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Issue Number: 2021-07

Inside This Issue

1. Information for FIRE users
2. Common errors to avoid when requesting advance payment of employer credit
3. IRS extends tax relief for employer leave-based donation programs aiding victims of the COVID-19 pandemic
4. Making payments for deferred tax reported by third party payers
5. ETAAC delivers 2021 Annual Report with recommendations to Congress and IRS
6. Fringe benefits aircraft valuation formula – SIFL
7. Employers must choose their payroll service provider carefully to protect against fraud
8. New and draft forms, instructions and publications on IRS.gov

The IRS will be making significant improvements to the Filing Information Returns Electronically (FIRE) application process for new users. The new online Information Returns (IR) Application for Transmitter Control Code (TCC) is scheduled to deploy on September 26, 2021. The new application will be available on IRS.gov and will replace both the current Form 4419 and the Fill-in Form 4419 on the FIRE System.
 
New users will be required to authenticate their identities and create a new account through IRS Secure Access Account to access the new online IR Application for TCC. Details on what users need to verify their identities can be found at www.IRS.gov/SecureAccess. Existing Secure Access (SA) users will be able to use their existing SA account.
 
Any filer, including corporations, partnerships, employers, estates and trusts, who files 250 or more Forms 1097, 1042-S, 1098, 1099, 3921, 3922, 5498, 8027, 8955-SSA or W-2G for any calendar year must file their information returns electronically.

In late 2022, to better secure the FIRE system, existing FIRE users will also be required to transition to a stronger identity proofing authentication process. The target timeframe for this move is Fall 2022.
 
A quick reminder that the Taxpayer First Act of 2019 (TFA) required the IRS to increase electronic filing. Counsel has now issued proposed regulations to reduce the current 250-return threshold to 100 in 2022 and to 10 in 2023. To review the proposed regulation or for details on the public hearing and comment period, see the Federal Register.
 
For more information on FIRE changes, see FIRE System Update: Improving the Process and Security for Information Return (IR) Application for Transmitter Control Code (TCC).

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Employers who are filing Form 7200, Advance Payment of Employer Credits Due to COVID-19 should read the instructions carefully and take their time when completing this form to avoid mistakes.

Here are some things to double check when filling out Form 7200:

• Missing or inaccurate employer identification number. Each EIN should be exact. Taxpayers must complete this box.
• Calendar quarter. Check only one box for the applicable calendar quarter.
• Employment tax return type. Check only one box for Part 1, Line A.
• Credits and advance requested. Complete Part II, Lines 1-9 using actual dollar amounts. Part II should be completed using dollar amounts, not the number of eligible employees. All lines in Part II should be completed with an actual dollar amount.
• Federal tax deposit reductions. Part II, Line 6 cannot be a negative dollar amount. It must be a positive number.
• Check the math. Taxpayers should make sure they check the math on lines 5, 7 and 9.
• Sign the form. Taxpayers should remember to sign the form. Failure to sign the form will result in an automatic rejection.
• Authorized signer. Ensure the person signing the form is authorized to do so. Failure to use an authorized signer will result in an automatic rejection.
• Fax submission only. Fax completed Form 7200 to (855) 248-0552. Forms 7200 sent by mail will not be processed.

Share this tip on social media – #IRSTaxTip: People who don’t have to file taxes may need to register for monthly advance child tax credit payments. https://go.usa.gov/x6vBp.

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The IRS is extending the federal income and employment tax treatment previously provided in Notice 2020-46 with regard to cash payments made to charitable organizations described in section 170(c) after December 31, 2020, and before January 1, 2022.

Notice 2021-42 extends the relief offered in response to the COVID-19 pandemic through December 31, 2021.

The tax relief is extended for calendar year 2021 for employers that make cash payments to charitable organizations providing COVID-19 relief in exchange for sick, vacation or personal leave that employees forgo because of the COVID-19 pandemic. These cash payments will not be treated as compensation, and the employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the leave that they donated to their employer. Employers, however, may deduct these cash payments as a business expense or as a charitable contribution deduction if the employer otherwise meets the respective requirements of either section.

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The CARES Act allowed employers to defer the deposit and payment of the employer's share of Social Security taxes and self-employed individuals to defer payment of certain self-employment taxes.

There are special considerations in repaying the deferred taxes when an employer uses a third party payer that files aggregate Forms 941 and 943 under its own EIN. This includes a non-certified professional employer organization and a third party payer designated as an agent by an employer submitting Form 2678.

Third party payers that reported their clients’ deferred deposit and payment of the employer’s share of Social Security taxes must have attached a Schedule R to their aggregate returns in 2020. They must list all clients who are deferring deposits of the employer's share of Social Security tax on the Schedule R.

An IRS COVID Tax Tip explains how to make payments for deferred tax reported by third party payer aggregate filers.

You can also share this tip on social media – #IRSTaxTip: Making payments for deferred tax reported by third party payers. https://go.usa.gov/x6z6t.

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The Electronic Tax Administration Advisory Committee (ETAAC) released its annual report to Congress, featuring 10 recommendations with a focus on the prevention of identity theft and refund fraud.

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Revenue Ruling 2021-11 provides information for use in determining the value of noncommercial flights on employer-provided aircraft for the first half of 2021.

Because of the coronavirus pandemic, airline industry capacity (as measured by airline seat miles) was reduced faster than airline industry
expenses were reduced. The standard industry fare level (SIFL) rate generally is determined as airline industry expenses divided by airline seat miles. Because airline seat miles were reduced faster than airline industry expenses, the SIFL rate for the six-month period beginning January 1, 2021, increased substantially.

The CARES Act directed the Treasury Department to allot up to $25 billion for domestic carriers to cover payroll expenses through the Payroll Support Program (PSP) to offset airline industry expenses.

Revenue Ruling 2021-11 contains three SIFL rates:

1. The unadjusted SIFL rate
2. The SIFL rate adjusted for PSP grants
3. The SIFL rate adjusted for PSP grants and promissory notes

Find these rates in Revenue Ruling 2021-11 in Internal Revenue Bulletin 2021-24.

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Here’s an IRS Tax Tip to share with clients, employees and partners. It explains the importance of hiring a reputable payroll service provider to handle their payroll and payroll taxes. This can help a business avoid missed deposits for employment taxes and other unpaid bills, and avoid a possible Trust Fund Recovery Penalty.

You can also share this tip on social media – #IRSTaxTip: Employers should choose their payroll service provider carefully to protect against fraud. https://go.usa.gov/xFxVr.

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New forms

• Form 7200, Advance Payment of Employer Credits Due to COVID-19
• Form 7200 (SP), Advance Payment of Employer Credits due to COVID-19 (Spanish Version)

Draft forms

• Form 941, Employer's Quarterly Federal Tax Return
• Form 941 (Schedule R), Allocation Schedule for Aggregate Form 941 Filers
• Form 941-SS, Employer's Quarterly Federal Tax Return - American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands
• Form 1094-B, Transmittal of Health Coverage Information Returns  
• Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
• Form 1095-B, Health Coverage 
• Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

New instructions

• Inst 941-X (PR), Instructions for Form 941-X (PR), Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund (Puerto Rico Version)
• Inst 943-X (PR), Instructions for Form 943-X (PR), Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund (Puerto Rico Version)
• Inst 7200, Instructions for Form 7200, Advance Payment of Employer Credits Due to COVID-19
• Inst 7200 (SP), Instructions for Form 7200, Advance Payment of Employer Credits Due to COVID-19 (Spanish Version)

Draft instructions

• Inst 941, Instructions for Form 941, Employer's Quarterly Federal Tax Return
• Inst 941-SS, Instructions for Form 941-SS, Employer's Quarterly Federal Tax Return - American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands
• Inst 941-X (PR), Instructions for Form 941-X (PR), Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund (Puerto Rico Version)
• Inst 7200 (SP), Instructions for Form 7200, Advance Payment of Employer Credits Due to COVID-19 (Spanish Version)

New publications

• Pub 1187, Specifications for Electronic Filing of Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding
• Pub 1693, SSA/IRS Reporter

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