WASHINGTON – As part of ongoing efforts to improve service for the tax-exempt community, the Internal Revenue Service issued the revised Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4), and its instructions to allow electronic filing.

"Electronic filing will make the Form 1024-A application easier to complete while reducing errors," said Edward Killen, Acting Commissioner of the IRS Tax Exempt and Government Entities division. "Electronic filing also shortens IRS processing time so applicants won’t wait as long for a response."

Beginning Jan. 5, 2021, IRS will make available the electronic version of the Form 1024-A that organizations seeking to be exempt under Section 501(c)(4) may use to submit online at Pay.gov. The IRS will provide a 90-day grace period during which it will continue to accept paper versions of Form 1024-A (Rev. 01-2018); however, after April 5 the Form 1024-A must be submitted electronically.

The required user fee for Form 1024 will remain $600 for 2021. Applicants must pay the fee through Pay.gov when submitting the form. Payment can be made directly from a bank account or by credit or debit card.

Subscribe to Exempt Organizations Update, a free IRS e-Newsletter, for form updates and other exempt organization news.

Additional information on how to apply for IRS recognition of tax-exempt status:

Notice 2021-07 provides temporary relief in response to the ongoing COVID-19 pandemic for employers using the automobile lease valuation rule to value an employee’s personal use of an employer-provided automobile for purposes of income inclusion, employment tax, and reporting. Due solely to the COVID-19 pandemic, if certain requirements are satisfied, employers and employees that are using the automobile lease valuation rule to determine the value of an employee’s personal use of an employer-provided automobile may instead use the vehicle cents-per-mile valuation rule to determine the value of an employee’s personal use of an employer-provided automobile beginning as of March 13, 2020.

It will appear in IRB 2021-3 dated Jan. 19, 2021.

WASHINGTON – The Internal Revenue Service today urged people to visit IRS.gov for the most current information on the second round of Economic Impact Payments rather than calling the agency or their financial institutions or tax software providers. IRS phone assistors do not have additional information beyond what’s available on IRS.gov.
 
The IRS and the Treasury Department began issuing a second round of Economic Impact Payments, often referred to as stimulus payments, last week. 

The direct deposit payments may take several days to post to individual accounts. Some Americans may have seen the direct deposit payments as pending or as provisional payments in their accounts before the scheduled payment date of Jan. 4, 2021, which is the official date funds are available.

Paper checks also began going out and will continue to be sent through January. Some people will be mailed debit cards in January, and the IRS urges people to carefully check their mail. Mailed payments will require more processing and mailing time. Those who reside abroad will have longer wait times for checks as disruptions to air travel and mail delivery in some countries will slow delivery.

The IRS emphasizes that there is no action required by eligible individuals to receive this second payment. The payments are automatic, and people should not contact their financial institutions or the IRS with payment timing questions.

Eligibility
Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment. Eligible individuals will automatically receive an Economic Impact Payment of up to $600 for individuals or $1,200 for married couples and up to $600 for each qualifying child. Most people who have an adjusted gross income for 2019 of up to $75,000 for individuals and up to $150,000 for married couples filing joint returns and surviving spouses, will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced.

Checking the status of a payment
Starting today, people can check the status of both their first and second payments by using the Get My Payment tool, available in English and Spanish only on IRS.gov.

Payment not received or less than expected? Claim on 2020 tax return
Payments started going out last week and will continue through mid-January. Direct deposit payments are being made first to those that have valid routing and account information on file for direct deposit purposes. Because of the speed at which IRS issued this second round of payments, some payments may have been sent to an account that may be closed or no longer active. By law, the financial institution must return the payment to the IRS, they cannot hold and issue the payment to an individual when the account is no longer active. While the IRS is exploring options to correct these payments, if you have not received your full payment by the time you file your 2020 tax return, you may claim the Recovery Rebate Credit on your tax return.

The credit is figured like the Economic Impact Payment, except that the credit eligibility and the credit amount are based on the 2020 tax year information, including income.

For people who received a partial Economic Impact Payment, they can take the Recovery Rebate Credit for any remaining amount they’re eligible for by completing line 30 of the 2020 Form 1040 or 1040-SR.

Changing bank account or mailing information
The IRS cannot change payment information, including bank account or mailing information. If an eligible taxpayer does not get a payment or it is less than expected, it may be claimed on the 2020 tax return as the Recovery Rebate Credit. Remember, Economic Impact Payments are an advance payment of what will be called the Recovery Rebate Credit on the 2020 Form 1040 or Form 1040-SR.

More information
For more information about Economic Impact Payments and the 2020 Recovery Rebate Credit, visit IRS.gov/eip. Starting next week, people can check the status of their payment at IRS.gov/GetMyPayment. For other COVID-19-related tax relief, visit IRS.gov/Coronavirus.

WASHINGTON –The Treasury Department and the Internal Revenue Service today issued guidance providing an extension of the safe harbor for taxpayers developing renewable energy projects offshore or on federal land.

Renewable energy projects constructed offshore or on federal land are ordinarily subject to significant delays that can result in project completion times of up to twice as long as other renewable energy projects. These delays threaten taxpayers’ ability to satisfy requirements to claim the production tax credit and the investment tax credit.

To address this hurdle, the Treasury Department and the IRS have determined that it is necessary to extend the safe harbor period to up to 10 calendar years after the year in which construction of the project began.

By extending the safe harbor for these projects, Notice 2021-5 will provide flexibility for taxpayers constructing renewable energy projects offshore or on federal land to satisfy the beginning of construction requirements despite ordinary course delays that threaten their ability to claim tax credits.

WASHINGTON – Today, the Internal Revenue Service and the Treasury Department will begin delivering a second round of Economic Impact Payments as part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 to millions of Americans who received the first round of payments earlier this year.

The initial direct deposit payments may begin arriving as early as tonight for some and will continue into next week. Paper checks will begin to be mailed tomorrow, Wednesday, Dec. 30.

The IRS emphasizes that there is no action required by eligible individuals to receive this second payment. Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of Jan. 4, 2021. The IRS reminds taxpayers that the payments are automatic, and they should not contact their financial institutions or the IRS with payment timing questions.

As with the first round of payments under the CARES Act, most recipients will receive these payments by direct deposit. For Social Security and other beneficiaries who received the first round of payments via Direct Express, they will receive this second payment the same way.

Anyone who received the first round of payments earlier this year but doesn’t receive a payment via direct deposit will generally receive a check or, in some instances, a debit card. For those in this category, the payments will conclude in January. If additional legislation is enacted to provide for an additional amount, the Economic Impact Payments that have been issued will be topped up as quickly as possible.

Eligible individuals who did not receive an Economic Impact Payment this year – either the first or the second payment – will be able to claim it when they file their 2020 taxes in 2021. The IRS urges taxpayers who didn’t receive a payment this year to review the eligibility criteria when they file their 2020 taxes; many people, including recent college graduates, may be eligible to claim it. People will see the Economic Impact Payments (EIP) referred to as the Recovery Rebate Credit (RRC) on Form 1040 or Form 1040-SR since the EIPs are an advance payment of the RRC.

“Throughout this challenging year, the IRS has worked around the clock to provide Economic Impact Payments and critical taxpayer services to the American people,” said IRS Commissioner Chuck Rettig. “We are working swiftly to distribute this second round of payments as quickly as possible. This work continues throughout the holidays and into the new year as we prepare for the upcoming filing season. We urge everyone to visit IRS.gov in the coming days for the latest information on these payments and for important information and assistance with filing their 2021 taxes.”

Authorized by the newly enacted COVID-relief legislation, the second round of payments, or “EIP 2,” is generally $600 for singles and $1,200 for married couples filing a joint return. In addition, those with qualifying children will also receive $600 for each qualifying child. Dependents who are 17 and older are not eligible for the child payment.

Payments are automatic for eligible taxpayers

Payments are automatic for eligible taxpayers who filed a 2019 tax return, those who receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits as well as Supplemental Security Income (SSI) and Veterans Affairs beneficiaries who didn’t file a tax return. Payments are also automatic for anyone who successfully registered for the first payment online at IRS.gov using the agency’s Non-Filers tool by Nov. 21, 2020 or who submitted a simplified tax return that has been processed by the IRS.

Who is eligible for the second Economic Impact Payment?

Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment. Eligible individuals will automatically receive an Economic Impact Payment of up to $600 for individuals or $1,200 for married couples and up to $600 for each qualifying child. Generally, if you have adjusted gross income for 2019 up to $75,000 for individuals and up to $150,000 for married couples filing joint returns and surviving spouses, you will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced.

How do I find out if the IRS is sending me a payment?

People can check the status of both their first and second payments by using the Get My Payment tool, available in English and Spanish only on IRS.gov. The tool is being updated with new information, and the IRS anticipates the tool will be available again in a few days for taxpayers.

How will the IRS know where to send my payment? What if I changed bank accounts?

The IRS will use the data already in our systems to send the new payments. Taxpayers with direct deposit information on file will receive the payment that way. For those without current direct deposit information on file, they will receive the payment as a check or debit card in the mail. For those eligible but who don’t receive the payment for any reason, it can be claimed by filing a 2020 tax return in 2021. Remember, the Economic Impact Payments are an advance payment of what will be called the Recovery Rebate Credit on the 2020 Form 1040 or Form 1040-SR.
Will people receive a paper check or a debit card?

For those who don’t receive a direct deposit by early January, they should watch their mail for either a paper check or a debit card. To speed delivery of the payments to reach as many people as soon as possible, the Bureau of the Fiscal Service, part of the Treasury Department, will be sending a limited number of payments out by debit card. Please note that the form of payment for the second mailed EIP may be different than for the first mailed EIP. Some people who received a paper check last time might receive a debit card this time, and some people who received a debit card last time may receive a paper check.

IRS and Treasury urge eligible people who don’t receive a direct deposit to watch their mail carefully during this period for a check or an Economic Impact Payment card, which is sponsored by the Treasury Department’s Bureau of the Fiscal Service and is issued by Treasury’s financial agent, MetaBank®, N.A. The Economic Impact Payment Card will be sent in a white envelope that prominently displays the U.S. Department of the Treasury seal. It has the Visa name on the front of the Card and the issuing bank, MetaBank®, N.A. on the back of the card. Information included with the card will explain that this is your Economic Impact Payment. More information about these cards is available at EIPcard.com.

Are more people eligible now for a payment than before?

Under the earlier CARES Act, joint returns of couples where only one member of the couple had a Social Security number were generally ineligible for a payment – unless they were a member of the military. But this month’s new law changes and expands that provision, and more people are now eligible. In this situation, these families will now be eligible to receive payments for the taxpayers and qualifying children of the family who have work-eligible SSNs. People in this group who don’t receive an Economic Impact Payment can claim this when they file their 2020 taxes under the Recovery Rebate Credit.

Is any action needed by Social Security beneficiaries, railroad retirees and those receiving veterans’ benefits who are not typically required to file a tax return?

Most Social Security retirement and disability beneficiaries, railroad retirees and those receiving veterans’ benefits do not need take any action to receive a payment. Earlier this year, the IRS worked directly with the relevant federal agencies to obtain the information needed to send out the new payments the same way benefits for this group are normally paid. For eligible people in this group who didn’t receive a payment for any reason, they can file a 2020 tax return.

I didn’t file a tax return and didn’t register with the IRS.gov non-filers tool. Am I eligible for a payment?

Yes, if you meet the eligibility requirement. While you won’t receive an automatic payment now, you can still claim the equivalent Recovery Rebate Credit when you file your 2020 federal income tax return.

Will I receive anything for my tax records showing I received a second Economic Impact Payment?

Yes. People will receive an IRS notice, or letter, after they receive a payment telling them the amount of their payment. They should keep this for their tax records.

Where can I get more information?

For more information about Economic Impact Payments and the 2020 Recovery Rebate, key information will be posted on IRS.gov/eip. Later this week, you may check the status of your payment at IRS.gov/GetMyPayment. For other COVID-19-related tax relief, visit IRS.gov/Coronavirus.

Revenue Procedure 2021-9 provides a safe harbor that allows a trade or business that manages or operates a qualified residential living facility, as defined in the revenue procedure, to be treated as a real property trade or business, solely for purposes of qualifying to make the election under Internal Revenue Code section 163(j)(7)(B) to be an electing real property trade or business. This safe harbor has no effect on any determination for purposes of section 469 of the Code.

Revenue Procedure 2021-9 will appear in Internal Revenue Bulletin 2021-3, dated Jan. 19, 2021.

In response to the continuing public health emergency caused by the Coronavirus Disease 2019 (COVID-19) pandemic, Notice 2021-03 extends from January 1, 2021, through June 30, 2021, the temporary relief provided in Notice 2020-42, 2020-26 I.R.B. 986, from the physical presence requirement in Treasury Regulation § 1.401(a)-21(d)(6) for participant elections required to be witnessed by a plan representative or a notary public, and solicits comments with respect to the relief.

Notice-2021-3 will appear in IRB 2021-02, dated Jan. 11, 2021.

Notice 2021-04 provides the final extension of the temporary dyed fuel relief provided in section 3.02 of Notice 2017-30, 2017-21 I.R.B. 1248.  The temporary relief was extended through December 31, 2018, by section 3 of Notice 2018-39, 2018-20, I.R.B. 582, then extended through December 31, 2019, by section 3 of Notice 2019-04, 2019-02 I.R.B. 282, and further extended through December 31, 2020, by section 3 of Notice 2020-04, 2020-04 I.R.B. 380.  A claimant may submit a refund claim for the § 4081(a)(1) tax imposed on undyed diesel fuel and kerosene for fuel that is (1) removed from a Milwaukee or Madison terminal; (2) entered into a Green Bay terminal within 24 hours; and (3) subsequently dyed and removed from that Green Bay terminal.  The relief provided in this notice takes effect beginning January 1, 2021, and ending December 31, 2021. 

Notice 2021-04 will appear in IRB 2021-02, dated Jan. 11, 2021

IRS issues standard mileage rates for 2021

WASHINGTON — The Internal Revenue Service today issued the 2021 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2021, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

   • 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
   • 16 cents per mile driven for medical or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020, and
   • 14 cents per mile driven in service of charitable organizations, the rate is set by statute and remains unchanged from 2020.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 2021-02 contains the optional 2021 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2021 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule. 

Year-end reminder: Expanded tax benefits help individuals and businesses give to charity during 2020

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 Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted last spring, includes four temporary tax changes that are designed to help people and businesses who give to charity this year. Here is a rundown of these key changes.

New deduction for people who don’t itemize
Individuals who elect to take the standard deduction generally cannot claim a deduction for their charitable contributions. However, the CARES Act permits these individuals to claim a limited deduction on their 2020 federal income tax returns for cash contributions made to certain qualifying charitable organizations and still claim the standard deduction. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify.

Under this change, these individuals can claim an “above-the-line” deduction of up to $300 for cash contributions made to qualifying charities during 2020. The maximum above-the-line deduction is $150 for married individuals filing separate returns.

Though cash contributions to most charitable organizations qualify, those made either to supporting organizations or to establish or maintain a donor advised fund, do not. Cash contributions carried forward from prior years do not qualify, nor do most cash contributions to charitable remainder trusts.  In general, a donor-advised fund is a fund or account in which a donor can, because of being a donor, advise the fund on how to distribute or invest amounts 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 Pub. 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.

Up to 100% limit on eligible cash contributions made by itemizers in 2020

Subject to certain limits, individuals who itemize may claim a deduction for charitable contributions they make to qualifying charitable organizations. These limits generally range from 20% to 60% of an individual’s 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 generally is limited to 60% of the individual’s AGI. Excess contributions may be carried forward for up to five tax years.

The CARES Act permits electing individuals to apply an increased limit, up to 100% of their AGI, for qualified contributions (“Increased Individual Limit”). The election is made on a contribution-by-contribution basis. Qualified contributions are limited to those made in cash during calendar year 2020 to qualifying charitable organizations.

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

Unless an individual makes the election for any given qualified contribution, the usual percentage limit applies. Keep in mind an individual’s other allowed charitable contribution deductions reduce the maximum amount allowed under this election. Individuals who would like to take advantage of the Increased Individual Limit must make their elections with their Form 1040 or Form 1040-SR.

Corporate limit increased to 25% of taxable income

The CARES Act permits C Corporations to apply an increased limit of 25% of taxable income (Increased Corporate Limit) for charitable contributions of cash they make to eligible charities during the 2020 calendar year. The maximum allowable deduction is usually limited to 10% of a corporation’s taxable income.

Here again, the Increased Corporate Limit does not automatically apply. C Corporations must elect application of 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 is eligible for the enhanced deduction (for contributions for the care of the ill, needy, and infants) are eligible for increased deduction limits. For contributions made in 2020, 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 were 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 both individuals and businesses that special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining a receipt or acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt. For donations of property, additional recordkeeping rules may apply, including filing a form 8283 and obtaining a qualified appraisal.

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

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