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IP PIN opt-in goes nationwide

In News Release IR-2020-267, the IRS announced it was expanding its identity protection personal identification number (IP PIN) program in 2021 to all taxpayers who can properly verify their identity. Previously, taxpayers could be issued an IP PIN only if they (1) had experienced tax-related identity theft; (2) filed Form 14039, Identity Theft Affidavit, attesting that they had been a victim of another type of ID theft; or (3) resided in a state that was part of a opt-in pilot program. Since mid-January 2021, taxpayers anywhere have been able to opt in and obtain an IP PIN without having been an ID theft victim or filing Form 14039. Taxpayers enter the IP PIN, which is good for one year, on their income tax returns to confirm their identity.

'Tax insurance' premiums are nondeductible

A partnership may not deduct premiums paid for a "tax insurance" policy that reimburses partners for any difference between tax benefits claimed and those they are entitled to receive for a charitable contribution made by the partnership, the IRS Office of Chief Counsel stated in Chief Counsel Advice (CCA) 202050015. The CCA considered whether such premiums were deductible under Secs. 162(a) (ordinary and necessary business expenses); 212(1) and (2) (expenses incurred for the production or collection of income or the management, conservation, or maintenance of income-producing property); and 212(3) (expenses related to the determination, collection, or refund of any tax).

In the case of a contractual arrangement to reimburse an expense under specified contingencies, whether a deduction is allowable depends on whether the expense is sufficiently related under the arrangement's terms to activities recognized under Sec. 162(a), the CCA noted. Any difference between a deduction claimed and that allowed for a charitable contribution is unrelated to any trade or business activity of the partnership and therefore nondeductible under that subsection, the CCA stated. Similarly, the premiums are insufficiently related to the partnership's income-producing activities to support a deduction under Sec. 212(1) or (2). Finally, because Sec. 275 prohibits the deduction of federal income taxes, and the policy reimburses the partners for their minimum proper federal income tax, the partnership cannot deduct the policy premiums under Sec. 212(3), the CCA said.

Employer van pools get COVID-19 relief

On its website in "Frequently Asked Questions [FAQs] About COVID Relief for Van Pools," the IRS provided relief for employers claiming tax-favored treatment as a qualified transportation employee fringe benefit for a van pool operated for employee commuting during 2020. To qualify for the benefit under Sec. 132(f), a vehicle must seat at least six adult passengers. Also, at least 80% of the vehicle's mileage must be reasonably expected to be for the purpose of transporting employees between their residences and their place of employment, and the vehicle's adult passenger seating capacity during such trips must be at least 50% filled by employees (the 80%/50% requirement). In the FAQs, the IRS said if, at the beginning of the 2020 calendar year, an employer reasonably expected the 80%/50% requirement to be met, but, due to the COVID-19 emergency declared on March 13, 2020, it was not, the requirement will nonetheless be deemed to have been met for the duration of 2020.


Get your clients ready for tax season

Upon its enactment in March, the American Rescue Plan Act (ARPA) introduced many new tax changes, some of which retroactively affected 2020 returns. Making the right moves now can help you mitigate any surprises heading into 2022.


Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.