e-News for Small Business Issue 2023-15

Reduced 1099-K reporting threshold delay, ineligible ERC claim withdrawal, IRS business tax account

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e-News for Small Business November 28, 2023

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Issue Number: 2023-15

Inside This Issue

  1. IRS announces delay in Form 1099-K reporting threshold for third party platform payments
  2. New ERC withdrawal process available for those concerned about ineligible claim
  3. IRS launches business tax account
  4. Taxpayer experience enhancements
  5. Online threats, fake charities and fraud
  6. IRS advances innovative Direct File project for 2024 tax season
  7. Energy credits and deductions
  8. Get ready now to file 2023 federal income tax returns in early 2024
  9. Contribution limits for 401(k), IRA plans increase in 2024
  10. Video: Benefits of the Work Opportunity Tax Credit
  11. ITIN holders can register for online access
  12. Other tax news

1.  IRS announces delay in Form 1099-K reporting threshold for third party platform payments

Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service this week released Notice 2023-74 announcing a delay of the new $600 Form 1099-K reporting threshold for third party settlement organizations for calendar year 2023. As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn't expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.

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2.  New ERC withdrawal process available for those concerned about ineligible claim

The IRS announces a new Employee Retention Credit claim withdrawal process for taxpayers who filed an ERC claim and are concerned about its accuracy. The new process lets certain businesses withdraw their claims to avoid getting a refund for which they're ineligible. Withdrawn claims will be treated as if they were never filed. The IRS will not impose penalties or interest.

Businesses can find details about who can ask to withdraw an ERC claim and the steps they need to take in a new ERC withdrawal process fact sheet. It also contains links to other helpful information on this topic.

As a reminder, anyone incorrectly claiming the ERC must pay it back and may owe penalties and interest. The IRS wants to help honest taxpayers avoid this situation.

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3.  IRS launches business tax account

The IRS launched the first phase of the business tax account, allowing unincorporated sole proprietors who have an active Employer Identification Number to set up an account, view their business profile and manage authorized users. Over time, the business tax account will also allow business taxpayers to check their tax payment history, make payments, view notices, authorize powers of attorney and conduct other business with the IRS.

Future improvements will include access to view letters or notices, request tax transcripts, add third parties for power of attorney or tax information authorizations, schedule or cancel tax payments and store bank account information. Check out this news release for more about the business tax account and other initiatives underway to improve taxpayer service and modernize technology using Inflation Reduction Act funding.

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4.  Taxpayer experience enhancements

IRS achieves key Paperless Processing Initiative goal; improvements for filing season 2024

Following a dramatically improved 2023 Filing Season, thanks to Inflation Reduction Act investments, Treasury and IRS announced additional improvements taxpayers will experience next Filing Season. Treasury and IRS also announced meeting the first goal of the Paperless Processing Initiative announced in August by Secretary of the Treasury Janet L. Yellen and Commissioner of the IRS Danny Werfel. Taxpayers are now able to digitally submit all correspondence and responses to notices.

IRS extends electronic signatures and encrypted email to enhance the taxpayer experience

The IRS extended the ability to use digital signatures and encrypted email. The IRS will accept digital signatures on certain documents indefinitely, while it will permit use of encrypted email - when a taxpayer is working directly with IRS personnel - through Oct. 31, 2025.

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5.  Online threats, fake charities and fraud

Protect the business against online threats

As the tax season approaches, the IRS and its Security Summit partners encourage taxpayers during National Tax Security Awareness Week to remain vigilant against online threats and learn best practices to protect against cybersecurity attacks.

Beware of fake charities; use IRS tool to verify legitimate organizations

When fake charities scam unsuspecting donors, the proceeds don’t go to those who need the help, and those contributing to these fake charities can’t deduct their donations on their tax return. Those who wish to make donations should use the Tax-Exempt Organization Search (TEOS) tool on IRS.gov to help find or verify qualified, legitimate charities.

International Fraud Awareness Week

As part of ongoing efforts to protect taxpayers, the IRS urges taxpayers to protect personal and financial information from scam artists and tax schemes. 

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6.  IRS advances innovative Direct File project for 2024 tax season

As part of larger transformation efforts underway, the IRS announced key details about the Direct File pilot for the 2024 filing season with several states planning to join the innovative effort. The IRS will conduct a limited-scope pilot during the 2024 tax season to further assess customer support and technology needs. It will also provide a platform for the IRS to evaluate successful solutions for potential operational challenges identified in the report the IRS submitted to Congress earlier this year.

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7.  Energy credits and deductions

Clean vehicle sellers and dealers should register by Dec. 1

The IRS reminds dealers and sellers of clean vehicles to register their organizations immediately on the Energy Credits Online tool. The IRS is strongly urging sellers of clean vehicles to register by Dec. 1, 2023, if they want to be in a position to receive advance payments starting Jan. 1, 2024. The tool will generate a time-of-sale report that the taxpayer will use when filing their federal tax return to claim or report the credit.

A tax deduction for increased energy savings in commercial buildings may be available for those who qualify

Building owners who place in service energy efficient commercial building property (EECBP) or energy efficient building retrofit property (EEBRP) may be able to claim a tax deduction. Find out more on eligibility, and qualifications in this easy-to-understand e-poster, that you can post or distribute. Find more info about the Energy efficient commercial buildings deduction page on IRS.gov.

Home energy tax credits

Small businesses can find expanded home energy tax credits outlined in an easy-to-understand format. They can learn about credit amounts and types of qualifying expenses for these credits. Post, print or digitally share this e-poster.

IRS provides guidance on credit for builders of energy-efficient homes

Contractors who build or reconstruct qualified energy-efficient homes may be eligible for tax credits up to $5,000 per home.

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8.  Get ready now to file 2023 federal income tax returns in early 2024

With the nation’s tax season rapidly approaching, the IRS reminds taxpayers there are important steps they can take now to help “get ready” to file their 2023 federal tax return.

The IRS has a special page outlining items taxpayers can look into now.

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9.  Contribution limits for 401(k), IRA plans increase in 2024

The amount individuals can contribute to their 401(k) plans in 2024 has increased to $23,000, from $22,500 in 2023. Also, the limit on annual contributions to an IRA increased to $7,000, from $6,500. The IRA catch up contribution limit for individuals aged 50 and older remains at $1,000 for 2024. Details on these and other retirement-related cost-of-living adjustments for 2024 are in Notice 2023-75.

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10.  Video: Benefits of the Work Opportunity Tax Credit

Giving someone a work opportunity may translate into a business tax credit and greater stability for a family. Watch a video about Work Opportunity Tax Credit (WOTC) benefits. WOTC is a federal tax credit available to employers who hire individuals from certain targeted groups who have faced significant barriers to employment.

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11.  ITIN holders can register for online access

As a reminder, taxpayers with an ITIN can access their IRS online account, which provides balance due, payment history, payment plans, tax records, and more.

ITIN holders will first verify their identity through a one-time video chat process. During this verification, they will provide documentation proving their identity, address, and ITIN.

Once verified, taxpayers can access many IRS services including Online Account, Get Transcript Online, Online Payment Agreement, Get an Identity Protection PIN (IP PIN) and other available applications.

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12.  Other tax news

The following information may be of interest to individuals and groups in or related to small businesses:

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