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Issue Number: 2021-13

Inside This Issue

1. IRS joins leading nonprofit groups to highlight special charitable tax benefit available through December 31
2. Guidance regarding the retroactive termination of the Employee Retention Credit
3. IRS seeks applications for the Electronic Tax Administration Advisory Committee
4. Highlights from 2021 National Tax Security Awareness Week
5. Reporting nonemployee compensation and backup withholding
6. New forms, instructions and publications on IRS.gov

The Independent Sector and National Council of Nonprofits joined with the IRS to highlight a pandemic-related provision where married couples filing jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations.

Under the temporary law, taxpayers don't need to itemize deductions on their tax returns to take advantage of this, which creates tax-favorable donation options not normally available to about 90 percent of tax filers. At a time when many charitable groups are struggling during the pandemic, the IRS highlights the new provision and urges people to make sure they donate to a qualifying charity.

The special Tax Exempt Organization Search tool on IRS.gov can help people make sure they donate to a qualified charity.

This article is also available in Spanish and Simplified Chinese.

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The IRS issued guidance for employers regarding the retroactive termination of the Employee Retention Credit. The Infrastructure Investment and Jobs Act, which was enacted on November 15, 2021, amended the law so that the Employee Retention Credit applies only to wages paid before October 1, 2021, unless the employer is a recovery startup business.
 
Notice 2021-65 applies to employers that paid wages after September 30, 2021, and received an advance payment of the Employee Retention Credit for those wages or reduced employment tax deposits in anticipation of the credit for the fourth quarter of 2021, but are now ineligible for the credit due to the change in the law. The notice also provides guidance regarding how the rules apply to recovery startup businesses during the fourth quarter of 2021.

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The IRS is seeking qualified applicants for nomination to the Electronic Tax Administration Advisory Committee. ETAAC is an organized public forum for discussion of issues in electronic tax administration, such as prevention of identity theft and refund fraud.

The IRS is looking for up to 10 qualified individuals who will serve three-year terms beginning in September 2022. Applicants should have experience in such areas as state tax administration, cybersecurity and information security, tax software development, tax preparation, payroll and tax financial product processing, systems management and improvement, and implementation of customer service initiatives. The IRS also strongly encourages applications from people representing the viewpoints of average taxpayers, including consumer advocates and others with an interest in tax issues.

Applications will be accepted through January 31, 2022.

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The IRS and its Security Summit partners recently held the annual National Tax Security Awareness Week. One of the key messages this year was even if someone doesn't file a tax return, their online interactions can lead to scammers stealing sensitive information and using it to try and get a tax refund. Other key messages from the week included:

• Protect personal and financial information online
• Beware of scammers using fake charities
• Get an Identity Protection PIN
• Businesses should establish safeguards and watch out for tax-related scams

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The IRS reminds businesses, payroll professionals and other payers to use Form 1099-NEC, Nonemployee Compensation, to report nonemployee compensation of $600 or more paid to a payee. 

Generally, payers must file Form 1099-NEC, electronically or by paper, with the IRS by Monday, January 31, 2022, for tax year 2021. Payers must also furnish Form 1099-NEC to payees by this date. 

A payer may request a 30-day extension to file Form 1099-NEC by filing Form 8809, Application for Extension of Time to File Information Returns. The IRS does not grant the extension automatically. The payer must meet one of the criteria listed on line 7 of this form. 

Also, nonemployee compensation may be subject to backup withholding at a rate of 24% if:

• A payee has not yet provided a taxpayer identification number (TIN) to the payer at the time the compensation is paid to the payee, or
• The IRS notifies the payer that the TIN provided was incorrect.

If a payer must backup withhold, they must deposit the withholding with the IRS. See Publication 15, Employer’s Tax Guide, for information. The backup withholding must also be reported on Form 1099-NEC. Payers use Form 945, Annual Return of Withheld Federal Income Tax, to report backup withholding shown on Forms 1099-NEC. Payers must make sure to file Forms 1099-NEC and 945 using the same payer employer identification number (EIN). Filing returns with inconsistent EINs may cause processing delays and possibly the assessment of penalties. 

If a payer doesn’t have an EIN, it may apply for one online by visiting the IRS website at IRS.gov/EIN. Don't use an SSN in place of an EIN.

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Forms

• Form 945, Annual Return of Withheld Federal Income Tax
• Form 7200, Advance Payment of Employer Credits Due to COVID-19
• Form 8959, Additional Medicare Tax
• Form W-2, Wage and Tax Statement (Info Copy Only)

Instructions

• Inst 7200, Instructions for Form 7200, Advance Payment of Employer Credits Due to COVID-19
• Inst 8959, Instructions for Form 8959, Additional Medicare Tax
• Inst W-2 and W-3, Instructions for Forms W-2 and W-3, Wage and Tax Statement and Transmittal of Wage and Tax Statements

Publications

• Pub 1141, General Rules and Specifications for Substitute Forms W-2 and W-3
• Pub 5165, Guide for Electronically Filing Affordable Care Act (ACA) Information Returns for Software Developers and Transmitters

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