News Alerts

July 2 2020 Update on IRS Operations During COVID-19

The Internal Revenue Service issued an operations update on July 2, 2020. In that information they remind taxpayers and tax professionals to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments where possible.

In addition, the news update (see attachment) reiterated that taxpayer services such as live assistance on telephones, processing paper tax returns and responding to correspondence continue to be extremely limited. The processing of paper tax returns are taking additional time due to limited staffing levels and will be processed in the order received. The IRS asks that you do not file a second tax return or contact them about the status of your return.

The IRS is continuing to assess the impact of COVID-19 on a range of compliance activity across the agency and will continue working cases where a statute of limitation is pending. In some of these situations, the IRS will work with the taxpayer or their representative to obtain an extension of the statute.

IRS COVID-19 Update – Reopening Steps

In a message from IRS Commissioner dated June 3, 2020, the Commissioner communicated the next steps to reopening operations. The National Treasury Employees Union (NTEU) which represents IRS employees, issued a press release (see attachment) in response to the Commissioner’s message. The NTEU press release provides additional details not included in the Commissioner’s message, so we thought we would share the NTEU document with you.

The NTEU letter states in part,

After IRS employees in Utah, Texas and Kentucky started reporting back to their buildings this week, the next wave is scheduled to report June 15 in Michigan, Georgia, Missouri and Tennessee, which includes the large campuses in Atlanta and Kansas City.

Employees in California, Indiana, Ohio, Puerto Rico and Oregon, including the large campus in Fresno, are due to report on June 29. The IRS Commissioner announced the call backs to employees in a message Wednesday night.

Not all frontline workers in those states will be recalled. Employees who are currently teleworking will continue to do so, according to the IRS. And those who are considered a medical high risk also do not have to return to their work stations and will either continue to telework or remain on administrative leave. Finally, the IRS intends to limit the recalls so they can ensure proper physical distancing between employees in the workplace.

NTEU is awaiting information from the IRS about how many employees it intends to call back for each location and business division.

“We understand that the IRS has a backlog of important work that cannot be done remotely and they need to restart systems as soon as possible, but our concerns about the coronavirus pandemic have not changed,” said NTEU National President Tony Reardon. “Employees remain anxious about the risks posed by taking public transportation, being in enclosed facilities with hundreds of coworkers and whether their work stations will be consistently and properly cleaned and disinfected.”[End of NTEU excerpt.]

So while we anticipate the start of IRS communications to claims and return notices, the NTEU response indicates that delays will continue as the IRS moves towards full staffing levels.

Virginia Sales Tax on Fuel

Virginia fuel wholesale tax will be levied in every cities and counties of VA starting July 1, 2020. See attached for reference.

IRS Issues FAQ on Aviation Excise Tax Holiday

The IRS has issued an FAQ offering some guidance on the aviation excise tax holiday under the CARES Act. This includes the aviation fuel tax and the air transportation tax. With respect to the aviation fuel tax, the FAQ confirms that the holiday only applies to aviation fuel used in “commercial aviation” which is aviation fuel removed into the fuel tank of an aircraft. The ultimate purchaser can claim a refund of tax paid during the excise tax holiday or can waive its right to make such a claim which would then allow the registered ultimate vendor to claim the refund. There are no changes to the actual tax rates, the requirement to make semi-monthly deposits or the filing of tax returns. Additionally, the excise tax holiday only applies to kerosene actually used in commercial between March 28, 2020 and December 31, 2020; any kerosene purchased during this time that is not placed into the fuel tank of an aircraft is subject to the tax. The full list of FAQs and responses can be found at:  https://www.irs.gov/newsroom/faqs-aviation-excise-tax-holiday-under-the-cares-act.

Legislation Introduced in Congress to Ensure Receipt of Coronavirus Assistance Does Not Affect Ordinary Business Expenses

Senators Charles Grassley (R-IA) and Ron Wyden (D-OR), the Chairman and Ranking Member of the Senate Finance Committee have introduced legislation to ensure that taxpayers claiming benefit under the Paycheck Protection Program can still deduct normal business expenses from their taxes. The two page bill – S.3612, “The Small Business Expense Protection Act of 2020” – clarifies that paycheck protection loans in the CARES Act (Public Law 116-136) do not affect a taxpayer’s ordinary business expenses and confirms that ordinary business expenses such as wages, rent and employee health benefits can be deducted on the taxpayer’s income tax return. The legislation was introduced after the IRS issued guidance – IRS Notice 2020-32 – that the Senators said interpreted the statute in a manner contrary to what Congress intended (the Notice states that businesses may not take deductions for ordinary expenses covered by Paycheck Protection Program Loans).

The introduction of this legislation is striking in that this is the exact argument the energy industry has been making for years with respect to the alcohol and biodiesel mixture credits. In fact, in 2013 the IRS agreed that the credits were not to be included in income only to backtrack on its own guidance a few months later once the refund requests started rolling in. This change of position appeared to go against Congressional intent which was to confer the full benefit of the mixture credit, not reduce it by the excise tax. However, to date, Congress has not made any attempt to clarify the statute relating to the mixture credits. Here, the IRS appeared to do the exact same thing, by reducing the benefit of the payment protection loan through not allowing ordinary business expenses to be deducted. Congress has stepped in, saying that it intended to for the taxpayer to have the full benefit and if the IRS is not going to interpret it that way, Congress will need to clarify the language in the statute to ensure that the benefit is not reduced by the taxes.

Alabama Temporarily Suspends Motor Fuel License Requirements for Taxpayers Assisting in Disaster Relief Efforts

Alabama has temporarily suspended the motor fuel importer, exporter and transporter licensing requirements for taxpayers engaged in the business of exporting fuel from Alabama to surrounding states impacted by severe weather for which a state of emergency has been declared. The suspension also applies with respect to the import of fuel into areas of Alabama under a state of emergency or disaster declaration. This temporary license requirement suspension is effective until May 13, 2020.

Retroactive Biodiesel/Alternative Fuel Claim Status

TASG has received numerous calls regarding the retroactive claims asking if we know if there were any processing delays for these refunds. We contacted the IRS and learned that IRS personnel are processing claims and issuing refunds. If you haven’t received a refund let’s remember that the IRS has 60 days from receipt of a claim to pay it before interest is applied to the claim amount. Since the IRS only began accepting claims on February 14, 2020, they have until April 14, 2020 at a minimum to pay a claim before interest starts. So be patient as the processing window is still open and they are working.

Below is a summary of the key IRS points:

• IRS personnel are processing retroactive claims and issuing refunds – status could change due to COVID-19.
• Phone lines are currently down so IRS claim status inquiries are not available.
• Potential delay reasons:
  • Claims referred to field for exam – letter will be issued indicating the transfer.
  • IRS could pay a little late with interest.
  • Claim returned to claimant for additional information.
  • All correspondences may be delayed due to COVID-19

In conclusion, the good news is that IRS staff are working diligently. The bad news the status could understandably change and that patience is required. We know it is tough out there so hang in there. Best wishes to everyone.