Newsletters

The IRS has announced a second Voluntary Disclosure Program for employers to resolve erroneous claims for credit or refund involving the COVID-19 Employee Retention Credit (ERC). Participation in the second ERC Voluntary Disclosure Program is limited to ERC claims filed for the 2021 tax period(s), and cannot be used to disclose and repay ERC money from tax periods in 2020.

The IRS has announced a second Voluntary Disclosure Program for employers to resolve erroneous claims for credit or refund involving the COVID-19 Employee Retention Credit (ERC). Participation in the second ERC Voluntary Disclosure Program is limited to ERC claims filed for the 2021 tax period(s), and cannot be used to disclose and repay ERC money from tax periods in 2020.

The program is designed to help businesses with questionable claims to self-correct and repay the credits they received after filing erroneous ERC claims, many of which were driven by aggressive marketing from unscrupulous promoters.

The first ERC Voluntary Disclosure Program was announced in late December 2023, and ended on March 22, 2024 (Announcement 2024-3, I.R.B. 2024-2, 364). Over 2,600 taxpayers applied to the first program to resolve their improper ERC claims and avoid civil penalties and unnecessary litigation.

The second ERC Voluntary Disclosure Program will allow businesses to correct improper payments at a 15-percent discount, and avoid future audits, penalties and interest.

Procedures for Second Voluntary Disclosure Program

To apply, employers must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, and submit it through the IRS Document Upload Tool. Employers must provide the IRS with the names, addresses, telephone numbers and details about the services provided by any advisors or tax preparers who advised or assisted them with their claims, and are expected to repay their full ERC claimed, minus the 15-percent reduction allowed through the Voluntary Disclosure Program.

Eligible employers must apply by 11:59 pm local time on November 22, 2024.

The Department of the Treasury and the IRS released statistics on the Inflation Reduction Act clean energy tax credits for the 2023 tax year. Taxpayers have claimed over $6 billion in tax credits for residential clean energy investments and more than $2 billion for energy-efficient home improvements on 2023 tax returns filed and processed through May 23, 2024.

The Department of the Treasury and the IRS released statistics on the Inflation Reduction Act clean energy tax credits for the 2023 tax year. Taxpayers have claimed over $6 billion in tax credits for residential clean energy investments and more than $2 billion for energy-efficient home improvements on 2023 tax returns filed and processed through May 23, 2024.

For the Residential Clean Energy Credit, 1,246,440 returns were filed, with a total credit value of $6.3 billion and an average of $5,084 per return. Specific investments include:

• Rooftop solar: 752,300 returns, up to 30 percent of the cost;
• Batteries: 48,840 returns, up to 30 percent of the cost.

For the Energy Efficient Home Improvement Credit, 2,338,430 returns were filed, with a total credit value of $2.1 billion and an average of $882 per return. Specific improvements include:

• Home insulation: 669,440 returns, up to 30 percent of the cost;
• Windows and skylights: 694,450 returns, up to 30 percent of the cost or $600;
• Central air conditioners: 488,050 returns, up to 30 percent of the cost or $600;
• Doors: 400,070 returns, up to 30 percent of the cost, $250 per door or $500 total;
• Heat pumps: 267,780 returns, up to 30 percent of the cost or $2,000;
• Heat pump water heaters: 104,180 returns, up to 30 percent of the cost or $2,000.

Internal Revenue Service Commissioner Daniel Werfel is calling on Congress to maintain the agency’s funding and not make any further cuts to the supplemental funding provided to the agency in the Inflation Reduction Act, using recent successes in customer service and compliance to validate his request.

Internal Revenue Service Commissioner Daniel Werfel is calling on Congress to maintain the agency’s funding and not make any further cuts to the supplemental funding provided to the agency in the Inflation Reduction Act, using recent successes in customer service and compliance to validate his request.

"The Inflation Reduction Act funding is making a difference for taxpayers, and we will build on these improvements in the months ahead," Werfel said during a July 24, 2024, press teleconference, adding that "for this progress to continue, we must maintain a reliable, consistent annual appropriations for the agency as well as keeping the Inflation Reduction Act funding intact."

During the call, Werfel highlighted a number of improvements to IRS operations that have come about due to the IRA funding, including expansion of online account features (such as providing more digital forms, making it easier to make online payments, and making access in general easier); providing more access to taxpayers wanting face-to-face assistance (including a 37 percent increase in interactions at taxpayer assistance centers); IT modernization; and the collection of more than $1 billion in taxes due form high wealth individuals.

Werfel did highlight an area where he would like to see some improvements, including the number of taxpayers who have activated their online account.

While he did not have a number of how many taxpayers have activated their accounts so far, he said that “"we are nowhere near where we have the opportunity to be,"” adding that as functionality improves and expands, that will bring more taxpayers in to use their online accounts and other digital services.

He also noted that online accounts will be a deterrent for scams, and it will provide taxpayers with the information they need to not be fooled by scammers.

“We see the online account as a real way to test these scams and schemes because taxpayers will have a single source of truth about whether they actually owe a debt, whether the IRS is trying to reach them, and also information we can push out to taxpayers more regularly if they sign up and opt in for it on the latest scams and schemes,” Werfel said.

By Gregory Twachtman, Washington News Editor

The IRS has intensified its efforts to scrutinize claims for the Employee Retention Credit (ERC), issuing five new warning signs of incorrect claims. These warning signs, based on common issues observed by IRS compliance teams, are in addition to seven problem areas previously highlighted by the agency. Businesses with pending or previously approved claims are urged to carefully review their filings to confirm eligibility and ensure credits claimed do not include any of these twelve warning signs or other mistakes. The IRS emphasizes the importance of consulting a trusted tax professional rather than promoters to ensure compliance with ERC rules.

The IRS has intensified its efforts to scrutinize claims for the Employee Retention Credit (ERC), issuing five new warning signs of incorrect claims. These warning signs, based on common issues observed by IRS compliance teams, are in addition to seven problem areas previously highlighted by the agency. Businesses with pending or previously approved claims are urged to carefully review their filings to confirm eligibility and ensure credits claimed do not include any of these twelve warning signs or other mistakes. The IRS emphasizes the importance of consulting a trusted tax professional rather than promoters to ensure compliance with ERC rules.

The newly identified issues include essential businesses claiming ERC despite being fully operational, unsupported government order suspensions, misreporting wages paid to family members, using wages already forgiven under the Paycheck Protection Program, and large employers incorrectly claiming wages for employees who provided services. The IRS plans to deny tens of thousands of claims that show clear signs of being erroneous and scrutinize hundreds of thousands more that may be incorrect. In addition, the IRS announced upcoming compliance measures and details about reopening the Voluntary Disclosure Program, aimed at addressing high-risk ERC claims and processing low-risk payments to help small businesses with legitimate claims.

IRS Commissioner Danny Werfel emphasized the agency’s commitment to pursuing improper claims and increasing payments to businesses with legitimate claims. Promoters lured many businesses into mistakenly claiming the ERC, leading to the IRS digitizing and analyzing approximately 1 million ERC claims, representing over $86 billion. The IRS urges businesses to act promptly to resolve incorrect claims, avoiding future issues such as audits, repayment, penalties, and interest. Taxpayers should recheck their claims with the help of trusted tax professionals, considering options such as the ERC Withdrawal Program or amending their returns to correct overclaimed amounts.

The IRS, in collaboration with state tax agencies and the national tax industry, has initiated a new effort to tackle the rising threat of tax-related scams. This initiative, named the Coalition Against Scam and Scheme Threats (CASST), was launched in response to a significant increase in fraudulent activities during the most recent tax filing season. These scams have targeted both individual taxpayers and government systems, seeking to exploit vulnerabilities for financial gain.

The IRS, in collaboration with state tax agencies and the national tax industry, has initiated a new effort to tackle the rising threat of tax-related scams. This initiative, named the Coalition Against Scam and Scheme Threats (CASST), was launched in response to a significant increase in fraudulent activities during the most recent tax filing season. These scams have targeted both individual taxpayers and government systems, seeking to exploit vulnerabilities for financial gain.

CASST will focus on three primary objectives: enhancing public outreach and education to alert taxpayers to emerging threats, developing new methods to identify fraudulent returns at the point of filing, and improving the infrastructure to protect taxpayers and the integrity of the tax system. This initiative builds on the successful framework of the Security Summit, which was launched in 2015 to combat tax-related identity theft. While the Security Summit made significant progress in reducing identity theft, CASST aims to address a broader range of scams, reflecting the evolving tactics of fraudsters.

The coalition has received widespread support, with over 60 private sector groups, including leading software and financial companies, joining the effort. Key national tax professional organizations are also participating, all committed to strengthening the security of the tax system.

Among the measures CASST will implement are enhanced validation processes for tax preparers, including improvements to the Electronic Filing Identification Number (EFIN) and Preparer Tax Identification Number (PTIN) systems. The coalition will also target the issue of ghost preparers, who prepare tax returns for a fee without proper disclosure, leading to inflated refunds and significant revenue losses.

In addition to these technical improvements, CASST will address specific scams, such as fraudulent claims for tax credits like the Fuel Tax Credit. By the 2025 filing season, CASST aims to have new protections in place, bolstering defenses across both public and private sectors to make it more difficult for scammers to exploit the tax system. This coordinated effort seeks to protect taxpayers and ensure the integrity of the nation’s tax system.

The Internal Revenue Service will be processing about 50,000 "low-risk" Employee Retention Credit claims, and it will be shifting the moratorium dates on processing.

The Internal Revenue Service will be processing about 50,000 "low-risk"Employee Retention Credit claims, and it will be shifting the moratorium dates on processing.

"The IRS projects payments will begin in September with additional payments going out in subsequent weeks," the agency said in an August 8, 2024, statement."The IRS anticipates adding another large block of additional low-risk claims for processing and payment in the fall."

The agency also announced that it is shifting the moratorium period on processing new claims. Originally, the agency was not processing claims that were filed after September 14, 2023. It is now going to process claims filed between September 14, 2023, and January 31, 2024.

"Like the rest of the ERC inventory, work will focus on the highest and lowest risk claims at the top and bottom end of the spectrum," the IRS said. "This means there will be instances where the agency will start taking actions on claims submitted in this time period when the agency has seen a sound basis to pay or deny any refund claim."

The agency also said it has sent out "28,000 disallowance letters to businesses whose claims showed a high risk of being incorrect," preventing up to $5 billion in improper payments. It also has "thousands of audits underway, and 460 criminal cases have been initiated" with potentially fraudulent claims worth nearly $7 billion. Thirty-seven investigations have resulted in federal charges, with 17 resulting in convictions.

Businesses that receive a denial letter will have the ability to appeal the decision.

The agency also offered some other updates on the ERC program, including:

• The claim withdrawal process for unprocessed ERC has led to more than 7,300 withdrawing $677 million in claims;
• The voluntary disclosure program received more than 2,600 applications from ERC recipients that disclosed $1.09 billion in credits; and
• The IRS Office of Promoter Investigations has received "hundreds" of referrals about suspected abusive tax promoters and preparers improperly promoting the ability to claim the ERC.

"The IRS is committed to continuing out work to resolve this program as Congress contemplates further action, both for the good of legitimate businesses and tax administration," IRS Commissioner Daniel Werfel said in the statement.

By Gregory Twachtman, Washington News Editor

The IRS has announced substantial progress in its ongoing efforts to modernize tax administration, emphasizing a shift towards digital interactions and enhanced measures to combat tax evasion. This update, part of a broader 10-year plan supported by the Inflation Reduction Act, reflects the agency's commitment to improving taxpayer services and ensuring fairer compliance.

The IRS has announced substantial progress in its ongoing efforts to modernize tax administration, emphasizing a shift towards digital interactions and enhanced measures to combat tax evasion. This update, part of a broader 10-year plan supported by the Inflation Reduction Act, reflects the agency's commitment to improving taxpayer services and ensuring fairer compliance.

The IRS’s push for digital transformation has seen significant advancements, allowing taxpayers to conduct nearly all interactions with the agency online. This initiative aims to reduce the reliance on paper submissions, expedite tax processing, and improve overall efficiency. In 2024 alone, the IRS introduced extended hours at Taxpayer Assistance Centers across the country, particularly benefiting rural and underserved communities. The agency also reported a notable increase in face-to-face interactions, with a 37 percent rise in contacts during the 2024 filing season.

In parallel with these service improvements, the IRS has ramped up efforts to disrupt complex tax evasion schemes. Leveraging advanced data science and technology, the agency has focused on high-income individuals and entities employing sophisticated financial maneuvers to avoid taxes. Among the IRS’s new measures is a moratorium on processing Employee Retention Credit claims to prevent fraud, alongside initiatives targeting abusive use of partnerships and improper corporate practices.

The IRS also highlighted its progress in eliminating paper filings through the introduction of the Document Upload Tool, which allows taxpayers to submit documents electronically. This tool, along with upgraded scanning and mail-sorting equipment, is expected to significantly reduce the volume of paper correspondence, potentially replacing millions of paper documents each year. These technological upgrades are part of the IRS’s broader goal to create a fully digital workflow, thereby speeding up refunds and improving service accuracy.

Additionally, the IRS has launched new programs to ensure taxpayers are informed about and can claim eligible credits and deductions. This includes outreach efforts related to the Child Tax Credit and the Earned Income Tax Credit, aiming to bridge the gap for eligible taxpayers who may not have claimed these benefits. These initiatives underline the IRS's dedication to a more equitable tax system, ensuring that all taxpayers have access to the credits and services they are entitled to while maintaining robust compliance standards.

The IRS issued final and proposed rules governing required minimum distributions (RMDs) under Code Sec. 401(a)(9). The regulations reflect changes made by the SECURE Act (P.L. 116-94) and SECURE 2.0 Act (P.L. 117-328) that apply to qualified plans and IRAs. The final regulations apply for distribution calendar years beginning on or after January 1, 2025. The IRS simultaneously proposed further changes to reflect certain provisions of the SECURE 2.0 Act.

The IRS issued final and proposed rules governing required minimum distributions (RMDs) under Code Sec. 401(a)(9). The regulations reflect changes made by the SECURE Act (P.L. 116-94) and SECURE 2.0 Act (P.L. 117-328) that apply to qualified plans and IRAs. The final regulations apply for distribution calendar years beginning on or after January 1, 2025. The IRS simultaneously proposed further changes to reflect certain provisions of the SECURE 2.0 Act.

Final Regulations

The final regulations reflect the SECURE Act’s increase in the applicable age for beginning RMDs and the limitation on lifetime distributions to beneficiaries under defined contribution plans. With respect to lifetime distributions under Code Sec. 401(a)(9)(H), the final regulations provide that the 10-year rule applies to designated beneficiaries that die on or after the January 1, 2020, statutory effective date. The regulations provide additional details on the definition of eligible designated beneficiaries.

The IRS retained the controversial rule in the proposed regulations that requires continued annual distributions to a designated beneficiary under the 10-year rule. Thus, when an employee or IRA owner dies on or after their required beginning date and their beneficiary follows the 10-year distribution rule, the beneficiary must continue to take annual distributions until the end of the 10-year period, when full distribution is required. This rule also applies after the death of an eligible designated beneficiary taking life expectancy payments and a minor child beneficiary’s attainment of the age of majority. However, the IRS noted that transition relief applies through 2024.

The final regulations also provide rules for treating trusts as beneficiary, in particular, rules for see-through trusts and trusts with multiple beneficiaries. The final regulations include a special rule that prevents a surviving spouse from using the 10-year rule to delay the commencement of benefits beyond the decedent’s required beginning date.

Proposed Regulations

The IRS reserved some provisions of the final regulations that reflect changes made under the SECURE 2.0 Act. For example, the statute is unclear as to whether the applicable age for employees born in 1959 is 73 or 75. The proposed regulations would provide that 73 is the applicable age for beginning RMDs.

In addition, the IRS is seeking comments on the following:

• Rules of operation for aggregating the purchase of an annuity contract with a portion of the employee’s individual account.
• Whether distributions from a designated Roth account should be disregarded for purposes of satisfying RMD rules, so that it might be rolled over to a Roth IRA.
• Whether a RMD must be made in a year in which a corrective distribution for a previous year is made.
• How to make a spousal election to be treated as the employee for purposes of calculating the RMD.
• How divorce affects the purchase of qualifying longevity annuity contract (QLAC).

Effective Dates

The final regulations apply for distribution calendar years beginning on or after January 1, 2025. For earlier distribution calendar years, taxpayers must apply prior regulations plus a reasonable good faith interpretations of statutory amendments made by the SECURE Act and (for 2023 and 2024 distribution calendar years) the SECURE 2.0 Act.

The proposed regulations would have the same applicability dates as the corresponding provisions in the final regulations.

Department of the Treasury Secretary Janet Yellen said there are no plans to extend the Beneficial Ownership Information reporting deadline.

Department of the Treasury Secretary Janet Yellen said there are no plans to extend the Beneficial Ownership Information reporting deadline.

"I don't think it's going to be necessary to extend the timeframe," she testified during a July 9, 2024, House Financial Services Committee hearing, highlighting ongoing outreach and what the agency considers a good amount of reporting so far.

During the hearing, a number of committee members noted that there are still a lot of small business owners who do not know that they have this BOI reporting requirement from the Financial Crimes Enforcement Network and could be facing significant financial penalties that might create a financial hardship if they miss the deadline to report BOI by the end of the year.

However, Secretary Yellen does not expect this to be an issue, relying on specific wording of the reporting regulations that will help small business owners who may not be aware they have to file that could protect from the $250,000 fine associated with not filing a BOI report.

"The fine is for a ‘willful’ violation," she said, although when pressed, she could not provide a clear definition of what constitutes a willful violation. Yellen added that "FinCEN is not going to prioritize going after small businesses."

She also noted that FinCEN is engaged in extensive and ongoing outreach to make sure small business owners are aware of and educated on the requirement to file a BOI report.

By Gregory Twachtman, Washington News Editor

Compliance initiatives using supplemental Inflation Reduction Act funding have resulted in the Internal Revenue Service collecting more than $1 billion from millionaires, the agency stated.

Compliance initiatives using supplemental Inflation Reduction Act funding have resulted in the Internal Revenue Service collecting more than $1 billion from millionaires, the agency stated.

In a July 11, 2024, statement, the IRS noted that the collection of these past-due taxes is the result of targeting 1,600 individuals with more than $1 million per year in income and a past due balance of more than $250,000 in recognized debt.

The IRS assigned 1,500 revenue officers to these cases. They were able to collect the more than $1 billion in past due payments from more than 1,200 individuals. The agency expects more money to be collected from this group in the months ahead as the compliance initiative in this area continues.

"Our increased work in this area means these past-due tax bills from high-end taxpayers are no longer being left on the table, like they were too often in the past," IRS Commissioner Daniel Werfel said in a statement.

Werfel added that the supplemental funding the agency received in the IRA "is reversing a decade-long decline in our compliance work, including increasing our compliance work involving the wealthiest individuals and groups with tax issues. The collection results achieved in less than a year reveal the magnitude of what can be achieved over the long run as our Inflation Reduction enforcement continues to ramp up in the months ahead."

The Treasury Department and IRS have issued regulations requiring brokers of digital assets to report certain sales and exchanges. The regulations address the reporting requirements enacted by the Infrastructure Investment and Jobs Act (P.L. 117-58 ). According to the IRS, the regulations should improve the deter noncompliance through sales and exchanges of digital assets.

The Treasury Department and IRS have issued regulations requiring brokers of digital assets to report certain sales and exchanges. The regulations address the reporting requirements enacted by the Infrastructure Investment and Jobs Act (P.L. 117-58). According to the IRS, the regulations should improve the deter noncompliance through sales and exchanges of digital assets. In addition, the reporting requirements will provide taxpayers with the information needed to accurately report their digital asset activity. The regulations are part of the larger effort to ensure tax compliance from high-income individuals.

In addition to the broker reporting rules, the regulations establish the requirements for taxpayers to determine their basis, gain, and loss from digital asset transactions. The regulations also create backup withholding rules.

Reporting Requirements

Under the final regulations brokers must report the gross proceeds for sales or exchanges of digital assets taking place on or after January 1, 2025, on a new Form 1099-DA. In addition, the regulations require brokers to furnish their customers with payee statements. Beginning in 2026, brokers will also be required to include gain or loss and basis information for certain sales on these information returns and statements.

Real Estate Reporting

Under the final regulations, real estate reporting persons treated as brokers with respect to reportable real estate transactions would also be required to file information returns and furnish payee statements with respect to real estate purchasers who use digital assets to acquire real estate in transactions that close on or after January 1, 2026.

These real estate reporting persons would also be required to include the fair market value of digital assets paid to sellers of real estate in certain real estate transactions on Form 1099-S.

Brokers Impacted by the Regulations

These final regulations apply only to digital asset industry participants that take possession of the digital assets being sold by their customers, such as operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, certain PDAPs, and digital asset kiosks, as well as to certain real estate reporting persons that are already subject to the broker reporting rules. Brokers that do not take possession of the digital assets being sold or exchanged, often referred to as decentralized or non-custodial brokers, are not subject to the new reporting requirements. The IRS will provide rules for these brokers in separate regulations.

The definitions of a processor of digital asset payments (PDAP) and PDAP sales applies only to transactions in which PDAPs take possession of the digital asset payment. The requirement that a person must receive the digital assets in order to be a PDAP covers all transactions. Proposed new digital asset middleman rules that apply to non-custodial industry participants were not finalized. The IRS continue to study this area. However, the acceptance of digital assets in return for cash, stored-value cards, or different digital assets by a physical electronic terminal or kiosk is identified as a facilitative service.

The final regulations include a rule allowing taxpayers to use a standing order or instruction to make adequate identifications of digital assets. A broker may also take into account customer provided acquisition information for purposes of identifying which units are sold, disposed of, or transferred under the identification rules. A new rule accommodates the unlikely circumstance in which the broker does not have any transfer-in date information about the units in the broker’s custody.

Stablecoins and NFTs

Stablecoins pegged to a fiat currency are not excluded from the definition of "digital assets." The IRS will take into account any subsequent legislation regarding stablecoins. The final regs provide an alternative reporting method for certain stablecoin transactions. The final regs also provide an alternative reporting method for certain types of nonfungible tokens (NFTs). For PDAP transactions, the regulations require reporting on a transactional basis only if the customer’s sales are above a de minimis threshold.

The IRS concluded that optional approaches to reporting dual classification assets generally are not appropriate, but special rules may apply to tokenized securities (which do not include stablecoins). Exceptions also apply to apply to dual classification assets that are cleared or settled on a limited-access regulated network, are section 1256 contracts, or are shares in money market funds. Additional special rules apply when a dual classification asset is a digital asset solely because its sale is cleared or settled on a limited-access regulated network.

Delay on Information Reporting for Certain Transactions

Under Notice 2024-57, until the IRS issues further guidance, brokers will not have to file information returns or furnish payee statements on digital asset sales and exchanges for the following six types of transactions:

• Wrapping and unwrapping transactions,
• Liquidity provider transactions,
• Staking transactions,
• Transactions described by digital asset market participants as lending of digital assets,
• Transactions described by digital asset market participants as short sales of digital assets, and
• Notional principal contract transactions.

Transitional Relief

The IRS has provided general transitional relief in Notice 2024-56. Any broker who does not timely and accurately file information returns and furnish payee statements for sales and exchanges of digital assets during calendar year 2025, will not be subject to reporting penalties and backup withholding, provided that the broker makes a good faith effort to comply with the reporting obligations. In addition, more limited relief is provided from backup withholding for certain sales of digital assets during 2026 for brokers using the IRS’s TIN-matching system in place of certified TINs. Finally, the Notice provides backup withholding relief for exchanges of digital assets in return for specified NFTs and real property and for certain sales effected by PDAPs.

The IRS released final regulations relating to the excise tax imposed on certain sales by manufacturers, producers, or importers of designated drugs. 

The IRS released final regulations relating to the excise tax imposed on certain sales by manufacturers, producers, or importers of designated drugs. Specifically, the final regulations set forth procedural provisions relating to how taxpayers must report liability for such tax. The final regulations also except such tax from semimonthly deposit requirements. The final regulations affect manufacturers, producers, or importers of designated drugs dispensed, furnished, or administered to individuals under the terms of Medicare during certain statutory periods. The proposed regulations (NPRM REG-115559-23) were published on October 2, 2023. After consideration of the public comments, the regulations finalized by the IRS adopt the proposed regulations with three non-substantive modifications. Specifically, the final regulations modify proposed §§40.0-1, 40.6011-1(d), and 40.6302(c)-1 by clarifying that the Code Sec. 5000D tax is imposed on “the sale of” designated drugs. The language, as modified, more closely tracks the language of Code Sec. 5000D(a).

Applicability Dates

The final regulations, which are effective on August 16, 2024, generally apply to calendar quarters beginning on or after October 1, 2023. For rules that apply before October 1, 2023, see 26 CFR part 40, revised as of April 1, 2024.

The IRS warned taxpayers about misleading claims regarding a fictitious "Self Employment Tax Credit." Promoters and social media posts are inaccurately suggesting self-employed individuals and gig workers can claim substantial payments for the COVID-19 pandemic period. These claims are not valid, and taxpayers were advised to consult trusted tax professionals before filing such claims.

The IRS warned taxpayers about misleading claims regarding a fictitious "Self Employment Tax Credit." Promoters and social media posts are inaccurately suggesting self-employed individuals and gig workers can claim substantial payments for the COVID-19 pandemic period. These claims are not valid, and taxpayers were advised to consult trusted tax professionals before filing such claims.

Promoters are falsely marketing a"Self Employment Tax Credit," similar to incorrect promotions about the Employee Retention Credit. The actual credit being misrepresented is the Credits for Sick Leave and Family Leave, which is highly specific and only applicable under certain conditions in 2020 and 2021. Taxpayers filing claims based on misleading information risk submitting incorrect returns, as these credits are not available for 2023 tax returns. The IRS is scrutinizing such claims, and inaccurate filings can lead to complications.

IRS Commissioner Danny Werfel emphasized the danger of such misleading information, urging taxpayers to avoid outlandish claims from social media and marketers. Claims should be verified by consulting a reliable tax professional. The IRS highlighted that many self-employed individuals wrongly use Form 7202, leading to inappropriate claims. The IRS continues to see a pattern of incorrect claims fueled by social media, advising taxpayers to be vigilant and seek professional advice before filing.

The Internal Revenue Service needs to do more in underserved markets, according to a recent report from the Treasury Inspector General for Tax Administration.

The Internal Revenue Service needs to do more in underserved markets, according to a recent report from the Treasury Inspector General for Tax Administration.

"The IRS has made improvements to increase the accessibility and availability of customer service in underserved, underrepresented, and rural communities; however additional efforts are needed to improve the geographic outreach efforts in these communities," a June 25, 2024, report states.

One of the problems identified in the report is that while there are various models that the agency uses to identify these populations, "there is no clear definition for these populations. Without a clear definition of what constitutes these populations, the IRS is unable to measure its progress in increasing accessibility and availability to these segments of taxpayers."

The agency watchdog noted that not having a clear definition "presents a risk that the IRS will not meet the objectives of the SOP [Strategic Operating Plan] and as such, will not provide additional service where it is needed and to whom needs it."

TIGTA also reported that the IRS’s data for determining locations to set up Taxpayer Assistance Centers is out of date and causing the agency to not reach these underserved populations. The agency is currently using demographic data from 2016 to identify the availability of TACs but, as TIGTA reports, citing U.S. Census Bureau data, "approximately 8.2 million people moved to different states in 2022. Considering the IRS is using data over six years old, the information is most likely outdated and therefore, the IRS may be incorrectly identifying where underserved and underrepresented populations are located."

TIGTA also called for a more comprehensive communications strategy to reach these populations.

"[W]e identified that additional efforts are needed to market these efforts to increase taxpayer education and awareness as to these eligible services," including TACs, Volunteer Income Tax Assistance, Low-Income Taxpayer Clinics, and Taxpayer Counseling for the Elderly, the report stated.

For example, IRS management stated that some events in rural communities had low attendance, with IRS management noting that the agency "relies on the local contact personnel within each community to help spread the word about these types of events," TIGTA reported. "Intentional planning and focused marketing strategies could increase taxpayer participation."

TIGTA made a number of recommendations with it said the IRS agreed with.

By Gregory Twachtman, Washington News Editor