This announcement notifies lenders who have filed or furnished Forms 1099-MISC, Miscellaneous Information, reporting certain payments on loans subsidized by the Administrator of the U.S. Small Business Administration as income of the borrower, that the lenders must file and furnish corrected Forms 1099-MISC that exclude these subsidized loan payments. This accords with section 278(e)(1) of the COVID-related Tax Relief Act, which provides that these payments are not includible in the gross income of the borrowers; and Notice 2021-6, waiving Form 1099-MISC reporting requirements for these payments.

The Office of Professional Responsibility (OPR) announces recent disciplinary sanctions involving attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers. These individuals are subject to the regulations governing practice before the Internal Revenue Service (IRS), which are set out in Title 31, Code of Federal Regulations, Part 10, and which are published in pamphlet form as Treasury Department Circular No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary sanctions for violating the regulations.

This revenue procedure provides a safe harbor for eligible educators, within the meaning of § 62(d)(1) of the Internal Revenue Code, to treat unreimbursed expenses paid or incurred after March 12, 2020, for personal protective equipment, disinfectant, and other supplies used for the prevention of the spread of COVID–19 in the classroom, as expenses that are described in § 62(a)(2)(D)(ii) and allowable as a deduction under § 62(a)(2)(D) pursuant to section 275 of the COVID-related Tax Relief Act of 2020, which was enacted as part of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182, 1978 (2020).

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also: Part I, §§ 62, 162)

This revenue procedure provides a safe harbor for eligible educators, within the meaning of § 62(d)(1) of the Internal Revenue Code (Code), to treat unreimbursed expenses paid or incurred after March 12, 2020, for personal protective equipment, disinfectant, and other supplies (COVID-19 Protective Items) used for the prevention of the spread of COVID–19 in the classroom, as expenses that are described in § 62(a)(2)(D)(ii) and allowable as a deduction under § 62(a)(2)(D) pursuant to section 275 of the COVID-related Tax Relief Act of 2020 (COVID Tax Relief Act), which was enacted as part of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182, 1978 (2020).

.01 Section 62 of the Code sets forth the deductions an individual may deduct from gross income in arriving at adjusted gross income. Section 62(a)(2)(D) provides, in part, that deductions allowed under § 162 not in excess of $250 ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each) that consist of unreimbursed expenses described in § 62(a)(2)(D)(ii) that are paid or incurred by an eligible educator may be deducted in arriving at gross income. The unreimbursed expenses described in § 62(a)(2)(D)(ii) are those paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services), other equipment, and supplementary materials used by the eligible educator in the classroom.

.02 Section 62(d)(1)(A) defines an “eligible educator” as any individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year. Section 62(d)(1)(B) defines a “school” as any school which provides elementary or secondary education, as determined under State law.

.03 For an unreimbursed expense to be deducted from gross income in arriving at adjusted gross income under § 62(a)(2)(D), the expense must be allowed as a deduction under § 162(a) of the Code as an ordinary and necessary expense paid or incurred during the taxable year in carrying on the eligible educator’s trade or business of performing services as an employee.

.04 Section 275 of the COVID Tax Relief Act requires the Secretary of the Treasury or the Secretary’s delegate to clarify that COVID-19 Protective Items used for the prevention of the spread of COVID-19 are treated as described in § 62(a)(2)(D)(ii) if paid or incurred by an eligible educator after March 12, 2020.

In accordance with section 275 of the COVID Tax Relief Act, an eligible educator may treat unreimbursed expenses paid or incurred after March 12, 2020, for COVID-19 Protective Items that are, or will be, used by that eligible educator for the prevention of the spread of COVID-19 in the classroom, as expenses that are described in § 62(a)(2)(D)(ii) and allowable as a deduction under § 62(a)(2)(D), subject to the aggregate dollar limitation provided in such provision. For purposes of this revenue procedure, COVID-19 Protective Items include, but are not limited to: face masks; disinfectant for use against COVID-19; hand soap; hand sanitizer; disposable gloves; tape, paint or chalk used to guide social distancing; physical barriers (for example, clear plexiglass); air purifiers; and other items recommended by the Centers for Disease Control and Prevention (CDC) to be used for the prevention of the spread of COVID-19.

This revenue procedure applies to unreimbursed expenses paid or incurred by an eligible educator after March 12, 2020, for COVID-19 Protective Items used for the prevention of the spread of COVID–19 in the classroom.

The principal authors of this revenue procedure are Sharon Horn and Edward Schwartz of the Office of the Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure contact Sharon Horn at (202) 317-7003 (for questions relating to § 162), or Edward Schwartz at (202) 317-7006 (for questions relating to § 62(a)(2)) (not a toll-free number).

This announcement notifies lenders who have filed with the Internal Revenue Service (IRS), or furnished to a borrower, a Form 1099-MISC, Miscellaneous Information, reporting certain payments on loans subsidized by the Administrator of the U.S. Small Business Administration (Administrator) as income of the borrower that the lenders must file and furnish corrected Forms 1099-MISC that exclude these subsidized loan payments.

Section 1112(c) of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, 134 Stat. 281, 309-310 (March 27, 2020) (CARES Act), 15 U.S.C. 9011(c), authorizes the Administrator to subsidize certain payments of principal, interest, and any associated fees owed by a borrower on certain loans. Section 278(c)(1) of the COVID-related Tax Relief Act of 2020 (COVID Relief Act), enacted as Subtitle B of Title II of Division N of the Consolidated Appropriations Act, 2021, Pub. L. 116-260, 134 Stat.1182 (December 27, 2020), retroactively provides that such a payment is not included in the gross income of the person on whose behalf the payment is made. This provision is effective for taxable years ending after March 27, 2020, the date of the enactment of the CARES Act. Section 278(e)(1) of the COVID Relief Act. Section 278(c)(2) provides that no deduction shall be denied by reason of the exclusion of the loan payments from gross income.

Section 279 of the COVID Relief Act authorizes the Secretary of the Treasury or the Secretary’s delegate to provide an exception with respect to any amount excluded from gross income by reason of section 278 of the COVID Relief Act from any requirement to file an information return otherwise required under chapter 61 of the Internal Revenue Code (Code), including information returns and payee statements required to be filed or furnished under section 6041 of the Code.

On January 19, 2021, the Department of the Treasury and the IRS issued, pursuant to section 279 of the COVID Relief Act, Notice 2021-6, 2021-06 I.R.B. 822, to waive the requirement for lenders to file with the IRS, or furnish to a borrower, a Form 1099-MISC reporting the payment of principal, interest, and any associated fees subsidized by the Administrator under section 1112(c) of the CARES Act. The filing of information returns that include these loan payments could result in IRS correspondence to borrowers regarding underreported income, and the furnishing of payee statements that include these loan payments to borrowers could cause confusion.

If a lender has already furnished to borrowers Forms 1099-MISC that report these loan payments, whether before, on, or after December 27, 2020, the lender must furnish to the borrowers corrected Forms 1099-MISC that exclude these loan payments. In addition, if a lender has already filed with the IRS Forms 1099-MISC that report these loan payments, whether before, on, or after December 27, 2020, the lender must file with the IRS corrected Forms 1099-MISC that exclude these loan payments. Directions for how to file corrected Forms 1099-MISC are included in the 2020 Instructions for Forms 1099-MISC and 1099-NEC and the 2020 General Instructions for Certain Information Returns. If a lender described in this announcement furnishes corrected payee statements within 30 days of the furnishing deadline, it will have reasonable cause for any failure-to-furnish penalty imposed under section 6722. A lender described in this announcement must file corrected information returns by the filing deadline in order to avoid section 6721 failure-to-file penalties.

The principal author of this announcement is Isaac Brooks Fishman of the Office of the Associate Chief Counsel (Procedure & Administration). For further information regarding this announcement, contact Isaac Brooks Fishman at (202) 317-5436 (not a toll-free number).

The Office of Professional Responsibility (OPR) announces recent disciplinary sanctions involving attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, appraisers, and unenrolled/unlicensed return preparers (individuals who are not enrolled to practice and are not licensed as attorneys or certified public accountants). Licensed or enrolled practitioners are subject to the regulations governing practice before the Internal Revenue Service (IRS), which are set out in Title 31, Code of Federal Regulations, Subtitle A, Part 10, and which are released as Treasury Department Circular No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary sanctions for violating the regulations. Unenrolled/unlicensed return preparers are subject to Revenue Procedure 81-38 and superseding guidance in Revenue Procedure 2014-42, which govern a preparer’s eligibility to represent taxpayers before the IRS in examinations of tax returns the preparer both prepared for the taxpayer and signed as the preparer. Additionally, unenrolled/unlicensed return preparers who voluntarily participate in the Annual Filing Season Program under Revenue Procedure 2014-42 agree to be subject to the duties and restrictions in Circular 230, including the restrictions on incompetent or disreputable conduct.

The disciplinary sanctions to be imposed for violation of the applicable standards are:

Disbarred from practice before the IRS—An individual who is disbarred is not eligible to practice before the IRS as defined at 31 C.F.R. § 10.2(a)(4) for a minimum period of five (5) years.

Suspended from practice before the IRS—An individual who is suspended is not eligible to practice before the IRS as defined at 31 C.F.R. § 10.2(a)(4) during the term of the suspension.

Censured in practice before the IRS—Censure is a public reprimand. Unlike disbarment or suspension, censure does not affect an individual’s eligibility to practice before the IRS, but OPR may subject the individual’s future practice rights to conditions designed to promote high standards of conduct.

Monetary penalty—A monetary penalty may be imposed on an individual who engages in conduct subject to sanction, or on an employer, firm, or entity if the individual was acting on its behalf and it knew, or reasonably should have known, of the individual’s conduct.

Disqualification of appraiser—An appraiser who is disqualified is barred from presenting evidence or testimony in any administrative proceeding before the Department of the Treasury or the IRS.

Ineligible for limited practice—An unenrolled/unlicensed return preparer who fails to comply with the requirements in Revenue Procedure 81-38 or to comply with Circular 230 as required by Revenue Procedure 2014-42 may be determined ineligible to engage in limited practice as a representative of any taxpayer.

Under the regulations, individuals subject to Circular 230 may not assist, or accept assistance from, individuals who are suspended or disbarred with respect to matters constituting practice (i.e., representation) before the IRS, and they may not aid or abet suspended or disbarred individuals to practice before the IRS.

Disciplinary sanctions are described in these terms:

Disbarred by decision, Suspended by decision, Censured by decision, Monetary penalty imposed by decision, and Disqualified after hearing—An administrative law judge (ALJ) issued a decision imposing one of these sanctions after the ALJ either (1) granted the government’s summary judgment motion or (2) conducted an evidentiary hearing upon OPR’s complaint alleging violation of the regulations. After 30 days from the issuance of the decision, in the absence of an appeal, the ALJ’s decision becomes the final agency decision.

Disbarred by default decision, Suspended by default decision, Censured by default decision, Monetary penalty imposed by default decision, and Disqualified by default decision—An ALJ, after finding that no answer to OPR’s complaint was filed, granted OPR’s motion for a default judgment and issued a decision imposing one of these sanctions.

Disbarment by decision on appeal, Suspended by decision on appeal, Censured by decision on appeal, Monetary penalty imposed by decision on appeal, and Disqualified by decision on appeal—The decision of the ALJ was appealed to the agency appeal authority, acting as the delegate of the Secretary of the Treasury, and the appeal authority issued a decision imposing one of these sanctions.

Disbarred by consent, Suspended by consent, Censured by consent, Monetary penalty imposed by consent, and Disqualified by consent—In lieu of a disciplinary proceeding being instituted or continued, an individual offered a consent to one of these sanctions and OPR accepted the offer. Typically, an offer of consent will provide for: suspension for an indefinite term; conditions that the individual must observe during the suspension; and the individual’s opportunity, after a stated number of months, to file with OPR a petition for reinstatement affirming compliance with the terms of the consent and affirming current fitness and eligibility to practice (i.e., an active professional license or active enrollment status, with no intervening violations of the regulations).

Suspended indefinitely by decision in expedited proceeding, Suspended indefinitely by default decision in expedited proceeding, Suspended by consent in expedited proceeding—OPR instituted an expedited proceeding for suspension (based on certain limited grounds, including loss of a professional license for cause, and criminal convictions).

Determined ineligible for limited practice---There has been a final determination that an unenrolled/unlicensed return preparer is not eligible for limited representation of any taxpayer because the preparer violated standards of conduct or failed to comply with any of the requirements to act as a representative.

A practitioner who has been disbarred or suspended under 31 C.F.R. § 10.60, or suspended under § 10.82, or a disqualified appraiser may petition for reinstatement before the IRS after the expiration of 5 years following such disbarment, suspension, or disqualification (or immediately following the expiration of the suspension or disqualification period if shorter than 5 years). Reinstatement will not be granted unless the IRS is satisfied that the petitioner is not likely to engage thereafter in conduct contrary to Circular 230, and that granting such reinstatement would not be contrary to the public interest.

Reinstatement decisions are published at the individual’s request, and described in these terms:

Reinstated to practice before the IRS---The individual’s petition for reinstatement has been granted. The agent, and eligible to practice before the IRS, or in the case of an appraiser, the individual is no longer disqualified.

Reinstated to engage in limited practice before the IRS---The individual’s petition for reinstatement has been granted. The individual is an unenrolled/unlicensed return preparer and eligible to engage in limited practice before the IRS, subject to requirements the IRS has prescribed for limited practice by tax return preparers.

OPR has authority to disclose the grounds for disciplinary sanctions in these situations: (1) an ALJ or the Secretary’s delegate on appeal has issued a final decision; (2) the individual has settled a disciplinary case by signing OPR’s “consent to sanction” agreement admitting to one or more violations of the regulations and consenting to the disclosure of the admitted violations (for example, failure to file Federal income tax returns, lack of due diligence, conflict of interest, etc.); (3) OPR has issued a decision in an expedited proceeding for indefinite suspension; or (4) OPR has made a final determination (including any decision on appeal) that an unenrolled/unlicensed return preparer is ineligible to represent any taxpayer before the IRS.

Announcements of disciplinary sanctions appear in the Internal Revenue Bulletin at the earliest practicable date. The sanctions announced below are alphabetized first by state and second by the last names of the sanctioned individuals.