IRS issues letters to Advance Child Tax Credit recipients, recipients of the third round of Economic Impact Payments; taxpayers should keep these letters to help with their 2021 tax returns

ssue Number:​ ​ 2021-51

Inside This Issue

  1. IRS issues letters to Advance Child Tax Credit recipients, recipients of the third round of Economic Impact Payments; taxpayers should keep these letters to help with their 2021 tax returns
  2. U.S., Malta sign a competent authority arrangement confirming pension fund meaning
  3. Filing Information Returns Electronically file status and user ID change
  4. Reporting nonemployee compensation and backup withholding
  5. Tax relief for tornado victims in Illinois, Tennessee
  6. Hurricane Ida tax relief extended for qualifying areas in six states
  7. IRS webinar: Tax Changes from a Forms Perspective
  8. News from the Justice Department’s Tax Division
  9. Technical Guidance

1.​ ​ IRS issues letters to Advance Child Tax Credit recipients, recipients of the third round of Economic Impact Payments; taxpayers should keep these letters to help with their 2021 tax returns


The IRS will issue information letters to Advance Child Tax Credit recipients starting in December and to recipients of the third round of the Economic Impact Payments at the end of January. Urge your clients to keep these letters to help prepare their 2021 federal tax returns in 2022. Using this information when preparing a tax return can reduce errors and delays in processing. This article is also available in Spanish and Simplified Chinese.

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2.​ ​ U.S., Malta sign a competent authority arrangement confirming pension fund meaning


The competent authorities of the United States and Malta signed a competent authority arrangement (CAA) confirming their understanding of the meaning of pension fund for purposes of the United States–Malta income tax treaty (Treaty). The competent authorities have entered into this agreement after becoming aware that U.S. taxpayers with no connection to Malta were misconstruing the pension provisions of the Treaty to avoid income tax on the earnings of, and distributions from, personal retirement schemes established in Malta. The CAA is available on IRS.gov and will be published in the Internal Revenue Bulletin.

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3.​ ​ Filing Information Returns Electronically file status and user ID change


Effective Jan. 1, 2022, the Filing Information Returns Electronically (FIRE) “Good, Not Released” file status and the “Good, Released” file status will be combined, so users will only see a “Good” status change. This will improve system response time and streamline customer file status reporting. Additionally, on the Test System, “Good, Federal Reporting” status has been changed to “Good” while the Combined Federal State Reporting status of “Good, Federal/State Reporting” remains unchanged. IRS.gov and all associated publications will be updated to reflect this change. Also, effective Jan. 1, 2022, a new FIRE account user ID format will be required. It must contain:

  • A minimum of 8 to 25 characters and
  • Both alpha and numeric characters with no special characters or spaces.​

If your current user ID does not meet this criteria, you will be prompted to create a new user ID. At that point, the system will log you out and place you back on the logon page. You will then be able to logon using your newly created user ID.

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4.​ ​ Reporting nonemployee compensation and backup withholding


Tax pros: Remind your clients to use Form 1099-NEC, Nonemployee Compensation, to report nonemployee compensation of $600 or more to a payee. Generally, payers must file Form 1099-NEC by Jan. 31, 2022. Nonemployee compensation may be subject to backup withholding if a payee has not provided a Taxpayer Identification Number (TIN) to the payer or the IRS notifies the payer that the payee provided a TIN that does not match their name in IRS records. This article is also available in Spanish.

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5.​ ​ Tax relief for tornado victims in Illinois, Tennessee


Tornado victims in parts of Illinois and Tennessee will now have until May 16, 2022, to file various individual and business tax returns, and make tax payments. Currently, relief is available to affected taxpayers who live or have a business in Bond, Cass, Coles, Effingham, Fayette, Jersey, Macoupin, Madison, Montgomery, Morgan, Moultrie, Pike and Shelby counties in Illinois and Cheatham, Decatur, Dickson, Dyer, Gibson, Lake, Obion, Stewart and Weakley counties in Tennessee. Also, farmers who choose to forgo making estimated tax payments and normally file their returns by March 1 will now have until May 16, 2022, to file their 2021 return and pay any tax due. This article is available in Spanish and Simplified Chinese.

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6.​ ​ Hurricane Ida tax relief extended for qualifying areas in six states


Victims of Hurricane Ida in six states now have until Feb. 15, 2022 – extended from Jan. 3 – to file various individual and business tax returns and make tax payments. The updated relief covers the entire states of Louisiana and Mississippi, as well as parts of New York, New Jersey, Connecticut and Pennsylvania. The current list of eligible localities is always available on the Around the Nation section of the disaster relief page on IRS.gov.

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7.​ ​ IRS webinar: Tax Changes from a Forms Perspective


The webinar, Tax Changes from a Forms Perspective – Tax Year 2021, takes place Thursday, Jan. 13, 2022, at 2 p.m. ET. This 75-minute course is eligible for one CE credit and will cover:

  • Income tax changes for individual taxpayers for tax year 2021,
  • Employment tax changes for tax year 2021,
  • Tax form changes from 2020 to 2021,
  • New tax forms for tax year 2021 and
  • Tax products available for limited English proficiency (LEP) taxpayers.

Complete the online form to register for the webinar, or if you have questions, email them to cl.sl.web.conference.team@irs.gov.

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8.​ ​ News from the Justice Department’s Tax Division


A federal jury convicted a Florida man for preparing false tax returns for his clients. At trial, Fred Pickett Jr. of Belle Glade was convicted of 22 counts of aiding and assisting the preparation of false tax returns. He is scheduled to be sentenced on March 8, 2022, and faces a maximum penalty of three years in prison for each count.

A federal court in the Eastern District of Louisiana has permanently enjoined Hammond tax return preparer Kenisha Callahan from preparing federal income tax returns for others and from owning or operating any tax return business in the future. The civil complaint filed against Callahan alleged that she reported fabricated income or losses, and false filing statuses, to maximize her customers’ earned income tax credit. Further, the complaint alleged that Callahan impermissibly lowered some of her customers’ tax liabilities by falsely claiming unreimbursed employee business expenses and charitable gifts for individuals who were not entitled to claim such deductions.

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9.​ ​ Technical Guidance


Notice 2022-01 announces that lenders or servicers of certain student loans should not file Forms 1099-C, Cancellation of Debt, or submit payee statements, for student loan debt described in section 9675 of the American Rescue Plan Act of 2021 (American Rescue Plan Act).

Notice 2022-04 provides that the adjusted applicable dollar amount that applies for determining the Patient-Centered Outcomes Research Trust Fund (PCORTF) fee for policy years and plan years ending on or after Oct. 1, 2021, and before Oct. 1, 2022, is equal to $2.79.

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