As part of continuing efforts to help taxpayers, the Internal Revenue Service today announced plans to issue automatic payments later this month to eligible people who did not claim the Recovery Rebate Credit on their 2021 tax returns.

The IRS announced the special step after reviewing internal data showing many eligible taxpayers who filed a return but did not claim the credit. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments (EIP), also known as stimulus payments.

No action is needed for eligible taxpayers to receive these payments, which will go out automatically in December and should arrive in most cases by late January 2025. The payments will be automatically direct deposited or sent by paper check; eligible taxpayers will also receive a separate letter notifying them of the payment.

“The IRS continues to work hard to make improvements and help taxpayers,” said IRS Commissioner Danny Werfel. “These payments are an example of our commitment to go the extra mile for taxpayers. Looking at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were actually eligible. To minimize headaches and get this money to eligible taxpayers, we’re making these payments automatic, meaning these people will not be required to go through the extensive process of filing an amended return to receive it.”

The payments vary depending on several factors, but the maximum payment is $1,400 per individual. The estimated amount of payments going out will be about $2.4 billion.

The IRS also reminded taxpayers who haven’t filed 2021 tax returns they might be eligible as well, but they face an April 15, 2025, deadline to file their returns to claim the credit and any other refund they might be owed.

Most eligible taxpayers already claimed the credit

Most taxpayers eligible for EIPs have already received their EIP or Recovery Rebate Credit.

These December payments for the 2021 Recovery Rebate Credit are only going to taxpayers where IRS data demonstrates a taxpayer qualifies for the credit. Qualified taxpayers are those who filed a 2021 tax return, but where the data field for the Recovery Rebate Credit was left blank or was filled out as $0 when the taxpayer was actually eligible for the credit.

How automatic payments work

Taxpayers who qualify but did not claim any portion of the credit on their 2021 tax return should receive these payments by late January 2025. The payment will be sent to the bank account listed on the taxpayer’s 2023 tax return or to the address of record.

An IRS letter will be sent to the taxpayer receiving these 2021 Recovery Rebate Credit payments. If the taxpayer closed their bank account since filing their 2023 tax return, taxpayers do not need to take any action. The bank will return the payment to the IRS and the refund will be reissued to the address of record.

For questions regarding eligibility and how the payment was calculated, see 2021 Recovery Rebate Credit Questions and Answers.

Taxpayers who didn’t file a 2021 tax return may be eligible to claim the credit if they file a return

The IRS reminds taxpayers who have not yet filed their 2021 tax returns that they may be eligible for a refund if they file and claim the Recovery Rebate Credit by the April 15, 2025, deadline.

Eligible taxpayers who did not file must file a tax return to claim a Recovery Rebate Credit, even if their income from a job, business or other source was minimal or non-existent.

Additional information about automatic payments; filing 2021 tax returns

To calculate the amount of Recovery Rebate Credit, taxpayers may access their IRS Online Account to determine the amount they received in Economic Impact Payment(s). See FAQ G2 2021 Recovery Rebate Credit — Topic G: Finding the Third Economic Impact Payment Amount to Calculate the 2021 Recovery Rebate Credit and 2021 Recovery Rebate Credit — Topic A: General Information.

Any Recovery Rebate Credit received does not count as income when determining eligibility for federal benefits such as Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).

As the 2025 tax filing season approaches, the IRS is committed to helping taxpayers understand and claim the credits and deductions for which they are eligible including Coronavirus tax relief. Many taxpayers are unaware of tax credits and deductions for which they are eligible or face other barriers keeping them from claiming them. The IRS will be reminding taxpayers about these credits, including the Earned Income Tax Credit, during the 2025 filing season.

Source: IRS-2024-314, Dec. 20, 2024

The Department of the Treasury and the Internal Revenue Service today issued proposed regulations to update the rules for certain tax professionals who can practice before the IRS; these rules are contained in Treasury Department Circular 230.

The IRS Office of Professional Responsibility generally has responsibility for matters related to practitioner conduct, and exclusive responsibility for discipline, including disciplinary proceedings and sanctions. The proposed regulations, if finalized, would amend Circular 230 in various ways to account for changes in the law and the evolving nature of tax practice.

Among other changes, the proposed regulations would remove or update the parts of Circular 230 related to registered tax return preparers and tax return preparation, as well as contingent fees to reflect changes in the law since the prior amendments to Circular 230 in 2011 and 2014. The proposed regulations would also revise or eliminate other provisions that are out of date.

Additionally, the proposed regulations would incorporate new provisions that better align Circular 230 with the current practice environment, such as requiring that practitioners maintain technological competency as part of their practice before the IRS. The proposed regulations would also clarify some provisions, such as confirming that OPR retains jurisdiction over practitioners who have been suspended or disbarred from practice.

Finally, the proposed regulations would provide rules related to appraisers, including the standards for disqualification.

Source: IRS-2024-315, Dec. 20, 2024

$4.7 billion recovered for U.S. taxpayers as part of new initiatives; continued progress made on Paperless Processing and Simple Notice Initiatives

The Internal Revenue Service today provided the regular quarterly update to the Strategic Operating Plan, outlining key milestones in criminal investigations, improvements to taxpayer services and advancements in digital modernization that have transformed agency operations while protecting billions of taxpayer dollars.

The IRS has now recovered $4.7 billion from new initiatives underway. This includes more than $1.3 billion from high-income, high-wealth individuals who have not paid overdue tax debt or filed tax returns, $2.9 billion related to IRS Criminal Investigation work into tax and financial crimes, including drug trafficking, cybercrime and terrorist financing, and $475 million in proceeds from criminal and civil cases attributable to whistleblower information.

The IRS also announced today new results from the focus on high-income non-filers who have not filed taxes since 2017. The IRS has now collected an initial $292 million from more than 28,000 non-filers, an increase of $120 million since September 2024. These are cases where IRS has received third party information—such as through Forms W-2 and 1099s—indicating these people received income between $400,000 and $1 million or more than $1 million, but failed to file a tax return. The non-filer program ran sporadically since 2016 due to severe budget and staff limitations that did not allow these cases to be pursued. With additional funding, the IRS had the capacity to resume this core tax administration work earlier this year.

“The IRS continues to show dramatic progress on a wide array of the agency’s transformation efforts, producing real-world improvements to help taxpayers and businesses while also taking important steps in the law-enforcement and compliance arena to protect billions from ongoing schemes, ensure high-income individuals file returns and pay their taxes and penalties, and battle everything from terrorist financing to drug traffickers,” said IRS Commissioner Danny Werfel.

Pursuing drug traffickers, cybercrime, terrorist financing

IRS Criminal Investigation (IRS-CI) is charged with investigating tax and financial crimes, including drug trafficking, cybercrime and terrorist financing. In Fiscal Year 2024 (FY24), IRS-CI identified more than $9.1 billion in fraud, obtained court orders totaling $1.7 billion in restitution to U.S. taxpayers and seized criminal assets totaling approximately $1.2 billion.

Examples of IRS-CI Cases

As part of the Organized Crime Drug Enforcement Task Force (OCDETF), CI has helped investigate numerous cases in partnership with other law enforcement agencies. CI’s financial expertise in following the money not only helped unravel financial and tax crimes, but other crimes including organized drug trafficking. According to public court records, these include:

• In October, Jason Brown was sentenced to 18 years in federal prison for trafficking fentanyl and attempting to provide material support to the Islamic State of Iraq and al-Sham, also known as ISIS. On three occasions in 2019, Brown provided $500 in cash to an individual with the understanding that the money would be wired to an ISIS soldier engaged in terrorist activity in Syria. Unbeknownst to Brown, the individual to whom he provided the money was confidentially working with law enforcement, and the purported ISIS fighter was actually an undercover law enforcement officer. Also in 2019, Brown trafficked fentanyl and other drugs from California to the Chicago suburbs and illegally possessed several loaded handguns in furtherance of his drug trafficking activities.

• IRS-CI provided significant assistance in an investigation that led to drug dealer George Pherai-Bogeajis being sentenced in November to 19 years and 7 months in federal prison for conspiring to distribute methamphetamine and fentanyl and possessing firearms in furtherance of drug trafficking. Pherai-Bogeajis also forfeited four vehicles and four firearms used in the offense, along with $867,265 of drug proceeds. In April, law enforcement executed a search warrant at his Florida home, seizing nearly 50 kilograms of methamphetamine, thousands of grams of MDMA, more than two kilograms of cocaine and nearly a kilogram of other narcotics, including fentanyl.

• Christian Grajeda-Varela was sentenced in October to nearly four years in prison for fentanyl trafficking and money laundering. He admitted to selling roughly 1.5 pounds of fentanyl in July 2023 to a drug dealer in San Francisco. Upon a search of Grajeda-Varela’s Oakland residence, federal agents found 109 grams of fentanyl, more than six pounds of mannitol (a common mixing agent used to cut or dilute fentanyl), cocaine base, cocaine and heroin as well as drug distribution tools. Grajeda-Varela also admitted that, between March and August 2022, he laundered more than $200,000 in cash tied to the drug trade at America Latina, a money service business in Oakland; the funds were wired to recipients in Mexico and Honduras in the form of roughly 125 international wires.

Assistance from whistleblowers

Whistleblowers continue to provide valuable contributions in both criminal and civil cases. Whistleblower information has led to successful criminal investigations, prosecutions and the collection of tax, fines, penalties, interest and other amounts. In FY24, the IRS paid awards totaling $123.5 million to whistleblowers for aiding in the collection of $474.7 million in proceeds on cases that included unreported/underreported income, hidden offshore assets, overstated deductions, general allegations of tax fraud and abusive international transactions.

Improving taxpayer service

As part of the Digital First Initiative, the IRS is continuing to expand features in Business Tax Account, an online self-service tool for business taxpayers. C corporations can now activate a Business Tax Account, bringing the total number of business entities eligible for this online self-service tool into the millions. Highlights include:

• Authorized individuals of C corporations and S corporations who can legally act on behalf of their corporation are now able to view and pay tax balances and Federal Tax Deposits.
• The IRS also introduced a new feature that helps to speed up the lending process by providing sole proprietors and authorized individuals with access to the long-standing IRS Income Verification Express Service (IVES) to approve or reject a tax transcript authorization request from a lending company.
• Business taxpayers can now access available tax returns, account and most entity transcripts in Spanish.

These changes follow upgrades announced in September that allow business taxpayers to view and submit balance-due payments.

In addition, the IRS has expanded the types of Transcript Delivery System (TDS) transcripts available to business taxpayers, historically an underserved population. Previously, taxpayers and their representatives had to call to request information not available through a TDS transcript. Customer service representatives would provide an internal print with the requested information, manually masking the personally identifiable information before providing the prints to the caller. Masking the transcripts was time consuming. Now taxpayers and their representatives can access these new transcripts through online self-help tools that include Business Tax Account and e-Services TDS.

Business Entity and Form 94X Series Tax Return transcripts are now available through TDS for tax professionals and reporting agents with access to TDS through e-Services. IRS employees can access these transcripts through the Employee User Portal, and authorized users of Business Tax Account can download these transcripts. Transcript expansion will continue in a phased approach through December 2026. Future releases will include the Form 990 series, Form 1041, Form 2290, Form 1042, Form 706, and transcripts in Spanish.

More details on the Digital First Initiative; more digital tools launched in the last 2 years than the previous 20 years

The IRS is significantly improving taxpayer service in person, over the phone and online. The IRS is working to deliver the same modern online experience that taxpayers experience with their bank or financial institutions. The IRS has created and enhanced popular and convenient online tools that save taxpayers time and money by providing easy, secure self-service options to get information and resolve issues. For example, in Filing Season 2024, the IRS updated the “Where’s My Refund?” tool to provide more detailed refund status information in plain language, increasing use by nearly 30%.

The IRS has launched more digital tools in the last two years than the previous 20 years, including:

• More than two dozen new features and enhancements to Individual Online Account and Tax Pro Account.
• The launch of Business Tax Account.
• The release of more than 60 digital mobile-adaptive forms.
• The ability for taxpayers to receive their refund status via a conversational hotline.
• A mobile-friendly web tool for “Where’s My Refund?”.

Through the Digital First Initiative, the IRS is pursuing a vision where taxpayers can complete all their transactions with the IRS digitally if they prefer. At the core of that improved digital experience for taxpayers are enhancements to Individual Online Account, including the ability to self-correct withholding amounts, redesigned notices for better user experience, provided digital mobile-adaptive tax forms, transcript requests in Spanish and sign-up for paperless and email preferences. Expanded payment options including Offer-in-Compromise and multiple payments in one session. Other expanded services include:

• A lien payoff calculator that can generate an IRS letter that they can share with authorized third parties to confirm the payoff balance.
• The ability to see their correspondence audit status.
• For taxpayers whose employer has received a “lock in” letter requiring a minimum amount of federal tax to be withheld from each paycheck, they can now find information about actions needed to release or modify the lock in amount.
• The ability to use a self-service Offer-in-Compromise (OIC) eligibility check to determine if they meet the major eligibility requirements for submitting an OIC.
• Single Transaction for Multiple Payments, allowing taxpayers to add and delete multiple payments to a shopping cart for a single transaction within their online account.
• Transcripts available in English and Spanish.
• Selection for paperless contact and email preferences.
• Request an Identity Protection PIN.

The IRS has also expanded Tax Pro Account, helping tax professionals manage their authorization relationship with taxpayers, view the taxpayers’ information and act on the taxpayers’ behalf. New capabilities include:

• The ability to view individual and business taxpayer payment activity.
• A new virtual assistant that allows tax professionals access to an automated chatbot to resolve tax issues, with the ability to escalate to live chat for help with collection related issues.
• The ability to view and act on behalf of individual taxpayers to set up and revise payment plans.
• The option to make up to five same day payments on behalf of authorized clients using a checking or savings account.

When fully developed, Tax Pro Account will become a robust online tool, including the ability to initiate POA/TIA for business taxpayers that they can review and approve in their Business Tax Account, link and manage business CAF access, view refund and audit status for individual and business taxpayers and much more.

Additional progress in developing digital tools for taxpayers includes:

• Redesigning notices to be more clear as part of the Simple Notice Initiative: The IRS has redesigned 247 of the most common notices, with additional notices scheduled to deploy in the coming months. All notices have recently been added to Individual Online Account for taxpayers to view.

• Mobile-adaptive forms through the Paperless Processing Initiative: The IRS now has more than 60 forms available for mobile use, allowing taxpayers to fill out common non-tax forms on cell phones and tablet devices. Taxpayers have submitted more than 100k forms since the September 2023 launch. The most recent forms feature “save and draft” capabilities, which allow the taxpayer to start a form, save it and return to it later. The addition of save and draft allows for future capabilities including the ability for multiple spouses to sign a form. It will also allow a taxpayer to sign a form, save the form and send to a second taxpayer to sign using their Individual Online Account. Seventeen additional forms went live on Dec. 8, 2024, bringing the total to 67 mobile-adaptive forms currently available.

• Through the Paperless Processing Initiative, Document Upload Tool use continues to increase: The Document Upload Tool makes it easier for taxpayers and tax professionals to correspond digitally with the IRS. Thanks to the tool, taxpayers can digitally submit correspondence and responses to notices and letters to the IRS. The tool launched in March 2021 and expanded in 2023. The Document Upload Tool has surpassed over 1.5 million submissions with 1,669,625 submissions to date. It is estimated that 94% of taxpayers no longer need to send mail to the IRS, decreasing a substantial amount of paper correspondence entering the IRS.

Source: IRS-2024-310, Dec. 12, 2024

On the final day of National Tax Security Awareness Week, the Internal Revenue Service and its Security Summit partners urged tax professionals to reassess their plans for protecting themselves and their clients’ sensitive information amid increasing attempts by identity thieves to steal tax data.

Identity thieves on the hunt for taxpayer data aren’t just targeting taxpayers, they’re going after the tax professionals, who hold enormous amounts of sensitive taxpayer data, in hopes of filing fraudulent tax returns. This year, the IRS has already received more than 250 reports of data breach incidents from tax professionals affecting approximately 200,000 clients.

Amid these continuing reports of tax professionals encountering data breaches, the Security Summit partners urged practitioners to review the newly updated Written Information Security Plan (WISP) PDF.

Tax professionals are required by federal law to have written plans identifying foreseeable data security risks and safeguards, and a plan of action to take in the event of a security breach. To simplify this complex task, a special team of Security Summit members from the tax community released an updated WISP that tax professionals can use as a roadmap to apply to their own practice.

The IRS also reminds taxpayers that additional safeguards, like multi-factor authentication (MFA), are required by federal law to better protect themselves and their clients. MFA provides an extra layer of security to ensure the proper people are accessing sensitive accounts and systems.

“Countering identity theft is a collective effort, and tax pros are the first line of defense when it comes to protecting taxpayer information,” said IRS Commissioner Danny Werfel. “Millions of taxpayers entrust their personal data to tax professionals, and we want to make it as easy as possible for tax pros to know what they need to do to keep themselves and their clients’ information safe. The Written Information Security Plan forms an essential part of the tax professionals’ defense against data breaches and identity thieves, helping protect their clients and protect themselves.”

The WISP, available in IRS Publication 5708, Creating a Written Information Security Plan for your Tax & Accounting Practice PDF, walks tax professionals through the steps of assembling a plan, including understanding security compliance requirements and professional responsibilities. It also provides a sample template that tax professionals can use as they draft a plan for their business.

The new version of the WISP, the result of a year-long collaborative effort between the IRS and its Security Summit partners, includes several updates, like highlighting best practices for implementing multi-factor authentication.

During National Tax Security Awareness Week, now in its ninth year and concluding today, the Security Summit partnership of the IRS, tax professionals, tax software and financial companies as well as state tax agencies work to raise awareness among taxpayers and tax professionals about the importance of safeguarding information to protect against identity theft. The Security Summit formed in 2015 to combat tax-related identity theft through better public-private sector coordination as well as strengthening internal protections in the tax community and raising public awareness about security threats.

Tax pros are on the front lines of defense in protecting taxpayer information. The Summit partners highlighted several key steps that tax pros – regardless of the size of their practice – should take to protect their systems and comply with federal standards.

WISPs and MFA are crucial – and necessary

Members of the Summit’s tax professional team developed a helpful guide that allows practitioners to quickly develop their own WISP to provide a blueprint for information security.

“This helpful guide with sample templates provides a starting point for businesses large or small, and can be scaled for a company’s size, scope of activities, complexity and customer data sensitivity,” said Kimberly Rogers, the IRS Return Preparer Office director and co-chair of the Summit’s tax pro group. “There’s not a one-size-fits-all WISP. A sole practitioner can use a more abbreviated and simplified plan than a 10-partner accounting firm. This flexibility is reflected in the sample policies and pre-populated templates included in the publication.”

Addressing security issues for a tax professional can be difficult and expensive. A WISP addresses risk considerations for inclusion in an effective plan and provides a blueprint of applicable actions in the event of a security incident, data loss or theft.

Tax pros can also review IRS Publication 5709, How to Create a Written Information Security Plan for Data Safety PDF, for more information on WISPs.

In addition to requirements to have a WISP, the IRS also reminds the tax community that the Federal Trade Commission last year updated its safeguards standards and now require tax professionals to use MFA to protect client information. MFA, which can include sending text/SMS verification codes to a user or asking additional questions to confirm the identity of a person logging into a system, provides an extra layer of security to ensure the proper people are accessing sensitive accounts and systems.

“Building and maintaining a resilient security plan is more than just a requirement — it’s a safeguard for both tax professionals and their clients,” said Jared Ballew, president of the National Association of Computerized Tax Processors and one of the Summit members who helped develop the WISP.

“There’s no single silver bullet for security; effective protection requires multiple layers of defense,” Ballew continued. “Our goal with these resources is to help tax pros create and reinforce those layers, with the WISP providing a solid foundation to start or enhance that process. The Security Summit partners remain committed to helping every tax professional stay proactive and protected in today’s digital landscape.”

IRS Tax Pro Account: Protects pros and their clients’ data and saves time, too

The IRS and Summit partners also emphasize another way to help protect sensitive information from identity thieves is through secure online tools such as the Tax Pro Account. These tools can help manage client information to safeguard sensitive taxpayer and financial data from cyberthreats.

The Tax Pro Account is a secure, mobile-friendly, digital, self-service application that enables tax professionals to act on a taxpayers’ behalf, view the taxpayers’ information and manage their authorization relationships more efficiently.

As part of IRS transformation efforts, the IRS will continue adding new features to the Tax Pro Account in the future to help tax professionals securely and efficiently serve their clients.

Currently, tax professionals can use Tax Pro Account to send Power of Attorney and Tax Information Authorization requests directly to a taxpayer’s individual IRS Online Account. Once the taxpayer approves the request, it’s processed in real time — no faxing, mailing, uploading or long waits.

Visit the Tax professionals page on IRS.gov to learn more about E-Services, Tax Pro Account, Employer Identification Numbers, filing, forms, third-party authorizations as well as other safe and secure online tools to serve clients.

Data breaches: What to do when the worst happens

The IRS also recommends tax professionals create an action plan to outline the steps to take in the event of a breach or data theft, in addition to the required Written Information Security Plan. Tax pros now need to report a security event affecting 500 or more people to the Federal Trade Commission as soon as possible, but no later than 30 days from the date of discovery.

A key component to an effective action plan is knowing who to contact. In addition to reporting data loss to the IRS, tax professionals should contact law enforcement, the appropriate states, clients and security professionals.

Places to get help in case of a data breach:

• IRS Stakeholder Liaison – The IRS recommends reporting data theft to the local Stakeholder Liaison first. Liaisons will notify IRS Criminal Investigation and others within the agency on the tax professional’s behalf. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in clients’ names.
• Federal Trade Commission – Data breaches involving 500 or more people are now required to be reported to the FTC as soon as possible, but no later than 30 days from the date of discovery.
• Federal Bureau of Investigation – The local office.
• Secret Service – The local office (if directed).
• Local police – To file a police report on the data breach.

Contacting states in which tax pros prepare state returns:

• Federation of Tax Administrators – Tax professionals can reach this special “report a data breach” web page for victim reporting guidance to the states.
• State attorneys general – Most states require that the state attorney general be notified of data breaches.

Additional resources

• Go to National Tax Security Awareness Week 2024 for additional information.
• For more information on preventing tax information theft, visit Security Summit.
• Victims of identity theft, or a client that is, can visit Identity Theft Central.
• Publication 4557, Safeguarding Taxpayer Data PDF.
• Publication 5293, Data Security Resource Guide for Tax Professionals PDF.
• Publication 4524, Security Awareness for Taxpayers PDF.
• National Institute of Standards and Technology — Small Business Information Security: The Fundamentals PDF.
• Federal Trade Commission’s Cybersecurity for Small Businesses.

Tax professionals should also stay connected to the IRS through subscriptions to e-News for tax professionals and its social media sites.

Source: IRS-2024-308, Dec. 6, 2024

The Internal Revenue Service today issued Notice 2024-85 PDF providing transition relief for third-party settlement organizations (TPSOs), also known as payment apps and online marketplaces, regarding transactions during calendar years 2024 and 2025.

Under the guidance issued today, TPSOs will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in calendar year 2026 and after.

Notice 2024-85 also announces for calendar year 2024, that the IRS will not assert penalties under section 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year.

TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee.

For calendar year 2025 and after, the IRS will assert penalties under section 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax.

Source: IRS-2024-299, Nov. 26, 2024