An Overview of IRS COVID-19 Response and Relief Three and a Half Years Later
- Jun 13, 2023
On May 11, 2023, the COVID-19 Pandemic (“the Pandemic”) ended its status as a Federal Public Health Emergency1 per the Department of Health and Human Services. Although the Pandemic is starting to feel like history, its effect on, and relief provided by, the Internal Revenue Service (“IRS”) are still very relevant. The following is an overview of the current status of select COVID-19 related programs, announcements, and tax rulings:
- Stimulus Payments: Taxpayers entitled to Economic Impact payments (“EIP”)2 who did not receive it through a “stimulus check” or by filing and claiming the Recovery Rebate Credit on their 2020 or 2021 personal income tax return may still claim it now. See Economic Impact Payments | Internal Revenue Service (irs.gov) to claim the stimulus before time expires.
- Failure to File and Information Return Penalties: Taxpayers assessed failure-to-file and information return (IIR) penalties for certain late-filed 2019 and 2020 tax returns but who filed prior to September 30, 2022 were entitled to automatic abatement of penalties. Taxpayers should review their tax account transcript and ensure the penalty relief was applied, if applicable.
- 2020 Unemployment: The American Rescue Plan Act of 20213 authorized individual taxpayers with a modified AGI of less than $150,0004 per household to exclude up to $10,200 of unemployment compensation received in tax year 2020. Some taxpayers filed their income tax returns prior to Congress authorizing the exclusion. In response, the IRS automatically corrected many returns; however, if you are otherwise eligible for this exclusion and it was not claimed or automatically corrected, you can file an amended return for a refund of any tax paid on the excludable amount.
- 2020 Advanced Premium Tax Credit (APTC): Repayment of the APTC was suspended and the IRS automatically reduced the excess APTC repayment amount to zero for any returns filed with repayment. Taxpayers should review their accounts to ensure they received all reimbursements due to them.
- Employee Retention Credit:5 It is not too late for business owners to claim the Employee Retention Credit (ERC) for applicable quarters of tax years 2020 and 2021. However, beware of scams due to the proliferation of fraud in this area. Business owners must do their due diligence and employ a reputable tax and accounting firm for the calculation of this credit.
- ERC-Related Penalties:
- If an employer incurred a failure to deposit penalty because they did not deposit the full amount of employment taxes because of the CARES Act6 retroactively limiting the credit for the third and fourth calendar quarters of 2021, they were entitled to administrative penalty relief. Employers should review their tax account transcript to determine if the penalty relief was applied, if applicable.
- Similarly, employers who incurred penalties due to the IRS's backlog in processing adjusted employment tax returns on which the taxpayers claim ERTC retroactively are urged to request reasonable cause or administrative relief by the IRS if they incurred penalties due to additional income tax owed because the deduction for qualified wages was reduced by the amount of a retroactively claimed employee retention tax credit.
- 2020 Social Security Tax Deferrals: Employers were able to defer quarterly Social Security tax payments and deposits in 2020. The deferred taxes needed to be paid back – one half on December 31, 2021, and the remainder on December 31, 2022. Business owners should review their records to ensure they made all repayments to avoid incurring any further penalties and interest on unpaid amounts.
- Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL): Unforgiven PPP loans and EIDL loans have come or are coming due. Business owners should ensure they are current with lenders and the Small Business Administration (SBA) to avoid default.
Taxpayers should Look into these above items NOW, before the time to file for a refund expires. Updates on IRS Operations are published frequently and can be found: IRS Operations: Status of Mission-Critical Functions | Internal Revenue Service
1Fact Sheet: End of the COVID-19 Public Health Emergency
2Who is eligible to receive stimulus checks recovery rebate credit?
3Public Law No: 117-2
4See 2020 Unemployment Compensation Exclusion FAQs — Topic A: Eligibility | Internal Revenue Service (irs.gov) for details.
5Employee Retention Credit | Internal Revenue Service (irs.gov)
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