Month: October 2024

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Issue Number: IR-2024-284

Inside This Issue

IRS hires new Associate Chief Counsel to focus on partnerships and other passthrough entities

WASHINGTON — The Internal Revenue Service today announced the selection of the first Associate Chief Counsel for the newly created Passthroughs, Trusts and Estates office that will focus exclusively on partnerships, S corporations, trusts and estates. Staffing for this office will be drawn from the current Passthroughs and Special Industries office. The new Associate Chief Counsel, Jeffrey Erickson, is expected to join the IRS in January 2025. Most recently, he served as a Principal in Ernst & Young’s National Tax Passthroughs Transaction Group.

Holly Porter will be the Associate Chief Counsel for the Energy, Credits, and Excise Tax office, which also will be drawn from the current Passthroughs and Special Industries office.

“We are excited that Jeff will be returning to the IRS to lead Chief Counsel’s work in this priority area,” said IRS Chief Counsel Margie Rollinson. “He will bring an extensive background in tax law that encompasses over 30 years of experience in both the federal government and the private sector.”

As the Associate Chief Counsel for Passthroughs, Trusts and Estates, Erickson will coordinate and direct the activities of the office and oversee legal advisory services that support the uniform interpretation, application, enforcement and litigation of tax laws involving partnerships, S corporations, trusts and estates.

Erickson began his tax career in 1991 as an Attorney Advisor at the IRS’s Office of Chief Counsel in Passthroughs and Special Industries and left the IRS in 1999 as an Assistant Branch Chief. Additionally, Erickson has served as an Adjunct Professor at the Georgetown University Law Center, where he co-taught Taxation of Partnerships for LL.M. and J.D. students and has authored articles for inclusion in tax publications.

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Tax Tip 2024-86: Tax benefits for businesses that accommodate people with disabilities

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October 29, 2024

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Issue Number: Tax Tip 2024-86

Tax benefits for businesses that accommodate people with disabilities

Businesses that make structural adaptations or other accommodations for employees or customers with disabilities may be eligible to save money on their taxes.

Here are the tax incentives for employers who provide accommodations for people with disabilities.

Disabled Access Credit
The Disabled Access Credit is a non-refundable credit for small businesses that have expenses for providing access to people with disabilities. An eligible small business is one that earned $1 million or less or had no more than 30 full-time employees in the preceding taxable year. The business can claim the credit each year they incur access expenditures They claim the credit by completing Form 8826, Disabled Access Credit, and filing it with their federal tax return.

Barrier Removal Tax Deduction
The Architectural Barrier Removal tax deduction encourages businesses of any size to remove architectural and transportation barriers to the mobility of people with disabilities and the elderly. Businesses may claim a deduction of up to $15,000 a year for qualified expenses on items that normally must be capitalized.

Businesses claim this deduction by listing it as a separate expense on their income tax return.

Businesses may use the Disabled Tax Credit and the architectural/transportation tax deduction together in the same tax year if the expenses meet the requirements of both sections. To use both, the deduction is equal to the difference between the total expenses and the amount of the credit claimed.

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IR-2024-283: National Cybersecurity Awareness Month reminder: IRS and Security Summit supply online safety tips

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Issue Number: IR-2024-283

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National Cybersecurity Awareness Month reminder: IRS and Security Summit supply online safety tips

WASHINGTON – As National Cybersecurity Awareness Month concludes and preparation for next tax season begins, the Internal Revenue Service and its Security Summit partners today reminded taxpayers to be wary of online threats like identity theft and fraud.

Whether shopping online or browsing social media, people unfamiliar with online security could be putting themselves at risk. Lax online behavior can open the door to swindlers eager to swipe people’s personal information and leave themselves vulnerable to tax-related identity theft.

The IRS and Security Summit alert taxpayers to remain vigilant and to teach children and teens how to recognize and avoid online scams to minimize their chances of falling prey or unwittingly exposing their families to identity theft and tax fraud.

The public-private sector partnership encourages everyone to be aware of the many security vulnerabilities they face online and to review a wide range of resources available to them as October’s National Cybersecurity Awareness Month draws to a close.

Members of the Security Summit – a coalition that includes tax software and financial companies, tax professionals, state tax administrators and the IRS – also offer multiple online safety recommendations to protect taxpayers from tax-related identity theft.

Online safety tips

Options to help protect against cybersecurity attacks include:

Recognize scams and report phishing. It’s important to remember that the IRS does not use unsolicited email and social media to discuss personal tax issues, such as those involving tax refunds, payments or tax bills. Don’t reply, open any attachments or click any links. To report phishing, send the full email headers or forward the email as is to phishing@irs.gov; do not forward screenshots or scanned images of emails because this removes valuable information. Then delete the email.
Protect personal information. Refrain from revealing too much personal information online. Birthdates, addresses, age and financial information, such as bank accounts and Social Security numbers, are among things that should not be shared freely. Encrypt sensitive files such as tax records stored on computers.
Use strong passwords. Consider using a password manager to store passwords.
Enable multi-factor authentication (MFA). Use this for extra security on online accounts.
Use and update computer and phone software. Enable automatic updates to install critical security updates, including anti-virus and firewall protections.
Use a VPN. Criminals can intercept personal information on insecure public Wi-Fi networks. Individuals are encouraged to always use a virtual private network (VPN) when connecting to public Wi-Fi.

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Tax Tip 2024-85: Employers must certify eligibility of new hires to claim the Work Opportunity Tax Credit

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October 28, 2024

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Issue Number: Tax Tip 2024-85

Employers must certify eligibility of new hires to claim the Work Opportunity Tax Credit

Employers who hire people from certain groups can reduce the tax they owe when they claim the Work Opportunity Tax Credit on their federal tax return. To claim the credit, an employer must first get certification an individual is eligible.

This credit is extended through the end of 2025. It encourages employers to hire workers certified as members of any of 10 groups who face barriers to employment. When hiring, employers should review eligibility requirements for the Work Opportunity Tax Credit.

Who are eligible employees
An employee may be eligible if they are a member of one of the following groups:

People who receive:

Long-term family assistance.
Long-term unemployment.
Supplemental Nutrition Assistance Program benefits.
Supplemental Security Income.
Temporary Assistance for Needy Families.

Formerly incarcerated individuals.
Qualified unemployed veterans, including disabled veterans.
Designated community residents living in Empowerment Zones or Rural Renewal Counties.
People referred to vocational rehabilitation programs.
Summer youth employees living in Empowerment Zones.

Certification requirement
To get certification that an individual is eligible, the employer submits IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to the workforce agency for the state where the employee works. This must be done within 28 days after the individual begins work. Employers should not submit this form to the IRS. They can contact the state workforce agency with questions about processing Form 8850.

Figuring and claiming the credit
Eligible employers claim the Work Opportunity Tax Credit on their federal income tax return. It is generally based on wages paid to eligible workers during the first year of employment. After the employer receives Form 8850 certification from the state workforce agency, they figure the credit on Form 5884, Work Opportunity Credit, and then claim the credit on Form 3800, General Business Credit. Generally, the wages used to calculate WOTC can’t be used to calculate other wage-based credits.

Special rule for tax-exempt organizations
A special rule lets tax-exempt organizations claim the credit only for hiring qualified veterans who began work for the organization before 2026. After the employer receives the Form 8850 certification from the state workforce agency, they claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations. IRS recommends that qualified tax-exempt employers don’t reduce their required deposits as they wait for the tax credit. The credit will not affect the employer’s Social Security tax liability.

Limitations on the credits
For a taxable business, the credit is limited to the business’ income tax liability. Unused credit is subject to the normal carry back and carry forward rules. For qualified tax-exempt organizations, the credit is limited to the amount of the employer’s share of Social Security tax it owes on wages it paid to qualifying employees.

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IR-2024-282: IRS relief now available to flood victims in the Juneau area; multiple deadlines postponed to May 1, 2025

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October 25, 2024

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Issue Number: IR-2024-282

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IRS relief now available to flood victims in the Juneau area; multiple deadlines postponed to May 1, 2025

WASHINGTON — The Internal Revenue Service today announced disaster tax relief for individuals and businesses in the Juneau area of Alaska, affected by flooding that began on Aug. 5, 2024.

Affected taxpayers now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes the City and Borough of Juneau in Alaska.

Individuals and households that reside or have a business in this locality qualify for tax relief. The same relief will be available to any other localities added later to the disaster area. The current list of eligible localities is always available on the Tax Relief in Disaster Situations page on IRS.gov.

Filing and payment relief

The tax relief postpones various tax filing and payment deadlines that occurred beginning on Aug. 5, 2024, and end on May 1, 2025 (postponement period). As a result, affected individuals and businesses will have until May 1, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the May 1, 2025, deadline will now apply to:

Any 2024 individual or business tax return normally due during March or April 2025.
Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the flooding occurred.
2024 quarterly estimated income tax payments normally due on Sept. 16, 2024, and Jan. 15, 2025, and 2025 quarterly estimated tax payments normally due on April 15, 2025.
Quarterly payroll and excise tax returns normally due on Oct. 31, 2024, and Jan. 31 and April 30, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after Aug. 5, 2024, and before Aug. 20, 2024, will be abated, as long as the deposits were made by Aug. 20, 2024.

The Disaster Assistance and Emergency Relief for Individuals and Businesses page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Disaster area tax preparers with clients located outside the disaster area can choose to use the Bulk Requests from Practitioners for Disaster Relief option, described on IRS.gov.

Additional tax relief

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the prior year (the 2023 return filed this year). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means Oct. 15, 2025. Be sure to write the FEMA declaration number – 4836-DR – on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

The IRS may provide additional disaster relief in the future.

The tax relief is part of a coordinated federal response to the damage caused by the flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Reminder about tax return preparation options

Eligible individuals or families can get free help preparing their tax return at Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites. To find the closest free tax help site, use the VITA Locator Tool or call 800-906-9887. Note that normally, VITA sites cannot help claim disaster losses.
To find an AARP Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669.
Any individual or family whose adjusted gross income (AGI) was $79,000 or less in 2023 can use IRS Free File’s guided tax software at no cost. There are products in English and Spanish.
Another Free File option is Free File Fillable Forms. These are electronic federal tax forms, equivalent to a paper 1040 and are designed for taxpayers who are comfortable filling out IRS tax forms. Anyone, regardless of income, can use this option.

MilTax, a Department of Defense program, offers free return preparation software and electronic filing for federal tax returns and up to three state income tax returns. It’s available for all military members and some veterans, with no income limit.

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IRS video tax tip: Gift Card Scam

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October 25, 2024

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Issue Number: Gift Card Scam

Here is a video tax tip from the IRS:

Gift Card Scam English | Spanish

Subscribe today: The IRS YouTube channels provide short, informative videos on various tax related topics.

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IR-2024-281: Treasury, IRS issue final regulations for the advanced manufacturing production credit

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October 24, 2024

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Issue Number: IR-2024-281

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Treasury, IRS issue final regulations for the advanced manufacturing production credit

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued final regulations to provide guidance for the Advanced Manufacturing Production Credit established by the Inflation Reduction Act of 2022 (IRA).

The Advanced Manufacturing Production Credit provides a tax credit for the production and sale of statutorily specified eligible components to unrelated persons. Such eligible components include solar and wind energy components, inverters, qualifying battery components and 50 applicable critical minerals. The eligible components must be produced in the United States or a territory of the United States.

Generally, the final regulations define qualifying production activities, provide rules for the sale of eligible components to unrelated persons as well as special rules that apply to sales between related persons, and provide rules to address contract manufacturing scenarios.

The final regulations also provide definitions of eligible components, rules related to calculating the credit, including eligible production costs, and specific recordkeeping and reporting requirements.

More information about IRA guidance may be found on the Inflation Reduction Act of 2022 page on IRS.gov.

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IR-2024-280: Treasury and IRS issue guidance for the energy efficient home improvement credit

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October 24, 2024

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Issue Number: IR-2024-280

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Treasury and IRS issue guidance for the energy efficient home improvement credit

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued Revenue Procedure 2024-31 and proposed regulations to provide guidance for the energy efficient home improvement credit.

The revenue procedure provides procedures and requirements that a manufacturer of specified property must follow to be treated as a qualified manufacturer (QM). To become a QM, a manufacturer must:

Register and enter into an agreement with the IRS.
Assign a qualified product identification number (PIN) unique to each item of specified property.
Label such items with PINs.
Make periodic reports to the IRS of PINs assigned.

Soon manufacturers will be able to use IRS Energy Credits Online Portal (IRS ECO) to register with the IRS. IRS ECO is a free electronic service that is secure and requires no special software, making it accessible to large and small businesses alike.

Taxpayers can use the IRS ECO platform to register and provide information to the IRS for filing purposes. In addition, IRS ECO incorporates validation checks and other risk-mitigation measures and allows for monitoring in real time of key metrics to include identification of customer-service enhancements and fraudulent activity.

For property placed in service beginning in 2023, a taxpayer may take a credit equal to 30% of the total amount paid for certain energy efficient products or for a home energy audit.

The credit is limited to certain amounts, per taxpayer and per tax year. A taxpayer may claim a total credit of up to $3,200, with a general total limit of $1,200, and a separate total limit of $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves or boilers that meet certain requirements.

The $1,200 general limit also includes additional limitations specific to certain types of property that meet the requirements:

$600 for any item of qualified energy property.
$600 in total for exterior windows and skylights.
$250 for an exterior door.
$600 in total for exterior doors.
Home energy audits are limited to $150.

Beginning in 2025, for each item of specified property placed in service, no credit will be allowed unless the item was produced by a QM and the taxpayer includes the PIN for the item on the taxpayer’s tax return.

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IR-2024-279: IRS reminder to disaster area taxpayers with extensions: Parts of 8 states need to file 2023 returns by Nov. 1; others have until Feb. 3 or May 1

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October 23, 2024

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