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President Biden is looking to add $2.1 billion more to the Department of the Treasury budget over 2023 enacted levels, an increase that would give the agency $16.3 billion in discretionary budget authority, with the majority of those funds earmarked for the Internal Revenue Service.

President Biden is looking to add $2.1 billion more to the Department of the Treasury budget over 2023 enacted levels, an increase that would give the agency $16.3 billion in discretionary budget authority, with the majority of those funds earmarked for the Internal Revenue Service.

"To ensure that taxpayers receive the highest quality customer service and that all Americans are treated fairly by the U.S. tax system, the Budget provides a total of $14.1 billion for the IRS, $1.8 billion, or 15percent, above the 2023 enacted level," the White House stated in the budget document released on March 9, 2023.

On the same day, the Treasury Department released the so-called “Greenbook” which outlines the administration’s revenue proposals for Fiscal Year 2024.

Adding some additional details, the budget document noted that the IRS budget includes "an increase of $642 million to improve the taxpayer experience and expand customer service outreach to underserved communities and the entire taxpaying public," the document states, adding that $290 million will be allocated to information technology modernization.

The budget document also notes that in "addition to the annual discretionary funding, the Budget proposes to maintain deficit reducing Inflation Reduction Act-funded initiatives in 2032 and beyond. This proposal builds on decades of analysis demonstrating that program integrity investments to enforce existing tax laws and increase revenues in a progressive way by closing the tax gap—the difference between taxes owed and taxes paid."

Tax Policy Highlights

The budget document notes that spending within the overall budget will be offset "by tax reforms to ensure that the wealthiest Americans and multinational corporations pay at least a minimum tax rate and reforming taxation of stock buybacks," which is expected to reduce the deficit by $1.17 trillion during the next decade.

On the corporate side, the document states it plans to raise the corporate income tax rate to 28 percent.

The budget also notes that it will invest "in working families, by cutting taxes for working people and families with children, providing paid leave, and improving home care."

President Biden is proposing in the budget to restore "and make permanent the American Rescue Plan expansion of the Earned Income Tax Credit for workers without qualifying children," as well as other tax provisions, including:

• Providing a neighborhood homes credit;
• Expanding and enhancing the low-income housing credit;
• Expanding the child credit, and making permanent full refundability and advanceability;
• Making the adoption tax credit refundable and allowing certain guardianship arrangements to qualify; and
• Making permanent the income exclusion for forgiven student debt.

The Greenbook also provides some additional clarity on the tax policy proposals. The Biden Administration once again will be seeking the implementation of a billionaire minimum tax of 25 percent, targeted at the wealthiest 0.01 percent of individuals to ensure they are paying their fair share of taxes.

The budget also includes health-related tax policy proposals, including the closure of Medicare tax loopholes and increasing the Medicare tax and the Net Investment Income Tax rate by 1.2 percentage points above $400,000 for a total Medicare tax rate of 5 percent on high-income taxpayers. It also looks to expand tax credits for health insurance premiums.

The IRS has offered tips to taxpayers who received an incorrect Form 1099-K, Payment Card and Third-Party Network Transactions or received one of these forms in error. 2022 transactions were reported on the form taxpayers received by January 31, 2023. If the information on the form is incorrect or wrong, taxpayers are directed to contact the issuer of the Form 1099-K immediately. The issuer’s name appears in the upper left corner on the form along with their phone number. Further, taxpayers should keep a copy of all correspondence with the issuer for their records.

The IRS has offered tips to taxpayers who received an incorrect Form 1099-K, Payment Card and Third-Party Network Transactions or received one of these forms in error. 2022 transactions were reported on the form taxpayers received by January 31, 2023. If the information on the form is incorrect or wrong, taxpayers are directed to contact the issuer of the Form 1099-K immediately. The issuer’s name appears in the upper left corner on the form along with their phone number. Further, taxpayers should keep a copy of all correspondence with the issuer for their records.

If taxpayers can’t get a corrected Form 1099-K, they should report the information on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, as follows:

• Part I – Line 8z – Other Income – Form 1099-K Received in Error.
• Part II – Line 24z – Other Adjustments - Form 1099-K Received in Error.

The net effect of these two adjustments on adjusted gross income would be $0.

Personal Item Sold at Loss

If a taxpayer receives a Form 1099-K for a personal item sold at a loss, report the information on Schedule 1 with offsetting transactions. The net effect of these two adjustments on adjusted gross income would be $0.

Personal Item Sold at Gain

If a taxpayer sells an item owned for personal use, they should report the gain as any other capital gain on Form 8949, Sales and other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses.

Mix of Personal Items Sold

If a taxpayer sold an item owned for personal use at a gain, see Personal items sold at a gain for information on how to report. For personal items sold at a loss, follow the instructions for Personal items sold at a loss.

New Reporting Threshhold

The IRS announced that the new Form 1099-K reporting threshold will start in tax year 2023.

• The old threshold was $20,000 and 200 transactions per year. This applies to tax year 2022 and prior years.
• The new threshold is more than $600. This applies to tax year 2023 and future years.

The IRS has provided relief that permits taxpayers affected by the Coronavirus Disease 2019 (COVID-19) emergency who had a return filing due date postponed by Notice 2020-23, I.R.B. 2020-18, 742, or Notice 2021-21, I.R.B. 2021-15, 986, who did not receive an extension of time for filing such return, and who file timely credit or refund claims, to be credited or refunded amounts deemed paid on April 15 of each year.

The IRS has provided relief that permits taxpayers affected by the Coronavirus Disease 2019 (COVID-19) emergency who had a return filing due date postponed by Notice 2020-23, I.R.B. 2020-18, 742, or Notice 2021-21, I.R.B. 2021-15, 986, who did not receive an extension of time for filing such return, and who file timely credit or refund claims, to be credited or refunded amounts deemed paid on April 15 of each year.

Among other things, Notice 2020-23 postponed certain federal tax return filing and payment obligations that were due to be performed on or after April 1, 2020, and before July 15, 2020, to July 15, 2020. Notice 2021-21 postponed the due date for both filing Form 1040 series returns with an original due date of April 15, 2021, and making federal income tax payments in connection with one of these forms, to May 17, 2021.

Under Code Sec. 6511, a taxpayer must file a refund or credit claim within three years from the time the taxpayer’s return was filed, or two years from the time the tax was paid, whichever period expires later. Under Code Sec. 6511(b)(2), the credit or refund amount is limited to the amount of tax paid within a specified period immediately preceding the filing of the refund or credit claim (the "lookback period"). When a taxpayer files a claim within three years of filing the return, the lookback period is three years plus the period of any extension of time for filing the return. Otherwise, the lookback period is two years.

While Notice 2020-23 and Notice 2021-21 postponed certain return filing due dates, they did not extend the time for filing the returns because a postponement is not an extension. As a result, the postponements did not lengthen the lookback periods.

Relief for Determining Lookback Period

The relief applies for determining the credit or refund amount on the tax for which the return filing or payment due date was postponed:

• For any person with a federal tax return filing or payment obligation that was postponed by Notice 2020-23 to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in determining the beginning of the lookback period.
• For any person with a filing or payment obligation for a Form 1040 series federal income tax return that was postponed by Notice 2021-21 to May 17, 2021, the period beginning on April 15, 2021, and ending on May 17, 2021, will be disregarded in determining the beginning of the lookback period.

The relief is automatic, so affected taxpayers do not have to call the IRS, file any form, or send letters or other documents to receive the relief.

The IRS has issued final regulations for filing certain returns and other documents electronically (e-file). The regulations affect persons required to file returns for partnerships, corporations, unrelated business income tax, withholding, excise taxes, as well as information returns, disclosure statements, and other documents

The IRS has issued final regulations for filing certain returns and other documents electronically (e-file). The regulations affect persons required to file returns for partnerships, corporations, unrelated business income tax, withholding, excise taxes, as well as information returns, disclosure statements, and other documents. The electronic filing requirements generally apply to applicable returns and documents required to be filed beginning in 2024, except for returns of tax-exempt organizations which apply to tax years beginning after July 1, 2019.

Electronic Filing

The final regulations generally adopt the proposed regulations issued in 2021 for electronic filing under the following Code Section:

• Code Secs. 1474, 6011, 6012, 6033, 6057, 6058, and 6059 for determining whether applicable returns and documents must be filed electronically,
• Code Sec. 6011 for reporting certain excise taxes,
• Code Secs. 1461 and 1474 for withholding income taxes on U.S. source income of foreign persons,
• Code Secs. 6045 and 6050M for certain broker reporting and federal agency contracts, and
• Code Sec. 6050I for reporting financial transactions in cash exceeding $10,000.

Like the 2021 proposals, the final regulations generally require e-filing by taxpayers other than individuals if, during the calendar year, they are required to file 250 or more returns. The final rules also eliminate the e-filing exception for income tax returns of corporations that report total assets under $10 million at the end of their taxable year. Partnerships with more than 100 partners are required to e-file information returns, and they require partnerships required to file at least 10 returns of any type during the calendar year to e-file their partnership return.

Information Returns

Under Code Sec. 6011(e) and related regulations, filers are already required to file information returns and statements electronically if, during a calendar year, they are required to file 250 or more returns. The 2021 proposed regulations would have reduced the applicable threshold to 100 or more returns for returns required to be filed during 2022 and 10 or more returns for returns required to be filed after calendar year 2022.

Because the final regulations are not applicable until calendar year 2024, the proposed electronic-filing thresholds of 100 and 10 returns, respectively are not adopted. Instead, the electronic-filing threshold for information returns required to be filed in calendar years 2022 and 2023 remains at 250. However, the final regulations adopt the electronic-filing threshold of 10 for returns required to be filed on or after January 1, 2024.

In addition, the final regulations adopt the proposed rule without any change that if a person is required to file original information returns electronically, that person must file any corresponding corrected information returns electronically.

Waivers and Exemption

Many of the regulations imposing electronic-filing requirements also provide a waiver from electronic filing to any person who establishes undue hardship. The final regulations adopt several changes in reviewing waiver requests, noting that costs to a taxpayer will only be one factor. The Treasury and IRS anticipate providing additional details on the specific hardship-waiver procedures for each form affected by the final regulations, including exemptions for taxpayers whose religious belief conflict with the electronic filing requirement. The final regulations do not provide for waivers and exemptions in all circumstances or for all tax forms required to be electronically filed.

The Financial Crimes Enforcement Network (FinCEN) has published its first set of guidance materials to aid the public, and especially the small business community, in understanding the beneficial ownership information (BOI) reporting requirements which will take effect on January 1, 2024.

The Financial Crimes Enforcement Network (FinCEN) has published its first set of guidance materials to aid the public, and especially the small business community, in understanding the beneficial ownership information (BOI) reporting requirements which will take effect on January 1, 2024.

The Corporate Transparency Act (CTA) established uniform BOI reporting requirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States. New FinCEN regulations require these entities to report to FinCEN information about their "beneficial owners"—the persons who ultimately own or control the company.

In an effort to make the process as simple as possible, particularly for small businesses who may have never heard of or interacted with FinCEN before, FinCEN has placed several items on its BOI reporting webpage (https://www.fincen.gov/boi), including:

• answers to Frequently Asked Questions about the reporting requirement;
• a Key Filing Dates document;
• a one-page document covering a few Key Questions on the BOI requirement;
• a link to an introductory video; and
• a link to a more detailed video about the BOI requirement.

In the coming months, FinCEN expects to publish additional guidance on the BOI webpage, including a Small Entity Compliance Guide.

The American Institute of CPAs is suggesting a series of frequently asked questions for the Internal Revenue service to post and answer on its website regarding the new digital asset question that appears on the 2022 Form 1040.

The American Institute of CPAs is suggesting a series of frequently asked questions for the Internal Revenue service to post and answer on its website regarding the new digital asset question that appears on the 2022 Form 1040.

The 2022 Form 1040 asks the following yes/no question: "At any time during 2022, did you (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digitalasset (or a financial interest in a digitalasset)?"

In a February 17, 2023, letter to the agency, AICPA identified 12 questions and offered recommended responses to those questions that the IRS could include on its website to guide taxpayers on how to answer the digital asset question. Among the questions the organization is recommending the IRS answer are:

• What is a digital representation of value?
• What is a cryptographically secured distribution ledger as used in the Form 1040 question?
• How do I determine if my digital asset is recorded on a cryptographically secured distributed ledger?
• What is considered "similar technology" to a cryptographically distributed ledger?
• What are the "characteristics of a digitalasset" as that term is used in the 2022 Form 1040 instructions?
• Does a "yes" answer to the 2022 Form 1040 digital asset question mean that I have tax consequences from digital asset transactions that should be reported on my 2022 Form 1040?

AICPA sent the letter in hopes that "IRS will consider posting these or similar FAQs on the website for this 2022 tax return filing season and that the 2023 Form 1040 instructions will be modified for next year to provide greater certainty to taxpayers and their preparers in confidently and properly complying with the question and overall requirements for digitalasset," the letter states.

A copy of this letter can be found with all of AICPA’s tax policy and comment letters here.

The IRS added widely circulating promoter claims involving Employee Retention Credits (ERC) as a new entry in the annual Dirty Dozen list of tax scams.

The IRS added widely circulating promoter claims involving Employee Retention Credits (ERC) as a new entry in the annual Dirty Dozen list of tax scams. These promotions can be based on inaccurate information related to eligibility for and computation of the credit. Eligible taxpayers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020 through December 31, 2021.

"The aggressive marketing of these credits is deeply troubling and a major concern for the IRS," said IRS Commissioner Danny Werfel. "Businesses need to think twice before filing a claim for these credits. While the credit has provided a financial lifeline to millions of businesses, there are promoters misleading people and businesses into thinking they can claim these credits. People should remember the IRS is actively auditing and conducting criminal investigations related to these false claims. We urge honest taxpayers not to be caught up in these schemes," he added.

Further, abusive ERC promotions highlight day one of the IRS annual Dirty Dozen campaign. These are a list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more. Finally, more information can be found here.

The U.S. Government Accountability Office is offering recommendations to close the tax gap, a move it says could yield large fiscal benefits even if there is only a modest narrowing of the gap between what is paid and what is owed.

The U.S. Government Accountability Office is offering recommendations to close the tax gap, a move it says could yield large fiscal benefits even if there is only a modest narrowing of the gap between what is paid and what is owed.

In a "snapshot" report issued February 27, 2023, the GAO cited Internal Revenue Service-reported figures for the years 2014-2016 that show taxpayers owed $3.3 trillion in taxes but paid only $2.8 trillion. GAO analysis of IRS data attributes the gap to three key factors: underreporting ($398 billion); underpayment ($59 billion); and nonfiling ($39 billion).

GAO reported a number of factors that have contributed to the tax gap, including limited third-party information reporting, declines in audit rates, worsening customer service and the complexities of the tax code. It also noted that abusive tax shelters also play a role in contributing to the tax gap. The report did not quantify how much these factors contributed to the tax gap.

"Our work shows there are no easy ways to reduce the taxgap," the report states. "Multiple approaches are needed to address the many causes of tax noncompliance."

The government watchdog recommends that the IRS re-establish quantitative goals to reduce the tax gap; expand third-party information reporting; digitize taxpayer returns to make them more readily available to enforcement programs; and make it easier for individuals to report preparers and promoters involved in abusive tax schemes.

It also is recommending that Congress give the IRS explicit authority to establish professional requirements for paid preparers; expand third-party reporting requirements related to real estate; expand IRS authority to correct errors and discrepancies between taxpayer reported and other government collected information; and requiring paper returns include a scannable code to allow information to be processed digitally.

The GAO did not quantify how much benefit the federal government could get with even a modest reduction in the tax gap.

Panelists convened to testify before the Senate Finance Committee called for enhancements of the low income housing tax credit as a means of making real estate more available and affordable.

Panelists convened to testify before the Senate Finance Committee called for enhancements of the low income housing tax credit as a means of making real estate more available and affordable.

During a March 7, 2023 hearing, Denise Scott, president of Local Initiatives Support Corporation, testified that the credit "has been responsible for the production of most of the affordable housing, and more than 50 percent of the households in tax credit properties are extremely low income families."

An overview of various tax policies was prepared for the hearing by the Joint Committee on Taxation and can be found here.

She suggested Congress could "spur the creation of over 2 million more rental units over the next decade by restoring the 12.5 percent increase to the formula for the allocated tax credits." That increase was enacted in 2018 but expired in 2021.

Sharon Wilson Geno, president of the National Multifamily Housing Council, recommended that the low income housing tax credit be expanded to capture more middle class families and build "off of the success of the low income housing tax credit."

However, Mark Calabria, senor advisor at the Cato Institute, urged a little restraint when it comes to using tax policy to stimulate the housing market.

"Most indicators suggest that rents would decline over the next 12-to-18 months," he testified before the committee. "So, I would just urge some cautiousness to thinking about adding stimulus to additional construction at a time when we are likely passing the peak of the cycle."

Wilson Geno said that the private market "simply cannot afford to provide housing in the amounts we need it in the lowest income tiers, and also the middle-income tier. So those tax incentives are incredibly useful."

Calabria also cautioned about offering any additional credits that are focused on the demand side of housing equation.

"We need to be cautious about adding demand subsidies that simply run up prices, which is how we’ve gotten the inflationary pressures we face today," he said.

Department of the Treasury Secretary Janet Yellen was noncommittal on the idea of trading a permanent child tax credit for the elimination of the state and local tax deduction.

Department of the Treasury Secretary Janet Yellen was noncommittal on the idea of trading a permanent child tax credit for the elimination of the state and local tax deduction.

Yellen was faced with this question during a March 16, 2023, Senate Finance Committee hearing convened to discuss the Biden Administration’s proposed budget for fiscal year 2024 and the corresponding so-called "Greenbook," which outlines proposed changes to tax policy that in total reflect how the government plans to pay for changes to the overall budget.

Sen. Steve Daines (R-Mont.) noted that the White House budget proposal increases the child tax credit from $2,000 to $3,600 and makes it fully refundable and deliverable on a monthly basis.

"However, I see they didn’t make that change permanent," Sen. Daines said, adding that increase would expire in 2025. "My question is this: does the President believe that the child tax credit should be made permanent for $3,600? And if so, are you willing to eliminate the SALT deduction, which overwhelmingly benefits the wealthy, to give working families an expanded child tax credit that, importantly, never ends?"

Yellen explained that the reason for the proposed expanded tax credit expiring in 2025 is due to other provisions in the Tax Cuts and Jobs Act that will expire in 2025 that affect the child tax credit.

"And then there will need to be consideration of what to do," Yellen said, while offering no explicit comment on the desire to make the child tax credit permanent and not addressing at all the possibility of making the CTC permanent while at the same time eliminating the SALT deduction.

One point Yellen was challenged on was on the promise that there would be no increases in taxes on individuals and corporations making less than $400,000. Sen. Todd Young (R-Ind.) suggested that President Biden would not be able to keep that promise based on provisions in the Tax Cuts and Jobs Act that would sunset in or after 2025.

"Well, there certainly are aspects of the TCJA that, if they sunset, would impact households [with] taxpayers earning under $400,000,”" Yellen testified. "And the President has, as you mentioned, pledged he doesn’t want to see taxes raised by a penny on anyone making under that. He stands ready to work with Congress."

However, when pressed further to provide a list of those sunsetting provisions that could push taxes higher for taxpayers making under $400,000, Yellen said that "I don’t know that I can provide you with that. I think there are a lot of complicated provisions." She declined to commit to providing the information within the two-week time frame that Sen. Young asked for, but pledged to work with the committee to provide the information.

A Mirror Of Previous Testimony

For the questions that covered the budget, the committee touched on many of the same subjects and asked similar questions of Yellen that the House Ways and Means Committee did on March 10, 2023, although conversations about the budget at times took a back seat to discussion on the recent bank failures and the government’s response to it as well as the looming need to address the debt ceiling.

When the budget was discussed, Yellen promoted the improvements to customer service, noting that the Internal Revenue Service has answered "hundreds of thousands" of more call calls this tax season than at the same point last year. She also pushed the Biden Administration’s targeting of the highest earning taxpayers, both individual and corporate, to get them to pay their fair share.

Yellen also reiterated the defense of the United States’ participation in the Organisation for Economic Co-operation and Development’s work on building a framework for implementing a global corporate minimum tax structure. She did emphasize that any agreement would not violate existing tax treaties between the United States and other individual countries, although there was pushback on whether that was accurate.

She also promoted the provisions in the Greenbook that will help close the housing supply gap, noting the budget has provisions to make to make rent and ownership more affordable.

Yellen also said the IRS plan to spend the $80 billion that was allocated to agency in the Inflation Reduction Act would be ready in the coming weeks.

The U.S. Supreme Court has ruled that the $10,000 maximum penalty under the Bank Secrecy Act (BSA) for the nonwillful failure to file a compliant Report of Foreign Bank and Financial Accounts (FBAR) accrues on a per-report, not a per-account, basis. This ruling settles a split in authority between the Ninth Circuit (J. Boyd, CA-9, 2021-1 ustc ¶50,112) and the Fifth Circuit (A. Bittner, CA-5, 2021-2 ustc ¶50,242).

The U.S. Supreme Court has ruled that the $10,000 maximum penalty under the Bank Secrecy Act (BSA) for the nonwillful failure to file a compliant Report of Foreign Bank and Financial Accounts (FBAR) accrues on a per-report, not a per-account, basis. This ruling settles a split in authority between the Ninth Circuit (J. Boyd, CA-9, 2021-1 ustc ¶50,112) and the Fifth Circuit (A. Bittner, CA-5, 2021-2 ustc ¶50,242).

Background

U.S. citizens and residents must keep records and/or file reports when the person makes a transaction or maintains a relation for any person with a foreign financial agency (31 USC 5314). Each person with a financial interest in a financial account in a foreign country must report the relationship to the IRS for each year the relationship exists by providing specified information on and filing the FBAR. The FBAR generally must be filed by June 30 of each calendar year for foreign financial accounts over $10,000 maintained during the previous calendar year (31 C.F.R. 1010.350, 1010.306). If the person fails to file the FBAR, the IRS can impose a penalty of up to $10,000 for nonwillful violations, unless the violation was due to reasonable cause (31 USC 5321).

Here, the taxpayer nonwillfully failed to report his interests in multiple foreign bank accounts on annual FBAR forms for several years. The government assessed $2.72 million in civil penalties against the taxpayer: $10,000 for each unreported account each year for five years. The district court found the taxpayer liable and denied his reasonable cause defense, but reduced the assessment to $50,000 because it determined that the $10,000 maximum penalty attached to each failure to file an annual FBAR, not to each failure to report an account.

The Fifth Circuit ruled that the text, structure, history, and purpose of the relevant statutory and regulatory provisions showed that the "violation" of 31 USC 5314 contemplated by the 31 USC 5321 penalty was the failure to report a qualifying account, not the failure to file an FBAR. Therefore, the $10,000 penalty cap applied on a per-account basis, not a per-report basis.

FBAR Penalty Per Report

In the majority opinion by Justice Gorsuch, the Court determined that 31 USC 5314, which delineates an individual’s legal duties under the BSA, does not mention accounts or their number, but instead addresses the legal duty to file reports which must include various kinds of information about an individual’s foreign transactions or relationships. Further, 31 USC 5321 authorizes the Treasury Secretary to impose a civil penalty of up to $10,000 for “any violation” of section 5314. The nonwillful penalty provision in section 5321 does not speak in terms of accounts or their number, but instead pegs the quantity of nonwillful penalties to the quantity of violations. While multiple deficient reports may yield multiple $10,000 penalties, and even a simple deficiency in a single report may expose an individual to a $10,000 penalty, the Court ruled that the penalties for nonwillful violations accrue on a per-report basis, not a per-account basis. Also, while section 5321 does tailor penalties to accounts for certain cases that involve willful violations, Congress did not say in section 5321 that the government may impose nonwillful penalties on a per-account basis.

The Court found other contextual clues that cut against the government’s arguments. First, the government's guidance to the public in various warnings, fact sheets, and instructions seemed to tell the public that the failure to file a report represented a single violation exposing a nonwillful violator to one $10,000 penalty. Also, when Congress amended the law in 2004 to authorize penalties for nonwillful violations, it did not apply language from previous amendments to willful penalties to authorize per-account penalties for nonwillful violations.

The Court also observed that other features of the BSA and its regulatory scheme suggested that the law aimed to provide the government with a report sufficient to tip it to the need for further investigation, not to ensure the presentation of every detail or maximize revenue for each mistake. Finally, the Court stated that the government’s per-account penalty reading of the statute invited anomalies, such as subjecting willful violators to lower penalties than nonwillful violators, that are avoided by reading the nonwillful penalty to apply on a per-report basis.

The Court concluded that, best read, the BSA treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis.

Dissenting Opinion

Justice Barrett’s dissent (joined by Justices Thomas, Sotomayor, and Kagan) stated that the most natural reading of the statute establishes that each failure to report a qualifying foreign account constitutes a separate reporting violation, so the government can levy penalties on a per-account basis.

For 2021, the Social Security tax wage cap will be $142,800, and Social Security and Supplemental Security Income (SSI) benefits will increase by 1.3 percent. These changes reflect cost-of-living adjustments to account for inflation.

For 2021, the Social Security tax wage cap will be $142,800, and Social Security and Supplemental Security Income (SSI) benefits will increase by 1.3 percent. These changes reflect cost-of-living adjustments to account for inflation.

2021 Wage Cap
The Federal Insurance Contributions Act (FICA) tax on wages is 7.65 percent each for the employee and the employer. FICA tax has two components:

• a 6.2 percent Social Security tax, also known as Old Age, Survivors, And Disability Insurance (OASDI); and
• a 1.45 percent Medicare tax, also known as hospital insurance (HI).

For self-employed workers, the Self-Employment tax is 15.3 percent, consisting of:

• a 12.4 percent OASDI tax; and
• a 2.9 percent HI tax.

OASDI tax applies only up to a wage base, which includes most wages and self-employment income up to the annual wage cap.

For 2021, the wage base is $142,800. Thus, OASDI tax applies only to the taxpayer’s first $142,800 in wages or net earnings from self-employment. Taxpayers do not pay any OASDI tax on earnings that exceed $142,800.

There is no wage cap for HI tax.

Maximum Social Security Tax for 2021
For workers who earn $142,800 or more in 2021:

• an employee will pay a total of $8,853.60 in social security tax ($142,800 x 6.2 percent);
• the employer will pay the same amount; and
• a self-employed worker will pay a total of $17,707.20 in social security tax ($142,800 x 12.4 percent).

Additional Medicare Tax
Higher-income workers may have to pay an Additional Medicare tax of 0.9 percent. This tax applies to wages and self-employment income that exceed:

• $250,000 for married taxpayers who file a joint return;
• $125,000 for married taxpayers who file separate returns; and
• $200,000 for other taxpayers.

The annual wage cap does not affect the Additional Medicare tax.

Benefits Increase for 2021
Finally, a cost-of-living adjustment (COLA) will increase social security and SSI benefits for 2019 by 1.3 percent. The COLA is intended to ensure that inflation does not erode the purchasing power of these benefits.

The IRS has adopted previously issued proposed regulations ( REG-106808-19) dealing with the 100 percent bonus depreciation deduction. In addition, some clarifying changes have been made to previously issued final regulations ( T.D. 9874). Changes to the proposed and earlier final regulations are largely in response to various comments submitted by practitioners, and generally relate to:

The IRS has adopted previously issued proposed regulations ( REG-106808-19) dealing with the 100 percent bonus depreciation deduction. In addition, some clarifying changes have been made to previously issued final regulations ( T.D. 9874). Changes to the proposed and earlier final regulations are largely in response to various comments submitted by practitioners, and generally relate to:

• the definition of qualified used property;
• the election to claim bonus depreciation on components acquired or self-constructed after September 27, 2017, for larger self-constructed property for which manufacture, construction, or production began before September 28, 2017;
• application of the mid-quarter convention;
• clarifications to the definition of qualified improvement property, predecessor, and class of property; and
• clarifications to the rules for consolidated groups
  The rules for consolidated groups have also been moved from Proposed Reg. §1.168(k)-2(b)(3)(v) to new Reg. §1.1502-68.

Used Property
The 2019 final regulations provide that in determining whether the taxpayer or a predecessor had a depreciation interest in property prior to its acquisition, only the five calendar years immediately prior to the current placed-in-service year are considered. The latest IRS regulations clarify that the five calendar years immediately prior to the current calendar year in which the property is placed in service by the taxpayer, and the portion of such current calendar year before the placed-in-service date of the property without taking into account the applicable convention, are taken into account. In addition, the five-year look-back period applies separately to the taxpayer and a predecessor.

Furthermore, if the taxpayer or a predecessor, or both, have not been in existence during the entire look-back period, then only the portion of the look-back period during which the taxpayer or a predecessor, or both, have been in existence is taken into account.

Expanded Component Election
The prior regulations allow taxpayers to election to claim 100 percent bonus depreciation on components of certain larger constructed property that qualifies for bonus depreciation if the construction of the larger property began before September 28, 2017. The components must be acquired or constructed after September 27, 2017, and the larger property must be placed in service before 2020 (2021 in the case of property with a longer construction period). The final regulations remove the 2020/2021 cutoff date. In addition, the final regulations provide that eligible larger self-constructed property also includes property that is constructed for a taxpayer under a written contract that is not binding and that is entered into prior to construction for use in the taxpayer’s trade or business. The definition of a larger constructed property is also clarified.

Qualified Improvement Property
The 15-year recovery period for qualified improvement property applies only to improvements "made by the taxpayer." The final regulations clarify that an improvement is considered made by a taxpayer if the property is constructed for the taxpayer. However, qualified improvement property received by a transferee taxpayer in a nonrecognition transaction described in Code Sec. 168(i)(7) is not eligible for bonus depreciation.

Mid-Quarter Convention
The final regulations clarify that depreciable basis is not reduced by the amount of bonus deduction in determining whether the mid-quarter convention applies.

Binding Contracts
Generally, property acquired pursuant to a binding contract entered into after September 27, 2017, does not qualify for bonus depreciation at the 100 percent rate. The final regulations clarify that a contract for a sale of stock of a corporation that is treated as an asset sale as the result of a Code Sec. 336(e) election made for a disposition described in Reg. §1.336-2(b)(1) is a binding contract if enforceable under state law.

Floor Plan Financing
The IRS intends to issue guidance relating to transition relief for taxpayers with a trade or business with floor plan financing indebtedness that want to revoke elections not to claim bonus depreciation for property placed in service during 2018.

The IRS will not allow a taxpayer to limit the amount of its otherwise deductible floor plan interest in order to qualify for bonus depreciation. However, guidance will address transition relief for the 2018 tax year for taxpayers that treated Code Sec. 168(j)(1) as providing an option for a business with floor plan financing indebtedness to include or exclude its floor plan financing interest expense in determining the amount allowed as a deduction for business interest expense for the tax year.

Effective Date
In general, the regulations apply to property acquired after September 27, 2017, and placed in service during or after a tax years that begins on or after January 1, 2021. However, they may be relied on for earlier tax years.

Final regulations reflect the significant changes that the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97) made to the Code Sec. 274 deduction for travel and entertainment expenses. These regulations finalize, with some changes, previously released proposed regulations, NPRM REG-100814-19.

Final regulations reflect the significant changes that the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97) made to the Code Sec. 274 deduction for travel and entertainment expenses. These regulations finalize, with some changes, previously released proposed regulations, NPRM REG-100814-19.

Changes to Code Sec. 274 under the TCJA
For most expenses paid or incurred after 2017, TCJA:

• repealed the "directly related to a trade or business" and the business-discussion exceptions to the general disallowance of entertainment expense deductions;
• eliminated the general business expense deduction for 50 percent of entertainment (but not meal) expenses; and
• repealed the special substantiation rules for deductible entertainment (but not travel) expenses. Taxpayers may rely on the proposed regulations until they are finalized.

Entertainment Expenses
Among other things, Reg. §1.274-11:

• restates the statutory rules of Code Sec. 274(a), including the entertainment deduction disallowance rule for dues or fees to any social, athletic, or sporting club or organization;
• substantially incorporates the existing definition of "entertainment" from Reg. §1.274-2(b)(1); and
• confirms that the nine exceptions in Code Sec. 274(e) continue to apply to deductible entertainment expenditures.

The regulations also confirm that "entertainment" does not include food or beverages unless they are provided at or during an entertainment activity, and their costs are included in the entertainment costs.

Food and Beverage Expenses
As under the proposed regulations, Reg. §1.274-12 allows taxpayers to deduct 50 percent of business meal expenses if:

• the expense is an ordinary and necessary business expense;
• the expense is not lavish or extravagant; the taxpayer or an employee is present when the food or beverage is furnished;
• the food or beverage is provided to a current or potential business customer, client, consultant, or similar business contact; and
• food and beverages that are provided during or at an entertainment activity are purchased separately from the entertainment, or their cost is separately stated.

With respect to the fourth requirement listed above, the final regulations adopt the definition of "business associate" in Reg. §1.274-2(b)(2)(iii), but expands it to include employees. Thus, these requirements would apply to employer-provided meals to employees as well as non-employees. The final regulations also flesh out the fifth requirement listed above, and clarify that the separate charges for entertainment-related food and beverages must reflect their actual cost, including delivery fees, tips, and sales tax. Indirect expenses such as transportation to the food are not included in the actual cost.

Exceptions and Special Rules
Food or beverage expenses for employer-provided meals at an eating facility do not include expenses for the operation of the facility, such as salaries of employees preparing and serving meals, and other overhead costs. The final regulations apply the TCJA changes to the exceptions and special rules for deductible food and beverages in Code Sec. 274(e), Code Sec. 274(k) and Code Sec. 274(n), including:

• reimbursed food or beverage expenses;
• recreational expenses for employees;
• items available to the public; and
• goods or services sold to customers.

The final regulations also provide examples on several specific scenarios to illustrate the rules.

The IRS has issued a final regulation addressing tax withholding on certain periodic retirement and annuity payments under Code Sec. 3405(a), to implement amendments made by the Tax Cuts and Jobs Act ( P.L. 115-97) (TCJA). The regulation affects payors of certain periodic payments, plan administrators that are required to withhold on such payments, and payees who receive such payments. The final regulation adopts, without modification, a proposed regulation that updated and replaced the provisions of three questions and answers with a new regulation regarding the default withholding rate on periodic payments made after December 31, 2020.

The IRS has issued a final regulation addressing tax withholding on certain periodic retirement and annuity payments under Code Sec. 3405(a), to implement amendments made by the Tax Cuts and Jobs Act ( P.L. 115-97) (TCJA). The regulation affects payors of certain periodic payments, plan administrators that are required to withhold on such payments, and payees who receive such payments. The final regulation adopts, without modification, a proposed regulation that updated and replaced the provisions of three questions and answers with a new regulation regarding the default withholding rate on periodic payments made after December 31, 2020.

Withholding on Periodic Payments
Before the TCJA, if a withholding certificate (Form W-4P) was not in effect for a periodic payment, the default withholding rate on the payment was determined by treating the payee as a married individual claiming three withholding exemptions. The TCJA amended Code Sec. 3405(a)(4) so that the default withholding rate on such a periodic payment is instead determined under rules prescribed by the Treasury Secretary.

After the TCJA was enacted, the IRS issued three notices providing that, for calendar years 2018, 2019, and 2020, the default withholding rate on periodic payments under Code Sec. 3405(a)(4) is based on treating the payee as a married individual claiming three withholding allowances ( Notice 2020-3, I.R.B. 2020-3, 330; Notice 2018-92, I.R.B. 2018-51, 1038; Notice 2018-14, I.R.B. 2018-7, 353).

Under new Reg. §31.3405(a)-1, the default rate of withholding on periodic payments made after December 31, 2020, is determined in the manner described in the applicable forms, instructions, publications, and other guidance prescribed by the IRS.

Applicability Date
The final regulation applies to periodic payments made after December 31, 2020.

The IRS has issued final regulations that provide guidance for employers on federal income tax withholding from employees’ wages.

The IRS has issued final regulations that provide guidance for employers on federal income tax withholding from employees’ wages. The final regulations:

• address the amount of federal income tax that employers withhold from employees’ wages;
• implement changes made by the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97); and
• reflect the redesigned Form W-4, Employee’s Withholding Certificate, and related IRS publications.

TCJA Changes
The TCJA made many amendments affecting income tax withholding on employees’ wages. The TCJA made many amendments affecting income tax withholding on employees’ wages.After the TCJA was enacted, the IRS issued guidance to implement the changes (for example, Notice 2018-14, I.R.B. 2018-7, 353; Notice 2018-92, I.R.B. 2018-51, 1038; Notice 2020-3, I.R.B. 2020-3, I.R.B. 2020-3, 330). The IRS updated Form W-4 and its instructions with significant changes intended to improve the accuracy of income tax withholding and make the withholding system more transparent for employees. It also released IRS Publication 15-T, Federal Income Tax Withholding Methods, which provides percentage method tables, wage bracket withholding tables, and other computational procedures for employers to use to compute withholding for the 2020 calendar year.

On February 13, 2020, the IRS published a notice of proposed rulemaking ( REG-132741-17) to update the regulations under Code Sec. 3401 and Code Sec. 3402 to reflect the legislative changes, and expand the rules to accommodate changes necessary to fully implement the redesigned Form W-4 and its related computational procedures, along with most existing computational procedures that apply to 2019 or earlier Forms W-4.

The final regulations adopt the proposed regulations with a few revisions.

Form W-4
The final regulations do not require all employees with a 2019 or earlier Form W-4 in effect to furnish a redesigned Form W-4. Comments expressed concerns that the proposed regulations and the related forms, instructions, publications, and other IRS guidance would require employers to maintain two different systems for computing income tax withholding on wages: one for 2019 or earlier Forms W-4, and another for the redesigned Forms W-4.

In response, the IRS is acknowledging concerns with (1) instructions to the redesigned Form W-4 for employees with multiple jobs and (2) optional computational “bridge” entries permitted under the regulations and described in Publication 15-T that will allow employers to continue in effect 2019 or earlier Forms W-4 as if the employees had furnished redesigned Forms W-4.

The final regulations revise Reg. §31.3402(f)(4)-1(a) to provide that an employer’s use of the computational bridge entries to adapt a 2019 or earlier Form W-4 to the redesigned computational procedures as if using entries on a redesigned Form W-4 will continue in effect such a Form W-4 that was properly in effect on or before December 31, 2019.

Lock-in Letters
The IRS issues a "lock-in" letter to notify an employer that an employee is not entitled to claim exemption from withholding, or is not entitled to the withholding allowance claimed on the employee’s Form W-4. The lock-in letter prescribes the withholding allowance the employer must use to figure withholding. After the lock-in letter becomes effective, the IRS may issue a subsequent modification notice, but only after the employee contacts the IRS to request an adjustment to the withholding prescribed in the lock-in letter.

Under the final regulations, employers are not required to notify the IRS that they no longer employ an employee for whom a lock-in letter was issued. Further, the final regulations do not require the IRS to reissue lock-in letters or modification notices solely because of the redesigned Form W-4.

The final regulations revise Reg. §31.3402(f)(2)-1(g)(2)(iv) relating to lock-in letters. and Reg. §31.3402(f)(2)-1(g)(2)(vii) relating to modification notices, to provide that an employer may comply with a lock-in letter or modification notice that is based on a 2019 or earlier Form W-4, as required by the regulations, if the employer implements the maximum withholding allowance and filing status permitted in a lock-in letter or modification notice by using the computational bridge entries as set forth in forms, instructions, publications, and other IRS guidance to calculate withholding for such a Form W-4.

Estimated Tax Payments
The final regulations revise Reg. §31.3402(m)-1(d) to allow employees to take estimated tax payments into account, as long as the employee (1) follows the instructions to the IRS’s Tax Withholding Estimator (available at https://www.irs.gov/individuals/tax-withholding-estimator) or IRS Publication 505, (2) is not subject to a lock-in letter or modification notice, and (3) does not request withholding from wages that falls below the pro rata share of income taxes attributable to wages determined under forms, instructions, publications, and other IRS guidance. The IRS intends to update its Tax Withholding Estimator and Publication 505 to reflect this rule.

Applicable Date
The final regulations generally apply on the date they are published in the Federal Register. Reg. §31.3402(f)(2)-1(g), regarding withholding compliance, applies as of February 13, 2020. Reg. §31.3402(f)(5)-1(a)(3), regarding the requirement to use the current version of Form W-4, applies as of March 16, 2020. The removal of Reg. §31.3402(h)(4)-1(b), regarding the combined income tax withholding and employee FICA tax withholding tables, applies on and after January 1, 2020.

Except for the removal of Reg. §31.3402(h)(4)-1(b), taxpayers may choose to apply the final regulations on and after January 1, 2020, and before their applicability date set forth in the regulations.

The IRS has reminded taxpayers that the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) can provide favorable tax treatment for withdrawals from retirement plans and Individual Retirement Accounts (IRAs). Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.

The IRS has reminded taxpayers that the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) can provide favorable tax treatment for withdrawals from retirement plans and Individual Retirement Accounts (IRAs). Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.

Also, until September 22, 2020, individuals eligible to take coronavirus-related withdrawals may be able to borrow as much as $100,000 (up from $50,000) from a workplace retirement plan, if their plan allows. Loans are not available from an IRA. For eligible individuals, plan administrators can suspend, for up to one year, plan loan repayments due on or after March 27, 2020, and before January 1, 2021. A suspended loan is subject to interest during the suspension period, and the term of the loan may be extended to account for the suspension period.

To be eligible for COVID-19 relief, coronavirus-related withdrawals or loans can only be made to an individual if:

• the individual is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetics Act);
• the individual’s spouse or dependent is diagnosed with COVID-19 by such a test; or
• the individual, their spouse, or a member of the individual’s household experiences adverse financial consequences from: (1) being quarantined, furloughed or laid off, having work hours reduced, being unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19; or (2) closing or reducing hours of a business owned or operated by the individual, the individual’s spouse, or a member of the individual’s household, due to COVID-19.

Taxpayers can learn more about these provisions in IRS Notice 2020-50, I.R.B. 2020-28, 35. The IRS has also posted FAQs that provide additional information.

The IRS has issued guidance to employers on the requirement to report the amount of qualified sick and family leave wages paid to employees under the Families First Coronavirus Response Act (Families First Act) ( P.L. 116-127). This reporting provides employees who are also self-employed with information necessary for properly claiming qualified sick leave equivalent or qualified family leave equivalent credits under the Families First Act.

The IRS has issued guidance to employers on the requirement to report the amount of qualified sick and family leave wages paid to employees under the Families First Coronavirus Response Act (Families First Act) ( P.L. 116-127). This reporting provides employees who are also self-employed with information necessary for properly claiming qualified sick leave equivalent or qualified family leave equivalent credits under the Families First Act.

Background
Under the Families First Act, many employers with fewer than 500 employees must provide paid leave to employees due to circumstances related to the Coronavirus Disease 2019 (COVID-19). Certain employers must provide an employee with up to 80 hours of paid sick leave if the employee cannot work or telework because he or she:

1. is subject to a federal, state or local quarantine or isolation order related to COVID-19;
2. has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
3. is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
4. is caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
5. is caring for a son or daughter if the child’s school or place of care has been closed, or the child’s care provider is unavailable, due to COVID-19 precautions; or
6. is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of the Treasury and Labor.

The employee is entitled to paid sick leave at his or her regular pay rate (or if higher, the applicable federal, state, or local minimum wage), up to:

• $511 per day ($5,110 in the aggregate) if the employee cannot work for reasons listed in (1), (2), or (3), above;
• $200 per day ($2,000 in the aggregate) if the employee cannot work for reasons listed in (4), (5), or (6) above.

The Families First Act also amends the Family and Medical Leave Act of 1993 to require employers to provide expanded paid family and medical leave to employees who cannot work or telework for reasons related to COVID-19. An employee can receive up to 10 weeks of paid family and medical leave at two-thirds the employee’s regular rate of pay, up to $200 per day ($10,000 in the aggregate) if the employee cannot work because he or she is caring for a son or daughter whose school or place of care is closed, or whose child care provider is unavailable, for reasons related to COVID-19.

Eligible employers may receive a refundable payroll credit for required qualified sick leave wages or qualified family leave wages paid to an employee, plus allocable qualified health plan expenses. An equivalent credit is available to self-employed individuals carrying on a trade or business, if the self-employed individual would be entitled to receive paid leave if he or she were an employee of an employer (other than himself or herself). The refundable credits apply to qualified leave wages paid with respect to the period beginning on April 1, 2020, and ending on December 31, 2020.

Reporting Qualified Leave Wages
In addition to reporting qualified sick leave wages paid and qualified family leave wages paid in Boxes 1, 3 (up to the social security wage base), and 5 of Form W-2 (or, in the case of compensation subject to the Railroad Retirement Tax Act (RRTA), in Boxes 1 and 14 of Form W-2), employers must report to the employee the following types and amounts of the wages that were paid, with each amount separately reported either in Box 14 of Form W-2 or on a separate statement:

• the total amount of qualified sick leave wages paid for reasons (1), (2), or (3) above, labelled as "sick leave wages subject to the $511 per day limit" or in similar language;
• the total amount of qualified sick leave wages paid for reasons (4), (5), or (6) above, labelled as "sick leave wages subject to the $200 per day limit" or in similar language; and
• the total amount of qualified family leave wages paid, labelled as "emergency family leave wages" or in similar language.

If a separate statement is provided and the employee receives a paper Form W-2, the statement must be included with the Form W-2 provided to the employee. If the employee receives an electronic Form W-2, the statement must be provided in the same manner and at the same time as the Form W-2.

Self-Employed Individuals
Self-employed individuals who are claiming qualified sick leave equivalent or qualified family leave equivalent credits, and who are also eligible for qualified sick leave and qualified family leave wages as employees, must report the qualified leave wage amounts described above on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, included with their income tax returns. They also must reduce (but not below zero) any qualified sick leave or qualified family leave equivalent credits by the amount of these qualified leave wages.

"At President Trump’s direction, we are moving Tax Day from April 15 to July 15," Treasury Secretary Steven Mnuchin said in a March 20 tweet. "All taxpayers and businesses will have this additional time to file and make payments without interest or penalties."

"At President Trump’s direction, we are moving Tax Day from April 15 to July 15," Treasury Secretary Steven Mnuchin said in a March 20 tweet. "All taxpayers and businesses will have this additional time to file and make payments without interest or penalties."

The Treasury and IRS officially announced the extension on March 21 (IR-2020-58; more details can be found in Notice 2020-18).

The move to extend this year’s tax filing deadline to July 15 follows the IRS’s formal announcement that certain 2019 tax year payments could be deferred without interest or penalties (see "Due Date for Federal Income Tax Payments Extended to July 15" in this Issue).

File as Usual if a Refund is Expected
"Working with our members, state societies, and tax professionals everywhere, AICPA scored a victory in the extension of the tax filing deadline to July 15, 2020," the American Institute of CPAs (AICPA) said in a March 20 tweet. However, the AICPA noted that it still encourages taxpayers to file their returns as soon as possible so that refunds can stimulate the economy.

"The AICPA understands the need for economic stimulus and, if possible, those who can file and get refunds should do so now," AICPA president and CEO Barry Melancon said in a statement.

Similarly, Mnuchin also encouraged taxpayers to file their returns, if possible. "While I still encourage taxpayers who expect to get a refund to file their taxes, this deadline extension will give everyone maximum flexibility to do what is best for them."

See Tax Filing and Tax Payment Relief for Coronavirus/COVID-19 Pandemic for a summary of filing and payment delays allowed by the federal and state governments.

The Treasury Department and IRS have extended the due date for the payment of federal income taxes otherwise due on April 15, 2020, until July 15, 2020, as a result of the ongoing coronavirus (COVID-19) emergency. The extension is available to all taxpayers, and is automatic. Taxpayers do not need to file any additional forms or contact the IRS to qualify for the extension. The relief only applies to the payment of federal income taxes. Penalties and interest on any remaining unpaid balance will begin to accrue on July 16, 2020.

The Treasury Department and IRS have extended the due date for the payment of federal income taxes otherwise due on April 15, 2020, until July 15, 2020, as a result of the ongoing coronavirus (COVID-19) emergency. The extension is available to all taxpayers, and is automatic. Taxpayers do not need to file any additional forms or contact the IRS to qualify for the extension. The relief only applies to the payment of federal income taxes. Penalties and interest on any remaining unpaid balance will begin to accrue on July 16, 2020.

Dollar Limits
The due date for making federal income tax payments otherwise due on April 15, 2020, for any taxpayer is automatically extended until July 15, 2020. The extension is limited to a maximum amount:

• up to $1 million for individuals, regardless of filing status, and other unincorporated entities such as trust and estates; and
• up to $10 million for each C corporation that does not join in filing a consolidated return or for each consolidated group.

Federal Income Tax Payments Only
The relief is available for federal income tax payments, including payments of tax on self-employment income, otherwise due on April 15, 2020. Thus, it applies to the payment of federal income taxes for the 2019 tax year, as well estimated income tax payments for the 2020 tax year that are due on April 15, 2020. The extension is not available for the payment or deposit of any other type of federal tax.

Taxpayers are urged to check with their state tax agencies for details on any delays in filing and payment state taxes.

Penalties and Interest
Any interest, penalty, or addition to tax for failure to pay federal income taxes postponed will not begin to accrue until July 16, 2020. The period from April 15, 2020, to July 15, 2020, will be disregarded but only for interest, penalties, or additions to tax up to maximum dollar amounts ($1 million or $10 million as applicable).

Interest, penalties, and additions to tax will continue to accrue from April 15, 2020, on the amount of any federal income tax in excess of the maximum dollar amounts. Taxpayers subject to penalties or additions to tax that are not suspended may seek reasonable cause under Code Sec. 6651 for failure to pay tax.

Individuals and certain trusts and estates may also seek a waiver to a penalty under Code Sec. 6654 for failure to pay estimated income taxes. Similar relief is not available for estimated tax payments by corporations or tax-exempt organizations for the penalty under Code Sec. 6655.