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Issue Number:  2023-10

Inside This Issue

1. IRS announces new ERC withdrawal process
2. Educational assistance programs can help pay workers’ student loans
3. Guidance for employer leave-based donation that aid victims of Hawaii wildfires
4. Technical guidance regarding Forms 8955-SSA and 5500-EZ
5. Reminder: Payers filing erroneous information returns will receive a CP2100 or 2100A notice

  1.  IRS announces new ERC withdrawal process

The IRS announces a new Employee Retention Credit claim withdrawal process for taxpayers who filed an ERC claim and are concerned about its accuracy. The new process lets certain businesses withdraw their claims to avoid getting a refund for which they’re ineligible. Withdrawn claims will be treated as if they were never filed. The IRS will not impose penalties or interest.

Businesses can find details about who can ask to withdraw an ERC claim and the steps they need to take in a new ERC withdrawal process fact sheet. It also contains links to other helpful information on this topic.

As a reminder, anyone incorrectly claiming the ERC must pay it back and may owe penalties and interest. The IRS wants to help honest taxpayers avoid this situation.

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  2.  Educational assistance programs can help pay workers’ student loans

Employers that offer educational assistance programs can also use those programs to help pay their employees’ student loans.

Though educational assistance programs have been available for many years, the option to use them to pay student loans is available only for payments made after March 27, 2020. Under current law, this option will be available until Dec. 31, 2025.

These programs can now also be used to pay principal and interest on an employee’s qualified education loans. Payments made directly to the lender, as well as those made to the employee, qualify. By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages.

For information on other requirements, see Publication 15-B, Employer’s Tax Guide to Fringe Benefits. Chapter 10 in Publication 970, Tax Benefits for Education provides details on what qualifies as a student loan.

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  3.  Guidance for employers on leave-based donations that aid victims of Hawaii wildfires 

Employers now have guidance from the IRS regarding employees that want to forgo sick, vacation or personal leave to help victims of the summer wildfires in Hawaii.

Notice 2023-69 provides that cash payments employers make to charitable organizations during 2023 and 2024 providing relief to victims of the wildfires in Hawaii in exchange for sick, vacation or personal leave which their employees give up will not be treated as compensation. Similarly, the employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the leave that they donated to their employer.

Employers, however, may deduct these cash payments as a business expense or as a charitable contribution deduction if the employer otherwise meets the respective requirements of the applicable sections of the Internal Revenue Code.

Additional information about tax relief for those affected by the wildfires in Hawaii is available at IRS.gov.

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  4.  Technical guidance regarding Forms 8955-SSA and 5500-EZ

Revenue Procedure 2023-31 refers filers to applicable publications, forms, instructions or other guidance, including postings on IRS.gov, for procedures related to seeking a hardship waiver or administrative exemption from requirements to file Form 8955-SSA: Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits and Form 5500-EZ: Annual Return of a One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan electronically.

This revenue procedure is effective with respect to Forms 8955-SSA and 5500-EZ required to be filed for plan years beginning on or after Jan. 1, 2024.

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  5.  Reminder: Payers filing erroneous information returns will receive a CP2100 or 2100A notice

Payers who file information returns with data that doesn’t match IRS records will get a CP2100 or CP2100A notice. These notices tell payers that the information returns they submitted have a missing or incorrect Taxpayer Identification Number, name or both.

Each notice includes a list of payees with the issues found. Payers need to compare the names on the notice with their account information and correct or update their records, as necessary. Payers may also need to correct their backup withholding on payments made to payees.

Tax Tip 2023-75 provides a list of the most common information returns with errors, as well as additional links to further guidance on backup withholding.

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