IRS Guidance

IRS Issues Deadline Relief for Michigan Storm Victims

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for Michigan victims of severe storms, flooding, and tornadoes. The tax relief postpones various tax filing and payment deadlines that occurred starting June 25. Individuals and households that were affected and reside in the Washtenaw and Wayne counties, as well as taxpayers with records located in the covered area needed to meet covered deadlines qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1).

Affected taxpayers with a covered deadline on or after June 25, 2021, and before November 1, 2021, will have until November 1, 2021, to complete the act(s). This includes the filing of Form 5500 series returns that were required to be filed on or after June 25, 2021, and before November 1, 2021.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS at 866-562-5227 to request relief.


IRS Proposes Electronic Filing Requirements for Certain Information Returns

The IRS has released a pre-publication version of proposed regulations amending rules intended to increase the filing of electronic returns in accordance with the Taxpayer First Act of 2019. Additionally, the IRS has withdrawn previously proposed regulations regarding electronic filing that were published on May 31, 2018.

The new proposed regulations reduce the threshold by which filers must electronically file from 250 to 100 returns for the 2022 calendar year. For filings required after calendar year 2022, the threshold will be further reduced to 10 returns. Currently, the threshold is determined separately for each type of information return. The proposed regulations would remove this rule, thus, requiring all return types to be aggregated for determining the new thresholds. The regulations further clarify that for purposes of filing amended returns, the amended form must be filed in the same manner (electronic or hardcopy) as the original filing.

Information returns affected by the proposal include, but are not limited to, the following.

  • Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
  • Form 1042-S, Foreign Persons’ U.S. Source Income Subject to Withholding
  • Form 945, Annual Return of Withheld Federal Income Tax
  • Form 5498-ESA, Coverdell ESA Contribution Information
  • Form 5498-QA, ABLE Account Contribution Information
  • Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information
  • Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits
  • Form 5500, Annual Return/Report of Employee Benefit Plan
  • Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan
  • Form 5500-EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan
  • Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

Filers with an inability to file electronically (i.e., lack of Internet service) may file with the IRS to request a waiver.

A period of 60 days for submitting comments on the guidance, or to request a public hearing, will begin upon publication in the Federal Register.


IRS Releases Updated EPCRS Guidance

The IRS has released Revenue Procedure 2021-30, which contains long-awaited guidance updating the Employee Plans Compliance Resolution System (EPCRS). Plan sponsors use EPCRS to correct certain plan qualification failures. EPCRS is composed of the Self-Correction Program (SCP), the Voluntary Correction Program (VCP) and the Audit Closing Agreement Program (Audit CAP), and there are several noteworthy changes.

 

Elective deferral failure—sunset of safe harbor extended

The sunset provisions of safe harbor correction methods for elective deferral failures related to automatic contribution features have been extended from December 31, 2020 to December 31, 2023.

 

Self-correction of certain significant operational failures extended

The last day for self-correction of certain significant operational failures and plan document failures has been extended by one year. The new deadline is the last day of the third plan year (instead of the second plan year) following the plan year for which the failure occurred.

 

Anonymous submissions eliminated

Effective January 1, 2022, the existing anonymous submission procedure is eliminated. But also effective January 1, 2022, the IRS will have the discretion to make anonymous VCP pre-submission conferences available to discuss correction methods not described as safe harbor methods in the Revenue Procedure. The process requires submitting a pre-submission conference request (using Form 8950) and providing sufficient details about the failure so that the IRS can evaluate the request. The conference is advisory only and cannot be relied upon as a basis for obtaining relief under EPCRS.

 

New correction methods for overpayments added

Plan sponsors may now provide overpayment recipients with the option of repaying an overpayment 1) in a single sum payment, 2) through an installment agreement, or 3) through an adjustment in future payments. For defined benefit plans, additional new methods are outlined.

  • Funding exception correction method – This method allows single employer defined benefit plans that are subject to the funding limits in Internal Revenue Code Section 436 to avoid corrective payments so long as the plan’s adjusted funding target attainment percentage (“AFTAP”) is equal to at least 100 percent. Future benefit payments to an overpayment recipient must be reduced to the correct benefit payment amount.
  • Contribution credit correction method – This method allows the overpayments to be reduced by the cumulative increase in the plan’s minimum funding requirements attributable to the overpayment. If overpayments remain after application of the credit, the plan sponsor or another party must reimburse the plan for the remainder of the overpayment.

Revenue Procedure 2021-30 is effective today, July 16, 2021, with the exceptions noted above. The Treasury Department and the IRS invite comments, and they can be submitted electronically or in writing by October 14, 2021.


IRS Again Extends Temporary Relief from Physical Presence Requirement for Retirement Plan Consents

The IRS issued Notice 2021-40, extending guidance released under Notice 2020-42 and previously extended by Notice 2021-03, which provided temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax-favored retirement arrangements. The additional extension provides relief through June 30, 2022. This includes signatures of those making an election ordinarily needing to be witnessed in the physical presence of a plan representative or notary public, including spousal consent and certain forms of distribution from retirement plans.

Under this relief, live audio-video technologies may be used to facilitate remote notarization for distributions if meeting other election requirements and if this is consistent with state laws governing notarization. Also, for certain plan elections that must be witnessed by a plan representative, witnessing may be accomplished by live audio-video technology, but only if certain access, security, review, and confirmation conditions are met.

The IRS has received comments from several stakeholders requesting permanent relief from the physical presence requirement, or asking for additional time to comment. The IRS continues to request comments until September 30, 2021, particularly on cost burdens associated with the physical presence requirement, whether there is evidence that the temporary removal has resulted in fraud, how participant elections are being witnessed, and what procedures and guidance should be implemented to provide safeguards in lieu of existing requirements.


IRS Issues Final Regulations for Mandatory Deadline Postponements Related to Federally Declared Disasters

The IRS has released final regulations regarding the mandatory 60-day postponement of deadlines for certain time-sensitive, tax-related acts in circumstances of federally declared disasters, implemented under the Further Consolidated Appropriations Act of 2020.

The tax-related acts covered by this guidance are defined in Internal Revenue Code Section 7508A. This is the authority cited for postponement of deadlines in cases of localized disaster declarations. Such localized relief is announced by the IRS in news release form, describing the area affected—generally on a county-by-county basis—and describing the length of the deadline postponements.

The final regulations clarify the definition of “federally declared disaster” for purposes of deadline extensions to include both a major disaster declared under section 401 of the Stafford Act and an emergency declared under section 501 of the Stafford Act.

Additionally, the guidance provides details of the 60-day mandatory postponement period.

  • If the Treasury Secretary does not exercise her discretion to postpone a time-sensitive act, it cannot be postponed under the mandatory extension.
  • Time-sensitive acts specifically postponed include making contributions to a qualified retirement plan or IRA, withdrawing excess IRA contributions, recharacterizing IRA contributions, and completing rollovers.
  • The mandatory 60-day postponement period begins on the earliest incident date specified in a disaster declaration and ends on the date that is 60 days after the latest incident date.
  • In no event will the mandatory 60-day postponement period exceed one year.
  • The extension will not apply when there is no specified initial incident date.

The definition of “federally declared disaster” is applicable today with final publication in the Federal Register. The clarifications to the mandatory 60-day postponement period apply to disasters declared on or after December 21, 2019.


IRS Issues Deadline Relief for Louisiana Storm Victims

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for Louisiana victims of severe storms and flooding. The tax relief postpones various tax filing and payment deadlines that occurred starting May 17. The areas included in the relief are Ascension, Calcasieu, East Baton Rouge, Iberville, and Lafayette parishes.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1), which include filing Form 5500 for retirement plans, completing rollovers, and making retirement plan loan payments.

Affected taxpayers with a covered deadline on or after May 17, 2021, and before August 16, 2021, will have until August 16, 2021, to complete the act(s). This includes the May 17 deadline for filing 2020 individual income tax returns and paying any tax due. Taxpayers also have until August 16 to make 2020 IRA contributions.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS at 866-562-5227 to request relief.


IRS Issues Deadline Relief for West Virginia Storm Victims

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for West Virginia victims of severe storms, straight-line winds, tornadoes and flooding. The tax relief postpones various tax filing and payment deadlines that occurred starting February 27. In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1), which include filing Form 5500 for retirement plans, completing rollovers, and making retirement plan loan payments.

Affected taxpayers with a covered deadline on or after February 27, 2021, and before June 30, 2021, will have until June 30, 2021, to complete certain time-sensitive, tax-related acts. This includes the May 17 deadline for filing 2020 individual income tax returns and paying any tax due. Taxpayers also have until June 30 to make 2020 IRA contributions.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. The areas included in this relief are Boone, Cabell, Kanawha, Lincoln, Logan, Mingo, and Wayne counties in West Virginia.

Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS at 866-562-5227 to request relief.


IRS Issues Revised 2020 Publication 590-B

The IRS has issued a revised 2020 Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), intended to clarify the application of required minimum distribution (RMD) rules under the Setting Every Community Up for Retirement Enhancement Act (SECURE Act).

The explanation of the 10-year rule has been expanded to indicate that, if applicable, the entire balance of the IRA must be withdrawn by December 31 of the year containing the 10th anniversary of the owner’s death, and the beneficiary is allowed, but not required, to take a distribution before that date. The publication notes that the 10-year rule applies if

  • the beneficiary is an eligible designated beneficiary who elects the 10-year rule if the owner died before reaching his required beginning date, or
  • the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching his required beginning date.

An example in the prior version of the publication that was carried forward from 2019 has caused some confusion in that it suggested a required life expectancy distribution where the 10-year rule would have been applicable. This example has been modified to reflect life expectancy payments for an eligible designated beneficiary, and a note has been added clarifying that, if death occurred before the required beginning date and the 10-year rule applies, no distribution is required for any year before the 10th year.

Taken together, the publication appears to suggest that the 10-year rule may not be an option for an eligible designated beneficiary for death on or after the account owner’s required beginning date.

The IRS has indicated that it will soon issue proposed regulations regarding changes made to the RMD rules under the SECURE Act.


IRS Issues Deadline Relief for Tennessee Storm Victims

The IRS has issued a news release announcing the postponement of tax-related deadlines for Tennessee victims of severe storms, straight-line winds, tornadoes, and flooding. The tax relief postpones various tax filing and payment deadlines that occurred starting March 25. Affected taxpayers with a covered deadline on or after March 25, 2021, and before August 2, 2021, will have until August 2, 2021, to complete certain time-sensitive, tax-related acts. This includes the May 17 deadline for filing 2020 individual income tax returns and paying any tax due. Taxpayers also have until August 2 to make 2020 IRA contributions.

In addition, the relief includes completion of acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1), which include filing Form 5500 for retirement plans, completing rollovers, and making retirement plan loan payments.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. The areas included in this relief are Campbell, Cannon, Cheatham, Claiborne, Clay, Davidson, Decatur, Fentress, Grainger, Hardeman, Henderson, Hickman, Jackson, Madison, Maury, McNairy, Moore, Overton, Scott, Smith, Wayne, Williamson, and Wilson counties.

Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS at 866-562-5227 to request relief.


IRS Provides 2022 Amounts for HSAs and HRAs

IRS Revenue Procedure (Rev. Proc.) 2021-25 provides the 2022 inflation-adjusted amounts for health savings accounts (HSAs) and the maximum amount that may be made newly available for expected benefit health reimbursement arrangements (HRAs).

The HSA 2022 calendar year annual limitation on deductions under Internal Revenue Code (IRC) Sec. 223(b)(2) is $3,650 for an individual with self-only coverage under a high deductible health plan (HDHP) and $7,300 for an individual with family coverage under an HDHP.

In calendar year 2022, under IRC Sec. 223(c)(2)(A), an HDHP is a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage. The annual out-of-pocket expenses—deductibles, co-payments, and other amounts (but not premiums)—cannot exceed $7,050 for self-only coverage or $14,100 for family coverage.

Under Pension Excise Tax Regulation Sec. 54.9831-1(c)(3)(vii), the maximum amount that may be made newly available for the plan year for an excepted benefit HRA is $1,800 for plan years beginning in 2022.