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2021 Tax Filing Season for Tax Year 2020 Starts on February 12 2021

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On January 15, 2021, the IRS announced that the 2021 tax filing season for the tax year 2020 will start on Friday, February 12, 2021. On that day, the IRS will begin accepting and processing 2020 tax year returns.

The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits. This programming work is critical to ensuring IRS systems run smoothly. If the 2021 tax filing season were to open without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time,” said IRS Commissioner Chuck Rettig. “Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”

Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed during the 2021 Tax Filing Season, with the vast majority before the Thursday, April 15, 2021, deadline.

Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.

The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check ‘Where’s My Refund’ on the IRS website IRS.gov under ‘Refunds’ for their personalized refund date. Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return.

Here are some important 2021 Tax Season deadlines:

A. Estimated Tax Deadlines: April 15, 2021; June 15, 2021; September 15, 2021; and January 15, 2022.

B. Individual Income Tax Returns: April 15, 2021 for US taxpayers who live in the United States; June 15, 2021, for US taxpayers who live outside of the United States (their tax payment deadline is still April 15); October 15, 2021, for extended tax returns; December 15, 2021, special extension for US taxpayers who reside overseas.

C. Partnership and S-Corporations: March 15, 2021; if extended, September 15, 2021.

D. C-Corporations: April 15, 2021; if extended, October 15, 2021.

E. Forms 3520-A: for calendar-year foreign trusts, March 15, 2021; extension is possible until September 15, 2021.

F. Form 3520: April 15, 2021; extension is possible until October 15, 2021.

G. FBARs: April 15, 2021; extension is possible until October 15, 2021.

H. International Information Returns filed with US tax returns (Forms 5471, 8621, 8865, 926, et cetera): same deadline as for the US income tax return with which these international information returns are filed.

2020 2Q IRS Interest Rates | US International Tax Law Firm

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On February 28, 2020, the Internal Revenue Service (“IRS”) announced that the 2020 Second Quarter IRS underpayment and overpayment interest rates (“2020 2Q IRS Interest Rates”) will not change from the first quarter of 2020. This means that, the 2020 2Q IRS interest rates will be as follows:

  • five (5) percent for overpayments (four (4) percent in the case of a corporation);
  • two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • five (5) percent for underpayments; and
  • seven (7) percent for large corporate underpayments.

Under the Internal Revenue Code, these interest rates are determined on a quarterly basis. The IRS used the federal short-term rate for February of 2020 to determine the 2020 2Q IRS interest rates. The IRS interest is compounded on a daily basis.

The 2020 2Q IRS interest rates are important to not just US domestic tax law, but also US international tax law. For example, the IRS will use these rates to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an amendment of his US tax return through Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. The IRS will also utilize 2020 2Q IRS interest rates with respect to the calculation of PFIC interest on Section 1291 tax.

As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment and overpayment interest rates on a regular basis. Since our specialty is offshore voluntary disclosures, we often amend our client’s tax returns as part of an offshore voluntary disclosure process and calculate the interest owed on any additional US tax liability. We also need to take interest payments into account with respect to additional tax liability that arises out of an IRS audit.

Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology. This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.

Finally, it is important to point out that the IRS will use the 2020 2Q IRS interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. This situation may also often arise in the context of offshore voluntary disclosures.

Thus, the IRS underpayment and overpayment interest rates have an impact on a lot of basic items in US tax law. Hence, it is important to keep track of changes in these rates on a quarterly basis.

2017 Tax Reform Seminar | U.S. International Tax Lawyer & Attorney

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On April 19, 2018, Mr. Eugene Sherayzen, an international tax lawyer, co-presented with an attorney from KPMG at a seminar entitled “The 2017 U.S. Tax Reform: Seeking Economic Growth through Tax Policy in Politically Risky Times” (the “2017 Tax Reform Seminar”). This seminar formed part of the 2018 International Business Law Institute organized by the International Business Law Section of the Minnesota State Bar Association.

The 2017 Tax Reform Seminar discussed, in a general manner, the main changes made by the 2017 Tax Cuts and Jobs Act to the U.S. international tax law. Mr. Sherayzen’s part of the presentation focused on two areas: the Subpart F rules and the FDII regime.

Mr. Sherayzen provided a broad overview of the Subpart F rules, the types of income subject to these rules and the main exceptions to the Subpart F regime. He emphasized that the tax reform did not repeal the Subpart F rules, but augmented them with the GILTI regime (the discussion of GILTI was done by the KPMG attorney during the same 2017 Tax Reform Seminar).

Then, Mr. Sherayzen turned to the second part of his presentation during the 2017 Tax Reform Seminar – the Foreign Derived Intangible Income or FDII. After reviewing the history of several tax regimes prior to the FDII, the tax attorney concluded that the nature of the current FDII regime is one of subsidy. In essence, FDII allows a US corporation to reduce its corporate income by 37.5% of the qualified “foreign derived” income (after the year 2025, the percentage will go down to 21.875%). Mr. Sherayzen explained that, in certain cases, there is an additional limitation on the FDII deduction.

Qualifying income includes: sales to a foreign person for foreign use, dispositions of property to foreign persons for foreign use, leases and licenses to foreign persons for foreign use and services provided to a foreign person. There are also a number exceptions to qualifying income.

Mr. Sherayzen concluded his presentation at the 2017 Tax Reform Seminar with a discussion of the reaction that FDII produced in other countries. In general this reaction was not favorable; China and the EU even threatened to sue the United States over what they believed to be an illegal subsidy to US corporations.