received an Economic Impact Payment, should keep Notice 1444, Your Economic Impact Payment, with their 2020 tax records. They may be eligible to claim the Recovery Rebate Credit on their tax year 2020 federal income tax return if:

If a taxpayer didn’t receive the full amount of the Economic Impact Payment for which they were eligible, they may be able to claim the Recovery Rebate Credit when they file in 2021. Individuals do not need to complete information about the Recovery Rebate Credit on tax year 2020 Form 1040 or 1040-SR when filing in 2021, unless eligible to claim an additional credit amount.

Interest on refunds taxable. Taxpayers who received a federal tax refund in 2020 may have been paid interest. Refund interest payments are taxable and must be reported on federal income tax returns. In January 2021, the IRS will send Form 1099-INT to anyone who received interest totaling $10 or more.

Charitable deduction changes. New this year, taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, read Publication 526, Charitable Contributions.

Refunds. The IRS always cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and processing may take longer. For example, the IRS, along with its partners in the tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud. Just like last year, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit, cannot be issued before mid-February. This applies to the entire refund, even the portion not associated with these credits.

The IRS reminds taxpayers that the fastest and safest way to receive a refund is to combine direct deposit with electronic filing including the IRS FreeFile program. Taxpayers can track their refund using the Where’s My Refund? tool.

For more information to plan ahead, see Publication 5348, Get Ready to File, and Publication 5349, Year-Round Tax Planning is for Everyone.

IRS YouTube Video:

New Security Measures Help Protect Against Tax-Related Identity Theft  English

WASHINGTON – The IRS, state tax agencies and the tax industry marked the final day of National Tax Security Awareness Week with a warning to all tax professionals that they face additional challenges from cybercriminals seeking to exploit COVID-19 fears.

The partners, working together as the Security Summit, today closed a week-long effort to heighten awareness about identity theft and data security measures among taxpayers, businesses and tax practitioners. This was the fifth annual National Tax Security Awareness Week.

“When the Security Summit formed five years ago to fight identity thieves it was clear that the IRS, the state and industry could not be successful without the help of taxpayers and tax professionals. Everyone has a role to play in protecting sensitive financial data,” said IRS Commissioner Chuck Rettig. “We’ve made tremendous progress in the past five years, but we still have work to do. The coronavirus and the increase in teleworking creates new ways for these sophisticated cybercriminals to scam people out of their money or their sensitive tax and financial information.”

As the IRS and Security Summit partners took important steps to strengthen defenses against cybercriminals, identity thieves increasingly turned to tax professionals, targeting their offices and systems. Data thefts from tax professionals can provide valuable information to thieves trying to file fraudulent tax returns.

The Summit partners remind all tax professionals to review their security measures. IRS Publication 4557, Safeguarding Taxpayer Data, provides practitioners with a starting point for basic steps to protect clients.

The Security Summit also created the “Taxes-Security-Together” Checklist to help tax practitioners identify the basic steps they should take. As more tax preparers work from home or remote locations because of COVID-19, these measures are even more critical for securing tax data.

Basic protections - the ‘Security Six’ measures
These easy steps can make a big difference, both for tax pros and taxpayers:

Use multi-factor authentication to protect tax accounts
In 2021, all online tax preparation products for tax professionals will include an option for using multi-factor authentication. The Security Summit urges all tax professionals to use this option. Multi-factor authentication may not be available on all over the counter, hard-disk products.

Of the numerous data thefts reported to the IRS from tax professional offices this year, most could have been avoided had the practitioner used multi-factor authentication to protect tax software accounts.

Practitioners can download to their mobile phones readily available authentication apps offered through Google Play or the Apple Store. These apps will generate a security code. Codes also may be sent to practitioner's email or text but the IRS notes those are not as secure as the authentication apps. Use a search engine for "Authentication apps" to learn more.

Virtual private networks to protect remote sites
A VPN provides a secure, encrypted tunnel to transmit data between a remote user via the Internet and the company network. As teleworking or working from home continues during COVID-19, VPNs are critical to protecting and securing internet connections.

Failing to use VPNs can add risks to remote takeovers by cyberthieves, giving criminals access to the tax professional's entire office network simply by accessing an employee's remote internet.

Tax professionals should seek out cybersecurity experts whenever possible. Practitioners can also search for "Best VPNs" to find a legitimate vendor, or major technology sites often provide lists of top services. Remember, never click on a "pop-up" ad that’s marketing a security product. Those generally are scams.

Phishing scams, including COVID-19 and Economic Impact Payments
Phishing emails generally have an urgent message, such as “your account password expired.” They direct you to an official-looking link or attachment. But the link may take you to a fake site made to appear like a trusted source, where it requests your username and password. Or, the attachment may contain malware, which secretly downloads software that tracks keystrokes and allows thieves to eventually steal all the tax pro's passwords.

The Department of Homeland Security's Cybersecurity and Infrastructure Security Agency (CISA) recently issued a warning to all organizations to educate employees, especially those teleworking, about increased activity related to phishing scams.

The IRS often sees thieves posing as potential clients, trying to trick tax pros into opening an embedded link or attachment. Scams involving COVID-19 and the Economic Impact Payments also have been prevalent.

Protect yourself: The need for a security plan and data theft plan
The IRS and Security Summit partners remind tax professionals that federal law requires them to have a written information security plan. Federal law gives the Federal Trade Commission enforcement authority over this provision. Practitioners can learn more about the FTC’s “Safeguards Rule” from IRS Publication 4557.

In addition to the required information security plan, tax pros also should consider an emergency response plan should they experience a breach and data theft. This time-saving step should include contact information for the IRS Stakeholder Liaisons who are the first point of contact for data theft reporting to the IRS and to the states.

IRS Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov, including the reporting processes.

The IRS, state tax agencies, the private sector tax industry, including tax professionals, work in partnership as the Security Summit to help protect taxpayers from identity theft and refund fraud. This is the last of a week-long series of tips to raise awareness about identity theft. See IRS.gov/securitysummit for more details.

The latest IRS executive column, “A Closer Look,” features information about how the IRS continues to focus on ensuring integrity and fairness in our nation’s voluntary tax system despite the challenges  of COVID-19. “Taxpayers who exercise their best efforts to file their tax returns and pay their taxes, or enter into agreements to pay their taxes, deserve to know that the IRS is pursuing others who have failed to satisfy their filing and payment obligations,” explains Eric Hylton, Commissioner, Small Business Self-Employed. Continue reading here. It’s also available in Spanish 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.

Revenue Ruling 2020-28 provides the interest rates for the first quarter of 2021. The rates for interest determined under Section 6621 of the code for the calendar quarter beginning January 1, 2021, will be 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments, and 5 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 0.5 percent.

Revenue Ruling 2020-28 will be in IRB: 2020-52, dated December 21, 2020.

WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2021.  The rates will be: 

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. 

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2020 to take effect Nov. 1, 2020, based on daily compounding.

Revenue Ruling 2020-28, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2020-52, dated Dec. 21, 2020.

WASHINGTON — The Internal Revenue Service today reminded employers that they must file Form W-2 and other wage statements by Feb. 1, 2021, to avoid penalties and help the IRS prevent fraud.

A 2015 law made it a permanent requirement that employers file copies of their Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31. That is also the date the Forms W-2 are due to workers. This upcoming tax season, however, Jan. 31 falls on a Sunday, pushing the due dates to the next business day, which is Monday, Feb. 1.

Certain Forms 1099-MISC, Miscellaneous Income and Forms 1099-NEC, Nonemployee Compensation, are also normally due to taxpayers on Jan. 31, but this tax season they too will be due on the next business day, Feb. 1, 2021. Various other due dates related to Form 1099-MISC, including dates dues to the IRS, can be found in the instructions on IRS.gov.

Helping fraud detection

The normal January filing date for wage statements means that the IRS can more easily detect refund fraud by verifying income that individuals report on their tax returns. Employers can help support that process, and avoid penalties, by filing the forms on time and without errors. The IRS recommends e-file as the quickest, most accurate and convenient way to file these forms.

Start early

Good preparation now can help businesses avoid problems later. For instance, employers can get an early start verifying or updating employee information like names, addresses and Social Security numbers or Individual Taxpayer Identification Numbers. They should also ensure their company’s account information is current and active with the Social Security Administration before January. Businesses should also order paper Forms W-2 early if needed. 

Automatic extensions of time to file Forms W-2 are not available. The IRS will only grant extensions for very specific reasons. Details can be found on the instructions for Form 8809, Application for Time to File Information Returns.

For more information, read the instructions for Forms W-2 & W-3 and the Information Return Penalties page at IRS.gov.

IRS YouTube Video:
New Security Measures Help Protect Against Tax-Related Identity Theft  English

WASHINGTON – The Internal Revenue Service, state tax agencies and the tax industry urged businesses to be on guard as thieves try to use their stolen names and data to file fraudulent tax returns.

The partners, operating cooperatively as the Security Summit to fight identity theft, marked the fourth day of National Tax Security Awareness Week with a warning to businesses to enact the strongest measures possible to protect their data and systems. The IRS also is planning additional steps to help businesses combat cybercriminals trying to steal their data.

“As the IRS and our partners have strengthened our security standards, identity thieves have looked for new ways to find sources of information, and businesses need to stay alert,” said IRS Commissioner Charles Rettig. “Businesses, just like individuals, can be victims of identity theft. Thieves may steal enough information to file a business tax return for refund or use other scams using the company’s identity.” 

More than 70% of cyberattacks are aimed at businesses with 100 or fewer employees. Thieves may be targeting credit card information, the business identity information or employee identity information.

Business are encouraged to follow best practices from the Federal Trade Commission include:

More information is available at FTC’s Cybersecurity for Small Businesses.

Businesses should especially be alert to any COVID-19 or tax-related phishing email scams that attempt to trick employees into opening embedded links or attachments. IRS related scams may be sent to phishing@irs.gov.

Starting Dec. 13, 2020, the IRS will begin masking sensitive information from business tax transcripts, the summary of corporate tax returns, to help prevent thieves from obtaining identifiable information that would allow them to file fake business tax returns.

Only financial entries will be fully visible. All other information will have varying masking rules. For example, only the first four letters of each first and last name – of individuals and businesses – will display. Only the last four digits of the Employer Identification Number will be visible.

The IRS also has publicly launched the Form 14039-B, Business Identity Theft Affidavit, that will allow companies to proactively report possible identity theft to the IRS when, for example, the e-filed tax return is rejected.

Businesses should file the Form 14039-B if it receives a:

This form will enable the IRS to respond to the business much faster than in the past and work to resolve issues created by a fraudulent tax return. Businesses should not use the form if they experience a data breach but see no tax-related impact. For more information, see Identity Theft Central’s Business section.

Although the tax scams can come and go, all employers should remain alert to Form W-2 theft schemes. In the most common version, a thief poses as a high-ranking company executive who emails payroll employees and asks for a list of employees and their W-2s. Businesses often don’t know they’ve been scammed until a fraudulent return shows up in employees’ names.

There is a special reporting procedure for employers who experience the W-2 scam. It also may be found at Identity Theft Central’s Business section.

Finally, Security Summit partners urge businesses to keep their EIN application information current. Changes of address or responsible party may be reported using Form 8822-B. Reminder: Changes in the responsible party must be reported to the IRS within 60 days. Current information can help the IRS find a point of contact to resolve identity theft and other issues.

The IRS, state tax agencies, the private sector tax industry, including tax professionals, work in partnership as the Security Summit to help protect taxpayers from identity theft and refund fraud. This is the third in a week-long series of tips to raise awareness about identity theft. See IRS.gov/securitysummit for more details.

IRS YouTube Video:
New Security Measures Help Protect Against Tax-Related Identity Theft  English

WASHINGTON – As part of the Security Summit effort, the Internal Revenue Service announced today that starting in January the Identity Protection PIN Opt-In Program will be expanded to all taxpayers who can properly verify their identities.

The Summit partners, including state tax agencies, the nation’s tax industry and the IRS, marked the third day of the National Tax Security Awareness Week by urging taxpayers who want the proactive protection against identity theft to opt into the Identity Protection PIN program in 2021.

The IP PIN is a six-digit number assigned to eligible taxpayers to help prevent the misuse of their Social Security number on fraudulent federal income tax returns. An IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return. The online Get An IP PIN tool at IRS.gov/IPPIN immediately displays the taxpayer’s IP PIN.

“When you have this special code, it prevents someone else from filing a tax return with your Social Security number,” said IRS Commissioner Chuck Rettig. “The fastest way to get an Identity Protection PIN is to use our online tool but remember you must pass a rigorous authentication process. We must know that the person asking for the IP PIN is the legitimate taxpayer.”

The online tool uses Secure Access authentication which uses several different ways to verify a person’s identity. Before using the “Get an IP PIN” tool, the IRS encourages taxpayers to review the requirements at IRS.gov/SecureAccess.

For those who cannot pass Secure Access authentication, there are alternatives. Taxpayers with incomes of $72,000 or less and with access to a telephone should complete Form 15227 and mail or fax it to the IRS. An IRS assistor will call the taxpayer to verify their identity with a series of questions. For additional security reasons, taxpayers who pass authentication will receive an IP PIN the following tax year.

Taxpayers who cannot verify their identities remotely or who are ineligible to file a Form 15227 may make an appointment, visit a Taxpayer Assistance Center and bring two forms of picture identification. Because this is an in-person identity verification, an IP PIN will be mailed to the taxpayer within three weeks.

Taxpayers who obtain an IP PIN should never share their code with anyone but their trusted tax provider. The IRS will never call to request the taxpayer’s IP PIN, and taxpayers must be alert to potential IP PIN scams.

Here’s what taxpayers need to know about the IP PIN before applying:

There is no change in the IP PIN program for confirmed victims of tax-related identity theft. Those taxpayers should still file a Form 14039 if their e-filed tax return rejects because of a duplicate SSN filing. The IRS will investigate their case and once the fraudulent tax return is removed from their account, confirmed victims automatically will receive an IP PIN via postal mail at the start of the next calendar year.

IP PINs will be mailed annually to confirmed victims only and participants enrolled prior to 2019. Because of security risks, confirmed identity theft victims cannot opt out of the IP PIN program. Confirmed victims also can use the Get an IP PIN tool to retrieve lost IP PINs assigned to them.

The IRS, state tax agencies, the private sector tax industry, including tax professionals, work in partnership as the Security Summit to help protect taxpayers from identity theft and refund fraud. This is the third in a week-long series of tips to raise awareness about identity theft. See IRS.gov/securitysummit for more details.

On this Giving Tuesday, taxpayers are reminded there’s a special tax deduction available through Dec. 31, 2020 for the many people who give cash donations up to $300 to qualifying charities. Continue reading here or for Spanish 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.