Critical Reminder: EFC and IRS Shutdown for TY 2021 - 2023 - Business Returns

IRS has announced its MeF (e-file) shutdown and cutover for Tax Year 2023. To ensure that all business tax returns e-filed through the MeF system are processed in a timely manner, submissions must occur before IRS shuts down the system on Thursday, December 26, 2024, at 11:59 a.m. Eastern time.

Electronic Filing Center (EFC) Maintenance/Shutdown

To prepare for the upcoming season and to ensure that all business returns for tax year 2023 are processed timely, Wolters Kluwer will shut down the Electronic Filing Center (EFC) on Tuesday, December 24, 2024, at 10:00 PM EST (in advance of the IRS Business E-filing Shutdown) for the following returns:

• Partnership (1065)
• Corporation (1120)
• S Corporation (1120S)
• Fiduciary (1041)
• Employee Benefit Plans (5500)
• Exempt Organization (990 Series)
• 94X Series
• All other return types not listed including state, local, and school district returns

This maintenance will end no later than the date that the IRS opens for tax year 2024, which is yet to be announced. During this maintenance period, you will NOT be able to:

• Transmit returns
• Receive acknowledgements (acks)

Final Day for Electronic Filing of 2021 Returns

Tuesday, December 24, 2024, is the final day that tax year 2021 returns can be electronically filed. Any acknowledgements must be retrieved by the user no later than December 26, 2024 at 11:59 PM EST for TY21 e-files. EFC for TY21 will not be available after December 26,2024 at 11:59 PM EST to pick up these acks.

IRS Reject F7004-905-03 for Form 7004-Business Extension

Customers submitting an extension for business returns may encounter the following rejection code from IRS.

“F7004-905-03 In Form 7004, Line 1, 'ExtensionReturnCd' the return for which the extension is filed must match the return type established with the IRS for the EIN.
/efile:Return/efile:ReturnData/efile:IRS7004/efile:ExtensionReturnCd”

The Form 7004 form code for the return associated with this application must match the IRS database.  If necessary, the type of return the extension is to be filed for can be updated on Form 7004 line 1 to match the code the IRS has on file.

The form code can be found on the EIN letter the client received form the IRS.  The customer  can also Contact the Internal Revenue Service at 1-866-255-0654 for additional information on the correct form code.

IRS Reject F1116-004-03

IRS Reject: F1116-004-03:

If Form 1116 'ForeignTaxCrCarrybackOrOverAmt' has a non-zero value and 'ForeignIncmSection951AInd' is not checked and 'ScheduleBNotRequiredInd' is not checked, then Form 1116 Schedule B must be attached at the form level.

Our team is currently investigating the root cause of reject F1116-004-03 with the IRS. Please hold returns containing Form 1116 with Schedule B until further notice. We will update this blog post as more information is made available.

Update: IRS Opens for Business Returns on January 16, 2024

 Please Note:  

The IRS will begin accepting all business tax returns at 9:00 a.m. Eastern time on Tuesday, January 16, 2024. 

Due to the number of legislation changes, the following forms will not be accepted, for the 2023 tax year, until Monday, January 29, 2024. If these forms are submitted with a tax return, the return will be rejected. Once these forms are available, they must be submitted in XML format and not as a Binary Attachment to claim the Clean Energy credits.

Form 3468 - Investment Credit 

Form 3800 - General Business Credit 

Form 7207 - Advanced Manufacturing Credit 

Form 7210 - Clean Hydrogen Production 

Form 8835 - Renewable Electricity Production Credit 

Form 8933 - Carbon Oxide Sequestration Credit 

Form 8936 Schedule A - Clean Vehicle Credit 

Please monitor the MeF Status page on IRS.gov for updates.

Reminder for Week of 12/20: EFC and IRS E-filing Shutdown for TY 2018-2020 - Business Returns

 Please take note of this important information about electronic filing.

IRS has announced its MeF (e-file) shutdown and cutover for Tax Year 2021. To ensure that all business tax returns e-filed through the MeF system are processed in a timely manner, submissions must occur before IRS shuts down the system on Sunday, December 26, 2021, at 11:59 a.m. Eastern time.

Electronic Filing Center (EFC) Maintenance/Shutdown 

To prepare for the upcoming season and to ensure that all business returns for tax year 2020 are processed timely, Wolters Kluwer will shut down the Electronic Filing Center (EFC) on Tuesday, December 21, 2021, at 11:00 PM EST (in advance of the IRS Business E-filing Shutdown) for the following returns:

• Partnership (1065)
• Corporation (1120)
• S Corporation (1120S)
• Fiduciary (1041)
• Employee Benefit Plans (5500)
• Exempt Organization (990 Series)
• 94X Series

All other return types not listed including state, local, and school district returns
This maintenance will end no later than the date that the IRS opens for tax year 2021, which is yet to be announced. During this maintenance period, you will NOT be able to:

• Transmit returns
• Receive acknowledgements (acks)

Final Day for Electronic Filing of 2018 Returns

Tuesday, December 21, 2021, is the final day that tax year 2018 returns can be electronically filed. Any acknowledgements must be retrieved by the user no later than December 26, 2021 at 11:00 PM EST for TY18 e-files. EFC for TY18 will not be available after December 26, 2021 at 11:00 PM EST to pick up these acks.

Reminder: EFC and IRS E-filing Shutdown for TY 2018-2020 - Business Returns

Please take note of this important information about electronic filing.

IRS has announced its MeF (e-file) shutdown and cutover for Tax Year 2021. To ensure that all business tax returns e-filed through the MeF system are processed in a timely manner, submissions must occur before IRS shuts down the system on Sunday, December 26, 2021, at 11:59 a.m. Eastern time.

Electronic Filing Center (EFC) Maintenance/Shutdown 

To prepare for the upcoming season and to ensure that all business returns for tax year 2020 are processed timely, Wolters Kluwer will shut down the Electronic Filing Center (EFC) on Tuesday, December 21, 2021, at 11:00 PM EST (in advance of the IRS Business E-filing Shutdown) for the following returns:

• Partnership (1065)
• Corporation (1120)
• S Corporation (1120S)
• Fiduciary (1041)
• Employee Benefit Plans (5500)
• Exempt Organization (990 Series)
• 94X Series

All other return types not listed including state, local, and school district returns
This maintenance will end no later than the date that the IRS opens for tax year 2021, which is yet to be announced. During this maintenance period, you will NOT be able to:

• Transmit returns
• Receive acknowledgements (acks)

Final Day for Electronic Filing of 2018 Returns

Tuesday, December 21, 2021, is the final day that tax year 2018 returns can be electronically filed. Any acknowledgements must be retrieved by the user no later than December 26, 2021 at 11:00 PM EST for TY18 e-files. EFC for TY18 will not be available after December 26, 2021 at 11:00 PM EST to pick up these acks.

IRS readies nearly 4 million refunds for unemployment compensation overpayments

 The Internal Revenue Service announced today it will issue another round of refunds this week to nearly 4 million taxpayers who overpaid their taxes on unemployment compensation received last year.

Refunds by direct deposit will begin July 14 and refunds by paper check will begin July 16. The IRS previously issued refunds related to unemployment compensation exclusion in May and June, and it will continue to issue refunds throughout the summer.

To ease the burden on taxpayers, the IRS has been reviewing the Forms 1040 and 1040SR that were filed prior to the law’s enactment to identify those people who are due an adjustment. For taxpayers who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.

Click here to read the full IRS News Release

IRS News: IRS letters explain why some 2020 Recovery Rebate Credits are different than expected

 WASHINGTON − As people across the country file their 2020 tax returns, some are claiming the 2020 Recovery Rebate Credit (RRC). The IRS is mailing letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected.

It's important to remember that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and shouldn't or don't need to include this information on their 2020 tax return.

People who didn't receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. They must file a 2020 tax return to claim the credit, even if they don't usually file a tax return.

When the IRS processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer's credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, it will be reduced by the amount of any EIPs already issued to them.

If there's a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return and the IRS will send the taxpayer a letter or notice explaining any change.

Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should read the notice. Then they should review their 2020 tax return, the requirements and the worksheet in the Form 1040 and Form 1040-SR instructions.

Here are some common reasons the IRS corrected the credit:

• The individual was claimed as a dependent on another person's 2020 tax return.
• The individual did not provide a Social Security number valid for employment.
• The qualifying child was age 17 or older on January 1, 2020.
• Math errors relating to calculating adjusted gross income and any EIPs already received.

IRS.gov has a special section - Correcting Recovery Rebate Credit issues after the 2020 tax return is filed – that provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter as well as the questions and answers for what information they should have available when contacting the IRS.

The Internal Revenue Service urges people who have not yet filed their 2020 tax return to properly determine their eligibility for the 2020 before they file their 2020 tax returns. To calculate any credit due, start with the amount of any EIPs received. Use the RRC Worksheet or tax preparation software. Taxpayers who didn't save or didn't receive an IRS letter or notice can securely access their individual tax information with an IRS online account.

Anyone with income of $72,000 or less can file their Federal tax return electronically for free through the IRS Free File program. The fastest way to get a tax refund which will include your 2020 RRC is to file electronically and have it direct deposited into their financial account. Bank accounts, many prepaid debit cards and several mobile apps can be used for direct deposit when a routing and account number are provided. If using a prepaid debit card, check with the financial institution to ensure the card can be used and to obtain the routing number and account number, which may be different from the card number.

For more information, see IRS information letters about Economic Impact Payments and the Recovery Rebate Credit or visit IRS.gov/rrc and the frequently asked questions by topic.

• Topic A: Claiming the Recovery Rebate Credit if you aren't required to file a tax return
• Topic B: Eligibility
• Topic C: Claiming the Credit
• Topic D: Calculating the Credit
• Topic E: Receiving the Credit
• Topic F: Finding the First and Second Economic Impact Payment Amounts to Calculate the 2020 Recovery Rebate Credit
• Topic G: Correcting issues after the 2020 tax return is filed

IRS to recalculate taxes on unemployment benefits; refunds to start in May

WASHINGTON – To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.

 

The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes.

 

Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

 

For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

 

For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.

 

There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

 

For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.

 

These taxpayers may want to review their state tax returns as well.

 

According to the Bureau of Labor Statistics, over 23 million U.S. workers nationwide filed for unemployment last year. For the first time, some self-employed workers qualified for unemployed benefits as well. The IRS is working to determine how many workers affected by the tax change already have filed their tax returns.

 

The new IRS guidance also includes details for those eligible taxpayers who have not yet filed.

 

The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns. See New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For others, instructions and an updated worksheet about the exclusion were available in March and posted to IRS.gov/Form 1040. These instructions can assist taxpayers who have not yet filed to prepare returns correctly.

IRS News: IRS projects stimulus payments to non-filer Social Security and other federal beneficiaries will be disbursed later this week

WASHINGTON – As work continues on issuing millions of Economic Impact Payments to Americans, the Internal Revenue Service and Treasury Department announced today that they anticipate payments will begin to be issued this weekend to Social Security recipients and other federal beneficiaries who do not normally file a tax return, with the projection that the majority of these payments would be sent electronically and received on April 7.

 

After receiving data from the Social Security Administration on Thursday, March 25, the IRS began the multi-step process to review, validate, and test tens of millions of records to ensure eligibility and proper calculation of Economic Impact Payments. If no additional issues arise, the IRS currently expects to complete that work and to begin processing these payment files at the end of this week. Because the majority of these payments will be disbursed electronically – through direct deposits and payments to existing Direct Express cards – they would be received on the official payment date of April 7. 

 

Many federal beneficiaries who filed 2019 or 2020 returns or used the Non-Filers tool last year were issued Economic Impact Payments, if eligible, during the last three weeks. The update today applies to Social Security, Supplemental Security Income (SSI), and Railroad Retirement Board (RRB) beneficiaries who did not file a 2019 or 2020 tax return or did not use the Non-Filers tool.

 

“IRS employees are working tirelessly to once again deliver Economic Impact Payments to the nation’s taxpayers as quickly as possible,” said IRS Commissioner Chuck Rettig. “Our teams immediately began processing data we received last week for federal benefit recipients. We know how important these payments are, and we are doing everything we can to make these payments as fast as possible to these important individuals.”

 

The Get My Payment tool is updated for eligible individuals once their payment is processed. The IRS notes that the Get My Payment tool on IRS.gov will not be updated until the weekend of April 3-4 with information for federal beneficiaries expecting payments next week.

 

The IRS continues to review data received for Veterans Affairs (VA) benefit recipients and expects to determine a payment date and provide more details soon. Currently, the IRS estimates that Economic Impact Payments for VA beneficiaries who do not regularly file tax returns could be disbursed by mid-April. VA beneficiary payment information will be available in the Get My Payment tool at a future date.

 

Federal benefit payments automatic; no action for most

 

Most Social Security retirement and disability beneficiaries, railroad retirees and recipients of veterans benefits who are eligible for an Economic Impact Payment do not need to take any action to receive a payment. These payments will be automatic. Like the previous Economic Impact Payments, Social Security and other federal beneficiaries will generally receive this third payment the same way that they receive their regular benefits.

 

Some federal benefit recipients may need to file a 2020 tax return, even if they don't usually file, to provide information the IRS needs to send payments for any qualified dependent. Eligible individuals in this group should file a 2020 tax return to be considered for an additional payment for their qualified dependent as quickly as possible.

Some federal benefit recipients already have received an Economic Impact Payment

 

The IRS emphasizes that federal benefit recipients in these groups who file tax returns already started to receive Economic Impact Payments earlier this month, along with other taxpayers.

 

Because some federal benefit recipients do not file tax returns, the IRS did not have in its tax systems the current information needed to generate the Economic Impact Payments. Last year, the IRS took the unprecedented step to receive and review data from other federal agencies and use that data to deliver payments automatically to these recipients.  This action – which had never occurred in previous stimulus efforts – minimized risk and burdens for the American public during the pandemic. Due to regular changes in the federal benefits population, the IRS needed to receive updated information this month from other government agencies. With these critical updates, eligible federal benefit recipients who don’t normally file an income tax return will get a payment automatically in the next few weeks.

 

Making these automatic payments to federal beneficiaries involves a complex, multi-step process to handle recipient data from the other agencies. For the first round of Economic Impact Payments last year, recipients in these groups received payments within four to six weeks after the CARES Act was signed into law. For the American Rescue Plan signed March 11, the IRS projects that it is on track to deliver Economic Impact Payments to federal beneficiaries at the same or faster speed.

 

More details on this third round of Economic Impact Payments and federal benefit recipients will be available soon on IRS.gov.

 

 

Other work continues on Economic Impact Payments; watch mail for checks, EIP Cards

 

In addition to work for federal benefit recipients, the IRS also continues to prepare and deliver additional Economic Impact Payments for other eligible individuals – as well as deliver tax refunds.

 

For those receiving payments in the mail, the IRS urges these taxpayers to continue to watch their mail for these payments, which could include a paper Treasury check or a special prepaid debit card called an EIP Card.

 

Taxpayers should note that the form of payment for the third Economic Impact Payment, including for some Social Security and other federal beneficiaries, may be different than earlier stimulus payments. More people are receiving direct deposits, while those receiving payments in the mail may receive either a paper check or an EIP Card – which may be different than how they received their previous Economic Impact Payments.

Special reminder for those who don't normally file a tax return

People who don't normally file a tax return and don't receive federal benefits may qualify for these Economic Impact Payments. This includes those experiencing homelessness, the rural poor, and others. For those eligible individuals who didn't get a first or second Economic Impact Payment or got less than the full amounts, they may be eligible for the 2020 Recovery Rebate Credit, but they’ll need to file a 2020 tax return. See the special section on IRS.gov: Claiming the 2020 Recovery Rebate Credit if you aren't required to file a tax return.

Free tax return preparation is available for qualifying people.

The IRS reminds taxpayers that the income levels in this new round of Economic Impact Payments have changed. This means that some people won't be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly). The payments end at $80,000 for individuals ($160,000 for married filing jointly); people with Adjusted Gross Incomes above these levels are ineligible for a payment.

 

Individuals can check the Get My Payment tool on IRS.gov to see the payment status of these payments. Additional information on Economic Impact Payments is available on IRS.gov.

 

IRS News: IRS warns university students and staff of impersonation email scam

 WASHINGTON – The Internal Revenue Service today warned of an ongoing IRS-impersonation scam that appears to primarily target educational institutions, including students and staff who have “.edu” email addresses.

The IRS’ phishing@irs.gov has received complaints about the impersonation scam in recent weeks from people with email addresses ending in “.edu.” The phishing emails appear to target university and college students from both public and private, profit and non-profit institutions.

Taxpayers who believe they have a pending refund can easily check on its status at “Where’s My Refund?” on IRS.gov. 

The suspect emails display the IRS logo and use various subject lines such as “Tax Refund Payment” or “Recalculation of your tax refund payment.” It asks people to click a link and submit a form to claim their refund.

The phishing website requests taxpayers provide their:

• Social Security Number
• First Name
• Last Name
• Date of Birth
• Prior Year Annual Gross Income (AGI)
• Driver's License Number
• Current Address
• City
• State/U.S. Territory
• ZIP Code/Postal Code
• Electronic Filing PIN

People who receive this scam email should not click on the link in the email, but they can report it to the IRS. For security reasons, save the email using “save as” and then send that attachment to phishing@irs.gov or forward the email as an attachment to phishing@irs.gov. The Treasury Inspector General for Tax Administration (TIGTA) and IRS Criminal Investigation have been notified.

Taxpayers who believe they may have provided identity thieves with this information should consider immediately obtaining an Identity Protection PIN. This is a voluntary opt-in program. An IP PIN is a six-digit number that helps prevent identity thieves from filing fraudulent tax returns in the victim’s name. 

Taxpayers who attempt to e-file their tax return and find it rejected because a return with their SSN already has been filed should file a Form 14039, Identity Theft Affidavit, to report themselves as a possible identity theft victim. See Identity Theft Central to learn about the signs of identity theft and actions to take. 

Questions and Answers about EIP3

  The IRS has released an FAQ page for EIP3, please visit it here

Modified Adjusted Income or MAGI

 If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation. If you file Form 1040-NR, you can’t exclude any unemployment compensation for your spouse.

The exclusion should be reported separately from your unemployment compensation. See the updated instructions and the Unemployment Compensation Exclusion Worksheet to figure your exclusion and the amount to enter on Schedule 1, line 8.  

When figuring the following deductions or exclusions from income, if you are asked to enter an amount from Schedule 1, line 7 enter the total amount of unemployment compensation reported on line 7 (unreduced by any exclusion amount) and if you are asked to enter an amount from Schedule 1, line 8, enter the amount from line 3 of the Unemployment Compensation Exclusion Worksheet. See the specific form or instructions for more information. If you file Form 1040-NR, you aren’t eligible for all of these deductions. See the Instructions for Form 1040-NR for details. 

• Taxable social security benefits (Instructions for Form 1040 or 1040-SR, Social Security Benefits Worksheet) 
• IRA deduction (Instructions for Form 1040 or 1040-SR, IRA Deduction Worksheet) 
• Student loan interest deduction (Instructions for Form 1040 or 1040-SR, Student Loan Interest Deduction Worksheet) 
• Nontaxable amount of Olympic or Paralympic medals and USOC prize money (Instructions for Form 1040 or 1040-SR, Schedule 1, line 8) 
• The exclusion of interest from Series EE and I U.S. Savings Bonds issued after 1989 (Form 8815) 
• The exclusion of employer-provided adoption benefits (Form 8839) 
• Tuition and fees deduction (Form 8917) 
• The deduction of up to $25,000 for active participation in a passive rental real estate activity (Form 8582) 

For more information please visit the IRS FAQ

Not calculating this correctly will result is an 8917 reject (If Form 8917 is present in the return, then 'TotalIncomeAmt' must be equal to Form 1040, 'TotalIncomeAmt'.)- the AGI on the 8917 has to match AGI on 1040

Federal Form Updates

 This morning, we released federal form updates relating to both the unemployment exclusion and the 5/17 due date. 

Important: The IRS has stated that there is no need to file an amended return (Form 1040-X) to figure the amount of unemployment compensation to exclude. The IRS will re-calculate and send the difference.

For states who have already declared their intentions on these issues, we are targeting a 3/29 release for those state forms. Please refer to our "Latest Impacts" landing page or to state government websites for individual state impacts.

Direct Debit Payment Dates: Please be aware that the IRS still has not changed their business rule for Direct Debit payment dates, and cannot currently accept Direct Debit payment dates that are after 4/15/21 (even though our software now has been updated to allow dates between 4/15 and 5/17). Until the IRS updates their rule for this, any returns with Direct Debit payment dates after 5/15 will be rejected by the IRS.

American Rescue Plan Act of 2021 Unemployment Compensation Update

It’s important to know when the Refunds Today software will be updated based on IRS guidance due to the American Rescue Plan Act of 2021’s changes to unemployment taxability.

By March 29, 2021, we will have the software updated to ensure these calculations are based on IRS e-filing guidance and are auto-calculated.

The majority of tax returns filed using Refunds Today are e-filed rather than paper filings. We want you to be aware the recently released IRS guidance for handling unemployment compensations due to the American Rescue Plan Act of 2021 changes are for paper filings, not those who choose to e-file.

We have chosen not to provide you with workarounds and manual calculations to input the pertinent data into your tax preparation filing software. These workarounds would be drawn from recently released IRS guidance for paper filings and possibly cause rework at a later date.

At Wolters Kluwer, we are here to support you during busy season and especially during the peak of your compression period. We believe taking the time to act deliberately and ensure accuracy is the best way to support you during busy season. We want you to be right the first time, not waste time and lose productivity because a workaround didn’t fully capture the information you need in current and future years.

Make sure to check the Latest Impacts to 2021 Tax Season Filing Dates blog post for more information on State and Federal filing changes. 

Wolters Kluwer – when you have to be right.

IRS News: MeF Extended Maintenance Window Sunday March 7

 MeF Production and Assurance Testing System (ATS) environments will be unavailable due to maintenance from 12:01 a.m. Eastern through 10:00 a.m. Eastern on Sunday, March 07, 2021.

Please refrain from accessing the MeF Systems during this maintenance.

Please monitor the MeF Operational Status page  for any future updates.

We apologize for any inconvenience this may cause.

IRS News: 2021 tax filing season begins Feb. 12; IRS outlines steps to speed refunds during pandemic

 IR-2021-16, January 15, 2021

WASHINGTON ― The Internal Revenue Service announced that the nation's tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.

The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.

This programming work is critical to ensuring IRS systems run smoothly. If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. People can begin filing their tax returns immediately with tax software companies, including IRS Free File partners. These groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting February 12.

"Planning for the nation's filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time," said IRS Commissioner Chuck Rettig. "Given the pandemic, this is one of the nation's most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible."

Last year's average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline.

Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.

The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where's My Refund for their personalized refund date.

Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.

Tips for taxpayers to make filing easier

To speed refunds and help with their tax filing, the IRS urges people to follow these simple steps:

• File electronically and use direct deposit for the quickest refunds.
   
• Check IRS.gov for the latest tax information, including the latest on Economic Impact Payments. There is no need to call.
   
• For those who may be eligible for stimulus payments, they should carefully review the guidelines for the Recovery Rebate Credit. Most people received Economic Impact Payments automatically, and anyone who received the maximum amount does not need to include any information about their payments when they file. However, those who didn't receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit when they file their 2020 tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.
   
• Remember, advance stimulus payments received separately are not taxable, and they do not reduce the taxpayer's refund when they file in 2021.

Key filing season dates

There are several important dates taxpayers should keep in mind for this year's filing season:

• January 15. IRS Free File opens. Taxpayers can begin filing returns through Free File partners; tax returns will be transmitted to the IRS starting Feb. 12. Tax software companies also are accepting tax filings in advance.
   
• January 29. Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
   
• February 12. IRS begins 2021 tax season. Individual tax returns begin being accepted and processing begins.
   
• February 22. Projected date for the IRS.gov Where's My Refund tool being updated for those claiming EITC and ACTC, also referred to as PATH Act returns.
   
• First week of March. Tax refunds begin reaching those claiming EITC and ACTC (PATH Act returns) for those who file electronically with direct deposit and there are no issues with their tax returns.
   
• April 15. Deadline for filing 2020 tax returns.
   
• October 15. Deadline to file for those requesting an extension on their 2020 tax returns

Filing season opening

The filing season open follows IRS work to update its programming and test its systems to factor in the second Economic Impact Payments and other tax law changes. These changes are complex and take time to help ensure proper processing of tax returns and refunds as well as coordination with tax software industry, resulting in the February 12 start date.

The IRS must ensure systems are prepared to properly process and check tax returns to verify the proper amount of EIP's are credited on taxpayer accounts – and provide remaining funds to eligible taxpayers.

Although tax seasons frequently begin in late January, there have been five instances since 2007 when filing seasons did not start for some taxpayers until February due to tax law changes made just before the start of tax time.

IRS News: Economic Impact Payments on their way, visit IRS.gov instead of calling

 WASHINGTON – The Internal Revenue Service today urged people to visit IRS.gov for the most current information on the second round of Economic Impact Payments rather than calling the agency or their financial institutions or tax software providers. IRS phone assistors do not have additional information beyond what’s available on IRS.gov.

 
The IRS and the Treasury Department began issuing a second round of Economic Impact Payments, often referred to as stimulus payments, last week. 

The direct deposit payments may take several days to post to individual accounts. Some Americans may have seen the direct deposit payments as pending or as provisional payments in their accounts before the scheduled payment date of Jan. 4, 2021, which is the official date funds are available.

Paper checks also began going out and will continue to be sent through January. Some people will be mailed debit cards in January, and the IRS urges people to carefully check their mail. Mailed payments will require more processing and mailing time. Those who reside abroad will have longer wait times for checks as disruptions to air travel and mail delivery in some countries will slow delivery.

The IRS emphasizes that there is no action required by eligible individuals to receive this second payment. The payments are automatic, and people should not contact their financial institutions or the IRS with payment timing questions.

Eligibility
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. Most people who have an adjusted gross income for 2019 of up to $75,000 for individuals and up to $150,000 for married couples filing joint returns and surviving spouses, will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced.

Checking the status of a payment
Starting today, 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.

Payment not received or less than expected? Claim on 2020 tax return 
Payments started going out last week and will continue through mid-January. Direct deposit payments are being made first to those that have valid routing and account information on file for direct deposit purposes. Because of the speed at which IRS issued this second round of payments, some payments may have been sent to an account that may be closed or no longer active. By law, the financial institution must return the payment to the IRS, they cannot hold and issue the payment to an individual when the account is no longer active. While the IRS is exploring options to correct these payments, if you have not received your full payment by the time you file your 2020 tax return, you may claim the Recovery Rebate Credit on your tax return.

The credit is figured like the Economic Impact Payment, except that the credit eligibility and the credit amount are based on the 2020 tax year information, including income.

For people who received a partial Economic Impact Payment, they can take the Recovery Rebate Credit for any remaining amount they’re eligible for by completing line 30 of the 2020 Form 1040 or 1040-SR.

Changing bank account or mailing information 
The IRS cannot change payment information, including bank account or mailing information. If an eligible taxpayer does not get a payment or it is less than expected, it may be claimed on the 2020 tax return as the Recovery Rebate Credit. Remember, 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.

More information

For more information about Economic Impact Payments and the 2020 Recovery Rebate Credit, visit IRS.gov/eip. Starting next week, people can check the status of their payment at IRS.gov/GetMyPayment. For other COVID-19-related tax relief, visit IRS.gov/Coronavirus. 

IRS News: IRS issues scam warning to EROs

 

The Internal Revenue Service today warned Electronic Return Originators of an identity theft scam targeting EFIN holders. Fraudsters posing as a “contractor” for the IRS may contact EROs, suggesting they are verifying or checking on the ERO’s EFIN acceptance letter. The scammers may request that the ERO email them a copy of the EFIN acceptance letter and provide a telephone number to call for questions. As with all scams, this one can evolve and the elements may change. EROs should remain vigilant and take steps to protect their identities and taxpayer data. EROs who receive contacts from individuals posing as the IRS should contact the Treasury Inspector General for Tax Administration at www.tigta.gov to file a complaint. EROs who received a contact and disclosed their acceptance letter should contact the e-Services help desk immediately.

IRS News: e-News for Payroll Professionals

 

1.  Electronic signature options will simplify third-party authorizations

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Check out the latest IRS issue of “A Closer Look”, where Office of Professional Responsibility Director Sharyn Fisk explains how new electronic signature options will simplify third-party authorizations.

By moving submission of Form 2848, Power of Attorney and Form 8821, Tax Information Authorization, to a new online process, it gives tax/payroll professionals and taxpayers a safe option to electronically sign and upload these critical documents without an in-person meeting.

"A Closer Look" features posts from a variety of IRS executives that delve into the major issues facing the IRS and tax administration. Subscribe to IRS Newswire to get an email copy of the posts as they become available.

  2.  Common errors businesses should avoid when claiming employer tax credits

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Here’s a short IRS COVID Tax Tip to share with employers, partners and clients explaining how they can avoid common errors when filing Form 941 and claiming an employer tax credit.

Tips include information on:

• Reporting advances requested instead of the advance payments of credits received
• Incorrectly reconciling the advance payment of the credit requested and received
• Using Form 7200 to request the advance payment of employer credit – not claiming it

The Tax Tip also contains links to more helpful information on this topic.

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  3.  2020 National Tax Security Awareness Week – November 30 through December 4

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The IRS, state tax agencies and the nation's tax industry announced their 5th Annual National Tax Security Awareness Week will take place between November 30 and December 4, 2020.

This year there's a heightened need for security as fraudsters seek to use the COVID-19 pandemic to scam taxpayers and payroll community.

National Tax Security Awareness Week will feature a week-long series of 30-minute presentations on the following topics – click the links below to register for each event:

Monday, November 30: Cyber Monday: Security Tips from the IRS

• Shopping securely online
• Security software tips for computers and mobile devices
• Identifying phishing scams
• Cybersecurity when working from home

Tuesday, December 1: How to Protect Your Accounts Using Multi-Factor Authentication

• National Institute of Standards and Technology’s tips for strong passwords
• Password managers to secure unique passwords
• Options for multi-factor authentication

Wednesday, December 2: Get an Identity Protection Pin

• What is an Identity Protection PIN?
• January expansion of IRS IP PIN Program
• Steps to obtain an IP PIN

Thursday, December 3: Small Businesses Must Guard Against Identity Theft

• Federal Trade Commission’s security tips for small business
• Protecting wireless networks
• IRS assistance for businesses experiencing tax-related identity theft

Friday, December 4: Beware of Phishing Scams Targeting All Taxpayers

• Impact of COVID-19 on cybercriminal phishing scams
• Visual examples of recent COVID-19 related phishing scams
• Common characteristics of phishing messages

All events are at 2 p.m. Eastern, 1 p.m. Central, Noon Mountain, 11 a.m. Pacific, 8 a.m. Hawaii.

The week will also include special informational graphics and a social media effort on Twitter and Instagram with @IRSnews and #TaxSecurity.

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  4.  IRS to mask key business transcript details; protects taxpayers from identity theft

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The IRS will begin masking sensitive data on business tax transcripts beginning December 13 to protect business taxpayers from identity theft.

The announcement provides time for stakeholders to make any adjustments. The agency previously masked sensitive data on individual tax transcripts two years ago.

Here's what’s visible on the new tax transcript:

• Last 4 digits of any Employer Identification Number listed on the transcript: XX-XXX1234
• Last 4 digits of any Social Security number or Individual Tax Identification Number listed on the transcript: XXX-XX-1234
• Last 4 digits of any account or telephone number
• First 4 characters of the first, and last name for any individual (first 3 characters if the name has only 4 letters)
• First 4 characters of any name on the business name line
• First 6 characters of the street address, including spaces
• All money amounts, including wage and income, balance due, interest and penalties

More information about the masking of transcripts can be found at IRS.gov's e-Services page after December 13.

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  5.  IRS Advisory Council issues 2020 Annual Report

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The Internal Revenue Service Advisory Council (IRSAC) issued its annual report for 2020 that includes recommendations to the IRS on new and continuing issues in tax administration, such as:

• Funding of the IRS
• The Taxpayer First Act
• Expansion of e-File
• Proposal for an early exam program for Large Business
• Telephone response times for the Practitioner Priority Service
• Resources for Native American taxpayers and federally recognized tribes
• Taxpayer Digital Communications

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  6.  Reporting nonemployee compensation and backup withholding

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The IRS reminds payroll professionals that starting in tax year 2020, payers must complete the new Form 1099-NEC, Nonemployee Compensation, to report any payment of $600 or more to a payee.

Generally, payers must file Form 1099-NEC by January 31. For 2020 tax returns, the due date is February 1, 2021. There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Also, nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer or the IRS notifies the payer that the TIN provided was incorrect.

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  7.  Technical guidance

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Revenue Procedure 2020-51 provides a safe harbor for certain Paycheck Protection Program (PPP) loan participants, whose loan forgiveness has been partially or fully denied. Also for those who decide to forego requesting loan forgiveness, they may be able to deduct some or all of the eligible expenses on:

• The taxpayer’s timely filed, including extensions, original income tax return or information return, as applicable, for the 2020 taxable year
• An amended return or an administrative adjustment request (AAR) under section 6227 of the Internal Revenue Code (Code) for the 2020 taxable year, as applicable. 

For taxpayers who decide to forego requesting loan forgiveness, the safe harbor also allows these taxpayers to claim a deduction for the otherwise deductible eligible payments on an original income tax return or information return, as applicable, for the taxable year in which the taxpayer decides to forego requesting forgiveness.

Revenue Ruling 2020-27 provides guidance on whether a PPP loan participant that paid or incurred certain otherwise deductible expenses can deduct those expenses in the taxable year in which the expenses were paid or incurred, provided that if, at the end of that year, the taxpayer reasonably expects to receive forgiveness of the covered loan. The revenue ruling also provides guidance if, as of the end of the 2020 taxable year, the PPP loan participant has not applied for forgiveness, but intends to apply in the next taxable year.