US Taxes News

Wednesday, August 30, 2023

IR-2023-159: IRS: Those impacted by Idalia qualify for tax relief; Oct. 16 deadline, other dates postponed to Feb. 15

IRS Newswire

August 30, 2023

Issue Number: IR-2023-159

Inside This Issue

IRS: Those impacted by Idalia qualify for tax relief; Oct. 16 deadline, other dates postponed to Feb. 15

IR-2023-159, Aug. 30, 2023

WASHINGTON — The Internal Revenue Service today announced tax relief for individuals and businesses affected by Idalia in parts of Florida. These taxpayers now have until Feb. 15, 2024, 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, 46 of Florida's 67 counties qualify. Individuals and households that reside or have a business in these counties qualify for tax relief, but any area added later to the disaster area will also qualify. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

Filing and Payment Relief
The tax relief postpones various tax filing and payment deadlines that occurred from Aug. 27, 2023, through Feb. 15, 2024, (postponement period). As a result, affected individuals and businesses will have until Feb. 15, 2024, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the Feb. 15, 2024, deadline will now apply to:
• Individuals who had a valid extension to file their 2022 return due to run out on Oct. 16, 2023. The IRS noted, however, that because tax payments related to these 2022 returns were due on April 18, 2023, those payments are not eligible for this relief.
• Quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31, 2024.
• Calendar-year partnerships and S corporations whose 2022 extensions run out on Sept. 15, 2023.
• Calendar-year corporations whose 2022 extensions run out on Oct. 16, 2023.
• Calendar-year tax-exempt organizations whose extensions run out on Nov. 15, 2023.

In addition, penalties for the failure to make payroll and excise tax deposits due on or after Aug. 27, 2023, and before Sept. 11, 2023, will be abated as long as the deposits are made by Sept. 11, 2023.

The IRS disaster relief 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 kinds of 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.

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 2023 return normally filed next year), or the return for the prior year (2022). 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. Be sure to write the FEMA declaration number – DR-3596-EM − 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 this storm and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

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IR-2023-158: IRS issues guidance on state tax payments

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August 30, 2023

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Issue Number: IR-2023-158

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IRS issues guidance on state tax payments

IR-2023-158, Aug. 30, 2023

WASHINGTON – The Internal Revenue Service today provided guidance on the federal tax status of refunds of state or local taxes and certain other payments made by state or local governments to individuals. The IRS previously provided guidance on state payments made in 2022 in news release IR-2023-23.

The guidance is being issued as part of the IRS's efforts to provide additional certainty to states and their residents regarding the federal income tax consequences of state payments made to taxpayers.

In 2022, a number of states implemented programs to provide payments to certain individuals residing in their states. Many of these programs were related, directly or indirectly, to the various consequences of the Coronavirus Disease 2019 (COVID-19) pandemic, and the programs varied in terms of the types of payments, payment amounts and eligibility criteria. IR-2023-23 addressed the federal tax treatment of these 2022 payments.

Notice 2023-56 describes certain types of state payments to individuals and the federal tax treatment of those payments. This updates the previous guidance, which only described the taxability of payments made during 2022. Today's notice also requests comments regarding the application of the rules described in this notice, as well as specific aspects of state payment programs or additional situations on which federal income tax guidance would be helpful.

Most taxpayers receiving state tax refunds do not have to include the state tax refund in income for federal tax purposes. As a general rule, taxpayers who choose the standard deduction on their federal income tax returns do not owe federal income tax on state tax refunds.
The vast majority of taxpayers claim the standard deduction. For instance, in tax year 2021, 90% of individuals claimed the standard deduction instead of itemizing their deductions.

Taxpayers who itemize their deductions on their federal income tax returns and receive a state tax refund must include the refund in income only if they deducted the state tax paid. Because of the $10,000 limit on itemized deductions for state income and property taxes, some itemizers are not able to deduct all of the state taxes they paid and do not need to include a refund in income.

Spillover payments under 2022 programs covered by IRS News Release IR-2023-23
Some of the 2022 programs included in IRS News Release IR-2023-23 provided for certain state payments under the program to be made in early 2023. To the extent that the news release provided that taxpayers can exclude the state payment received in 2022 from federal income, this treatment also applies in 2023. This means taxpayers who did not get a payment under the program during 2022 may exclude from federal income a state payment provided under the 2022 program but actually received in 2023.

State general welfare programs
Payments made by states under legislatively provided social benefit programs for the promotion of the general welfare are not included as income on an individual recipient's federal income tax return.

To qualify for the general welfare exclusion, state payments must be paid from a governmental fund, be for the promotion of general welfare (that is, based on the need of the individual or family receiving such payments), and not represent compensation for services.

Determining whether payments qualify for this exclusion is a complex, fact-intensive inquiry that depends on a number of considerations. Notice 2023-56 provides an example of a general welfare situation.

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IR-2023-157: Businesses must electronically file Form 8300, Report of Cash Payments Over $10,000, beginning January 1, 2024

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August 30, 2023

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Issue Number: IR-2023-157

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Businesses must electronically file Form 8300, Report of Cash Payments Over $10,000, beginning January 1, 2024

WASHINGTON —The Internal Revenue Service today announced that starting Jan. 1, 2024, businesses are required to electronically file (e-file) Form 8300, Report of Cash Payments Over $10,000, instead of filing a paper return. This new requirement follows final regulations amending e-filing rules for information returns, including Forms 8300.

Businesses that receive more than $10,000 in cash must report transactions to the U.S. government. Although many cash transactions are legitimate, information reported on Forms 8300 can help combat those who evade taxes, profit from the drug trade, engage in terrorist financing or conduct other criminal activities. The government can often trace money from these illegal activities through payments reported on Forms 8300 that are timely filed, complete and accurate.

The new requirement for e-filing Forms 8300 applies to businesses mandated to e-file certain other information returns, such as Forms 1099 series and Forms W-2. Electronic filing and communication options will be simpler and will make it easier to interact with the IRS. Beginning with calendar year 2024, businesses must e-file all Forms 8300 (and other certain types of information returns required to be filed in a given calendar year) if they're required to file at least 10 information returns other than Form 8300.

For example, if a business files five Forms W-2 and five Forms 1099-INT, then the business must e-file all their information returns during the year, including any Forms 8300. However, if the business files fewer than 10 information returns of any type, other than Forms 8300, then that business does not have to e-file the information returns and is not required to e-file any Forms 8300. However, businesses not required to e-file may still choose to do so.

Waivers

A business may file a request for a waiver from electronically filing information returns due to undue hardship. For more information businesses can refer to Form 8508, Application for a Waiver from Electronic Filing of Information Returns. If the IRS grants a waiver from e-filing any information return, that waiver automatically applies to all Forms 8300 for the duration of the calendar year. A business may not request a waiver from filing only Forms 8300 electronically.

The business must include the word "Waiver" on the center top of each Form 8300 (Page 1) when submitting a paper filed return.

If a business is required to file fewer than 10 information returns, other than Forms 8300, during the calendar year, the business may file Forms 8300 in paper form without requesting a waiver.

If a business files less than 10 information returns, it can still choose to e-file the Forms 8300 electronically if it chooses to do so.

Exemptions

If using the technology required to e-file conflicts with a filer's religious beliefs, they are automatically exempt from filing Form 8300 electronically. The filer must include the words "RELIGIOUS EXEMPTION" on the center top of each Form 8300 (page 1) when submitting the paper filed return.

Late Returns

A business must self-identify late returns. A business must file a late Form 8300 in the same way as a timely filed Form 8300, either electronically or on paper. A business filing a late Form 8300 electronically must include the word "LATE" in the comments section of the return. A business filing a late Form 8300 on paper must write "LATE" on the center top of each Form 8300 (page 1).

Record keeping

A business must keep a copy of every Form 8300 it files, as well as any supporting documentation and the required statement it sends to customers, for five years from the date filed.

Filing electronically will provide a confirmation that the form was filed; however, e-file confirmation e-mails alone don't meet the record keeping requirement. When e-filing, filers must also save a copy of the form prior to finalizing the form submission. They should associate the confirmation number with the saved copy. Prior to finalizing the form for submission, businesses should save a copy of the form electronically or print a copy of the form.

E-filing

Many businesses have already found the free and secure e-filing system to be a more convenient and cost-effective way to meet the reporting deadline of 15 days after a transaction. They get free email acknowledgment of receipt of the form when they e-file. Businesses can batch e-file their reports, which is especially helpful to those required to file many forms.

To file Forms 8300 electronically, a business must set up an account with the Financial Crimes Enforcement Network's BSA E-Filing System. The IRS will ensure the privacy and security of all taxpayer data.

For more information, interested businesses can call the Bank Secrecy Act E-Filing Help Desk at 866-346-9478 or email them at BSAEFilingHelp@fincen.gov. For more information about the BSA E-Filing System, businesses can complete a technical support request at Self Service Help Ticket (treas.gov). The help desk is available Monday through Friday from 8 a.m. to 6 p.m. EST.

For more information about the reporting requirement, see FS-2023-19 on IRS.gov.

To help businesses prepare and file reports, the IRS created a video - How to Complete Form 8300 – Part I, Part II. The short video points out sections of Form 8300 for which the IRS commonly finds mistakes and explains how to accurately complete those sections.

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Tax Tip 2023-106: Tax professionals must act fast after discovering a data breach

IRS Tax Tips

August 30, 2023

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Issue Number: Tax Tip 2023-106

Tax professionals must act fast after discovering a data breach

Anyone can be a target of cybercriminals and scammers. Unfortunately, tax professionals can seem like the big fish in a sea of potential targets because of how much financial data they use to conduct their business. Even a careful, prepared tax pro may fall victim to a crime. If that happens, there are several key things they should do to protect their clients and their business.

Their clients
It is vitally important that tax professionals inform all their clients of a breach and encourage them to apply to the IRS for an Identity Protection Personal Identification Number, or IP PIN. The Electronic Tax Administration Advisory Committee called the IP PIN, "The number one security tool currently available to taxpayers from the IRS."

Preparers should work with law enforcement to determine when it's best to send an individual letter to all potential victims to inform them of a breach.

How to report a data breach

Contact the IRS – The tax preparer should report client data theft to their local IRS Stakeholder Liaison. The liaison will notify IRS Criminal Investigation and others within the agency on the tax professional's behalf. If reported quickly, the IRS can take steps to block fraudulent returns in clients' names.
Call local police – The taxpayer should contact police to file a report on the data breach.
File a complaint with the FBI's Internet Crime Complaint Center.
File a report with the nearest office of the Secret Service.
To help tax professionals find where to report data security incidents at the state level, the Federation of Tax Administrators has created a special page with state-by-state listings.
The preparer should contact the Attorneys General for each state in which the tax professional prepares returns.

Help from other experts

Security expert – Tax preparers should consult an expert who can help determine the cause and scope of the breach to stop the breach and prevent further breaches from occurring.
Insurance company – Tax preparers should report the breach to their insurance company and check if the insurance policy covers data breach mitigation expenses.
Federal Trade Commission – Preparers and other businesses can go to the FTC for guidance. For more individualized guidance, preparers can email the FTC.
Credit and identity theft protection agency – Certain states require that preparers offer credit monitoring and identity theft protection to victims of identity theft.
Credit bureaus – Preparers should notify them if there is a compromise and clients may seek their services.

Review security measures used to protect client data
Data protection is key in helping avoid data breaches. To help tax pros protect their clients and their business, the IRS, state tax agencies and the tax industry partners who make up the Security Summit created a Taxes-Security-Together Checklist. Whether a one-person shop or partner in a large firm, everyone can take several relatively simple steps to protect their clients and their business data.

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