by | Aug 15, 2021 | Tax Tips and News
New guidance from the Internal Revenue Service seeks to clear the air on the Work Opportunity Tax Credit (WOTC) for employers and gives relief to them as well.
WOTC makes a federal income tax credit available to those employers who hire qualified workers from groups specified in the Internal Revenue Code. These groups are known to face an uphill climb for employment and can include Designated Community Residents or Qualified Summer Youth Employees.
IRS Notice 2021-43 extends the existing 28-day deadline for employers to submit a request to a designated local agency (DLA) certifying new hires are either a Designated Community Resident or a Qualified Summer Youth Employee.
Qualified employees must have been hired between Jan. 1 and Oct. 8 of this year. To qualify, workers have to live full-time in an Empowerment Zone.
Empowerment zones themselves were scheduled to be terminated at the end of 2020, but new legislation allowed them to be extended through 2025.
While all Empowerment Zone designations were extended to Dec. 31, 2025, the relief set forth in Notice 2021-43 gives employers until Nov. 8, 2021 to submit Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit.
Notice 2021-43 also furnishes guidance to employers who submitted a Form 8850 to a DLA for these employees but were denied because of the original termination of the Empowerment Zones. Relief is also applied to employers who got a certification before the extension of Empowerment Zones went through.
The Work Opportunity Tax Credit can trace its roots all the way back to 1996 and the Small Business Job Protection Act. The WOTC tax credit amounts to a percentage of qualified wages paid in a given year to an employee certified by the Designated Local Agency as a member of one of the specified groups targeted for employment.
Source: IR-2021-168
– Story provided by TaxingSubjects.com
by | Aug 14, 2021 | Tax Tips and News
The Security Summit is this week broadening the scope of its 2021 “Protect Your Clients; Protect Yourself” campaign to include the different types of phishing scams that taxpayers may see in the coming months. This immediately follows the Summit highlighting recent unemployment compensation scams.
(Read more about those scams in “Security Summit Warns of Scams Targeting Unemployment Compensation.”)
Why is the Security Summit warning taxpayers and tax pros about phishing scams?
Now a ubiquitous part of having an email account, phishing scams have steadily added new online platforms to their portfolio over the past few years—and the pandemic has seemingly accelerated that evolution. Since identity thieves continue to see success when deploying these scams, the increasing number of places we will encounter them presents a threat that can’t be ignored.
The good news is that knowing what to look for can help protect your data.
What are the common signs of phishing scams?
According to the Security Summit, “phishing emails or SMS/texts (known as “smishing”) attempt to trick the person receiving the message into disclosing personal information such as passwords, bank account numbers, credit card numbers or Social Security numbers.” And most tend to do two things:
- Appear to come from a known or trusted source, such as a colleague, bank, credit card company, cloud storage provider, tax software provider or even the IRS.
- Tell a story, often with an urgent tone, to trick the receiver into opening a link or attachment.
Some phishing scams use information about their victims—whether gathered from social media or other easily accessible public sources—to make their messages appear legitimate. The Security Summit says this “spear phishing” is commonly used to tax professionals by impersonating current and prospective clients.
“In a reoccurring and very successful scam this year, criminals posed as potential clients, exchanging several emails with tax professionals before following up with an attachment that they claimed was their tax information,” the Summit warns. “This scam was popular as many tax professionals worked remotely and communicated with clients over email versus in-person or over the telephone because of COVID.”
Like other phishing emails and texts, these often include a link or attachment that can install a number of nasty types of malware that can be devastating to your tax practice:
- Remote access trojan (RAT) to take over the tax professional’s office computer systems, identify pending tax returns, complete them and e-file them, changing only the bank account information to steal the refund.
- Ransomware … [that] attacks the tax pro’s computer system to encrypt files and hold the data for ransom.
So, reconsider clicking any links or attachments you see in emails and text messages—especially those you aren’t expecting. (Heck, you might not even want to click on email links at all!)
Where will I encounter phishing scams?
Phishing existed long before “Internet” became a household term. Just as the name implies, you’re more likely to find success if you drop your line into water that has plenty of fish. That’s why criminals are quick to adopt communication platforms that are highly populated, starting with the mail and phone systems.
While we still get peppered with phishing letters and calls, identity thieves had added emails, text messages, and social media messages to their arsenal. And the Security Summit warns that the transition to remote work has simply increased the volume and type of online scams.
In other words, you and your clients will need to closely scrutinize all digital communications—even those that appear to come from friends and coworkers.
Source: IR-2021-166
– Story provided by TaxingSubjects.com
by | Aug 12, 2021 | Tax Tips and News
A new safe harbor unveiled by the Internal Revenue Service and the Treasury Department lets employers exclude some items from their gross receipts when figuring if they are eligible for the Employee Retention Credit, or ERC.
This new safe harbor is detailed in Revenue Procedure 2021-33 and allows employers to exclude these amounts when calculating ERC eligibility:
- The amount of the forgiveness of a Paycheck Protection Program (PPP) Loan;
- Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; and
- Restaurant Revitalization Grants under the American Rescue Plan Act of 2021.
Employers have to determine whether they qualify to claim the ERC on their quarterly employment tax return. To claim the safe harbor, they only have to leave those specific amounts out of the calculations.
The IRS reminds that when it comes to determining an employer’s eligibility for the ERC, the revenue procedure requires the safe harbor to be applied consistently across all quarters where the retention credit is relevant.
There’s also an all-or-none kind of rule when applying the safe harbor. In situations where several employers are treated as a single employer by aggregation rules, the employer claiming the credit has to apply the safe harbor to the others.
Conversely, employers aren’t required to use the safe harbor and the specified amounts can’t be excluded for any purpose other than calculating ERC eligibility.
The IRS is expanding their guidance
Revenue Procedure 2021-33 updates and expands guidance originally handed down in these publications:
- Notice 2021-20, detailing the ERC in terms of qualified wages paid after March 12, 2020, and before Jan. 1, 2021;
- Notice 2021-23, addressing the ERC relating to qualified wages paid after Dec. 31, 2020, and before July 1, 2021; and
- Notice 2021-49, which applies to qualified wages paid after June 30, 2021 and before Jan. 1, 2022.
To claim the ERC on their regular quarterly employment tax return, employers generally use Form 941, Employers Quarterly Federal Tax Return. If filing an adjusted return, Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund is generally used.
There may yet be more to come on the safe harbor for the Employee Retention Credit. Both the IRS and the Treasury Department say they are watching for new legislation and promise to update resources when it’s available.
Source: IR-2021-167
– Story provided by TaxingSubjects.com
by | Aug 12, 2021 | Tax Tips and News
A new safe harbor unveiled by the Internal Revenue Service and the Treasury Department lets employers exclude some items from their gross receipts when figuring if they are eligible for the Employee Retention Credit, or ERC.
This new safe harbor is detailed in Revenue Procedure 2021-33 and allows employers to exclude these amounts when calculating ERC eligibility:
- The amount of the forgiveness of a Paycheck Protection Program (PPP) Loan;
- Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; and
- Restaurant Revitalization Grants under the American Rescue Plan Act of 2021.
Employers have to determine whether they qualify to claim the ERC on their quarterly employment tax return. To claim the safe harbor, they only have to leave those specific amounts out of the calculations.
The IRS reminds that when it comes to determining an employer’s eligibility for the ERC, the revenue procedure requires the safe harbor to be applied consistently across all quarters where the retention credit is relevant.
There’s also an all-or-none kind of rule when applying the safe harbor. In situations where several employers are treated as a single employer by aggregation rules, the employer claiming the credit has to apply the safe harbor to the others.
Conversely, employers aren’t required to use the safe harbor and the specified amounts can’t be excluded for any purpose other than calculating ERC eligibility.
The IRS is expanding their guidance
Revenue Procedure 2021-33 updates and expands guidance originally handed down in these publications:
- Notice 2021-20, detailing the ERC in terms of qualified wages paid after March 12, 2020, and before Jan. 1, 2021;
- Notice 2021-23, addressing the ERC relating to qualified wages paid after Dec. 31, 2020, and before July 1, 2021; and
- Notice 2021-49, which applies to qualified wages paid after June 30, 2021 and before Jan. 1, 2022.
To claim the ERC on their regular quarterly employment tax return, employers generally use Form 941, Employers Quarterly Federal Tax Return. If filing an adjusted return, Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund is generally used.
There may yet be more to come on the safe harbor for the Employee Retention Credit. Both the IRS and the Treasury Department say they are watching for new legislation and promise to update resources when it’s available.
Source: IR-2021-167
– Story provided by TaxingSubjects.com
by | Aug 11, 2021 | Tax Tips and News
The third installment of the Security Summit’s 2021 “Protect Yourself; Protect Your Client” campaign highlights recent scams targeting unemployment compensation. As part of a five-week focus on identity theft prevention, the Summit is once again asking tax professionals to help spread the word to clients.
Issued last week, the IRS press release noted that thieves had ramped up their efforts following continued Congressional expansion of unemployment throughout the pandemic. This comes as no surprise since criminals frequently target victims of natural disasters: The confusion and urgency created by these events makes people more susceptible to phishing scams and fraud.
Unfortunately, criminals pushing these unemployment scams have already been successful. In 2020 alone, roughly $89 billion in benefits were stolen. And just last week, the Federal Trade Commission sounded the alarm on a spate of new phishing text messages that—at first glance—appear to be from state workforce agencies.
In other words, identity thieves are not content to rest on their laurels.
What are the signs that someone is the victim of an unemployment compensation scam?
The IRS says one surefire sign that someone is the victim of an unemployment compensation scam is receiving a tax form for unreceived benefits.
“States report compensation to the individual and to the IRS by using the Form 1099-G,” the agency explains. “Because of fraud and identity theft, many taxpayers received Forms 1099-G for compensation they did not receive. Some taxpayers received forms from multiple states.”
What should I do if I think my client is a victim of an unemployment compensation scam?
Since unemployment benefits are taxable, the IRS warns that these scams can also affect a victim’s tax return. Luckily, tax professionals specialize in tax-related issues. That’s why the agency recommends six things you can do to help clients who may have been the victim of an unemployment compensation scam:
- File a Form 14039, Identity Theft Affidavit PDF, only if an e-filed tax return rejects because the client’s Social Security number has already been used. Do not file the IRS Form 14039 to report unemployment compensation fraud to the IRS.
- Report the fraud to state workforce agencies, and request a corrected Form 1099-G. Each state has its own process for reporting unemployment compensation fraud. The U.S. Department of Labor has created an information page with all state contacts and other information at DOL.gov/fraud.
- File a tax return reporting only the actual income received. State workforce agencies may not be able to timely issue a corrected Form 1099-G. Even if the client has not received a corrected Form 1099-G, report only wages and income received and exclude any fraudulent claims.
- Consider an IRS Identity Protection PIN. Clients receiving Forms 1099-G are identity theft victims whose personal information could be used for additional criminal activities, such as filing fraudulent tax returns. All taxpayers who can verify their identities can now obtain an Identity Protection PIN to protect their SSNs. Read more about IP PINs at IRS.gov/ippin.
- Follow Federal Trade Commission recommendations for identity theft victims. Taxpayers should consider steps to protect their credit and other actions outlined by the FTC. The DOL also includes this information on its DOL.gov/fraud page.
- Finally, tax professionals’ business clients can also assist in fighting unemployment compensation fraud by responding quickly to state notices about employees filing jobless claims, especially when it has no record of those employees.
The IRS also notes that the American Rescue Plan Act included an exclusion for tax year 2020 unemployment compensation that could help some victims of an unemployment compensation scam deal with the fallout:
- Up to $10,200 for individuals
- Up to $20,400 for married couples filing jointly ($10,200 per spouse)
However, this exclusion is only available to taxpayers with an adjusted gross income that is less than $150,000.
What other data security resources does the IRS recommend?
The IRS suggests checking out the following links for additional information about data security:
Source: IR-2021-163
– Story provided by TaxingSubjects.com
by | Aug 10, 2021 | Tax Tips and News
New guidance from the Internal Revenue Service aims to help employers better understand the employee retention credit—and how they can qualify for it.
The new guidance spotlights employers who pay qualified wages after June 30 of this year and before Jan. 1 of 2022. Additional guidance tries to answer various miscellaneous questions around the credit in both the 2020 and 2021 tax years.
Why is the IRS issuing new employee retention credit guidance?
Additional instructions were needed after the American Rescue Plan Act of 2021 (ARP) made changes to the employee retention credit that apply to the third and fourth quarter of 2021.
This new guidance is contained in Notice 2021-49, which builds on guidance on the employee retention credit that was originally published in Notice 2021-20 and Notice 2021-23.
Some of the changes outlined in Notice 2021-49 include:
- Making the credit available to eligible employers who pay qualified wages after June 30, 2021, and before Jan. 1, 2022,
- Expanding the definition of eligible employer to include “recovery startup businesses,”
- Modifying the definition of qualified wages for “severely financially distressed employers,” and
- Providing that the employee retention credit does not apply to qualified wages taken into account as payroll costs in connection with a shuttered venue grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or a restaurant revitalization grant under section 5003 of the ARP.
The Treasury Department also uses Notice 2021-49 to respond to various questions it has received about the employee retention credit. The IRS says these issues are addressed in the latest guidance:
- The definition of full-time employee and whether that definition includes full-time equivalents,
- The treatment of tips as qualified wages and the interaction with the section 45B credit,
- The timing of the qualified wages deduction disallowance and whether taxpayers that already filed an income tax return must amend that return after claiming the credit on an adjusted employment tax return, and
- Whether wages paid to majority owners and their spouses may be treated as qualified wages.
Those employers who qualify for the employee retention credit should report their total qualified wages and the related health insurance costs for each quarter on their employment tax returns for the period. Generally, this will be done using Form 941.
If a reduction in the employer’s employment tax deposits isn’t enough to cover the amount of the credit, some employers could get an advance payment from the IRS. Employers seeking the advance should file Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Both the Treasury Department and the IRS say they recognize that the employee retention credit is a changing landscape and are closely watching for new legislation that can change the current guidance.
New guidance will be issued, they say, whenever it’s warranted.
For more information on the employee retention credit, check out the Frequently Asked Questions on Tax Credits for Required Paid Leave and other topics found on the Coronavirus page on the IRS website, IRS.gov.
Source: IR-2021-165
– Story provided by TaxingSubjects.com
Golden Coast Tax Service