WASHINGTON — The Internal Revenue Service and the Treasury Department announced today that millions of American families are now receiving their advance Child Tax Credit (CTC) payment for the month of August as direct deposits begin posting in bank accounts and checks arrive in mailboxes.

This second batch of advance monthly payments, worth about $15 billion, are reaching about 36 million families today across the country. The majority will be issued by direct deposit.

Under the American Rescue Plan, most eligible families received the first payment on July 15, and payments will continue each month for the rest of 2021. For these families, each payment is up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6 through 17.

Besides the July 15 and Aug. 13 payments, payment dates are Sept. 15, Oct. 15, Nov. 15 and Dec. 15.

Here are further details on these payments:

Low-income families can still sign up

It’s not too late for low-income families to sign up for advance CTC payments. The IRS urged anyone who normally isn’t required to file a tax return to explore the tools available on IRS.gov. These tools can help determine eligibility for the advance CTC or help people file a simplified tax return to sign up for these payments as well as Economic Impact Payments and the Recovery Rebate Credit. People can get these benefits, even if they don’t work and even if they receive no income.

The IRS continues to raise awareness of the expanded Child Tax Credit. The IRS encourages partners and community groups to share information and use available online tools and toolkits to help non-filers, low-income families and other underserved groups sign up to receive the advance Child Tax Credits as well as Economic Impact Payments. People can check their eligibility for the advance payments by using the new advance Child Tax Credit Eligibility Assistant.

Families can stop payments anytime

Families can stop payments anytime, even after payments begin. They do that by using the unenroll feature in the Child Tax Credit Update Portal. Eligible families who make this choice will still receive the rest of their Child Tax Credit as a lump sum when they file their 2021 federal income tax return next year. To stop all payments starting in September and the rest of 2021, they must unenroll by 11:59 p.m. ET on Aug. 30, 2021.

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

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

Links to these tools, a step-by-step guide to using the Non-filer Sign-up Tool, answers to frequently asked questions and other helpful resources are available on the tax agency’s special advance CTC 2021 page. It’s at IRS.gov/childtaxcredit2021.

Today, the IRS published the latest executive column “A Closer Look,” which features Dietra Grant, director of the Customer Account Services (CAS) organization, discussing the new Tax Pro Account, an application on IRS.gov that allows greater online interaction and collaboration between tax professionals and taxpayers. “This new, groundbreaking application allows for all-digital interaction between tax professionals and taxpayers on authorizations and sets the stage for several advancements on third-party authorizations in the future,” said Grant. 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.

Rev. Proc. 2021-34 modifies Rev. Proc. 2019-43, 2019-48 I.R.B. 1107, to provide procedures under § 446 of the Internal Revenue Code (Code) and § 1.446-1(e) of the Income Tax Regulations to obtain automatic consent of the Commissioner to change methods of accounting to comply with final regulations under §§ 1.451-3, 1.451-8, and 1.1275-2(l) and to change methods of accounting for certain inventory costs to comply with §§ 263A, 461, and 471 if made in connection with a change to comply with § 1.451-3 and/or § 1.451-8, as applicable. 

Rev. Proc 2021-34 also modifies Rev. Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 2015-33, 2015-24 I.R.B. 1067, and further modified by Rev. Proc. 2016-1, 2016-1 I.R.B. 1, Rev. Proc. 2017-59, 2017-48 I.R.B. 543, and Rev. Proc. 2021-26, 2021-22 I.R.B. 1163, to provide procedures for a taxpayer to obtain the consent of the Commissioner to change its method of accounting to comply with §§ 1.451-3 and/or 1.451-8, as applicable, by providing rules related to cost offset method changes.

Rev. Proc. 2021-35 modifies Rev. Proc. 2013-26 to reflect changes made to the treatment of certain credit card fees by § 451(b), as amended by section 13221 of the Tax Cuts and Jobs Act, and §§ 1.451-3 and 1.1275-2(l) of the Income Tax Regulations. Rev. Proc. 2013-26, 2013-22 I.R.B. 1160, allows a taxpayer to use a safe harbor method of accounting for original issue discount on a pool of credit card receivables for purposes of § 1272(a)(6) of the Internal Revenue Code—the "proportional method." 

Both Rev. Proc. 2021-34 and Rev. Proc. 2021-35 will be published in Internal Revenue Bulletin 2021-35 on August 30, 2021.

Notice 2021-43 provides transition relief for employers that hire or hired certain individuals residing in empowerment zones and who begin work on or after January 1, 2021, and before the date that is 60 days from the date of publication of the notice. Section 51 of the Code provides employers with a work opportunity credit for hiring certain individuals certified by a Designated Local Agency (DLA) to be a member of a targeted group listed in section 51(d). Employers must receive, on or before the day on which such individual begins work for the employer, a certification from a DLA that such individual is a member of a targeted group or must request certification that the individual is a member of a targeted group by submitting Form 8850 (Pre-Screening Notification and Certification Request for the Work Opportunity Credit) to a DLA within 28 days of that individual beginning work. The certification of an individual as a Designated Community Resident, under section 51(d)(5), or as a Qualified Summer Youth Employee, under section 51(d)(7), requires that the individual reside within an empowerment zone. Empowerment zone designations under section 1391 of the Code were not in effect after December 31, 2020. However, in accordance with an automatic procedure for a state or local government in which an empowerment zone is located to extend the empowerment zone designation made under section 1391(a) of the Code, if the state or local government did not opt out of an empowerment designation by May 25, 2021, the designation was deemed to be extended until December 31, 2025. Employers, therefore, could not timely request certification for employees otherwise satisfying the criteria for these two targeted groups until empowerment zone designations were renewed. This notice allows employers additional time beyond the 28-day requirement to request certification for individuals in these two targeted groups.

Notice 2021-43 will appear in IRB 2021-35, dated Aug. 30, 2021.

WASHINGTON – The Internal Revenue Service today announced it is providing transition relief to certain employers claiming the Work Opportunity Tax Credit (WOTC).  The WOTC is a federal income tax credit available to employers that hire certified members of certain groups specified in the Internal Revenue Code who face significant barriers to employment, including Designated Community Residents or Qualified Summer Youth Employees.

The IRS today issued Notice 2021-43, which extends the 28-day deadline for employers to submit a request to a designated local agency (DLA) to certify that an employee hired between January 1 and October 8 of this year is a Designated Community Resident or a Qualified Summer Youth Employee. To be certified as a Designated Community Resident or a Qualified Summer Youth Employee under the WOTC, an employee must have a principal place of residence within an Empowerment Zone where the employee continuously resides.

Empowerment Zone designations terminated on Dec. 31, 2020, but the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division EE of the Consolidated Appropriations Act, 2021, permitted the designations to be extended through 2025.  On May 26, 2021, all Empowerment Zone designations were extended from Dec. 31, 2020 to Dec. 31, 2025. The transition relief under this notice allows employers to submit Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit) for these employees until Nov. 8, 2021.

The notice also provides guidance to certain employers who submitted a Form 8850 to a DLA for these employees during the period of transition relief and received a denial due to the termination of Empowerment Zone designations on Dec. 31, 2020, or who received a certification before Empowerment Zone designations were extended.

The WOTC has been subject to several legislative extensions and modifications since its enactment by the Small Business Job Protection Act of 1996. The amount of the tax credit under WOTC equals a percentage of qualified wages paid in a given tax year to an employee certified by the DLA as being a member of the one of the groups specified in the law.

Revenue Procedure 2021-33 provides a safe harbor that permits a taxpayer to exclude certain items from “gross receipts” under §§ 448(c) and 6033 of the Internal Revenue Code (Code), as applicable, solely for purposes of determining eligibility to claim the employee retention credit under section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as amended by sections 206 and 207 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division EE of the Consolidated Appropriations Act, 2021 (CAA), and under section 3134 of the Code as enacted by section 9651 of the American Rescue Plan Act of 2021 (the ARP).  The items covered by the safe harbor are: (1) the amount of the forgiveness of a Paycheck Protection Program loan under section 7(a)(37) or 7A of the Small Business Act, (2) a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, enacted as Title III of Division N of the CAA, and (3) a restaurant revitalization grant under section 5003 of the ARP.

Revenue Procedure 2021-33 will appear in IRB 2021-34, dated Aug. 23, 2021.

WASHINGTON – The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) today issued a safe harbor allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC).

Revenue Procedure 2021-33 provides a safe harbor permitting employers to exclude certain amounts from gross receipts solely for determining eligibility for the ERC. These amounts are:

An employer elects to apply the safe harbor by excluding these amounts solely for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return.

Revenue Procedure 2021-33 requires employers to apply the safe harbor consistently for determining eligibility for the ERC. The employer must exclude the amounts from their gross receipts for each calendar quarter in which gross receipts are relevant to determining eligibility to claim the ERC. The employer claiming the credit must also apply the safe harbor to all employers treated as a single employer under the aggregation rules.

An employer is not required to apply this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.

Employers claim the ERC on their employment tax return, generally Form 941, Employers Quarterly Federal Tax Return, or adjusted employment tax return, generally Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

Revenue Procedure 2021-33, updates and amplifies guidance provided in Notice 2021-20, which addressed the ERC as it applies to qualified wages paid after March 12, 2020, and before January 1, 2021, Notice 2021-23, which addressed the ERC as it applies to qualified wages paid after December 31, 2020 and before July 1, 2021, and Notice 2021-49, which addressed the ERC as it applies to qualified wages paid after June 30, 2021 and before January 1, 2022.

Treasury and the IRS continue to closely monitor pending legislation related to the ERC and will provide additional information as needed.

WASHINGTON – In a continuing twist on a common scam, the Internal Revenue Service, state tax agencies and tax industry today warned tax professionals to beware of evolving phishing scams that use various pandemic-related themes to steal client data.

The Security Summit partners continue to see instances where tax professionals, especially those who engage in remote transactions, have been vulnerable this year to identity thieves posing as potential clients. The criminals then trick practitioners into opening email links or attachments that infect computer systems.

Avoiding phishing emails is the fourth in a five-part series sponsored by the IRS, state tax agencies and the nation’s tax community – working together as the Security Summit – highlighting critical steps tax professionals can take to protect client data. This year’s theme “Boost Security Immunity: Fight Against Identity Theft,” is an effort to urge tax professionals to work to strengthen their systems and protect client data during this pandemic and its aftermath.

“Identity thieves have been relentless in exploiting the pandemic and the resulting economic pain to trick taxpayers and tax professionals to disclose sensitive information,” said IRS Commissioner Chuck Rettig. “Fighting back against phishing scams requires constant vigilance, and we urge tax pros to take some basic steps to help protect their clients and themselves.”

Phishing emails or SMS/texts (known as “smishing”) attempt to trick the person receiving the message into disclosing personal information such as passwords, bank account numbers, credit card numbers or Social Security numbers. Tax pros are a common target.

Scams may differ in themes, but they generally have two traits:

A specific kind of phishing email is called spear phishing. Rather than the scattershot nature of general phishing emails, scammers take time to identify their victim and craft a more enticing phishing email known as a lure. Scammers often use spear phishing to target tax professionals.

In a reoccurring and very successful scam this year, criminals posed as potential clients, exchanging several emails with tax professionals before following up with an attachment that they claimed was their tax information. This scam was popular as many tax professionals worked remotely and communicated with clients over email versus in-person or over the telephone because of COVID.

Once the tax pro clicks on the URL and/or opens the attachment, malware secretly downloads onto their computers, giving thieves access to passwords to client accounts or remote access to the computers themselves.

Thieves then use this malware known as a remote access trojan (RAT) to take over the tax professional’s office computer systems, identify pending tax returns, complete them and e-file them, changing only the bank account information to steal the refund.

In recent months, international criminals have used a ransomware attack to shut down a variety of companies. Criminals use similar, smaller scale tactics against tax pros. When the unsuspecting tax professional opens a link or attachment, malware attacks the tax pro’s computer system to encrypt files and hold the data for ransom.

These scams highlight the importance of the basic security steps recommended by the Security Summit to protect data.

For example, using the two-factor (2FA) or the multi-factor authentication (MFA) option offered by tax preparation providers or storage providers would protect client accounts even if passwords were inadvertently disclosed. Keeping anti-virus software automatically updated helps prevent scams that target software vulnerabilities. Using drive encryption and regularly backing up files helps stop theft and ransomware attacks.

For tax professionals, securing their network to protect taxpayer data is their responsibility as a tax preparer.

To help tax professionals guard against phishing scams and better protect taxpayer information, the IRS recently updated Publication 4557, Safeguarding Taxpayer Data. The July 2021 version contains some of the latest suggestions such as using the multi-factor authentication option offered by tax software products and helping clients get an Identity Protection Pin.

Additional resources
In addition to reviewing the recently revised IRS Publication 4557, Safeguarding Taxpayer Data, tax professionals can also get help with security recommendations by reviewing Small Business Information Security: The Fundamentals by the National Institute of Standards and Technology. The IRS Identity Theft Central pages for tax pros, individuals and businesses have important details as well.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.

For more information, see Boost Security Immunity: Fight Against Identity Theft.

Revenue Procedure 2021-31 provides: (1) two tables of limitations on depreciation deductions for owners of passenger automobiles placed in service by the taxpayer during calendar year 2021; and (2) a table of dollar amounts that must be used to determine income inclusions by lessees of passenger automobiles with a lease term beginning in calendar year 2021. The tables detailing these depreciation limitations and amounts used to determine lessee income inclusions reflect the automobile price inflation adjustments required by section 280F(d)(7). For purposes of this revenue procedure, the term “passenger automobiles” includes trucks and vans.

Revenue Procedure 2021-31 will appear in IRB 2021-34, dated Aug. 23, 2021

Notice 2021-49 provides guidance on the employee retention credit provided under section 3134 of the Internal Revenue Code (the Code), as added by section 9651 of the American Rescue Plan Act (ARP), applicable to qualified wages paid after June 30, 2021, and before January 1, 2022. Notice 2021-49 also provides guidance on several issues that arise under both section 2301 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) and section 3134 of the Code. The miscellaneous issues addressed in this notice respond to various questions that the Treasury Department and the Internal Revenue Service have received about the employee retention credit applicable to both section 2301 of the CARES Act and section 3134 of the Code for qualified wages paid after March 12, 2020 and before January 1, 2022. Notice 2021-49 amplifies Notice 2021-20 and Notice 2021-23.

Notice 2021-49 will appear in IRB 2021-34, dated Aug. 23, 2021