Tax Tip 2021-145: Here’s what tax professionals should do after a data theft or loss

If a tax pro or their firm is the victim of data or information theft, they must deal with it thoroughly and efficiently. Here are some actions they should take immediately to help minimize damage and protect against future data and theft or losses.

Contact the IRS and law enforcement:

• Internal Revenue Service – The tax preparer should report client data theft to their local Stakeholder Liaison. Stakeholder Liaison will notify IRS Criminal Investigation and others within the agency on the tax professional’s behalf. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in clients’ names.
• Federal Bureau of Investigation or the United States Secret Service – the preparer should contact a local office of either the FBI or the USSS.
• Local police – The taxpayer should contact police to file a report on the data breach.

Contact states in which the tax professional prepares state returns:

• Any breach of personal information could have an adverse effect on the victim’s tax accounts with the states as well as the IRS. To help tax professionals find where to report data security incidents at the state level, the Federation of Tax Administrators has created a special page with state-by-state listings.
• The preparer should contact the State Attorneys General for each state in which the tax professional prepares returns.

Contact experts:

• Security expert – Tax preparers should consult an expert who can help determine the cause and scope of the breach, to stop the breach, and to prevent further breaches from occurring.
• Insurance company – The preparer should report the breach to their insurance company and to check if the insurance policy covers data breach mitigation expenses.
• Federal Trade Commission – Preparers and other businesses can go to the FTC for guidance. For more individualized guidance, preparers can contact the FTC at idt-brt@ftc.gov.
• Credit and identity theft protection agency – Certain states require that preparers offer credit monitoring and ID theft protection to victims of ID theft.
• Credit bureaus – Preparers should notify them if there is a compromise and clients may seek their services.

Contact clients:

Preparers should send an individual letter to all victims to inform them of the breach, but they should work with law enforcement on when to send the letter.

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Client Accounting Suite/Premier (CAS/P) 20.6 is available

The 20.6 version of CAS is now available from the Solution Center or via the auto-update feature in CAS. It includes the following regulatory updates.

Regulatory Updates

The following regulatory information is now available for Client Accounting Suite and Client Accounting Suite Premier:

• Federal Forms
• 941 Updates
• Line 13a includes the vendor deposit made for the selected quarter.
• Line 15 calculates the Overpayment for the selected quarter.
• 2021 State Withholding Rates - The following state withholding calculations have been updated for 2021:
• Idaho
• Kansas
• Ohio

Scheduled Updates

• November 2021 - Client Accounting Suite 21.0 - Annual Release
• December 2021 - Client Accounting

California Golden State Stimulus (GSS) September Payments

 On Friday, September 17^th, the Franchise Tax Board (FTB) and the State Controller’s office will release the next batch of GSS I & II payments.

Alabama MeF Scheduled Maintenance

Alabama will be turning off MeF (all tax types) around 4:00pm on Thursday, September 23^rd.  They will be updating their system over that weekend and will not be retrieving submissions or sending ACKs from 4:00pm on Thursday, September 23^rd until after the cutover to their new system and go live.

 

Note: Anything transmitted after 3:00pm, Thursday, September 23^rd may not be acknowledged until after they open back up on Monday, September 27^th or Tuesday, September 28^th.

Arizona's MeF system maintenance

 Arizona's MeF system will be unavailable from 6 PM - 8 PM MST today, Sept. 16th.

Programming issue impacts business taxpayers reporting COVID-19 employment tax relief

There is a Transcript Delivery System (TDS) programming issue impacting business taxpayers who reported information related to COVID-19 employment tax relief on Form 941.

 

Account Transcripts requested for Form 941 for all quarters in Tax Year 2021 may not generate properly. Transcripts are not being delivered to the Secure Object Repository (SOR) Mailbox for e-Services users. When viewing the transcript online, a message will display on the transcript indicating TDS has encountered an unrecoverable error processing the request. With the Postal Mail delivery method, no transcript is mailed.

 

As the Record of Account Transcript is a combination of the Tax Return and Account Transcripts, the Record of Account Transcript is also impacted and can display a message of “No record of return filed.”

 

IRS Customer Service Representatives are also unable to obtain these transcripts.

 

The programming issue is expected to be fixed on September 26, 2021.

IRS: Hurricane Ida victims in Mississippi now eligible for tax relief; Oct. 15 deadline, other dates extended to Nov. 1

 

Victims of Hurricane Ida in parts of Mississippi now have until Nov. 1, 2021, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance. Currently, individuals and households affected by Hurricane Ida that reside or have a business in all 82 counties and the Mississippi Choctaw Indian Reservation qualify for tax relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

“The IRS stands ready to help people and businesses affected by Hurricane Ida, now and in the weeks ahead,” said IRS Commissioner Chuck Rettig.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 28, 2021. As a result, affected individuals and businesses will have until Nov. 1, 2021, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return due to run out on Oct. 15, 2021, will now have until Nov. 1, 2021, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The Nov. 1, 2021 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2021, and the quarterly payroll and excise tax returns normally due on Nov. 1, 2021. Businesses with an original or extended due date also have the additional time including, among others, calendar-year partnerships and S corporations whose 2020 extensions run out on Sept. 15, 2021 and calendar-year corporations whose 2020 extensions run out on Oct. 15, 2021.    

In addition, penalties on payroll and excise tax deposits due on or after Aug. 28, 2021 and before Sept. 13, will be abated as long as the deposits are made by Sept. 13, 2021.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or the return for the prior year (2020). Be sure to write the FEMA declaration number – EM-3569 − on any return claiming a loss. See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by Hurricane Ida and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

EIN Holders Must Update Any Change to Responsible Party

The IRS is urging those entities with Employer Identification Numbers (EINs) to update their applications if there has been a change in the responsible party or contact information.

IRS regulations require EIN holders to update responsible party information within 60 days of any change by filing Form 8822-B, Change of Address or Responsible Party - Business. It is critical that the IRS have accurate information in cases of identity theft or other fraud issues related to EINs or business accounts.

For more information see IR-2021-161,July 30, 2021.

Note:  Form 8822-B can only be paper-filed.  Please refer to the form instructions for the 

appropriate address to mail the completed for to.

IRS News: Scheduled Maintenance for the Modernized e-File (MeF) Production System

Please be advised that the MeF Production System will be unavailable from 7:00 a.m. through 5:00 p.m. Eastern time on Saturday, September 11, 2021.

During this time you can still transmit returns to the Electronic Filing Center (EFC) and we will hold the e-files until the IRS restores service.  You will not receive any acks during this time.

Tax pros: Watch for tell-tale signs of identity theft

 All tax professionals should learn the signs of data theft so they can react quickly to protect clients.

During this summer’s campaign Boost Security Immunity: Fight Against Identity Theft, the IRS and its Security Summit partners remind tax pros to contact the IRS immediately when there's an identity theft issue. They should also contact insurance or cybersecurity experts to assist them with determining the cause and extent of the loss.

Here are the critical signs of data theft:

• Client e-filed returns rejected because their Social Security number was already used on another return.
• More e-file acknowledgements received than returns the tax pro filed.
• Clients responded to emails the tax pro didn't send.
• Slow or unexpected computer or network responsiveness such as:
• Software or actions take longer to process than usual
• Computer cursor moves or changes numbers without touching the mouse or keyboard
• Unexpectedly locked out of a network or computer.

Tax pros should watch for warning signs when clients report they've received:

• IRS Authentication letters 5071C, 4883C, 5747C even though they haven't filed a return.
• A refund even though they haven't filed a return.
• A tax transcript they didn't request.
• Emails or calls from the tax pro that they didn't initiate.
• A notice that someone created an IRS online account for the taxpayer without their consent.
• A notice the taxpayer wasn't expecting that:
• Someone accessed their IRS online account,
• The IRS disabled their online account.

These are just a few common examples. Tax pros should ensure they have the highest security possible.

If a tax pro or their firm thinks they are the victim of data theft, they should immediately:

• Report the theft to their local IRS Stakeholder Liaison
  Liaisons will notify IRS Criminal Investigation and others within the agency on the practitioner's behalf. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in the clients' names and will assist tax pros through the process.
• Email the Federation of Tax Administrators at statealert@taxadmin.org
  Get information on how to report victim information to the states. Most states require that the state attorney general be notified of data breaches. This notification process may involve multiple offices.

More information:
Data Theft Information for Tax Professionals
Publication 4557, Safeguarding Taxpayer Data
Small Business Information Security: The Fundamentals
Boost Security Immunity: Fight Against Identity Theft

IRS: Deadline for third quarter estimated tax payments is Sept. 15

The Internal Revenue Service reminds people that Sept. 15, 2021, is the deadline for third quarter estimated tax payments. This generally applies to people who are self-employed and some investors, retirees and those who may not normally have taxes withheld from their paycheck by their employers.

The U.S. tax system operates on a pay-as-you-go basis. This means taxpayers are to pay most of their tax during the year, as they earn or receive income. Therefore, individuals not subject to withholding may need to make quarterly estimated tax payments.