Now is a good time for people to begin thinking about next year’s tax return. While it may seem early to be preparing for 2021, reviewing your recordkeeping now will pay off when it comes time to file again.
Here are some suggestions to help taxpayers keep good records.
Taxpayers should develop a system that keeps all their essential information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.
Throughout the year, they should add tax records to their files as they receive them. This includes Notice 1444, Your Economic Impact Payment, and unemployment compensation documentation. Having records handy makes preparing a tax return next year easier.
- Taxpayers should notify the IRS if their address changes. Taxpayers should let the IRS know if they change their address. They should also notify the Social Security Administration of a legal name change to avoid a delay in processing their tax return.
- Review their tax return to make sure they didn’t overlook any credits or deductions. Double check credits and deductions. Records that taxpayers should keep include receipts, canceled checks and other documents that support income, including any unemployment compensation.
- Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for figuring gains or losses.
- Taxpayers should keep records for three years from the date they filed the return. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
Posted in INDIVIDUALS, SMALL BUSINESSES
The home office deduction allows qualifying taxpayers to deduct certain home expenses on their tax return. With more people working from home than ever before, some taxpayers may be wondering if they can claim a home office deduction when they file their 2020 tax return next year.
Here are some things to help taxpayers understand the home office deduction and whether they can claim it:
- Employees are not eligible to claim the home office deduction.
- The home office deduction Form 8829 is available to both homeowners and renters.
- There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
- Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
- The term “home” for purposes of this deduction: a) includes a house, apartment, condominium, mobile home, boat or similar property; b) also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse; c) doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.
- There are two basic requirements for the taxpayer’s home to qualify as a deduction: a) there must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business; b) the home must be the taxpayer’s principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
- Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.
- Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction: a) the simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500; b) when using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.
Posted in INDIVIDUALS, NEWS
School may look a little different this year, but eligible teachers and other educators can still deduct certain unreimbursed expenses on their tax return next year.
Who is considered an eligible educator
The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.
Things to know about this deduction:
Educators can deduct up to $250 of trade or business expenses that were not reimbursed. As teachers prepare for the school year, they should remember to keep receipts after making any purchase to support claiming this deduction.
The deduction is $500 if both taxpayers are eligible educators and file their return using the status married filing jointly. These taxpayers cannot deduct more than $250 each.
Qualified expenses are amounts the taxpayer paid themselves during the tax year.
Examples of expenses the educator can deduct include:
- Professional development course fees
- Computer equipment, including related software and services
Other equipment and materials used in the classroom
Posted in INDIVIDUALS
Ya que la fecha límite de presentación de impuestos federales pasó para la mayoría de las personas, algunos contribuyentes aún no han presentado sus declaraciones de impuestos de 2019.
Si un contribuyente tiene derecho a un reembolso, no hay multa por presentar tarde. Las multas e intereses comenzarán a acumularse por cualquier impuesto no pagado restante adeudado a partir del 16 de julio de 2020.
Cualquier persona que no presentó y adeuda impuestos debe presentar una declaración tan pronto como sea posible y pagar tanto como sea posible para reducir las multas y los intereses. Las opciones de presentación electrónica todavía están disponibles en IRS.gov hasta el 15 de octubre de 2020 para preparar y presentar declaraciones electrónicamente.
Los contribuyentes deben revisar sus opciones de pago. El IRS tiene información para los contribuyentes que no pueden pagar los impuestos que adeudan.
Algunos contribuyentes pueden tener tiempo adicional para presentar sus declaraciones de impuestos y pagar los impuestos adeudados. Esto incluye algunas víctimas de desastres, miembros de las fuerzas armadas y personal de apoyo elegible en zonas de combate.
Presentar pronto es muy importante porque las multas por presentación tardía y por pago tardío en los impuestos no pagados aumentan rápidamente. Sin embargo, en algunos casos, una presentación de contribuyentes después de la fecha límite puede calificar para un alivio de multa. Para aquellos que se le aplicó una multa, pueden comunicarse con el IRS al llamar al número en su aviso y explicar por qué no pudieron presentar y pagar a tiempo.
Además, los contribuyentes que tienen antecedentes de presentar y pagar a tiempo a menudo califican para el alivio de multa administrativa. Un contribuyente suele calificar para este alivio si no se le han aplicado multas durante los últimos tres años y cumple con otros requisitos.
Los plazos estatales de presentación y pago pueden ser diferentes de la fecha límite federal del 15 de julio.
Posted in INDIVIDUALS
With the July 15 tax deadline now past, the Internal Revenue Service reminds all taxpayers that there is no secret way to find out when a refund will be issued.
Most taxpayers have already filed their federal tax return, and many have already received their refund. Those that have not are understandably eager for details about when their refund will arrive. When it comes to tax refunds, a few common myths keep circulating and misinforming taxpayers.
Some key facts can help people understand the refund process better:
- Taxpayers who file electronically and use direct deposit can expect their refund faster than those who mail a paper return, especially since the COVID-19 outbreak has reduced IRS staffing available to process paper returns.
- Taxpayers who file a paper tax return are likely to face processing and refund delays.
- The best and easiest way to check on a refund is “Where’s My Refund?”
- A tax refund’s status can be checked within 24 hours after the taxpayer receives the e-file acceptance notification.
- “Where’s My Refund?” is updated once a day, usually overnight.
Processing delays for paper tax returns
The IRS continues to process electronic and paper tax returns, issue refunds, and accept payments.
The IRS is experiencing delays in processing paper tax returns due to limited staffing. This is causing refund delays. Taxpayers who have already filed a paper return should know that the IRS is processing paper returns in the order in which they are received. In addition, interest on individual 2019 refunds reflected on returns filed by July 15, 2020, will generally be paid from April 15, 2020, until the date of the refund. Interest payments may be received separately from the refund and are considered taxable income in the year received.
Taxpayers who filed a paper return should not file the same tax return again or call the IRS.
Common myths about tax refunds include:
Getting a refund this year means there’s no need to adjust withholding for 2020
To help avoid a possible surprise next year, taxpayers should look to make changes now. Adjusting tax withholding with an employer can help ensure that neither too much nor too little tax is withheld from an employee’s paycheck.
Calling the IRS or a tax professional will provide a better refund date
Contacting the IRS or a tax professional will not expedite a refund. IRS assistors and tax professionals cannot move up a refund date nor do they have access to any “special” information that will provide a more accurate refund date.
Ordering a tax transcript is a secret way to get a refund date
Ordering a tax transcript will not help taxpayers find out when they will get their refund and it does not accelerate the issue date of a refund.
The ‘Where’s My Refund?’ tool is wrong because there’s no deposit date yet
When Where’s My Refund? shows the tax return status is received it means that we have received the tax return and are processing it. Some returns may take longer to process than others and needs further review. This includes when a return:
- Includes errors
- Is incomplete
- Is affected by identity theft or fraud
- Includes a Form 8379, Injured Spouse Allocation, which could take up to 14 weeks to process
Taxpayers will be contacted by mail if the IRS needs more information to process a tax return. People waiting for a refund in the mail should plan for the additional time a check takes to arrive.
Something is wrong when the refund amount is less than expected
There are a lot of reasons that cause a tax refund to be different than expected. Situations that could decrease a refund include:
- Taxpayer math errors or mistakes
- Owing federal or state taxes, child support, student loans or other federal non-tax obligations
- A portion of the refund is held while IRS reviews an item claimed on the return
The IRS will mail a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury’s Bureau of the Fiscal Service if their refund was reduced to offset certain financial obligations.
Posted in INDIVIDUALS
Taxpayers have a variety of options to consider when paying federal taxes. This year, in response to the COVID-19 pandemic, the filing deadline and tax payment due date was postponed from April 15 to July 15, 2020.
The IRS reminds taxpayers filing Form 1040 series returns that they must file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by July 15 to obtain the automatic extension to Oct. 15. The extension provides additional time to file the tax return – it is not an extension to pay any taxes due.
Those who owe a 2019 income tax liability, as well as estimated tax for 2020, must make two separate payments on or by July 15, 2020.One for their 2019 income tax liability and one for their 2020 estimated tax payments. The two estimated tax payments can be combined into a single payment.
Automatic extension of time to file
Taxpayers who need more time to prepare and file their federal tax return can apply for an extension of time to file until Oct. 15. To get an extension, taxpayers must estimate their tax liability on the extension form and pay any amount due.
- Individuals – Taxpayers can use Direct Pay for two payments each day. Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance. They will receive an email confirmation of their payments.
- Businesses – For businesses or those making large payments, the best payment option is the Electronic Federal Tax Payment System, which allows up to five payments per day. Enrollment is required. Taxpayers can schedule payments up to 365 days in advance and opt in to receive email notifications about their payments.
Additional electronic payment options:
- Taxpayers can pay when they file electronically using tax software online. If using a tax preparer, ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account.
- Taxpayers can choose to pay with a credit card, debit card or digital wallet option through a payment processor. Processing fees apply. No part of the card service fee goes to the IRS.
- The IRS2Go app provides mobile-friendly payment options, including Direct Pay and Payment Provider payments on mobile devices
Paying by check, money order or cashier’s check:
- 2019 Tax Liability – If paying a 2019 income tax liability without an accompanying 2019 tax return, taxpayers paying by check, money order or cashier’s check should include Form 1040-V, Payment Voucher with the payment. Mail the payment to the correct address by state or by form. Do not send cash through the mail. Indicate on the check memo line that this is a 2019 income tax payment.
- For those paying when filing their 2019 income tax return, do not staple or paperclip the payment to the return. For more information, go to Pay by Check or Money Order on IRS.gov.
- 2020 Estimated Tax Payments – Taxpayers making their 2020 estimated tax payment by check, money order or cashier’s check should include the appropriate Form 1040 ES payment voucher. Indicate on the check memo line that this is a 2020 estimated tax payment.
Paying by cash:
- Individuals and businesses, preferring to pay in cash, can do so at a participating retail store. Select the cash option in the “Other Ways You Can Pay” section and follow the instructions. There is a $1,000 payment limit per day and a $3.99 fee per payment.
Payment options for those who cannot pay in full:
For taxpayers who cannot pay in full, the IRS encourages them to pay what they can and consider a variety of payment options available for the remaining balance. Act as quickly as possible. Tax bills accumulate more interest and fees the longer they remain unpaid.
Most taxpayers have the following payment options:
- Online Payment Agreement — These are available for individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in combined payroll tax, penalties and interest and have filed all tax returns. Most taxpayers qualify for this option, and an Online Payment Agreement can usually be set up in a matter of minutes on IRS.gov/OPA. Online Payment Agreements are available Monday – Friday, 6 a.m. to 12:30 a.m.; Saturday, 6 a.m. to 10 p.m.; Sunday, 6 p.m. to midnight. All times are Eastern time. Certain fees may apply.
- Installment Agreement — Taxpayers who do not qualify to use the online payment agreement option, or choose not to use it, can also apply for a payment plan by phone, or by mail by submitting Form 9465, Installment Agreement Request. Installment agreements paid by direct deposit from a bank account or a payroll deduction will help taxpayers avoid default on their agreements. It also reduces the burden of mailing payments and saves postage costs. Certain fees may apply.
- Temporarily Delaying Collection — Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
- Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool.
Though interest and late-payment penalties continue to accrue on any unpaid taxes after July 15, the failure to pay tax penalty rate is cut in half while an installment agreement is in effect. The usual penalty rate of 0.5% per month is reduced to 0.25%. For the calendar quarter beginning July 1, 2020, the interest rate for underpayment is 3%.
In addition, taxpayers can consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law.
Posted in INDIVIDUALS, SMALL BUSINESSES
As part of its response to COVID-19, the IRS has postponed several tax deadlines until Wednesday, July 15, 2020. These postponements generally apply to all taxpayers with a filing or payment deadline between April 1 and July 15, 2020.
This relief includes individual and corporate quarterly estimated tax payments. Any taxpayer making payments received by July 15, 2020 will not be charged late-filing, late-payment or interest fees.
What taxpayers need to know
- The due date for filing estimated tax forms and paying estimated taxes has been automatically postponed to July 15, 2020.
- Taxpayers who still owe 2019 income tax, as well as estimated tax for 2020, must make two separate payments on or by July 15, 2020: One for their 2019 income tax owed and one for their 2020 estimated tax payments. The two estimated tax payments can be combined into a single payment. The IRS offers several convenient ways to make electronic tax payments.
- Taxpayers do not need contact the IRS or file any forms to receive this relief.
- This relief applies to individuals, trusts, estates, corporations and other non-corporate tax filers.
Taxpayers needing more time to file their return should request an extension by July 15, 2020. A taxpayer’s requests for an extension to file gives them until October 15, 2020 to file. Exceptions may apply for military personnel serving overseas.
For example, a Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, would normally provide an additional six-month extension until October 15, 2020. However, this year, a Form 7004 filed by July 15, 2020, will extend the time to file by three months, not six. The extended filing deadline is still October 15, 2020.
The tax filing deadline has been postponed to Wednesday, July 15, 2020. The IRS is processing tax returns, issuing refunds and accepting payments. Taxpayers who mailed a tax return will experience a longer wait. There is no need to mail a second tax return or call the IRS.
Posted in INDIVIDUALS, SMALL BUSINESSES
The gig economy, also called sharing or access economy, is activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.
Here are some things taxpayers should remember:
- Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is paid in cash.
- Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.
While providing gig economy services, it is important that the taxpayer is correctly classified.
- This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
- Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
- Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
Since income from the gig economy is taxable, it’s important that taxpayers remember to pay the right amount of taxes throughout the year to avoid owing when they file.
An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe. Gig economy workers who are not considered employees have two ways to cover their income taxes:
- Submit a new From W-4 to their employer to have more income taxes withheld from their paycheck, if they have another job as an employee.
- Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
Posted in INDIVIDUALS
Para la mayoría de los contribuyentes, la fecha límite de presentación y pago se pospuso para el 15 de julio. Aquellos que necesitan más tiempo para presentar más allá de esta fecha, pueden solicitar una prórroga de tiempo para presentar. Los contribuyentes deben solicitar una prórroga para presentar antes del 15 de julio. Esto les da hasta el 15 de octubre para presentar su declaración de impuestos. Una prórroga de tiempo para presentar no es una prórroga de tiempo para pagar. Los impuestos deben pagarse no más tardar del 15 de julio.
Cómo solicitar una prórroga de tiempo para presentar
Para obtener una prórroga para presentar, los contribuyentes deben hacer una de las siguientes acciones:
- Presentar el Formulario 4868 a través de su profesional de impuestos, software de impuestos o el uso de Free File en IRS.gov.
- Enviar un pago electrónico con Pago Directo, el Sistema de Pago Electrónico de Impuestos Federales (EFTPS) o con tarjeta de débito o crédito o su dispositivo móvil y seleccionar el Formulario 4868 o prórroga como tipo de pago.
Una prórroga automática de tiempo para presentar se procesará cuando los contribuyentes paguen la totalidad o parte de sus impuestos electrónicamente antes de la fecha de vencimiento del miércoles, 15 de julio.
Aunque la fecha límite de presentación de impuestos se pospuso al 15 de julio de 2020, el IRS continúa procesando declaraciones de impuestos electrónicas, emitiendo reembolsos de depósitos directos y aceptando pagos electrónicos.
La agencia está de vuelta procesando declaraciones de impuestos en papel enviadas por correo. Sin embargo, los contribuyentes que enviaron por correo una declaración de impuestos en papel probablemente experimentarán un tiempo de espera más largo. Aquellos que ya enviaron una declaración de impuestos en papel que aún no se ha procesado, no deben presentar una segunda declaración de impuestos o escribir al IRS para verificar el estado de su declaración de impuestos o pago de impacto económico.
Posted in INDIVIDUALS, SMALL BUSINESSES
Childcare or adult dependent care can be a major expense. Fortunately, the child and dependent care credit can provide some relief. Taxpayers who pay for daycare expenses may be eligible to claim up to 35% of what they spend; limits apply.
For the purposes of this credit, the IRS defines a qualifying person as:
• A taxpayer’s dependent who is under age 13 when the care is provided.
• A taxpayer’s spouse who is physically or mentally unable to care for themselves and lived with the taxpayer for more than half the year.
• Someone who’s physically or mentally unable to take care of themselves and lived with the taxpayer for six months and either:
a) The qualifying person was the taxpayer’s dependent or
b) They would have been the taxpayer’s dependent except for one of the following:
• The qualifying person received gross income of $4,200 or more
• The qualifying person filed a joint return
• The taxpayer or spouse, if filing jointly, could be claimed as a dependent on someone else’s return
Posted in INDIVIDUALS, NEWS