Annual Report Finds IRS Rose to Challenges of an “Unprecedented” Year

Annual Report Finds IRS Rose to Challenges of an “Unprecedented” Year

Annual Report Finds IRS Rose to Challenges of an “Unprecedented” Year

Ask most people what they thought of 2020, and the response is likely to be something like, “disastrous,” “catastrophic” — even “unprecedented.”

Ask IRS Commissioner Chuck Rettig, though, and he might say 2020 was his agency’s finest hour.

The just-departed year, while marked with turmoil and a pandemic, showcased the IRS’ ability to carry out a mission, no matter what the circumstances.

Annual report released

The IRS has released its annual report for 2020, which spotlights its work delivering taxpayer service and continuing compliance efforts in a year that saw the COVID-19 coronavirus challenge all aspects of the agency’s mission.

Internal Revenue Service Progress Update/Fiscal Year 2020 – Putting Taxpayers First” outlines how the agency overcame difficulties during the pandemic to deliver Economic Impact Payments in record time. At the same time, IRS employees made adjustments to complete a successful filing season despite office closures and the latest tax deadline ever.

“The COVID-19 pandemic presented some of the greatest challenges to the IRS in its history, both in terms of being able to carry out our mission and in protecting the health and safety of taxpayers and our own workforce,” Commissioner Rettig wrote in the report’s opening message and addressed in his ‘A Closer Look’ column. “IRS employees responded admirably by quickly facilitating financial assistance to millions of deserving and needy Americans.”

But the 44-page report isn’t just about the pandemic and overcoming its challenges. It also documents the agency’s progress toward six strategic goals and documents the ongoing effort to modernize the American tax system.

In addition, the 2020 report shows work completed on implementing the Taxpayer First Act.

“Even with all the challenges, we believe we have made great strides during Fiscal Year 2020, but we want to do more,” Rettig said.

Rettig explained that each year the IRS collects more than $3 trillion in taxes and generates approximately 96% of the funding that supports the federal government’s operations.

“My experiences as Commissioner have strengthened my belief that a fully functioning IRS is critical to the success of our nation,” he said. “When citizens can perform their civic duty each year by preparing and filing their taxes and paying only what they should, they help fund critical aspects of the United States ranging from schools and roads to Social Security payments and the nation’s military.”

Service came first

The 2020 Annual Report lays out numerous examples of how IRS employees helped taxpayers during a very challenging year:

  • Expanded information and assistance available to taxpayers in additional languages and underserved communities to help deliver Economic Impact Payments and other services.
  • Adjusted agency processes through the People First Initiative to help people and businesses encountering payment and other challenges during the pandemic.
  • Offered an electronic filing option for amended tax returns with the new Form 1040-X, marking a major milestone to help taxpayers and the tax community.
  • Served their communities outside official duties through charitable donations and service projects.

The report also illustrates ways IRS employees worked to maintain the tax system through a strong, visible and robust tax enforcement presence. It says the agency enhanced its criminal investigation and civil enforcement efforts with an expanded use of data analysis and artificial intelligence across all lanes, from selection to examination.

In the Progress Update section, the report touts the IRS’ work partnering on landmark criminal investigations that brought down child pornography, drug and terrorist organizations.

The IRS, the report explains, continues to increase its pursuit of those who promote and use abusive tax shelters – including syndicated conservation easements. The agency has seen successful Tax Court results on these cases, as well as completion of its first settlement initiative.

The report also details the IRS’ Integrated Business Modernization Plan, which is a roadmap that guides the agency move to offer best-in-class customer service. This level of service is what people are accustomed to have when dealing with an online retailer or financial institution.

“As we move into the future, the name of the game for the IRS will continue to be innovation, creativity and service to the people of our country to make their world better,” Rettig said. “Given all we’ve accomplished together in 2020 and all we’re working to achieve, we believe the future looks bright for the IRS, the tax system and our nation.”

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Go to for Answers to EIP Questions

Go to for Answers to EIP Questions

Go to for Answers to EIP Questions

The second set of Economic Impact Payments are already showing up in eligible Americans’ bank accounts, but some may encounter problems with their direct payment. Rather than picking up the phone, the Internal Revenue Service today advised taxpayers to instead visit the IRS website for answers since “IRS phone assistors do not have additional information beyond what’s on”

As with the CARES Act-provided Economic Impact Payments, the IRS expects there could be some confusion with the latest direct payments issued by the Treasury Department and IRS. From unavailable funds to less-than-anticipated payouts, the agency aims to set expectations and answer as many questions as possible at this early stage in the process.

“The direct deposit payments may take several days to post to individual accounts,” the IRS says. “Some Americans may have seen the direct deposit payments as pending or as provisional payments in their accounts before the scheduled payment date of January 4, 2021, which is the official date funds are available.”

That particular issue should have worked itself out for the earliest direct-deposit recipients, but those who are expecting paper checks won’t have the luxury of receiving a real-time alert from a mobile banking app when the check arrives in their mailbox. That’s why those recipients will need to regularly check the Get My Payment online tool and keep a close eye on their mailbox.

(Note: While distribution of checks began on December 30, the IRS expects to take until at least the middle of January to finish sending EIPs—and it could take even longer for eligible individuals living overseas.)

What if I don’t receive an Economic Impact Payment?

Economic Impact Payment-eligible Americans who receive a smaller-than-expected payment—or no payment at all—can claim the Recovery Rebate Credit on their tax year 2020 return. Since this credit covers both EIPs that were authorized in 2020, it helps ensure that all eligible Americans eventually get the financial relief they’re due.

“Because of the speed at which IRS issued this second round of payments, some payments may have been sent to an account that may be closed or no longer active,” the IRS explains. “By law, the financial institution must return the payment to the IRS, they cannot hold and issue the payment to an individual when the account is no longer active. While the IRS is exploring options to correct these payments, if you have not received your full payment by the time you file your 2020 tax return, you may claim the Recovery Rebate Credit on your tax return.”

Where can I find more information about Economic Impact Payments?

Aside from the Get My Payments tool, the IRS says the following webpages contain important information about coronavirus tax relief:

Source: IR-2021-01

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IRS Publishes Qualified Residential Living Facility Safe Harbor

IRS Publishes Qualified Residential Living Facility Safe Harbor

IRS Publishes Qualified Residential Living Facility Safe Harbor

The Internal Revenue Service this week published a safe harbor for the management or operation of qualified residential living facilities in Revenue Procedure 2021-9.

Trades and businesses managing or operating a residential living facility—as defined in the text of the revenue procedure—can “[treat] it as a real property trade or business, solely for purposes of qualifying to make the election under Internal Revenue Code section 163(j)(7)(B) to be an electing real property trade or business.”  

The residential living facility must meet three criteria to qualify for the safe harbor:

  1. [Consist] of multiple rental dwelling units within one or more buildings or structures that generally serve as primary residences on a permanent or semipermanent basis to individual customers or patients;
  2. [Provide] supplemental assistive, nursing, or other routine medical services; and
  3. [Have] an average period of customer or patient use of individual rental dwelling units of 30 days or more.

To determine the average period of customer or patient use, the IRS says the trade or business will generally need to divide:

  1. the sum of the total number of days in the taxable year that each customer or patient resides in a rental dwelling unit of the residential living facility, which may be determined by reference to a rental contract or other formal written lease agreement, or by the number of days paid for by Medicare or Medicaid;


  2. the total number of individual residential customers or patients that reside in all of the rental dwelling units of the facility for the taxable year.

For the full text of the revenue procedure, check out this page on the IRS website:

Source: Rev Proc 2021-9

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