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Tax Alerts
March 03, 2021
Tax Briefing(s)

The IRS has released new Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. The form allows eligible self-employed individuals to calculate the amount to claim for qualified sick and family leave tax credits under the Families First Coronavirus Response Act (FFCRA) ( P.L. 116-127). They can claim the credits on their 2020 Form 1040 for leave taken between April 1, 2020, and December 31, 2020, and on their 2021 Form 1040 for leave taken between January 1, 2021, and March 31, 2021.


The IRS is urging employers to take advantage of the newly-extended employee retention credit (ERC), which makes it easier for businesses that have chosen to keep their employees on the payroll despite challenges posed by COVID-19. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Division EE of P.L. 116-260), which was enacted December 27, 2020, made a number of changes to the ERC previously made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) ( P.L. 116-136), including modifying and extending the ERC, for six months through June 30, 2021.


The IRS has announced that lenders who had filed or furnished Form 1099-MISC, Miscellaneous Information, to a borrower, reporting certain payments on loans subsidized by the Administrator of the U.S. Small Business Administration (Administrator) as income of the borrower, must file and furnish corrected Forms 1099-MISC that exclude these subsidized loan payments.


The IRS is providing a safe harbor for eligible educators to deduct certain unreimbursed COVID-19-related expenses. The safe harbor applies to expenses for personal protective equipment, disinfectant, and other supplies used for the prevention of the spread of COVID-19 in the classroom, paid or incurred after March 12, 2020. All amounts remain subject to the $250 educator expense deduction limitation.


With some areas seeing mail delays, the IRS has reminded taxpayers to double-check before filing a tax return to make sure they have all their tax documents, including Form W-2, Wage and Tax Statement, and Forms 1099. Many of these forms may be available online. However, when other options are not available, taxpayers who have not received a W-2 or Form 1099, or who received an incorrect W-2 or 1099, should contact the employer, payer, or issuing agency directly to request the documents before filing their 2020 tax returns.


The IRS has highlighted how corporations may qualify for the new 100-percent limit for disaster relief contributions, and has offered a temporary waiver of the recordkeeping requirement for corporations otherwise qualifying for the increased limit. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 ( P.L. 116-260) temporarily increased the limit, to up to 100 percent of a corporation’s taxable income, for contributions paid in cash for relief efforts in qualified disaster areas.


The IRS has announced that tax professionals can use a new online tool to upload authorization forms with either electronic or handwritten signatures. The new Submit Forms 2848 and 8821 Online tool is now available at the IRS.gov/TaxPros page. The new tool is part of the IRS's efforts to develop remote transaction options that help tax practitioners and their individual and business clients reduce face-to-face contact.


The IRS has urged taxpayers to e-file their returns and use direct deposit to ensure filing accurate tax returns and expedite their tax refunds to avoid a variety of pandemic-related issues. The filing season opened on February 12, 2021, and taxpayers have until April 15 to file their 2020 tax return and pay any tax owed.


Tax reform discussions continue on Capitol Hill with legislation expected to be released very soon. GOP lawmakers in the House and Senate appear to be aiming for a comprehensive overhaul of the Tax Code. President Trump and Republicans in Congress have set out an ambitious schedule of passing a tax reform bill before year-end. 


Holiday gifts made to customers are generally deductible as ordinary and necessary business expenses as long as the taxpayer can demonstrate that such gifts maintain or improve customer goodwill. Such gifts must bear a direct relationship to the taxpayer's business and must be made with a reasonable expectation of a financial return commensurate with the amount of the gift. However, the $25 annual limitation per recipient on deductibility is applicable to holiday gifts, unless a statutory exceptions applies.


For purposes of federal tax, employers must withhold and pay FICA taxes (7.65%) if they paid a household employee cash wages of at least $2,000 in 2016 or in 2017 ($2,100 in 2018). Employers must pay FUTA tax (6%) if they paid total cash wages of at least $1,000 in a calendar quarter to household employees. A homeowner may be an “employer” to a housekeeper; or, if enough evidence is shown, merely a recipient of services by an independent contractor or self-employed individual.


Tax writers in Congress are set to begin debating and writing tax reform legislation. On September 27, the White House and GOP leaders in Congress released a framework for tax reform. The framework sets out broad principles for tax reform, leaving the details to the two tax-writing committees: the House Ways and Means Committee and the Senate Finance Committee. How quickly lawmakers will write and pass tax legislation is unclear. What is clear is that tax reform is definitely one of the top issues on Congress’ Fall agenda.