IRS Tax Updates
IRS sends letters disallowing improper ERC claims
As part of continuing efforts to combat dubious Employee Retention Credit (ERC) claims, the IRS is
sending letters to thousands of taxpayers notifying them of disallowed ERC claims.
For more information about how to respond to a disallowance letter, see
Understanding Letter 105-C, Disallowance of the Employee Retention Credit.
Resolving incorrect claims for the Employee Retention Credit
The IRS continues to urge employers to review their ERC claims. There is limited time to resolve incorrect claims without penalties and interest. Resources to check ERC eligibility:
Warning signs of incorrect claims
ERC Eligibility Checklist (interactive tool on IRS.gov or a printable guide (PDF) Frequently asked questions on ERC at IRS.gov/ercfaq
If their incorrect claim is still pending, they should consider the claim withdrawal program that allows them to withdraw a pending ERC claim with no interest or penalties.
The IRS announced a second ERC Voluntary Disclosure Program that lets businesses that received an incorrect ERC repay 85% of the amount of the credit without interest or penalties. The program is open through Nov. 22, 2024.
IRS helps taxpayers by providing penalty relief on nearly 5 million 2020 and 2021 tax returns with unpaid balances
In a major step to help people who owe back taxes, the IRS announced
The relief will total about $1 billion and most of those receiving it make under $400,000 a year.
Given the unusual situation due to the pandemic, the IRS is taking several steps in advance of resuming normal collection notices for tax years 2020 and 2021 to help taxpayers with unpaid tax bills. They include:
- Issuing a special reminder letter starting next month
- taking steps to waive the failure-to-pay penalties for eligible taxpayers affected by this situation for tax years 2020 and 2021
This penalty relief is automatic. Eligible taxpayers don't need to take any action to get it.
IRS announces delay in Form 1099-K reporting threshold for third party platform payments
— Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service this week released
Notice 2023-74
announcing a delay of the new $600 Form 1099-K reporting threshold for third party settlement organizations for calendar year 2023. As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.
IRS ends unannounced revenue officer visits to taxpayers
– The IRS announced a major policy change that will end unannounced visits to taxpayers
by agency revenue officers to reduce public confusion and increase overall safety. The change reverses a decades-long practice by IRS Revenue Officers, the unarmed agency employees whose duties included visiting households and businesses to collect unpaid taxes. Effective immediately, the unscheduled visits will end except in a few unique circumstances.
Inflation Reduction Act Strategic Operating Plan
– The IRS unveiled its
Strategic Operating Plan, an ambitious effort to transform the tax agency and dramatically improve service to taxpayers and the nation during the next decade. The report outlines the agency's historic plans to make fundamental changes following funding from last year's Inflation Reduction Act.
2023 tax inflation adjustments
– The IRS announced the tax year 2023 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.
Revenue Procedure 2022-38 provides details about these annual adjustments.
2023 standard mileage rates
– Beginning January 1, 2023, the standard mileage rates used to calculate the deductible costs of operating a car (also vans, pickups or panel trucks) are 65.5 cents per mile for business use. For details, see
IRS issues standard mileage rates for 2023; business use increases 3 cents per mile.
Clean vehicle and energy credits
New, Previously Owned and Qualified Commercial Clean Vehicles Credit –
The Inflation Reduction Act of 2022 (IRA) made several changes to the new clean vehicle credit for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles. The IRA also added a new credit for previously owned and commercial clean vehicles. Get answers to
frequently asked questions about the new, previously owned and qualified commercial clean vehicles credit.
Home energy credits
– The Inflation Reduction Act of 2022 (IRA) amended credits for energy efficient home improvements and residential energy property. Get details on eligible expenditures and how the credit limitations work in the
frequently asked questions about energy efficient home improvements and residential clean energy property credits.
Alternative fuel credits
– Find rules to make a one-time claim for the credit and payment allowable for alternative fuels sold or used during 2022 first, second, and third calendar quarters in
Notice 2022-39. Also get instructions for how a taxpayer's liability for excise tax may be reduced by claiming the alternative fuel mixture credit allowable for 2022 first and second quarters. The alternative fuel credits are part of the Inflation Reduction Act.
Prevailing Wage and Apprenticeship -
The Inflation Reduction Act of 2022 (IRA) amended and enacted various clean energy tax incentives that provide increased credit or deduction amounts if certain prevailing wage and registered apprenticeship requirements are met. Treasury and the IRS published final regulations and frequently asked questions
on providing rules and definitions for taxpayers seeking to satisfy the prevailing wage and apprenticeship requirements.
Elective pay and Transferability
– Elective pay allows applicable entities (as defined), including tax-exempt and governmental entities that would otherwise be unable to claim these credits because they do not owe federal income tax, to benefit from some clean energy tax credits by treating the amount of the credit as a payment of tax and refunding any resulting overpayment.
Transferability
allows entities that can't use elective pay but do qualify for an eligible tax credit to transfer all or a portion of the credit to a third-party buyer in exchange for cash. The buyer and seller would negotiate and agree to the terms and pricing.
The IRS has provided an overview and several audience specific posters that can be found on the elective pay and transferability landing page and frequently asked questions on providing rules and definitions for taxpayers seeking to satisfy the prevailing wage and apprenticeship requirements.
See Credits and deductions under the Inflation Reduction Act.
See Credits and deductions under the Inflation Reduction Act.
2023 tax filing
Missed the filing deadline
– The IRS urges taxpayers who missed the April 15 filing deadline to file their 2023 tax return as soon as possible. Taxpayers who owe and missed the deadline without requesting an extension should file quickly to limit penalties and interest. For struggling taxpayers unable to pay their tax bill, the IRS has several options available to help.
Disaster tax relief
– Individuals and business affected by the terrorist attacks in the State of Israel now have until Oct. 7, 2024, to file various federal returns, make tax payments and perform other time-sensitive tax-related actions.
Individuals and businesses in parts of Tennessee affected by severe storms and tornadoes that began on Dec. 9 now have until June 17, 2024, to file various federal individual and business tax returns and make tax payments.
Individuals and businesses affected by elevated levels of lead and copper in the water supply in the island of St. Croix
now have until Feb. 29, 2024, to file various individual and business tax returns and make tax payments.
Taxpayers affected by severe storms and flooding in parts of Illinois now have until Feb. 15, 2024, to file various individual and business tax returns and make tax payments.
Taxpayers affected by seawater intrusion in parts of Louisiana now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments.
Hawaii wildfire victims in Maui and Hawaii counties now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments.
Taxpayers affected by Hurricane Lee anywhere in Maine and Massachusetts now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments.
Individuals and businesses affected by Hurricane Idalia in several counties in Georgia, South Carolina, and Florida and now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments.
The current list of eligible localities and other details for each disaster are always available on the Tax relief in disaster situations page.
State Payments
– The IRS provided details clarifying the federal tax status involving special payments made by 21 states in 2022 . During a review, the IRS has determined that taxpayers in many states
will not need to report these payments on their 2022 tax returns.
Families who don't owe taxes can still claim key tax credits
– Families and individuals who qualify can still file their 2021 tax return and claim without penalty some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit, the Earned Income Tax Credit and other tax credits. The IRS sent a letter to 9 million individuals and families who appear to qualify for a variety of key 2021 tax benefits but did not yet claim them
Puerto Rico families can claim the Child Tax Credit - Families with children in Puerto Rico who don't owe taxes to the IRS can still file their 2021 tax return at any point until April 15, 2025, and claim without penalty the Child Tax Credit of $3,600 per child.
Tax credits for families revert to 2019 levels
– You'll likely receive a significantly smaller refund compared to last year because the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC) and the Child and Dependent Care Credit amounts revert to pre-COVID levels:
- The CTC is worth $2,000 for each qualifying child for 2022. A child must be under age 17 at the end of 2022 to be a qualifying child.
- For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $560 for the 2022 tax year.
- The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
Premium Tax Credit expanded
– You may be eligible for tax year 2022 under the temporarily expanded eligibility for the Premium Tax Credit. You must meet both the income requirements and the other
Stimulus payments
– There were no new stimulus payments for 2022, unlike 2020 and 2021.
No above-the-line charitable deductions
– During COVID, taxpayers were able to take up to a $600 charitable donation tax deduction on their tax returns. However, for tax year 2022, taxpayers who don't itemize and who take the standard deduction, won't be able to deduct their charitable contributions.
Paycheck Protection Program (PPP) loans improperly forgiven are taxable – If you inappropriately received forgiveness of your PPP loan, we encourage you to file an amended return that includes forgiven loan proceed amounts in income. IRS issued guidance PDF that confirms
if your PPP loan is forgiven based on misrepresentations or omissions, you can't exclude the forgiveness from your income. You must include in your income the portion of the loan proceeds that were forgiven based upon misrepresentations or omissions.
IRS operations
Status of IRS tax return inventory from prior years
– Visit our IRS operations: Status of mission-critical functions page to find the current status of IRS's processing of some prior year tax returns and amended returns.