Taxpayers can appeal a rejected offer in compromise

You can settle the EIDL for less if you meet certain conditions through OIC.

If the IRS rejects an offer in compromise, taxpayers have 30 days from the date on the rejection letter to request an appeal of that decision.

To request an appeal, a taxpayer must file Form 13711, Request for Appeal of Offer in Compromise, or send a letter to the IRS with certain information about their situation. Taxpayers should mail their request for an appeal to the office that sent them the rejection letter.

How to decide whether to submit an appeal
To identify areas of disagreement and decide whether to submit an appeal, taxpayers should review the Income/Expense and Asset/Equity Tables that came with the OIC rejection letter and Form 656, Offer in Compromise.

Documents to gather and review prior to submitting an appeal
Corporations, S corporations, partnerships, tax exempt organizations and limited liability companies defined as a corporation and other LLCs:

Form 433-B (OIC), Collection Information Statement for Businesses
Other supporting documentation
Individual wage earners and self-employed people:

Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals
Other supporting documentation
Taxpayers must be accurate and complete when addressing the reasons for disagreement
For each area of the offer in compromise rejection where the taxpayer disagrees with the IRS, they need to provide documents to support the income item, expense item and asset value they dispute.

For details on the supporting documents and kinds of records to keep, see Section 10 of Form 433-A (OIC) and Section 7 of Form 433-B (OIC) in Form 656-B, Offer in Compromise (Booklet).

May 30, 2024 0

Summer activities that could affect people’s tax returns next year

While summer is a time for fun, it’s never the wrong time to thinking about taxes – and some of those summer activities could have an impact. Here are a few summertime activities and tips on how taxpayers should consider them for filing season.

Marriage
Wedding season is upon us, and newlyweds can make their tax filing easier by taking two simple steps now:

First, report any name change to the Social Security Administration.
Next, notify the United States Postal Service, employers and the IRS of any address change. To officially change their mailing address with the IRS, taxpayers must compete and submit Form 8822, Change of Address. See page 2 of the form for detailed instructions.
Summer camp
If a taxpayer is sending a child to summer camp, the cost may count toward the Child and Dependent Care Credit.

Business travel
Kids may have the summer off, but parents generally don’t – and business travel happens year-round. Tax deductions are available for certain people who travel away from their home or main place of work for business reasons. Whether a business traveler is away for a few nights or all summer long, it’s important for them to remember the tax rules related to business travel.

Part-time work
While summertime and part-time workers may not earn enough to owe federal income tax, they should file a tax return to get any refund they may be owed. Part-time and seasonal workers can visit IRS.gov to learn more about who should file a tax return.

Some taxpayers earn summer income with a side hustle or doing gig work. They can visit the Gig Economy Tax Center at IRS.gov to learn how participating in the gig economy can affect their taxes. If taxpayers are paid through payment apps for goods and services during the year, they may receive an IRS Form 1099-K for those transactions. For more information, go to IRS.gov/1099k.

Home improvements
The IRS has information to help taxpayers take advantage of potential tax benefits for home improvements. If taxpayers make qualified energy efficient improvements to their home after Jan. 1, 2023, they may qualify for a tax credit up to $3,200. They can claim the credit for improvements made through 2032.

These types of improvements include Energy Efficient Home Improvement Credits for things like water heaters, exterior windows and doors and heating and air conditioning installations. Residential Clean Energy Credits are available for taxpayers who install solar water heaters, fuel cells and battery storage or solar, wind and geothermal power generation. Taxpayers can visit the Home Energy Tax Credits page on IRS.gov to learn more.

May 29, 2024 0

IRS continues work on Employee Retention Credit; new IRS CI education sessions come as agency urges businesses to review VDP, withdrawal program for questionable claims

WASHINGTON – The Internal Revenue Service renewed calls today for businesses to review their eligibility for the Employee Retention Credit as the agency’s law enforcement arm, Criminal Investigation (CI), begins a series of educational sessions for tax professionals.

As part of ongoing IRS efforts around the pandemic-era credit, the agency continues to increase compliance activity to protect against fraud. The IRS also renewed calls for businesses and employers to review their qualifications for the Employee Retention Credit, or ERC. If businesses do not meet the criteria, but claimed the credit, they should consider applying for the Voluntary Disclosure Program before the March 22 deadline. The IRS has also created a special withdrawal program for those with pending claims about which they have eligibility concerns. Both programs can help affected employers avoid penalties and interest on incorrect claims.

“Our compliance activities involving these payments continue to accelerate, and the IRS urges businesses with concerns about their claims to talk to a reputable tax professional and consider joining one of our special disclosure or withdrawal programs,” said IRS Commissioner Danny Werfel. “We saw aggressive marketing around this credit, and well-intentioned businesses were misled into filing claims. There’s a limited time window available for these businesses to voluntarily come in and avoid future issues.”
In the latest effort, CI special agents will host a series of educational sessions geared specifically to tax professionals about ERC at its field offices across the country. The sessions will take place in February and are part of a nationwide initiative to ensure that tax professionals have the latest information about ERC claims and understand ERC eligibility criteria.

The IRS has been working closely with the tax community following concerns that ERC promoters were aggressively marketing and encouraging businesses to ignore the advice of tax professionals and apply for the credit anyway.

“During the COVID-19 pandemic, tax credits and loans were extended to struggling businesses. We’ve seen many of these COVID-relief programs and credits misappropriated – sometimes knowingly and in other instances not,” said IRS CI Chief Jim Lee. “These educational sessions will help tax preparers navigate the complexities of ERC claims to ensure they’re in compliance with U.S. tax laws.”

CI special agents will walk attendees through ERC eligibility criteria, documentation requirements to receive ERC claims, and best practices for compliance and accurate reporting. These events will take place in at least 23 U.S. states and the District of Columbia and are specifically designed for tax professionals who have claimed ERCs for their clients on previous years’ tax returns. Invitations to attend will arrive by mail through the U.S. Postal Service.

The ERC is a refundable tax credit for certain eligible businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. The requirements vary depending on the time of claim, and it is not available to individuals.

With the end of the pandemic, the IRS announced in July it was shifting its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims.

Following concerns about aggressive ERC marketing from tax professionals and others, the IRS announced Sept. 14 a moratorium on processing new ERC claims. During the next four months, the IRS plans to continue steps on fraud protection measures, which are necessary before the IRS anticipates resuming processing of claims submitted after the Sept. 14 moratorium. A specific resumption date has not been determined.

The IRS continues to process ERC claims submitted before the moratorium, but with additional scrutiny and at a much slower rate than before the agency’s approach changed in the summer and fall. Since the IRS announced the moratorium in September, the IRS has more than $1 billion in ERC claims in process. Enhanced compliance reviews of the claims submitted before the moratorium is critical to combat fraud and protect businesses and organizations from facing penalties or interest payments stemming from bad claims pushed by promoters. Werfel has noted the IRS continues to make progress on a variety of ERC issues.

To help businesses lured into making inappropriate claims, the IRS has several special initiatives underway to assist.

ERC Voluntary Disclosure Program open until March 22, 2024

Businesses that filed a claim in error and received a payment may be able to participate in the IRS Voluntary Disclosure Program. The special program runs through March 22, 2024, and the IRS has added provisions allowing repayment of just 80% of the claim received. This reflects the share that ERC promoters took of a business’ ERC payment – frequently around 20%.

Withdrawal program still available for pending ERC claims

The IRS continues to accept and process requests to withdraw an employer’s full ERC claim under the special withdrawal process.

This withdrawal option allows certain employers that filed an ERC claim, but have not yet received a refund, to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that has not yet been paid can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible. They can also withdraw their claim if they’ve received a check but have not yet deposited or cashed it.

The IRS continues to see a large number of employers interested in the withdrawal program, with more than $167 million from pending applicants withdrawn through mid-January.

ERC eligibility information for businesses with questions

For more information on ERC eligibility, the IRS has prepared special information to help businesses understand the complex guidelines about the credit, sometimes referred to as the Employee Retention Tax Credit or ERTC. The special information includes ERC frequently asked questions and the ERC Eligibility Checklist, which is available as an interactive tool or as a printable guide. The interactive tool provides an easy, interactive way for businesses to check their eligibility.

Increased IRS compliance activity: Audits, criminal investigations, special letters

Last month, the IRS started sending thousands of letters to taxpayers notifying them of disallowed ERC claims. These disallowed claims involved entities that did not exist or did not actually have employees on the payroll during the period of eligibility – meaning the businesses failed to meet basic criteria for the ERC program.

In addition, the IRS plans to send a different set of letters to thousands of ERC recipients related to claiming an erroneous or excessive credit. These notices inform recipients that the IRS will recapture the erroneously claimed ERC payment through normal tax assessment and collection procedures.

These letters are for tax year 2020 where the statute of limitations is nearing in April. As we continue to ramp up our compliance work, the IRS will send more recapture letters for tax year 2021 this spring.

These efforts are in addition to other IRS compliance work:

Audits. The IRS has thousands of audits in the pipeline.
Civil investigations. Promoters are not off the hook. Promoter investigations are ongoing. The IRS has nine open investigations and another 123 under review. Plus, participants in the Voluntary Disclosure Program must share the promoter names with the IRS to assist the agency in its ongoing compliance work.
Criminal Investigation. As of Dec. 31, CI has initiated 352 investigations involving more than $2.9 billion in potentially fraudulent ERCs in tax years 2020-2023. Eighteen of the 352 investigations have resulted in federal charges, with 11 convictions and four sentencings with an average sentence of 21 months.
CI is the law enforcement arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI is the only federal law enforcement agency with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a nearly 90% federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.

January 25, 2024 0

Treasury, IRS issue guidance on the qualified alternative fuel vehicle refueling property credit

WASHINGTON – The Internal Revenue Service and the Department of the Treasury today issued Notice 2024-20 to provide guidance on eligible census tracts for the qualified alternative fuel vehicle refueling property credit and to announce the intent to propose regulations for the credit.

The Inflation Reduction Act amended the credit for qualified alternative fuel vehicle refueling property. The changes apply to qualified alternative fuel vehicle refueling property placed in service after Dec. 31, 2022 and before Jan. 1, 2033.

The credit amount for property not subject to depreciation is 30% of the cost of the qualified property placed in service during the tax year. The credit amount for depreciable property is 6% of the cost of the qualified property placed in service during the tax year but may be increased to 30% of the cost of the qualified property if the prevailing wage and apprenticeship requirements are met. The credit is limited to $100,000 for depreciable property and $1,000 for non-depreciable property.

Property must be placed in service in an eligible census tract to qualify for the credit. An eligible census tract is any population census tract that is a low-income community or any population census tract that is not an urban area. See Appendix A and Appendix B for eligible census tracts.

The primary purpose of the notice is to provide taxpayers with a list of eligible census tracts in advance of the 2023 filing season and to explain how taxpayers can identify the 11-digit census tract identifier for the location where the property is placed in service. The IRS intends to propose regulations including this information in the future, but taxpayers may rely on the notice until proposed regulations are published.

This notice also provides background and definitions, describes relevant census concepts, provides definitions for low-income communities and non-urban census tracts, and explains which delineation of census tract boundaries is applicable for each type of census tract determination. Further, the notice describes how updating of low-income community census tract determinations are considered for credit eligibility.

Finally, the IRS released frequently asked questions related to the alternative fuel vehicle refueling property credit.

More information about the alternative fuel vehicle refueling property credit may be found on the Inflation Reduction Act of 2022 page on IRS.gov.

January 19, 2024 0

IRS: New Voluntary Disclosure Program lets employers who received questionable Employee Retention Credits pay them back at discounted rate; interested taxpayers must apply by March 22

WASHINGTON — As part of an ongoing initiative aimed at combating dubious Employee Retention Credit (ERC) claims, the Internal Revenue Service today launched a new Voluntary Disclosure Program to help businesses who want to pay back the money they received after filing ERC claims in error.

The new disclosure program, which has been in the works for several months, is part of a larger effort at the IRS to stop aggressive marketing around ERC that misled some employers into filing claims. The special disclosure program runs through March 22, 2024, and the IRS added provisions allowing repayment of 80% of the claim received.

The IRS also continues to urge employers with pending ERC claims to consider a separate withdrawal program that allows them to remove a pending ERC claim with no interest or penalty. The IRS has already received more than $100 million in withdrawals as the agency continues intensifying audits and criminal investigation work in this area.

As these special initiatives for ERC continue, the IRS will provide an update in the new year on the status of the moratorium. Additionally, the IRS mailed out 20,000 denial letters to ERC claimants earlier this month.

“The disclosure program provides a much-needed option for employers who were pulled into these claims and now realize they shouldn’t have applied,” said IRS Commissioner Danny Werfel. “From discussions we have had with taxpayers and tax professionals around the country, we understand that there are many employers eager to correct their error, but who remain concerned about their ability to pay back the portion of the credit that has been lost to the promoter that brought them into this mess. This new option, with an opportunity to get right with a lower financial cost, provides the relief these taxpayers requested. The new initiative will also help with our ongoing efforts to gather information on promoters who created this situation by aggressively pushing people to apply for the credit.”

Interested employers must apply to the ERC Voluntary Disclosure Program by March 22, 2024. Those that the IRS accepts into the program will need to repay only 80% of the credit they received. If the IRS paid interest on the employer’s ERC refund claim, the employer doesn’t need to repay that interest. Employers who are unable to repay the required 80% of the credit may be considered for an installment agreement on a case-by-case basis, pending submission and review of a Form 433-B, Collection Information Statement for Businesses, available on IRS.gov, and all required supporting documentation.

The IRS will not charge program participants interest or penalties on any credits they repay. However, if the employer is unable to repay the required 80% of the credit at the time of signing their closing agreement, then the employer will be required to pay penalties and interest in connection with entering into an installment agreement.

The IRS selected an 80% repayment because many of the ERC promoters charged a percentage fee that they collected at the time of payment or in advance of the payment, and the recipients never received the full amount.

To qualify for this program, the employer must provide the IRS with the names, addresses and telephone numbers of any advisors or tax preparers who advised or assisted them with their claim and details about the services provided. Further qualifications and program details are in Announcement 2024-3, posted today on IRS.gov.

As part of this expanding effort for employers that claimed an erroneous or excessive ERC, the IRS also announced today it has started sending up to 20,000 letters with proposed tax adjustments that will recapture the erroneously claimed ERC. These mailings – which are on top of the 20,000 denial letters announced earlier in December – are currently just for tax year 2020, and work continues for tax year 2021, with additional mailings planned. If the IRS identifies an employer that has received excessive or erroneous ERC, the agency will reclaim that ERC through normal tax assessment and collection procedures.

“These letters are another incentive for businesses that believe they received an erroneous Employee Retention Credit payment to come forward and participate in the disclosure program,” Werfel said. “Our compliance activities involving these payments continue to accelerate, and the disclosure program’s 80% repayment figure is much more generous than later IRS action, which includes steeper costs and greater risk. We hope these taxpayers take advantage of this window now.”

ERC Voluntary Disclosure Program: Who can apply?

A variety of ERC recipients can apply. Any employer who already received the ERC for a tax period but isn’t entitled to it can apply if the following are also true:

The employer is not under criminal investigation and has not been notified that they are under criminal investigation.
The employer is not under an IRS employment tax examination for the tax period for which they’re applying to the Voluntary Disclosure Program.
The employer has not received an IRS notice and demand for repayment of part or all of the ERC.
The IRS has not received information from a third party that the taxpayer is not in compliance or has not acquired information directly related to the noncompliance from an enforcement action.

How to apply

To apply, the employer must first file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, available on IRS.gov. This form must be submitted using the IRS Document Upload Tool. Employers will be expected to repay their full ERC, minus the 20% reduction allowed through the Voluntary Disclosure Program. Employers who are not able to pay the amount in full will have the option to set up an installment agreement under certain conditions.

Employers who outsource their payroll must apply through the third party

Many employers outsource their payroll obligations to a third party who reports, collects and pays employment taxes on the employer’s behalf using the third party’s Employer Identification Number. In this situation, the third-party, not the employer, must file Form 15434. See the form and its instructions for details.

Help options for those considering applying

As part of a larger set of information on ERC, the IRS has provided a set of Frequently Asked Questions to help employers understand the terms of the program.

Once the employer has applied to the program and submitted their Form 15434, an IRS employee will contact them to go over the application and answer any questions.

Next steps after an application is approved

If the IRS approves the employer’s application, they will mail the employer a closing agreement. The employer must then repay 80% of the ERC they received, either online or by phone, using the Electronic Federal Tax Payment System (EFTPS). EFTPS is the Treasury Department system that most businesses already use to pay various federal tax obligations.

If the taxpayer is unable to pay the amount in full, they may enter into an installment agreement with the IRS to pay over time. However, under the standard installment agreement policy, penalties and interest will apply, so the IRS encourages those who cannot pay in full to consider obtaining a loan from a financial institution to avoid the costs of an installment agreement with the IRS. Once payment has been made, the employer must return the signed closing agreement to the IRS.

Ongoing ERC initiatives

The new Voluntary Disclosure Program is just the latest step taken by the IRS in its ongoing fight against ERC fraud.

In July, the IRS said it was shifting its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS has hundreds of criminal cases being worked, and thousands of ERC claims have been referred for audit.
Following concerns about aggressive ERC marketing from tax professionals and others, the IRS announced Sept. 14 a moratorium on processing new ERC claims. Enhanced compliance reviews of existing claims submitted before the moratorium is critical to protect against fraud and also to protect businesses and organizations from facing penalties or interest payments stemming from bad claims pushed by promoters.
Then, earlier this month, the IRS began sending an initial round of more than 20,000 letters to employers disallowing their ERC claims either because their business did not exist, or they didn’t have employees for the period covered by their claim.
As mentioned earlier, the IRS also announced today it has started sending letters to up to 20,000 employers that claimed an erroneous or excessive ERC that propose tax adjustments that will remove the ERC.
In addition to these efforts, IRS audit and Criminal Investigation work involving ERC continues to expand involving dubious claims. The IRS has more than 300 criminal cases being worked with claims worth almost $3 billion, and thousands of ERC claims have been referred for audit.

IRS reminder: Still time to withdraw pending ERC claims

The IRS is also continuing to accept and process requests to withdraw an employer’s full ERC claim under the special withdrawal process. Employers have until at least the end of the year to request a withdrawal.

The IRS continues to see a large amount of interest in the withdrawals, with more than $100 million from pending applicants withdrawn by early December. With the announcement of the Voluntary Disclosure Program today, the IRS continues to urge pending applicants to review their claims.

This withdrawal option allows certain employers that filed an ERC claim but have not yet received a refund to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that has not yet been paid can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible. They can also withdraw their claim if they’ve received a check but have not yet deposited or cashed it.

The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.

During this period, the IRS warns taxpayers to use extreme caution before applying for the ERC as aggressive maneuvers continue by marketers and scammers. In addition, the IRS continues to urge employers who submitted claims to review the ERC requirements and talk to a trusted tax professional about their eligibility amid misleading marketing around the credit.

When properly claimed, the ERC is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 pandemic while their business operations were either fully or partially suspended due to a government order, or had a decline or significant decline in gross receipts during the eligibility periods.

For more information on ERC eligibility, see the ERC frequently asked questions and the ERC Eligibility Checklist, which is available as an interactive tool or as a printable guide.

December 21, 2023 0