Covid-19

Eligible Paycheck Protection Program expenses now deductible

WASHINGTON – The Treasury Department and the Internal Revenue Service issued guidance today allowing deductions for the payments of eligible expenses when such payments would result (or be expected to result) in the forgiveness of a loan (covered loan) under the Paycheck Protection Program (PPP).

Today’s guidance, Revenue Ruling 2021-02, reflects changes to law contained in the COVID-related Tax Relief Act of 2020, enacted as part of the Consolidated Appropriations Act, 2021 (Act), Public Law 116-260, which was signed into law on Dec. 27, 2020.

The COVID-related Tax Relief Act of 2020 amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.

Revenue Ruling 2021-02 obsoletes Notice 2020-32 and Revenue Ruling 2020-27. This obsoleted guidance disallowed deductions for the payment of eligible expenses when the payments resulted (or could be expected to result) in forgiveness of a covered loan.

For more information about this, the COVID-related Tax Relief Act of 2020, and other tax changes, visit IRS.gov.

 

Treasury and IRS begin delivering second round of Economic Impact Payments to millions of Americans

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.

Most taxpayers can deduct up to $300 in charitable contributions without itemizing deductions

Following tax law changes, cash donations of up to $300 made this year by December 31, 2020 are now deductible without having to itemize when people file their taxes in 2021.

The Coronavirus Aid, Relief and Economic Security Act includes several temporary tax law changes to help charities. This includes the special $300 deduction designed especially for people who choose to take the standard deduction, rather than itemizing their deductions.

This change allows individual taxpayers to claim a deduction of up to $300 for cash donations made to charity during 2020. This deduction lowers both adjusted gross income and taxable income – translating into tax savings for those making donations to qualifying tax-exempt organizations.

Before making a donation, taxpayers should check the Tax Exempt Organization Search tool on IRS.gov to make sure the organization is eligible for tax deductible donations.

Cash donations include those made by check, credit card or debit card. They don’t include securities, household items or other property. Though cash contributions to most charitable organizations qualify, some don’t. People should review Publication 526, Charitable Contributions for details. Cash contributions made to supporting organizations are not tax deductible.

The CARES Act includes other temporary allowances designed to help charities. These include higher charitable contribution limits for corporations, individuals who itemize their deductions and businesses that give food inventory to food banks and other eligible charities. For more information, visit the Coronavirus Tax Relief page of IRS.gov.

By law, recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes getting a receipt or acknowledgement letter from the charity before filing a return and retaining a cancelled check or credit card receipt.

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Taxpayer Relief Initiative aims to help those financially affected by COVID-19

The IRS reviewed its collection activities to see how it could provide relief for taxpayers who owe taxes but are struggling financially because of the pandemic. The agency is expanding taxpayer options for making payments and other ways to resolve tax debt.

Taxpayers who owe taxes always had options to get help through payment plans and other tools from the IRS. The new IRS Taxpayer Relief Initiative is expanding on those tools.

These revised COVID-related collection procedures will be helpful to taxpayers, especially those who have a record of filing their returns and paying their taxes on time.

Here are the highlights of the Taxpayer Relief Initiative:

• Taxpayers who qualify for a short-term payment plan may now have up to 180 days to resolve their tax liabilities instead of 120 days.
• The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
• The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and business taxpayers who have gone out of business.
• Certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement if their monthly payment proposal is sufficient.
• Some individual taxpayers who only owe for the 2019 tax year and owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
• Qualified taxpayers with existing Direct Debit Installment Agreements may be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

Additional tools to assist taxpayers who owe taxes:

Temporarily delaying collection — Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves.

Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an Offer in Compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool. Now, the IRS is offering additional flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted offer in compromise.

Relief from penalties — Reasonable cause assistance is available for taxpayers with failure to file, pay and deposit penalties. First-time penalty abatement relief is also available for the first time a taxpayer is subject to one or more of these tax penalties.

Many taxpayers requesting payment plans, including Installment Agreements, can apply through IRS.gov.

These types of relief are not automatic. Taxpayers need to request payment relief by contacting the number on the their balance due notice or responding in writing.

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IRS designates November 10 National EIP Registration Day

The IRS has designated Tuesday, November 10, National EIP Registration Day. This is part of the agency’s final push to encourage everyone who doesn’t normally file a tax return to register to receive an Economic Impact Payment.

This special event will feature support from IRS partner groups including those that work with low-income and underserved communities. These groups will help spread the word about the new November 21 deadline and, in some cases, provide special support for people who still need to register for the payments.

The IRS has already sent nearly 9 million letters to people who may be eligible for the $1,200 Economic Impact Payments but don’t normally file a tax return. The letters along with the special November 10 event urge people to use the Non-Filers: Enter Info Here tool, available only on IRS.gov.

While most eligible U.S. taxpayers have automatically received their Economic Impact Payment, others who don’t have a filing obligation should use the Non-Filers tool to register with the IRS to get their money. Typically, this includes people who receive little or no income.

Who should use the Non-Filers tool
The tool is designed for people with incomes below $24,400 for married couples, and $12,200 for singles who could not be claimed as a dependent by someone else. This includes couples and individuals who are experiencing homelessness.

Anyone using the Non-Filers tool can speed up the arrival of their payment by choosing to receive it by direct deposit. Those not choosing this option will get a check.

People can track the status of their payment using the Get My Payment tool beginning two weeks after they register.

The IRS urges everyone to share this information to help the agency reach as many people before the November 21 deadline.

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Local IRS Offices

York
2670 Industrial Hwy, York, PA 17402
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:30pm)
(717) 757-4977

Harrisburg
228 Walnut St, Harrisburg, PA 17101
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm) (717) 777-9650

Lancaster
1720 Hempstead Rd, Lancaster, PA 17601
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm)
(717) 291-1994










NATP

National Association of Tax Professionals