Topics Include Several COVID-related items: Employee Retention Credits, Recovery Rebate Credits, and PPP Loan Update
As reported by Tax Chair, Stephen Mankowski, CPA, CGMA, who recently attended the monthly IRS Meeting
Nationwide Tax Forums
Registration opened on March 1. The IRS Forums will begin in July and spread over five weeks with Tuesday, Wednesday and Thursday seminars. A case resolution room will be available until the Forums go back to live events; however, there will be an Exhibit Hall, as well as a new Spanish track.
Returns and Refunds Update
Tax returns began getting accepted on 2/12/21. The IRS is expecting over 160M returns. E-filing is encouraged this year to reduce taxpayer errors and speed up processing. Weather problems across the country have caused delays in the initial processing. Refund timing should be less than 21 days. Where’s My Refund can be used to check the status 24 hours after a return is submitted. Taxpayers are encouraged to file timely even if they owe money and are unable to pay. Also, if paying, they are encouraged to submit their payment electronically with the return or through the IRS2Go Mobile App.
1099-NEC & 1099-MISC Reporting
There is a change to Forms 1099-MISC and 1099-NEC. In 2014, the U.S. Treasury Inspector General for Tax Administration (TIGTA) found that 27% of payments were issued improperly due to extended filing deadlines. The PATH Act of 2015 accelerated the deadlines and removed the extensions. It also moved the refund dates to 2/15 for Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC), which resulted in multiple due dates for 1099-MISC. The IRS is delaying the filing of both Forms to 3/31.
Form 1099-NEC is for payments made in the course of doing business. Personal payments for services do not apply. This form does not apply to merchandise, tax-exempt organizations, government payments, incorporated businesses. Form 1099-MISC changed accordingly and some boxes were also changed.
New Employee Retention Credits
The IRS realizes that there are a lot of questions around this credit. The legislation itself is about 70 days old and the IRS is working to get their hands around it. The credit is for employers that kept employees on payroll during the pandemic (under the CARES Act). It was modified to extend through 7/2021.
The Employee Retention Credit is against the employee’s share of social security tax. It applies to 70% of qualified wages from 1/1 through 6/30 and maxes at $10K per calendar quarter. Small employers (500 or less) can request advance credits, but they are not available for large employers.
The IRS plans to update additional materials, including tool kits, to further educate employers about the changes and availability of the credit.
Recovery Rebate Credits
All Economic Impact Payments have been made and there’s no need to report anything on your tax returns. If someone has not received or did not get the full amount, they should use Line 30 to reconcile the credit. This will be compared with the IRS calculation. The IRS has math-error authority to correct amounts and send out a notice code to explain the discrepancy. FAQs are available to guide the taxpayer on eligibility and claims.
Filers are reminded that the eligibility is based on their 2019 or 2020 return, whichever is more favorable for the taxpayer. Amended returns for 2020 can be e-filed but still require manual backend processing. That process opened on 2/12 as with other returns. If a 2019 return is still being processed, the taxpayer should claim their RRC on the 2020 return. They might go through the recalculation process but it should flow quickly.
The IRS is working on changes to Form 941-X for COVID credits. Other helpful resources include:
Civil Penalty Administration
The IRS should be removing unnecessary penalties proactively. Of course, the taxpayer or practitioner still needs to communicate with the IRS. First-time abatement is not always available depending on the type of penalty that was assessed. Furthermore, first-time abatement is not available on ‘event-based’ filings, such as information returns. First-time abatement and reasonable cause do not have dollar thresholds.
Look for my next IRS Update Report toward the end of March.
The National Conference of CPA Practitioners (NCCPAP) is a professional organization comprised of Certified Public Accountants practicing in the United States. In addition to serving as a forum for education, networking, and community impact, NCCPAP also advocates for its clients. NCCPAP influences tax administration and tax policy by regularly meeting with Internal Revenue Service representatives, state taxing authorities, and elected officials. NCCPAP members represent over one million businesses and individual clients. The organization is headquartered in Woodbury, NY. For more information visit, www.NCCPAP.org.