IR-2020-266, December 1, 2020
WASHINGTON — The Internal Revenue Service, state tax agencies and the tax industry today marked the second day of National Tax Security Awareness Week by announcing an improved feature that will be available on all 2021 online tax preparation products.
Designed to protect both taxpayers and tax professionals, multi-factor authentication means the returning user must enter two pieces of data to securely access an account or application. For example, taxpayers must enter their credentials (username and password) plus a numerical code sent as a text to their mobile phone.
The agreement to add the multi-factor authentication feature is just one publicly visible example of the ongoing collaboration by the IRS, state tax agencies and the tax industry, which work together as the Security Summit. 2020 marks the fifth year of the Security Summit and of National Tax Security Awareness Week.
“Multi-factor authentication option is an easy, free way to really step up protection of your data whether you’re a taxpayer or a tax professional,” said Chuck Rettig, IRS Commissioner. “This is an important step being taken by the tax software industry. This is just one example of the many actions taken by the Summit partners over the past five years that have dramatically improved our ability to combat identity thieves and to protect taxpayers.”
Some online products previously offered multi-factor authentication. However, for 2021 all providers agreed to make it a standard feature and all agreed that it would meet requirements set by the National Institute of Standards and Technology. Multi-factor authentication may not be available on over-the-counter hard disk tax products.
Because the multi-factor authentication option is voluntary, Summit partners urged both taxpayers and tax professionals to use it. Multi-factor authentication can reduce the likelihood of identity theft by making it difficult for thieves to get access to sensitive accounts.
Users should check the security section in their online tax product account to make the change. It may be labeled as two-factor authentication or two-step verification or similar names.
Use of multi-factor authentication is especially important for tax professionals who continue to be prime targets of identity thieves. Of the numerous data thefts reported to the IRS from tax professional offices this year, most could have been avoided had the practitioner used multi-factor authentication to protect tax software accounts.
Thieves use a variety of scams – but most commonly by a phishing email – to download malicious software, such as keystroke software. This malware will eventually enable them to steal all passwords from a tax pro. Once the thief has accessed the practitioner’s networks and tax software account, they will complete pending taxpayer returns, alter refund information and use the practitioner’s own e-filing and preparer numbers to file the fraudulent return – a dangerous combination.
However, with multi-factor authentication, it’s unlikely the thief will have stolen the practitioner’s cell phone — blocking the ability to receive the necessary security code to access the account. This protects the tax pro’s account information.
There are multiple options for multi-factor authentication. For example, taxpayers and tax practitioners can download an authentication app to their mobile device. These apps are readily available through Google Play or Apple’s App Store. Once properly configured, these apps will generate a temporary, single-use security code, which the user must enter into their tax software to complete authentication. Use a search engine for “Authentication apps” to learn more.
Other options include codes that may be sent to practitioner’s email or mobile phone via text but those are not as secure as an authentication app.
While no product is fool-proof, multi-factor authentication does dramatically reduce the likelihood that taxpayers or tax practitioners will become victims. Multi-factor authentication should be used wherever it is offered. For example, financial accounts, social media accounts, cloud storage accounts and popular email providers all offer multi-factor authentication options.
The IRS, state tax agencies, the private sector tax industry, including tax professionals, work in partnership as the Security Summit to help protect taxpayers from identity theft and refund fraud. This is the second in a week-long series of tips to raise awareness about identity theft. See IRS.gov/securitysummit for more details. https://www.irs.gov/newsroom/irs-national-tax-security-awareness-week-day-2-2021-online-tax-preparation-products-to-offer-multi-factor-authentication-for-taxpayers-tax-pros
IR-2020-254, November 13, 2020
WASHINGTON — Moving to protect business taxpayers from identity theft, the Internal Revenue Service today announced that starting December 13 it will begin masking sensitive data on business tax transcripts.
The announcement provides 30 days for stakeholders to make any adjustments. The IRS began informing tax professionals of this change during the summer Nationwide Tax Forums. The agencypreviously masked sensitive data on individual tax transcripts two years ago.
A tax transcript is a summary of a tax return. Transcripts are often used by tax professionals to prepare prior year tax returns or represent the client before the IRS. Lenders and others use tax transcripts for income verification purposes.
For both the individual and business tax transcript, there is space for a Customer File Number. The Customer File Number is an optional 10-digit number that can be created usually by third parties that allow them to match a transcript to a taxpayer. The Customer File Number field will appear on the transcript when that number is entered on Line 5 of Form 4506-T, Request for Transcript of Tax Return, and Form 4506T-EZ.
More information about the masking of transcripts can be found at IRS.gov’s e-Services page after December 13. https://www.irs.gov/newsroom/irs-to-mask-key-business-transcript-details-protect-taxpayers-from-identity-theft
IR-2020-248, November 2, 2020
WASHINGTON — The Internal Revenue Service today announced a number of changes designed to help struggling taxpayers impacted by COVID-19 more easily settle their tax debts with the IRS.
The IRS assessed its collection activities to see how it could apply relief for taxpayers who owe but are struggling financially because of the pandemic, expanding taxpayer options for making payments and alternatives to resolve balances owed.
“The IRS understands that many taxpayers face challenges, and we’re working hard to help people facing issues paying their tax bills,” said IRS Commissioner Chuck Rettig. “Following up on our People First Initiative earlier this year, this next phase of our efforts will help with further taxpayer relief efforts.”
“We want people to know our IRS employees are committed to continue helping taxpayers wherever possible, including offering many options for those struggling to pay their tax bills,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support. Guillot discussed the new relief options in a new edition of IRS “A Closer Look.”
Taxpayers who owe always had options to seek help through payment plans and other tools from the IRS, but the new IRS Taxpayer Relief Initiative is expanding on those existing tools even more.
The 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. Among the highlights of the Taxpayer Relief Initiative:
The IRS offers options for short-term and long-term payment plans, including Installment Agreements via the Online Payment Agreement (OPA) system. In general, this service is available to individuals who owe $50,000 or less in combined income tax, penalties and interest or businesses that owe $25,000 or less combined that have filed all tax returns. The short-term payment plans are now able to be extended from 120 to 180 days for certain taxpayers.
Installment Agreement options are available for taxpayers who cannot full pay their balance but can pay their balance over time. The IRS expanded Installment Agreement options to remove the requirement for financial statements and substantiation in more circumstances for balances owed up to $250,000 if the monthly payment proposal is sufficient. The IRS also modified Installment Agreement procedures to further limit requirements for Federal Tax Lien determinations for some taxpayers who only owe for tax year 2019.
In addition to payment plans and Installment Agreements, the IRS offers 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 — The IRS is highlighting reasonable cause assistance 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.
All taxpayers can access important information on IRS.gov. Many taxpayers requesting payment plans, including Installment Agreements, can apply through IRS.gov without ever having to talk to a representative.
Other requests, including this new relief, can be made by contacting the number on the taxpayer’s notice or responding in writing. However, to request relief, the IRS reminds taxpayers they must be responsive when they receive a balance due notice.
“If you’re having a tax issue, don’t go silent. Please don’t ignore the notice arriving in your mailbox,” Guillot said. “These problems don’t get better with time. We understand tax issues and know that dealing with the IRS can be intimidating, but our employees really are here to help.”
Throughout COVID-19, the IRS has continued to adjust operations to help ensure the health and safety of employees and taxpayers, including the extensive and temporary relief of the IRS People First Initiative. More information and background on the collection relief and procedures can be found in “A Closer Look.”
“While it’s been important for us and the nation to resume our critical tax compliance responsibilities, we continue to assess the wide-ranging impacts of COVID-19 and other difficulties people are experiencing,” Guillot said. https://www.irs.gov/newsroom/irs-makes-it-easier-to-set-up-payment-agreements-offers-other-relief-to-taxpayers-struggling-with-tax-debts
IR-2020-253, November 9, 2020
WASHINGTON – The Internal Revenue Service today urged anyone who doesn’t normally file a tax return and has not yet received an Economic Impact Payment (EIP) to take advantage of “National EIP Registration Day,” on Tuesday, Nov. 10. National EIP Registration Day is part of the agency’s further concerted push with partners across the country to make sure every eligible American has registered before the Nov. 21 deadline to receive their Economic Impact Payment this year.
National EIP Registration Day will take place just a few days ahead of the Nov. 21 deadline for registering online to receive an Economic Impact Payment. This special event will feature support from IRS partner groups inside and outside of the tax community, including those that work with low-income and underserved communities. These groups will help spread the word about the new Nov. 21 deadline and, in some cases, provide special support for people who still need to register for the payments on IRS.gov.
Earlier this fall, the IRS sent nearly 9 million letters to people who appear to qualify for the Economic Impact Payments but don’t normally file a tax return. To help tax professionals and other partners reach out to these non-filers, the IRS has posted a zip-code level breakdown of the number of these letters. The letters, along with the special Nov. 10 event, urge people to use the Non-Filers: Enter Info Here tool, available exclusively on IRS.gov.
“Our partner groups have been vital to our efforts to reach many underserved communities,” said IRS Commissioner Chuck Rettig. “Already, millions of Americans have successfully used the Non-Filers portal and received their Economic Impact Payment. Registration is quick and easy, and we urge everyone to share this information to reach as many people before time runs out on Nov. 21.”
Many partner groups have been working with the IRS, helping translate and making available Economic Impact Payment information and resources in 35 languages. The IRS is also conducting a multilingual push on social media to support the final registration drive.
Since the Non-Filers tool launched in the spring, nearly 8.3 million people who normally aren’t required to file a tax return have registered for the payments. The IRS continues to work to reach others who haven’t used the tool yet, which led to this fall’s mailing and the Nov. 10 registration event.
The tool is designed for people with incomes typically 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.
Normally, an eligible individual who registers will receive a $1,200 payment if they are single or $2,400 if married and file a joint return. If they have dependent children, they will normally also get an additional $500 for each qualifying child.
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.
Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool, available only on IRS.gov. For other EIP-related information, including answers to frequently asked questions, visit the Economic Impact Payment Information Center on IRS.gov. https://www.irs.gov/newsroom/irs-reminder-to-non-filers-nov-10-is-national-eip-registration-day-community-partners-can-help-people-sign-up-for-economic-impact-payment
IR-2020-242, October 23, 2020
WASHINGTON — The Internal Revenue Service today set November 10 as “National EIP Registration Day,” as the agency and partners across the country launch a final push to encourage everyone who doesn’t normally file a tax return to register to receive an Economic Impact Payment.
“National EIP Registration Day” will take place just a few days ahead of the extended November 21 registration deadline. This special event will feature support from IRS partner groups inside and outside of the tax community, 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, both urge people to use the Non-Filers: Enter Info Here tool, available exclusively on IRS.gov.
“Our partner groups have been a critical part of the unprecedented IRS outreach and education campaign this year to contact as many people as possible about these payments,” said IRS Commissioner Chuck Rettig. “As a result, millions of Americans have successfully used the Non-filers portal and received their Economic Impact Payment. Registration is quick and easy, and we urge everyone to share this information to reach as many people before time runs out on November 21.”
To support the ongoing effort as well as “National EIP Registration Day,” many partner groups have been working with the IRS, helping translate and making available Economic Impact Payment information and resources in 35 languages. The IRS also plans a special push on social media to support the final registration drive in multiple languages.
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.
Since the Non-Filers tool launched in the spring, over 8 million people who normally aren’t required to file a tax return have registered for the payments. The IRS continues to work to reach others who haven’t used the tool yet, which led to the special mailing and the special Nov. 10 registration event.
The tool is designed for people with incomes typically 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.
Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool, available only on IRS.gov. https://www.irs.gov/newsroom/to-help-non-filers-irs-sets-nov-10-as-national-eip-registration-day-register-at-irsgov-for-economic-impact-payment
IR-2020-239, October 21, 2020
WASHINGTON — The Internal Revenue Service recently awarded over $36 million in Tax Counseling for the Elderly and Volunteer Income Tax Assistance grants PDF to organizations that provide free federal tax return preparation.
This year, the IRS awarded grants to 34 TCE and 273 VITA applicants. The IRS received 354 applications requesting nearly $80 million.
“These two programs make a huge difference for people in need of tax assistance, and the IRS is proud to award these grants to help these groups perform their important service,” said IRS Commissioner Chuck Rettig. “We appreciate the continuing interest in these programs from our partners, and we greatly appreciate the TCE and VITA volunteers across the country who make a difference for so many taxpayers.”
The TCE program, established in 1978, provides tax counseling and return preparation nationwide to people who are 60 or older. Volunteers receive training and technical assistance.
The VITA program, created in 1969, assists underserved communities, such as low- and moderate-income individuals and limited English proficient taxpayers. VITA grant recipients provide free federal tax return preparation and electronic filing. Congress first appropriated funds in 2007 to establish a grant program. The grant program helps expand VITA services to underserved populations and increases the number of taxpayers able to file electronically.
The IRS forms partnerships with a wide variety of organizations across the country to develop VITA and TCE programs. Community partners include non-profit agencies, faith-based organizations, community centers and large employers. The IRS provides tax law training, certification and oversight to equip these organizations to prepare accurate returns.
For information on applying for the TCE or VITA programs along with a list of current grant recipients, visit the TCE webpage or theVITA webpage. For details on becoming a TCE or VITA volunteer, visit IRS Tax Volunteers. https://www.irs.gov/newsroom/irs-announces-2021-tax-counseling-for-the-elderly-and-volunteer-income-tax-assistance-program-grants
IR-2020-231, October 7, 2020
WASHINGTON — The Internal Revenue Service today reminds taxpayers who filed an extension that the October 15 due date to file their 2019 tax return is near. Taxpayers should file their tax returns on or before the October 15 deadline. For those who still owe, pay as soon as possible to reduce any penalties and interest.
Convenient electronic filing options, including IRS Free File, are still available. Taxpayers and tax professionals should continue to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments.
Although October 15 is the last day for most people to file, some taxpayers may have more time. They include:
The safest and fastest way for taxpayers to get their refund is to have it electronically deposited into their bank or other financial account. Taxpayers can use direct deposit to deposit their refund into one, two or even three accounts. Direct deposit is much faster than waiting for a paper check to arrive in the mail.
After filing, use the Where’s My Refund? tool on IRS.gov or download the IRS2Go mobile app to track the status of a refund.
Taxpayers can make their federal tax payments online, by phone or with their mobile device and the IRS2Go app. When paying federal taxes electronically, taxpayers should remember:
Several payment options are available on IRS.gov/payments to help taxpayers who can’t pay in full and some can offer taxpayers smaller penalties. Taxpayers should know:
Though most Americans − more than 160 million in all − have already received their Economic Impact Payments, the IRS reminds anyone with little or no income who is not required to file a tax return that they may be eligible to receive an Economic Impact Payment.
Available in both English and Spanish, the Non-Filers tool on IRS.gov is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles. This includes couples and individuals who are experiencing homelessness. People must enter their information by Nov. 21 to get a payment this year.
People can qualify for a payment, even if they don’t work or have no earned income. But low- and moderate-income workers and working families eligible to receive special tax benefits, such as the Earned Income Tax Credit or Child Tax Credit, cannot use this tool. They will need to file a regular return as soon as possible. The IRS will use their tax return information to determine and issue any EIP for which they are eligible.
Taxpayers may find answers to many of their questions using the Interactive Tax Assistant (ITA), a tax law resource that works using a series of questions and responses. IRS.gov has answers for Frequently Asked Questions. The IRS website has tax information in: Spanish (Español); Chinese – Traditional ((中文 (繁體)); Chinese – Simplified (中文 (简体)); Korean (한국어); Russian (Pусский); Vietnamese (Tiếng Việt); and Haitian Creole (Kreyòl ayisyen). https://www.irs.gov/newsroom/october-15-deadline-nears-for-taxpayers-who-requested-tax-filing-extensions
IR-2020-226, October 1, 2020
WASHINGTON — With the October 15 filing deadline quickly approaching, the Internal Revenue Service today encouraged taxpayers to consult an independent tax advisor if they participated in a micro-captive insurance transaction.
The IRS encourages any taxpayer who has continued to engage in an abusive micro-captive insurance transaction to not anticipate being able to settle its transaction with the IRS or Chief Counsel on terms more favorable than previously announced settlement offers and that any potential future settlement initiative that the IRS may consider will require additional concessions by the taxpayer.
With this in mind, the IRS encourages taxpayers to consult an independent tax advisor if they participated in a micro-captive insurance transaction. These taxpayers should seriously consider exiting the transaction and not claiming deductions associated with abusive micro-captive insurance transactions, just like many other taxpayers did who were contacted by the IRS in March and July 2020.
For those taxpayers that do not exit the transaction and continue taking such deductions, the IRS will disallow tax benefits from transactions that are determined to be abusive and may also require domestic captives to include premium payments in income and assert a withholding liability related to foreign captives. The IRS will also assert penalties, as appropriate, including the strict liability penalty that applies to transactions that lack economic substance under sections 7701(o) and 6662(i). The IRS Office of Chief Counsel will continue to litigate these abusive transactions in Tax Court.
“The IRS enforcement efforts will continue on these abusive transactions,” IRS Commissioner Chuck Rettig said. “Any future settlement terms will only get worse, not better. The IRS has never been better positioned in its quest to eradicate abusive transactions following the stand-up of a dedicated promoter office, a new Fraud Enforcement Office, enhanced service-wide coordination with Criminal Investigation and the Office of Professional Responsibility, and our advanced data analytics and mining capabilities. Taxpayers are strongly encouraged to use this opportunity to put this behind them and get into compliance.”
Abusive micro-captives have been a concern to the IRS for several years. The transactions first appeared on the IRS “Dirty Dozen” list of tax scams in 2014 and remain a priority enforcement issue for the IRS. In 2016, the Department of Treasury and IRS issued Notice 2016-66 PDF, which identified certain micro-captive transactions as having the potential for tax avoidance and evasion. In March and July 2020, IRS issued letters to taxpayers who participated in a Notice 2016-66 transaction alerting them that IRS enforcement activity in this area will be expanding significantly and providing them with the opportunity to tell the IRS if they’ve discontinued their participation in this transaction before the IRS initiates examinations. Early responses indicate that a significant number of taxpayers who participated in these transactions have exited the transaction.
This summer, the IRS issued a new round of section 6112 letters to material advisors who filed with the IRS pursuant to Notice 2016-66. In addition, the IRS has deployed 12 newly formed micro-captive examination teams to substantially increase the examinations of ongoing abusive micro-captive insurance transactions.
Also, as part of IRS’s continued focus in this area, the IRS has become aware of variations of the abusive micro-captive insurance transactions. Examples of these variations include certain Puerto Rico and offshore captive insurance arrangements that do not involve section 831(b) elections.
These variations appear to be designed and marketed with the express intent of avoiding reporting under Notice 2016-66 and yet perpetuating in some cases the same or similar abusive elements as abusive micro-captive insurance transactions. The IRS is aware of these abusive transactions and is actively working to counter their proliferation. The IRS cautions taxpayers that, to the extent they engage in variations of abusive micro-captive transactions that are substantially similar to Notice 2016-66, they must be disclosed. Otherwise, the IRS will impose penalties for the failure to disclose. https://www.irs.gov/newsroom/irs-expands-enforcement-focus-on-abusive-micro-captive-insurance-schemes-taxpayers-urged-to-consult-independent-tax-advisor-before-oct-15-filing-deadline
IR-2020-223, September 28, 2020
WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today issued final regulations PDF updating the federal income tax withholding rules for certain periodic retirement and annuity payments made after Dec. 31, 2020.
Prior to the Tax Cuts and Jobs Act (TCJA), if no withholding certificate was in effect for a taxpayer’s periodic payments, the amount to be withheld from the payments was determined by treating the taxpayer as a married individual claiming three withholding exemptions.
The TCJA amended this rule to provide that the rate of withholding on periodic payments when no withholding certificate is in effect (the default rate of withholding) would instead be determined under rules prescribed by the Secretary of the Treasury.
The final regulation issued today provides guidance for 2021 and future calendar years. This guidance specifies that the Treasury Department and the IRS will provide the rules and procedures for determining the default rate of withholding on periodic payments in applicable forms, instructions, publications and other guidance.
In July 2020, the IRS released a draft of a redesigned 2021 Form W-4P and instructions intended to align with the redesigned Form W-4, Employee’s Withholding Certificate.
The draft 2021 Form W-4P also proposed a new default rate of withholding on periodic payments that begin after Dec. 31, 2020. Based on comments received on the draft Form W-4P, regarding the time required by payors to implement the new form and a new default rate of withholding, the IRS will postpone issuance of the redesigned form. Instead, the 2021 Form W-4P will be similar to the 2020 Form W-4P.
The IRS also intends to provide in the instructions to the 2021 Form W-4P and related publications that the default rate of withholding on periodic payments will continue to be determined by treating the taxpayer as a married individual claiming three withholding allowances.
The Treasury and IRS will continue working closely with the tax community on the redesign of Form W‑4P, with the intention of making the withholding system more accurate and transparent for taxpayers.
For more information about this and other TCJA provisions, visit IRS.gov/taxreform.
IR-2020-221, September 24, 2020
WASHINGTON — During Small Business Week, the Internal Revenue Service reminds business owners and self-employed individuals of the employer credits available to them during COVID-19.
These credits were specially created to help small business owners during this unprecedented time. During Small Business Week, the IRS wants to ensure all eligible people know about the relief these credits provide.
The Employee Retention Credit is designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.
Employers will calculate these measures each calendar quarter.
The Paid Sick Leave Credit is designed to allow business to get a credit for an employee who is unable to work (including telework) because of Coronavirus quarantine, self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay up to $511 per day and $5,110 in total.
The employer can also receive the credit for employees who are unable to work due to caring for someone with Coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable due to the Coronavirus. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay or, up to $200 per day and $2,000 in total.
Employees are also entitled to paid family and medical leave equal to 2/3 of the employee’s regular pay, up to $200 per day and $10,000 in total. Up to 10 weeks of qualifying leave can be counted towards the Family Leave Credit.
Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.
Eligible employers are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and the employer’s share of Medicare tax on the leave, for the period of April 1, 2020, through December 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees.
Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.
Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.
The IRS has also posted Employee Retention Credit FAQs and Paid Family Leave and Sick Leave FAQs that will help answer questions.
Updates on the implementation of the Employee Retention Credit and other information can be found on the Coronavirus page of IRS.gov. https://www.irs.gov/newsroom/irs-highlights-employer-credits-for-businesses-during-small-business-week
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