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Tax guidance related to the Coronavirus (COVID-19) pandemic will be updated here as new information is made available through the U.S. Department of the Treasury and the IRS. You can also visit the Coronavirus Tax Relief and Economic Impact Payments page on IRS.gov.

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American Rescue Plan Act of 2021 (March 12, 2021)

The IRS and TAS are reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021 (ARP Act). Additional information about the tax related provisions will be made available on our site as well as IRS.gov, as this process is completed.

For a short summary of Individual tax changes, by tax year, under the ARP Act, see our Tax Tip.

Recovery Rebate Credit & Economic Impact Payments

2021 Recovery Rebate Credit & Third Round of Economic Impact Payments

2021 Overview

Section 9601 of the American Rescue Plan Act of 2021, enacted March 11, 2021, established Internal Revenue Code (IRC) 6428B, which provides a 2021 Recovery Rebate Credit (RRC) which can be claimed on the 2021 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors. It also provides for an advanced payment of the RRC in calendar year 2021 through payments that are referred to as Economic Impact Payments (EIP3).

This COVID-19 pandemic-related relief is similar to what other tax laws did for certain individual taxpayers in 2020, but with slightly different monetary amounts and eligibility criteria. For details on what rules are in effect for the 2020 tax year, see 2020 Recovery Rebate Credit & Economic Impact Payments.

2021 Recovery Rebate Credit

If you do not receive the full amount of EIP3 before December 31, 2021, claim the 2021 Recovery Rebate Credit (RRC) on your 2021 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors.

The 2021 RRC amount is $1,400 (or $2,800 in the case of a joint return), plus an additional $1,400 per each dependent of the taxpayer, for all U.S. residents with adjusted gross income up to a phase-out threshold of $75,000 ($150,000 in the case of a joint return or a surviving spouse, and $112,500 in the case of a head of household), who are not a dependent of another taxpayer and have a work eligible Social Security number (SSN).

Married taxpayers filing jointly where one spouse has a work eligible SSN and one spouse does not are eligible for a payment of $1,400, in addition to $1,400 per each qualifying dependent with a valid SSN or Adoption Taxpayer Identification Number issued by the IRS. The rebate amount is phased out above certain income levels.

More detailed information about when and how to claim the RRC on the 2021 individual tax forms will be provided prior to the opening of the next filing season.

2021 Economic Impact payments

The 2021 Economic Impact Payments (EIP3) are advanced payments of the 2021 RRC. The IRS started issuing the EIP3 to eligible individuals in phases in March of 2021. EIP3 will be sent each week to eligible individuals throughout most of the calendar year 2021 by direct deposit or mailed as a check or a debit card as the IRS continues to process tax returns.

EIP3 payments are separate from EIP1 and EIP2 payments, which are advance payments of the tax year 2020 RRC. For more information on the 2020 RRC or 2020 EIPs, see the 2020 Recovery Rebate Credit & Economic Impact Payments section.

How do I get an Economic Impact Payment in 2021?

No action is needed by most qualified taxpayers to receive the EIP3. Most of the 2021 EIP3s will be automatic and will be made through direct deposit, although some taxpayers will receive a check or debit card in the mail. The form of payment for EIP3s may differ from the first and second rounds of EIP.

Generally, only people who qualify for the RRC, but don’t normally file a tax return and don’t receive federal benefits will not receive advanced payments and will need to file a 2021 tax return and claim the full amount of RRC at that time.

Taxpayers can check the Get My Payment tool on IRS.gov to see the payment status of the EIP3. You can find help for using this tool under Frequently Asked Questions. Where’s My Refund and Online Account will not provide the status of your EIP3. Get My Payment is the only option available to get your payment status.

More detailed information about EIP3s can be found on the following IRS.gov pages:

Watch for further EIP3 and 2021 RRC updates on IRS.gov and here as the year progresses. The Taxpayer Advocate Service will also be sharing updated information on our News and Information page as new information becomes available.

2020 Recovery Rebate Credit & the First and Second Rounds of Economic Impact Payments

2020 Overview

The Coronavirus Aid, Relief, and Economic Security (CARES) Act established Internal Revenue Code (IRC) section 6428, 2020 Recovery Rebates for Individuals, which can be claimed on tax year 2020 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors.

The law also provided for an advanced payment of the Recovery Rebate Credit (RRC) in calendar year 2020. These payments are referred to as Economic Impact Payments (EIP1s). IRC section 6428(f)(3) provides that EIP1s cannot be made or allowed after Dec. 31, 2020. The IRS deadline for individuals to register for an EIP1 was Nov. 21, 2020. Therefore, beginning Jan. 1, 2021, taxpayers who did not receive an EIP1 during 2020 or received an amount less than the amount to which they are entitled can claim the RRC on tax year 2020 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors.

In December 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 became law, allowing a second round of advanced payments (EIP2). The EIP2 initial direct deposit payments began on December 29, 2020 with official payment date of January 4, 2021. The IRS began mailing paper checks on December 30, 2020. There is no action required by eligible individuals to receive this second payment, unlike some taxpayers who had to take action under the first EIP process.

In order to claim the 2020 RRC for any additional amount a taxpayer is entitled to but did not receive as an advanced payment, both EIP1 and EIP2 need to be reported on the Recovery Rebate Credit Worksheet contained in the 2020 Form 1040 and Form 1040-SR instructions.

More information can be found below about the:

  • RRC to be claimed on the 2020 Form 1040 or Form 1040-SR individual federal income tax returns filed in 2021;
  • EIP1 issued during calendar year 2020 and EIP2 which the IRS began issuing on December 29, 2020.

2020 Recovery Rebate Credit

The 2020 Recovery Rebate Credit (RRC) is established under the CARES Act. If you didn’t receive the full amount of the recovery rebate credit as EIPs, you may be able to claim the RRC on your 2020 Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors.

The eligibility criteria for the RRC is generally the same as for EIPs, except that the RRC is based on tax year 2020 information, instead of the tax year 2019 or tax year 2018 information used for EIP1 and tax year 2019 information used for EIP2.

(Note: the 2020 versions of these tax forms can be located on the IRS Forms and Publications site or through the Electronic Filing Options for Individuals page.)

RRC issues after the 2020 tax return is filed

The IRS is mailing letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected. When the IRS processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer’s credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, the credit will be reduced by the amount of any EIPs already issued to the taxpayer.

If there’s a mistake with the credit amount on Line 30 of the Form 1040 or Form 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return and the IRS will send the taxpayer a letter or notice explaining any change.

Taxpayers who receive a letter or notice saying the IRS changed the amount of their 2020 credit should read the letter or notice. Then they should review their 2020 tax return, the requirements for the credit and the worksheet in the Form 1040 and Form 1040-SR instructions.

If you believe the amount is incorrect after receiving an IRS letter or notice and checking the 2020 eligibility rules and calculation, see 2020 Recovery Rebate Credit — Topic G: Correcting issues after the 2020 tax return is filed, which provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter or notice as well as the questions and answers for what information they should have available when contacting the IRS.

For more information, visit IRS.gov/rrc and the frequently asked questions by topic.

Generally, this credit will increase the amount of your tax refund or lower the amount of the tax you owe. The EIPs paid during 2020 or during January 2021 are not taxable to you for federal income tax purposes, but because they are an advance payment of the RRC, they will reduce any RRC that you can claim on your 2020 Form 1040 or 1040-SR.

You do not need to complete any information about the RRC on your 2020 Form 1040 or Form 1040-SR if you already received the correct amounts of EIP1 and EIP2 to which you are entitled.

If you are claiming the RRC because you did not receive either EIP or did not get the full amount, you have to file a 2020 individual income tax return on Form 1040 or Form 1040-SR in 2021, even if you don’t have a filing obligation. If you received Notice 1444 or Notice 1444-B for one or both rounds of the EIPs, keep them for your 2020 tax records. You’ll need the amount of the payment(s) in the notice(s) when you file in 2021.

See the IRS 2020 Form 1040 instructions for more information.

How do I get my 2020 Recovery Rebate Credit?

If you already received the full amount of your RRC via the first round or second rounds of EIPs, you don’t need to take any action.

You may be able to claim the RRC only if EIPs received are less than the amount of the RRC to which you are eligible. This happens when:

  • You are eligible but were not issued an EIP1, an EIP2, or neither an EIP1 or EIP2, or
  • Your EIP1 was less than $1,200 ($2,400 if married filing jointly) plus $500 for each qualifying child you had in 2020; or
  • Your EIP2 was less than $600 ($1,200 if married filing jointly) plus $600 for each qualifying child you had in 2020.

You don’t qualify for the RRC if, for EIP1:

  • You received $1,200 plus $500 for each qualifying child you had in 2020, or
  • You’re filing a joint return for 2020 and together you and your spouse received $2,400 plus $500 for each qualifying child you had in 2020.

And for EIP2:

  • You received $600 plus $600 for each qualifying child you had in 2020, or
  • You’re filing a joint return for 2020 and together you and your spouse received $1,200 plus $600 for each qualifying child you had in 2020.

Claim the RRC on your 2020 Form 1040, Individual Income Tax or Form 1040-SR, U.S. Tax Return for Seniors. The 2020 Form 1040 instructions will include a worksheet you can use to figure the amount of any RRC for which you are eligible. For more details about claiming this credit, visit the Recovery Rebate Credit page on IRS.gov or follow the form’s instructions.

(Note: the 2020 versions of these tax forms can be located on the IRS Forms and Publications site or through the Electronic Filing Options for Individuals page.)

2020 Economic Impact Payment Information

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) legislation allows a first round of Economic Impact Payments, distributed during calendar year 2020 before December 31, by the Internal Revenue Service as an advance payment of the Recovery Rebate Credit (RRC). These payments were automatically issued, except for taxpayers who normally are not required to file a tax return. Taxpayers who normally are not required to file were given the opportunity through November 21, to either file a simplified tax return or used a special Non-Filers: Enter Payment Info Here tool to claim a payment.

This round of EIPs for taxpayers with existing direct deposit information on file began the week of April 13, 2020 and in most instances, payments continued to be issued until December 31, 2020.

The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 allows for an additional second round of EIP payments (EIP2). These payments are available starting January 4, 2021 and will be issued until mid-January.

EIP2 payments are also automatic for eligible taxpayers who filed a 2019 tax return, those who receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits as well as Supplemental Security Income (SSI), and Veterans Affairs beneficiaries who didn’t file a tax return. Payments are also automatic for anyone who successfully registered for the first EIP online at IRS.gov using the agency’s Non-Filers tool by November 21, 2020 or who submitted a simplified tax return that has been processed by the IRS.

See IRS.gov’s Economic Impact Payments page, this IRS Statement or Questions and Answers about the Second Economic Impact Payment for more details.

Who Is Eligible and For What Amount?

First Round of EIPs (April to December 2020)

Based on the 2018 or 2019 tax return information, eligible taxpayers could qualify for up to $1,200 each, or up to $2,400 if married filing jointly, and up to $500 for each qualifying child.

A qualifying child is one claimed as a dependent on the last filed tax return, tax year 2019 or tax year 2018, and who won’t reach age 17 by Dec. 31, 2020. This is the same criteria used to determine eligibility for the Child Tax Credit.

The gross amount, based on either the 2018 or 2019 tax returns, of the payment is reduced by $5 for each $100 earned above $75,000 for single filers, $112,500 for head of household filers and $150,000 for married filing joint filers. Single filers with income exceeding $99,000, $136,500 for head of household filers and $198,000 for joint filers with no qualifying children aren’t eligible and won’t receive payments.

Second Round of EIPs (January 2021)

Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment of up to $600 for individuals or $1,200 for married couples filing jointly and up to $600 for each qualifying child.

Similar to the first EIP, but based on the 2019 tax return, if you have adjusted gross income not exceeding $75,000 for individuals, $112,500 for taxpayers filing as head of household, or $150,000 for married couples filing joint returns and surviving spouses, you will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced by 5 percent of the amount by which the adjusted gross income exceeds the applicable threshold mentioned above.

Who Isn’t Eligible

Ineligible taxpayers include:

  • Taxpayers who were claimed as a dependent on someone else’s 2019 tax return. For example, this would include a child, student or older dependent who can be claimed on a parent’s tax return.
  • Taxpayers who are considered a nonresident alien who file or would file Form 1040-NR or Form 1040NR-EZ.
  • Taxpayers who don’t have an SSN that is valid for employment issued before the due date of their 2019 tax return (including any extensions).
  • People who died before 2020.
  • An estate or trust.

Taxpayers residing in American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands.

In general, the tax authorities in these five U.S. territories will provide the Recovery Rebate Credit (RRC) to eligible residents. Territory residents should direct questions about EIPs received in 2020, January 2021, or the 2020 RRC to the tax authorities in the territories where they reside.

Additional Economic Impact Payment Information

Filing A Tax Return for the EIP

2020: You can no longer file a tax return or use the Non-filer tool to claim either 2020 Economic Impact Payment (EIP) amount. Instead, if you are eligible but did not receive the full amount of Recovery Rebate Credit (RRC) allowed as advanced EIP, you must claim it on the 2020 Form 1040 or Form 1040-SR. See the 2020 Recovery Rebate Credit section above for more details.

2021: See the 2021 Recovery Rebate Credit and 2021 EIP sections above.

How Do I Know When I Will Get My Third Round of EIP?

Taxpayers can use the “Get My Payment tool” application to check your EIP3 payment status.  The tool is available in English and Spanish.

  • The Get My Payment tool will let you confirm A payment has been processed, a payment date is available, and payment is to be sent either by direct deposit or mail. Note: mail means you may be issued a debit card or a paper check.

 or

  • You are eligible, but a payment has not been processed and a payment date is not available.

You may also see other status messages; for more information about what you may see on the tool and what those messages mean, visit Get My Payment Frequently Asked Questions.  Since the tool is updated once per day overnight, there’s no need to check more than once per day.

Special note: The first and second EIPs no longer appear in the Get My Payment tool.

EIP Payment Letters

For security reasons, Notice series 1444 is generally sent to each taxpayer’s last known address within 15 days after the payment is made. This is the same for all EIPs. The notice provides information on the payment amount and how it was made. Here’s why some people got more than one notice about their Economic Impact Payments

Reminder: Be sure to keep copies of your IRS Notices for your records. If you are claiming the RRC, you may need to refer to the EIP amounts on the Notices when claiming the RRC on your tax returns.

Non-Receipt of an EIP

If you did not receive an EIP payment, but did get Notice 1444, visit the IRS’s Economic Impact Payments page, look for the EIP Frequently Asked Questions and Answers pages, and then under the section titled Payment Issued but Lost, Stolen, Destroyed or Not Received, follow the applicable instructions. Note the EIP FAQ pages are separated for the EIP1, EIP2, and EIP3 payments, so make sure you are looking at the correct page for the EIP you are missing.

If you didn’t receive your 2020 EIPs, and a 2018 or 2019 joint return was filed in your name without your consent, see If You Didn’t Get Your EIP, Your Joint Return May Be the Reason Why for steps to take to claim the RRC on your 2020 tax return.

If you only received half of the 2021 EIP3 amount expected, see the Get My Payment Frequently Asked Questions, and under the section titled Missing Payments, see the question titled: We received the third Economic Impact Payment, but it was only half the amount we’re eligible for. When will we get the second half?.

EIP/COVID-19 Scams

A variety of criminals looking to take advantage of unsuspecting taxpayers abound and there are numerous EIP and other financial schemes being marketed to taxpayers. These scams can involve setting up fake charities soliciting donations for individuals, false claims to help you get an EIP faster, and many others. Monitor the IRS Tax Scams/Consumer Alerts page for the latest information.

Coronavirus-related scams should be reported to the National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or submitted through the NCDF web Complaint Form. Taxpayers can also report fraud or theft of their EIPs to the Treasury Inspector General for Tax Administration (TIGTA). Reports can be made online.

More Information

  • Keep your address up-to-date with the IRS. If you’ve moved since filing your last tax return, you should notify the IRS by following the information for Address Changes. You should also notify the Post Office serving your old address. See why in our Tax Tip.
  • Economic Impact Payment received by check – Lost, Stolen or Destroyed. How do I get a new one?
    If the IRS issued your payment by check and it was either lost, stolen, or destroyed, you should request a payment trace. See the IRS Economic Impact Payment Information Center page, locate the Payment Issued but Lost, Stolen, Destroyed or Not Received section under the corresponding EIP Frequently Asked Question page (i.e., FAQ EIP1, FAQ EIP2, or FAQ EIP3) for more information on how to request a payment trace.

Visit the IRS Economic Impact Payment Information Center for more details on Economic Impact Payments.

 

Other Individual COVID-19 Related Credits and Deductions

Special $300 charitable contribution deduction on 2020 tax returns

The Coronavirus Aid, Relief and Economic Security (CARES) Act includes several temporary provisions designed to help charities. The special $300 charitable contribution deduction allows for a deduction from income of charitable cash donations of up to a total of $300, made to qualifying organizations before December 31, 2020, for individuals who choose to use the standard deduction rather than itemizing their deductions.

Cash donations include those made by check, credit card or debit card. They don’t include donated services, household items, securities or other property. See our Tax Tip for more information.

Educator expense deduction for COVID-19 protective items on 2020 tax returns

The Tax Relief Act of 2020, which was enacted as part of the Consolidated Appropriations Act (2021), allows for unreimbursed expenses paid or incurred after March 12, 2020, by eligible educators for protective items to stop the spread of COVID-19 in the classroom, to qualify for the educator expense deduction.

The educator expense deduction permits eligible educators to deduct up to $250 of qualifying expenses per year ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each). Eligible educators include any individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

Eligible taxpayers claim the deduction on Form 1040, Form 1040-SR, or Form 1040-NR (attach Schedule 1 Form 1040). See the Instructions for Form 1040 and Form 1040-SR or the Instructions for Form 1040-NR for more information.

Sick and family leave tax credits for self-employed individuals

The Families First Coronavirus Response Act (FFCRA), allows eligible self-employed individuals who, due to COVID-19, are unable to work or telework for reasons relating to their own health or to care for a family member to claim refundable tax credits to offset their federal income tax. The credits are equal to either the qualified sick leave or family leave equivalent amount, depending on circumstances. IRS.gov has instructions to help calculate the qualified sick leave equivalent amount and qualified family leave equivalent amount. Certain restrictions apply.

Eligible self-employed individuals will determine their qualified sick and family leave equivalent tax credits with the new IRS Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. These can be claimed on the 2020 Form 1040 for leave taken between April 1, 2020, and December 31, 2020, and on the 2021 Form 1040 for leave taken between January 1, 2021, and March 31, 2021.

For more information, see:

Unemployment Compensation Exclusion on 2020 Tax Returns

Sec. 9042, of the American Rescue Plan Act of 2021, allows an exclusion from gross income, for tax year 2020, of up to $20,400 if married filing jointly and up to $10,200 for all other eligible taxpayers in unemployment compensation, if the adjusted gross income of the taxpayer is less than $150,000. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation (UC). If you file Form 1040-NR, you can’t exclude any unemployment compensation for your spouse.

  • For those who received UC last year and have already filed their 2020 tax return, IRS anticipates it will be able to determine the correct taxable amount of unemployment compensation and tax, and refund any resulting overpayment of tax or apply it to other outstanding taxes owed, with some exceptions. See IRS to recalculate taxes on unemployment benefits; refunds to start in May. So, there is no need for taxpayers to file an amended return unless the calculations make you newly eligible for additional federal credits and deductions not already included on the original tax return. See the example in the News Release. If you do need to file an amended return, see Amending a Tax Return.
  • For those who received UC last year, but have not filed yet, follow the IRS instructions on the New Exclusion of up to $10,200 of Unemployment Compensation page. For additional information, go to About Form 1040 to see the updated Form 1040, Instructions for Form 1040,and Schedule.

For more information, see Tax Treatment of Unemployment Benefits.

Advanced Child Tax Credit (2021)

The American Rescue Plan Act (ARPA) of 2021 made important changes to the Child Tax Credit (CTC) for tax year 2021 only. Basic changes include:

  • The credit amounts will increase for many taxpayers.
  • The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
  • The credit will include children who turn age 17 in 2021.
  • Certain taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.

The IRS is currently working to implement the ARPA changes. See our TAS Tax Tips: Early information about Advanced Child Tax Credit payments under the American Rescue Plan Act article for information.

Important: Taxpayers do not need to take any action other than to file their 2020 tax return as soon as possible (preferably electronically) if they have not done so to ensure the IRS has the information needed in time to determine potential eligibility for the advanced payment program. Advanced payments of the 2021 CTC will be made regularly from July through December to eligible taxpayers. The advanced payments will be estimated based on information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).

Eligible taxpayers who do not want to receive advanced payments of the 2021 CTC will have the opportunity to decline receiving advanced payments.  For the latest IRS guidance, see the new IRS.gov Advance Child Tax Credit Payments in 2021 page and continue to watch it for more official updates over the coming months.

Note: do not confuse these advanced CTC payments with the additional Child Tax Credit.

Businesses and Tax-Exempt Entities Financially Impacted by the Coronavirus

Need employment tax relief?

Try our COVID-19 Business Tax Relief Tool now. All you need to do is answer a few questions. It should take less than 5 minutes.

Alert: this tool and the subsequent page text below is up to date as of December 31, 2020. Updates based on any new legislation, passed after December 15, 2020, are not reflected in here yet, but will be made as soon as possible.

Based on your answers, the tool will:

  • Let you know if you may be likely to qualify for any of the available tax relief options.
  • Link you to more information that will allow you to understand how to take advantage of those options.

Or you can simply read the information below about the available tax relief options.

Please help businesses affected by the COVID-19 pandemic understand tax relief options to stay in business by sharing this flyer (PDF), the link to this page or the tool’s direct link, via your website, newsletter, email, or social media. Read our TAS Tax Tip: COVID-19 Business Tax Relief Tool for Businesses and Tax-Exempt Entities for more information about this tool, how it works and more.

Employee Retention Credit

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, was designed to encourage eligible employers to keep employees on their payroll, despite experiencing financial hardship related to the coronavirus pandemic, with an employee retention tax credit (Employee Retention Credit). For the 2020 tax year, the CARES Act provided a refundable credit is 50% of up to $10,000 in wages paid by an eligible employer to employees after March 12, 2020, and before January 1, 2021. For more information, see Employer Tax Credits, Employee Retention CreditCoronavirus Tax Relief for Businesses and Tax-Exempt Entities, and Employee Retention Credit FAQs.

The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, and the American Rescue Plan Act, enacted on March 11, 2021, included changes to extend and modify the credit.

  • CARES Act – 2020 tax year

For employers who qualify, including borrowers who took a loan under the initial PPP, the credit can be claimed against 50 percent of qualified wages paid, up to $10,000 per employee annually for wages paid between March 13 and December 31, 2020.

  • Consolidated Appropriations Act – 2021 tax year

Employers who qualify, including PPP recipients, can claim a credit against 70% of qualified wages paid. Additionally, the amount of wages that qualifies for the credit is now $10,000 per employee per quarter for the first two quarters of 2021.

  • American Rescue Plan Act (ARPA)– 2021 tax year

The credit remains at 70% of qualified wages up to a $10,000 limit per quarter so a maximum of $7,000 per employee per quarter for all of 2021. So, an employee could claim $7,000 per quarter per employee or up to $28,000 for 2021.

Under the ARPA, the ERC is available to eligible employers for wages paid during the third and fourth quarters of 2021.

For more detailed guidance, including information relating to the definitions of qualified wages and eligible employers, as well as information about the applicable gross receipts test, see:


Paid Leave for Workers and Tax Credits for Small- and Mid-Size Businesses

Under the Families First Coronavirus Response Act (FFCRA), businesses can claim two new refundable payroll tax credits. The paid sick leave credit and paid family leave credit are available for eligible employers who pay qualified sick leave wages and/or qualified family leave wages from April 1, 2020, through December 31, 2020, and who have fewer than 500 employees. See COVID-19-Related Tax Credits for Paid Leave Provided by Small and Midsize Businesses FAQs for more information.

Extension of the Tax Credits January 1, 2021 through March 31, 2021

Beginning January 1, 2021, employers were no longer required to provide federal EPSL or EPFL to employees who might be absent from work due to pandemic related reasons.

However, the COVID Relief Act, part of the omnibus Consolidated Appropriations Act, 2021,provided that if a covered employer voluntarily provides EPSL and EPFL between January 1, 2021 and March 31, 2021, the employer could continue to be entitled to a 100% tax credit for the amount of those payments, through March 31, 2021.

In other words, even though a covered employer was not required to provide EPSL or EPFL after December 31, 2020, the employer could voluntarily do so throughout the first quarter of 2021 and continue to qualify for available tax credits for doing so.

Extension of the Tax Credits April 1, 2021 to September 30, 2021

Employers are still no longer required to provide federal EPSL or EPFL to employees.

However, the ARPA once extended to April 1, 2021 through September 30, 2021, and significantly modified the FFCRA paid leave credits.

These credits may be claimed on a quarterly basis against the employer’s share of the Medicare taxes (i.e., taxes imposed under Code Section 3111(b)) owed by the employer. Once again, a refund may be claimed if the amount of the credit exceeds the employer Medicare taxes due in a calendar quarter. The employer also is permitted to take an advance against the tax credit when making employment tax deposits.

Self-employed individuals looking to claim the Sick and family leave tax credits, see the information in the above Other Individual COVID-19 Related Credits and Deductions section.

See Under the American Rescue Plan, employers are entitled to tax credits for providing paid leave to employees who take time off related to COVID-19 vaccinations for more details, including information about paid leave to employees receiving COVID-19 vaccines.

Important note: An employer cannot use the same wages for the Employee Retention Credit and the credits for paid sick and family leave.

How do I receive my credit?

You can get immediate access to the credits by reducing the employment tax deposits you are otherwise required to make. If your employment tax deposits are not enough to cover the credit, you can request advance payment from the IRS by faxing your completed Form 7200, Advance Payment of Employer Credits Due to COVID-19 to 855-248-0552. Read the instructions carefully and take time when completing this form. IRS has put together a list of common errors to avoid when filing Form 7200. For more information call 833-551-3588.

If you fully reduce your required employment tax deposits otherwise due on wages paid in the same calendar quarter to employees in anticipation of receiving the credits, and you have not paid qualified leave wages in excess of this amount, you should not file Form 7200. If you file Form 7200, you will need to reconcile this advance credit and deposits with the qualified leave wages on Form 941 (or other applicable federal employment tax return such as Form 944 or Form CT-1), and you may have an underpayment of federal employment taxes for the quarter.

Note that a Form 7200 requesting an advance of less than $25 will not be processed. Employers can claim credits of less than $25 on Form 941.

Some Employers Received Notice of Failure to Deposit Penalty after Claiming New Tax Credits

Although the IRS has taken steps to implement rules that prevent the failure to deposit penalty from incurring on employers reducing their deposits in anticipation of claiming the Sick and Family Leave Credits or Employee Retention Credit, some employers may still have inadvertently received notice of the penalty.

No additional actions are needed at this time. The IRS is working to identify these employer accounts and correct them as soon as possible. To avoid receiving a penalty notice in the future, check IRS.gov/form941 for guidance on properly reporting liabilities when reducing deposits.

Delay processing Form 7200

For those experiencing a delay with processing your Form 7200, you will receive one of the following letters from the IRS:

Letter 6312, if the IRS either rejected Form 7200 or made a change to the requested amount of advance payment due to a computation error. The letter will explain the reason for the rejection or, if the amount is adjusted, the new payment amount will be listed on the letter.

Letter 6313, if the IRS needs written verification that the address listed on your Form 7200 is the current mailing address for your business. The IRS will not process Form 7200 or change the last known address until the verification is provided.

Deferral of Employer Social Security Tax Payments

The CARES Act allowed employers, including government employers, to defer the deposit and payment of the employer share of social security tax for deposits and payments due on or after March 27, 2020, and before January 1, 2021, as well as deposits and payments due after January 1, 2021, that were required for wages paid during the quarter ending on December 31, 2020. Payment for one-half of the deferred employer share of social security tax was due by December 31, 2021, and the remainder is due by December 31, 2022.

For more information, see the IRS Deferral of employment tax deposits and payments through December 31, 2020 FAQs.

Deferral of Certain Employee Social Security Tax Withholding and Payment

The President of the United States issued a Presidential Memorandum directing the Secretary of the Treasury to use his authority pursuant to section 7508A of the Internal Revenue Code to defer the withholding, deposit, and payment of certain payroll tax obligations. As a result, the Department of Treasury and the Internal Revenue Service issued guidance allowing employers to defer withholding and payment of the employee’s portion of the Social Security tax, if the employee’s wages or compensation were below a certain amount. Notice 2020-65 made relief available to employers for wages or compensation paid starting September 1, 2020, through December 31, 2020. It applies to payments of taxable wages or compensation to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately.

Payment of Deferred Social Security Tax Withholding

Repayment of the employee’s portion of the deferral started January 1, 2021 and will continue through December 31, 2021. Payments made by January 3, 2022, will be timely because December 31, 2021, is a holiday. The employer should send repayments to the IRS as they collect them. If the employer does not repay the deferred portion on time, penalties and interest will apply to any unpaid balance. Employees should see their deferred taxes in the withholdings from their pay.

For more information, see:

Business Closures

Closing your business can be a difficult and challenging task. The Taxpayer Advocate Service (TAS) partnered with IRS to expand its Closing a Business page to help business owners understand the specific actions needed, from a federal tax perspective, for each type of business.

More Resources

For more information, see the Coronavirus Tax Relief for Businesses and Tax-Exempt Entities or New Employer Tax Credits pages on IRS.gov. You can also visit the Department of Labor’s website, Families First Coronavirus Response Act: Questions and Answers.

 

 

Retirement Plans Relief

The Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136 (CARES Act), provides relief to eligible individuals taking withdrawals or loans from qualified employer retirement plans and Individual Retirement Arrangements (IRAs).

For more information visit:

 

Additional Resources

International Coronavirus Relief

Economic Impact Payment

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) legislation includes the Economic Impact Payments distributed by the IRS. Information in the Economic Impact Payment section above, includes information for international situations.

See also, the IRS’s Economic Impact Payment Information Center FAQs for specifics for people living in U.S. Territories and a special exception for U.S. Armed Forces members.

Filing and Payment Relief

June 15: IRS reminds taxpayers living and working abroad of June 15 deadline | Internal Revenue Service. Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. U.S. taxpayers who live and work abroad have until June 15, 2021 to file federal income tax returns and pay their federal income tax. If you need additional information about your tax responsibilities or and return filing requirements, see our Tax Responsibilities of U.S. Citizens and Resident Aliens Living Abroad, page or IRS’s U.S. citizens and resident aliens abroad page

Foreign Account Tax Compliance Act

IRS reminds foreign bank and financial account holders the FBAR deadline remains April 15, 2021. The Internal Revenue Service is reminding U.S. citizens, resident aliens and any domestic legal entity that the deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR) is still April 15, 2021.

The extension of the federal income tax filing due date and other tax deadlines for individuals to May 17, 2021, does not affect the FBAR requirement. However, filers missing the April 15 deadline will receive an automatic extension until October 15, 2021, to file the FBAR. They don’t need to request the extension.

For more information, see the “Reporting” category on the FATCA – FAQs General page.

Passport Certifications

The IRS recently announced that it resumed its Passport Certification program on March 14, 2021. The IRS is again notifying the Department of State of taxpayers certified as owing seriously delinquent tax debt. On March 25, 2020, the IRS suspended certain collection activities including passport certification under the People First Initiative in response to the Coronavirus (COVID-19) pandemic. See TAS Tax Tips: The IRS resumes its Passport Certification program for more information.

TAS and IRS Operational Status

TAS OPERATIONAL STATUS

The Taxpayer Advocate Service (TAS) remains committed to assisting taxpayers and championing their taxpayer rights. TAS will continue to offer help to qualified taxpayers. You can also visit our TAS Tax Tips and Get Help center for help with common tax questions.

Check this page frequently for updates.

Current Status

Taxpayer Advocate Service (TAS) employees are teleworking, sheltering at home and working to serve our taxpayers. We are experiencing delays and interruptions in working cases due to IRS services being limited. These limited services are also causing a high call volume to our organization resulting in delays in our response times. Please be patient.

For questions about Economic Impact Payments, please go to the IRS Coronavirus Relief site, or go to the top section of this page, Recovery Rebate Credit and Economic Impact Payments, first.

IRS OPERATIONAL STATUS

To protect the public and employees, and in compliance with orders of local health authorities around the country, certain IRS services are still extremely limited.

To get the latest updates on the status of IRS Operations and see details, visit IRS Operations During COVID-19: Mission-critical functions continue. We recommend checking this IRS page frequently for updates.

 

TAS Customer Case Alerts

General Tax-Related Topics

Tax Filing

Visit the IRS’s File page for tax filing information and resources. Free tax return filing options are available for some individuals. You can also visit our Get Help Filing Returns page too.

Important note: For most 2020 Individual tax returns the filing and payment deadline is extended to May 17, 2021. For more detailed information, see TAS Tax Tip: Key federal filing season dates and information and IRS.gov Tax Day for individuals extended to May 17.

Refunds

Please be aware that, due to COVID-19, the IRS is experiencing delays in processing some tax returns. Visit IRS Operations During COVID-19: Mission-critical functions continue for more information. If you have questions about your tax refund status after you’ve filed, visit IRS’s Where’s My Refund? page or TAS’s refund information hub for general help and information about refunds. Please also see Tax News & Information page and our NTA Blogs for updates, including the NTA Blog: 2021 Filing Season Bumps in the Road: Part I.

Tax Balance Due/IRS Notice Delays

If you owe a federal tax balance due and cannot pay, take a look at our Get Help Paying Taxes page or IRS’s Paying Your Taxes page for information about payment options available.

Please be aware that the IRS continues to experience delays mailing backlogged notices to taxpayers, this includes payment due notices. Delayed notices should have an insert with information to follow if you receive one. See the IRS Operations During COVID-19: Mission-critical functions continue or the Mailing of IRS notices delayed due to ongoing pandemic for more details.

TAS Resources

Visit the TAS Tax Tips and Get Help center for help with common tax questions. Or our Contact Us page to see what kind of cases we can help with and how to request assistance.