by Socheata Ten EA, LLC | Jul 8, 2021 | Tax Tips and News
New guidance from the Internal Revenue Service tries to clear up questions some transportation companies may have about pandemic-related federal grants.
The agency has published a series of frequently asked questions aimed at giving these companies a better idea of what is taxable and what isn’t when it comes to Treasury grants they may have received during the COVID-19 pandemic.
Grants from the Department of the Treasury were authorized by the Coronavirus Economic Relief for Transportation Service (CERTS) Act, which was part of the Consolidated Appropriations Act of 2021.
The legislation allows federal grants to qualified to companies providing transportation services that suffered annual revenue losses of 25% or more due to the pandemic. Qualified services include eligible motorcoach companies, school bus companies, and passenger vessel companies.
The IRS says the grants are generally meant to offset payroll costs stemming from the pandemic, although grant money can also be used for some operating expenses. This means a grant can be used to pay for services or equipment the company had to acquire in order to protect their employees and customers from the coronavirus; grants can also be used to repay debt the company incurs to maintain its payroll.
Any grant funds not used for an eligible activity within a year of their receipt, however, go back to the Treasury Department.
The IRS’s Frequently Asked Questions on the topic answer two major questions for transportation companies with grants:
Are the grants taxable?
Yes, the receipt of a CERTS Act grant is not excluded from the recipient’s gross income under the Code and therefore is taxable.
Are costs for which the grants are used deductible?
Yes, the costs are deductible to the extent that they are otherwise deductible under the law. The tax law generally permits the payment of wages, salaries, and benefits to employees and other amounts paid to carry on a trade or business to be deducted as ordinary and necessary business expenses.
For more on tax relief for companies affected by COVID-19, see the IRS website at IRS.gov.
Source: IRS provides answers for certain transportation companies eligible for Treasury grants
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Jul 7, 2021 | Tax Tips and News
For self-employed taxpayers and household employers, it’s time, as they say, to pay the piper.
The CARES Act—also known as the Coronavirus Aid, Relief and Economic Security Act—gave these specific taxpayers permission to defer paying certain Social Security taxes for tax year 2020.
“Defer” is the operative term; this change did not eliminate the need to pay Social Security tax owed. Half of the deferred Social Security tax is due by Dec. 31, 2021; the other half is due in Uncle Sam’s pockets by Dec. 31, 2022.
The deferred taxes can be paid any time on or before the due date.
What are the options for repayment of Social Security tax?
The IRS says taxpayers wishing to repay Social Security taxes can use the Electronic Federal Tax Payment System (EFTPS) or pay with a credit or debit card, money order, or check. Further, the agency stresses these payments:
- Should be separate payments from other tax payments to ensure they are applied to the deferred tax balance on the tax year 2020 Form 1040 since IRS systems won’t recognize the payment for deferred tax if it is with other tax payments or paid with the current Form 1040.
- Should designate the payment as “deferred Social Security tax.”
Those paying deferred Social Security tax using EFTPS should select 1040 US Individual Income Tax Returns and set the type of payment to deferred Social Security tax.
The payment should be applied to the 2020 tax year, since that’s where the payment was deferred.
Another payment option is to set up a same-day wire transfer of funds. Keep in mind, however, this option may entail a bank fee to complete. Some other electronic options for paying taxes, such as Electronic Funds Withdrawal or IRS Direct Pay, may not apply to this type of payment.
For more information on the payment of deferred taxes, go online to EFTPS.gov.
What if a taxpayer is unable to pay in full?
Taxpayers unable to pay the complete amount of deferred tax are advised to pay whatever they can by each of the two due dates to limit penalty and interest charges.
Taxpayers get a balance-due notice from the IRS if they don’t pay the full installment amount. To make a payment or to apply for an IRS payment plan, follow the directions given in the notice.
For more information on ways to pay, what to do when taxpayers can’t pay and viewing their tax account, visit the Paying Your Taxes webpage on IRS.gov.
Sources: How self-employed individuals and household employers repay deferred Social Security tax; Paying Your Taxes.
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Jul 2, 2021 | Tax Tips and News
Monthly Advance Child Tax Credit payments are set to begin in two weeks. While it’s too late to change the bank account that will receive the July 15 payment, qualifying taxpayers can now use a tool on IRS.gov to update their information before the August payment is issued.
The Internal Revenue Service announced a new feature for the Child Tax Credit Update Portal this week that will let users change the routing number used to receive direct deposits of the monthly advance payments. Those who want to update their account in time for next month’s payments need to do so by August 2—otherwise, the agency will send money using the method currently on file on August 13.
Check eligibility and more with the Child Tax Credit Update Portal.
Prior to the most recent feature update, the Child Tax Credit Update Portal still served as an important payment management tool for taxpayers—like helping families determine eligibility for the credit and choosing their payment method.
“First, families should use the Child Tax Credit Update Portal to confirm their eligibility for the payments,” the IRS says. “If eligible, the tool will also indicate whether they are enrolled to receive their payments by direct deposit.” The displayed information is where the July 15 payment will be direct deposited, “and if they don’t change the account, all future payments will go there as well.”
The IRS says that everyone should choose direct deposit for these monthly payments, citing speed, security, and convenience. Luckily, opting into direct deposit only requires entering three pieces of information:
- Routing number
- Account number
- Account type
When it comes to the type of account, users need to “[indicate] whether it is a savings or checking account.”
What if someone doesn’t want to get monthly advance payments of the Child Tax Credit?
The IRS notes that some taxpayers may not want to receive the Advance Child Tax Credit payments. Some might not want to deal with reconciling the payments next year (Topic H under the Child Tax Credit FAQ), while others may have one of the following reasons:
- Their income in 2021 is too high to qualify them for the credit.
- Someone else (an ex-spouse or another family member, for example) qualifies to claim their child or children as dependents in 2021
- Their main home was outside of the United States for more than half of 2021
Regardless, the IRS says the Child Tax Credit Update Portal will even let taxpayers opt out of the monthly payments: Simply choose the “unenroll feature.”
To learn more about the Child Tax Credit Update Portal and the Advance Child Tax Credit payments, visit IRS.gov.
Source: IR-2021-143
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Jul 2, 2021 | Tax Tips and News
New guidance from the Internal Revenue Service and the Treasury Department is aimed at keeping the lights on at renewable energy projects delayed by the COVID-19 pandemic.
Previous IRS notices gave eligible renewable energy projects a Continuity Safe Harbor, giving the green light to claim the production tax credit and the investment tax credit, as long as the overall project goes on line within a certain period of time.
Under this scenario, the clock starts ticking in the taxable year that construction started.
Unfortunately, there’s a problem.
Even with the recent inroads made against COVID-19, the pandemic has continued to impact construction of renewable energy projects, pushing them farther behind schedule, putting them at risk of missing the Continuity Safe Harbor deadline altogether.
This new guidance delivers relief to renewable energy projects that have been hit by pandemic-driven project delays, allowing them more time to comply with the Continuity Safe Harbor. It also introduces more flexibility for these projects to choose which way to best fulfill the continuity requirement outside of the safe harbor.
How does the safe harbor work?
The changes are laid out in Notice 2021-41. This new guidance gives qualified renewable energy projects a choice of two ways to show the taxpayer’s started construction on the project: the Physical Work Test, or the Five Percent Safe Harbor.
Once construction begins, the project has to make continuous progress toward completion in order satisfy requirements.
If the Physical Work test is used, the project falls under the Continuous Construction Test to show that the project has made continuous progress. With the Five Percent Safe Harbor method, the project is measured under the Continuous Efforts Test.
Notice 2021-41 extends the Continuity Safe Harbor period beyond that announced previously and covers renewable projects that started in 2016 through 2020:
- For projects for which construction began under the Physical Work Test or the Five Percent Safe Harbor in 2016, 2017, 2018, or 2019, the Continuity Safe Harbor is satisfied if the project is placed in service by the end of a calendar year that is no more than 6 calendar years after the calendar year during which construction began; and
- For projects for which construction began under the Physical Work Test or the Five Percent Safe Harbor in calendar year 2020, the Continuity Safe Harbor is satisfied if the project is placed in service by the end of the calendar year that is no more than 5 calendar years after the calendar year during which construction began.
In addition, the notice also gives qualifying projects a kind of escape hatch.
If the Continuity Safe Harbor doesn’t apply to their project, taxpayers can still satisfy the continuity requirement if they can satisfy either the Continuous Construction or the Continuous Efforts Tests.
This provision can be used regardless of the method the taxpayer used when construction commenced.
For more information about tax relief for businesses impacted by the COVD-19 pandemic, see Coronavirus Tax Relief for Businesses and Tax-Exempt Entities.
Source: Treasury, IRS extend safe harbor for renewable energy projects.
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Jun 29, 2021 | Tax Tips and News
Taxpayers who aren’t required to file a federal income tax return don’t need to file to get advance payments of the Child Tax Credit. They will, however, have to register with the IRS if they haven’t filed a return lately.
Registering through the IRS Non-Filer Sign-up Tool is an easy way for these taxpayers to provide the information the IRS needs to calculate and send out the advance CTC payments. The information, such as name, address and Social Security numbers, provides the IRS with the basic data to get the monthly credit payments set up.
The targeted taxpayers and families have little or no income, and include the homeless. Generally, they just don’t have enough income to file a return. And that’s where the IRS’ tool comes in.
The Non-Filer Sign-up Tool is for people who didn’t file a tax return for either 2019 or 2020 and have not used the tool previously to claim Economic Impact Payments (EIPs). The free tool provides individuals with a way to relay to the IRS the required information on themselves, their children and other dependents as well as their direct deposit information so the advance credit payments can go straight into their bank account.
Eligible families who already filed a 2019 or 2020 return—or expect to file one—should not use the Non-Filer Sign-up Tool. Once their return is processed, the IRS will automatically check their eligibility and calculate the credit. The advance payments will then be issued.
Those who want to claim other tax benefits, such as the earned income tax credit, also should not use the Non-Filer Sign-up Tool. They should instead simply file a regular tax return.
The Advance Child Tax Credit
The American Rescue Plan Act, which became law in March of this year, made the CTC possible in its present form. The legislation expanded the credit and made it payable in advance installments.
The Child Tax Credit is normally calculated using the taxpayer’s 2020 return. If the 2020 tax return hasn’t been filed or is still being processed, the 2019 return is used to calculate the initial payment. In lieu of a 2019 return, the information that available in 2020 and entered with the Non-Filer Tool can be used.
Advance payments will be up to $300 per month per child under age 6, and up to $250 per month per child aged 6 – 17.
If banking information has been provided by the taxpayer, the IRS will send the advance payments by direct deposit. Otherwise, the advance payments will be via paper check in the mail. Payment dates are: July 15, August 13, September 15, October 15, November 15, and December 15.
For more information and other helpful resources, see Advance Child Tax Credit Payments in 2012 on IRS.gov, and FAQs on the 2021 Child Tax Credit and Advance Child Tax Credit Payments.
Source: People who don’t have to file taxes may need to register for monthly advance child tax credit payments.
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Jun 26, 2021 | Tax Tips and News
The latest publication from the Internal Revenue Service is getting all the sendup worthy of a new best-seller. The Data Book for 2020 recounts the agency’s effort to deal with tax season during the time of the coronavirus.
Admittedly, the numbers supply a heroic read.
The Data Book spans the 2020 fiscal year, running from Oct. 1, 2019 to Sept. 30, 2020. Among other things, the Data Book recounts how the IRS responded to the COVID-19 pandemic, by developing new technology and equipment that allowed agency employees—thousands of employees—to work from home. This, in turn, allowed the IRS to continue processing tax returns and provide telephone assistance to taxpayers.
IRS Commissioner Chuck Rettig is understandably proud of his agency and its people for their hard work and teamwork during the pandemic.
“This year’s Data Book describes the important work that IRS employees accomplish on behalf of the public,” said Rettig. “The IRS accounts for approximately 96% of the funding that supports the federal government’s operations, while proudly serving and interacting with more Americans than any other public or private organization.”
“The 2020 Data Book also details the extraordinary measures the IRS took to protect the health and safety of taxpayers and IRS employees during the COVID-19 pandemic while implementing critical economic relief legislation—the largest economic rescue packages in US history,” Rettig added.
The 2020 Data Book also describes how the IRS eased the burden on taxpayers during the pandemic by extending the federal tax deadline to file and to pay from April 15 to July 15, 2020.
If all this sounds like it’s not enough to keep an entire federal agency busy, the IRS also debuted its People First Initiative during this time. The new program eased payment guidelines, delayed compliance actions, and suspended most collection enforcement actions, such as liens and levies, from April 15 to July 15, 2020.
The IRS giveth
To help combat the huge downturn to the economy the pandemic left in its wake, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. This new law sent nearly 162 million Economic Impact Payments (EIPs) directly to American taxpayers in the first round alone. The IRS played a leading role, sending out the actual payments to taxpayers.
A second round of 146.5 million EIPs was sent out by the IRS in 2020, bringing the calendar year’s direct-payment relief total to nearly $413 billion (yet another round of relief payments would go out in 2021).
While processing and sending out relief payments, the IRS still had to continue to handle incoming federal income tax returns, processing over 240 million returns and collecting almost $3.5 trillion in federal taxes over the fiscal year.
The IRS Data Book for 2020 includes some 33 tables that describe all the agency’s work during the fiscal year, from the returns processed to the revenue collected, audits and collection activities, as well as budget and personnel figures.
While Commissioner Rettig encourages people to have a look at the 2020 Data Book, he stresses that the IRS story goes beyond statistics, charts and tables.
“IRS employees care, and our agency is made up of people who give back to their communities and help one another. Our employees provide significant support for those devastated by hurricanes, wildfires, and other natural disasters, and across the nation, they did amazing work in their communities to help those impacted by COVID-19,” Rettig said.
Source: IRS releases Data Book for fiscal 2020 describing agency’s activities during pandemic
– Story provided by TaxingSubjects.com
Socheata Ten EA, LLC