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Issue Number:    IR-2023-11 

WASHINGTON – The Internal Revenue Service kicked off the 2023 tax filing season with a focus on improving service and a reminder to taxpayers to file electronically with direct deposit to speed refunds and avoid delays. 

Following a successful opening of its systems today, the IRS is now accepting and processing 2022 tax returns. Most of the individual tax returns for the 2022 tax year are expected to be filed before the April 18 tax deadline.  

Taxpayers have until April 18to file their taxes this year, but some taxpayers living overseas and disaster victims may have later filing deadlines. Alabama, California and Georgia storm victims now have until May 15 to file various federal individual and business tax returns and make tax payments. 

“Following months of hard work, we successfully opened our processing systems today to start this year’s tax season,” said IRS Acting Commissioner Doug O’Donnell. “Getting to this point is a monumental effort not only for the IRS but also for the nation’s tax community. The hard-working employees of the IRS look forward to serving taxpayers this filing season, and I personally want to thank them, and all of the tax and payroll community for their dedication to making tax time smoother for the nation.” 

 

O’Donnell also noted that taxpayers can count on IRS delivering improved service this filing season. As part of the August passage of the Inflation Reduction Act, the IRS has more than 5,000 new telephone assistors and added more in-person staff to help taxpayers. 

“We continue to increase IRS staffing to help provide taxpayers with the information and assistance they need,” said O’Donnell. “The IRS reminds taxpayers to take some important steps when filing their tax returns for a smoother process. They should gather their necessary tax records, file an accurate return electronically and choose direct deposit to get their refunds faster.” 

Taxpayers who electronically file a tax return with no issues and choose direct deposit should still receive their refund within 21 days of the date they file – similar to previous years. Due to tax law changes such as the elimination of the Advance Child Tax Credit and no Recovery Rebate Credit this year to claim pandemic-related stimulus payments, many taxpayers may find their refunds somewhat lower this year.  

 

IRS tips for a smooth filing season 

Fastest refunds by e-filing, avoiding paper returns: To avoid refund delays, IRS encourages taxpayers to file their tax return electronically with direct depositinstead of submitting a paper tax return. Taxpayers may use IRS Free Fileon IRS.gov, other tax software or a trusted tax professional. Members of the armed forces and qualifying veterans can file their federal tax return and up to three state tax returns for free electronically using MilTax,a Department of Defense program.  

Avoid delays; file an accurate tax return: Taxpayers should make sure they’re ready to filean accurate and complete tax return. This can help avoid processing delays, extensive refund delays and later IRS notices.  

Earned Income Tax Credit or Additional Child Tax Credit refunds: Taxpayers may file their returns beginning Jan. 23, but the IRS cannot issue refunds involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February. The law provides the extra time to help the IRS prevent fraudulent refunds. “Where’s My Refund?” on IRS.gov should show an updated status by Feb. 18 for most EITC and ACTC filers. The IRS expects most of these refunds to be available in taxpayer bank accounts or debit cards by Feb. 28 if people chose direct deposit and there are no other issues with their tax return.  

Avoid phone delays; online resources best option for help: IRS.gov is the quickest and easiest option for help. IRS assisted phone lines continue to receive a high volume of calls. To avoid delays, check IRS.gov first for refund informationand answers to tax questions. Setting up an Online Accounton IRS.gov can also help taxpayers get information quickly. IRS Online Account was recently expanded to allow more people to gain access. The Interactive Tax Assistantcan also help taxpayers get answers to many tax questions online at any time.  

Online options for free help; answers to common questions: Use IRS.gov to get answers to tax questions, check a refund statusor pay taxes. No wait time or appointment needed — online toolsand resources are available 24 hours a day.  

Other free options for help: IRS Free Fileis available to any person or family who earned $73,000 or less in 2022. For taxpayers who are comfortable completing their own tax forms, Free File Fillable Formsmay be a good option. MilTaxis a free tax resource available to the military community, and it’s offered through the Department of Defense. Qualified taxpayers can also find free one-on-one tax preparation help nationwide through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs.  

2021 tax returns still being processed: Taxpayers can check Where’s My Amended Return?to find out the status of their tax year 2021 Form 1040-X and can still file their 2022 tax returns even if their 2021 tax returns haven’t been processed. Visit the IRS Operations pagefor more information on what to expect.  

April 18 tax deadline: This year, the filing deadline is April 18 for most taxpayers, but automatic six-month extensions of time to file are available for anyone for free. See Extension of Time to File Your Tax Return for instructions. Taxpayers should be aware that filing Form 4868 only extends the time to file tax returns. Those who owe taxes should still pay by April 18 to avoid late payment penalties. 

Issue Number:    IR-2023-14 

WASHINGTON — The Internal Revenue Service announced today that businesses can now file Form 1099 series information returns using a new online portal, available free from the IRS. 

Known as the Information Returns Intake System (IRIS), this free electronic filing service is secure, accurate and requires no special software. Though available to any business of any size, IRIS may be especially helpful to any small business that currently sends their 1099 forms on paper to the IRS. 

“The IRS is excited to offer any business, especially small companies, a great new way to electronically file their 1099s for free,” said IRS Acting Commissioner Doug O’Donnell. “This simplifies filing for those issuing 1099s and helps recipients receive information timely. The launch of IRIS can help reduce the millions of paper Forms 1099 we project will be filed in 2023 and demonstrates our commitment to finding useful and innovative ways of reducing paperwork on the business community and others issuing 1099s. This is part of the larger effort underway to make improvements and transform operations at the IRS.” 
 
Filers can use the platform to create, upload, edit and view information and download completed copies of 1099-series forms for distribution and verification. 

With IRIS, businesses can e-file both small and large volumes of 1099-series forms by either keying in the information or uploading a file with the use of a downloadable template. 

Currently, IRIS accepts Forms 1099 only for tax year 2022 and later. 

The IRS encourages any business, especially those that now file on paper, to switch to e-filing through the platform and share in its benefits. 

These benefits include: 

  • E-file security standards keep information safe and protected. 
  • The portal is an accurate filing method that automatically detects filing errors and provides alerts for missing information. 
  • Filers can submit automatic extensions and make corrections to information returns filed through the platform. 
  • The IRS acknowledges receipt of the return as early as 48 hours. 
  • The platform keeps issuer information from year to year, and prior years filed through this platform, providing convenience to 1099 filers. 
  • E-filing eliminates trips to the post office and can reduce office expenses for paper, postage and storage space. 

Enrollment for the IRIS filing platform is now open. Filers should begin the enrollment process immediately. 

The Filing Information Returns Electronically (FIRE) system will remain available for bulk filing Form 1099 series and the other information returns through at least the 2023 filing season. 

For more information about IRIS visit www.irs.gov/iris. 

Issue Number:    IR-2023-12 

WASHINGTON — The Internal Revenue Service today reminded taxpayers that they must again answer a digital asset question and report all digital asset-related income when they file their 2022 federal income tax return, as they did for fiscal year 2021. The term “digital assets” has replaced “virtual currencies,” a term used in previous years. 

The question, which appears at the top of Forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return, was revised this year to update terminology. 

In addition, the instructions for answering the question were expanded and clarified to help taxpayers answer it correctly. All taxpayers must answer the question regardless of whether they engaged in any transactions involving digital assets. 

For the 2022 tax year it asks: “At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?” 

What is a digital asset? 
A digital asset is a digital representation of value which is recorded on a cryptographically secured, distributed ledger. Common digital assets include: 

  • Convertible virtual currency and cryptocurrency 
  • Stablecoins 
  • Non-fungible tokens (NFTs) 

Everyone must answer the question 
Everyone who files Form 1040, Form 1040-SR or Form 1040-NR must check one box, answering either “Yes” or “No” to the digital asset question. The question must be answered by all taxpayers, not just those who engaged in a transaction involving digital assets in 2022. 

When to check ‘Yes’ 
Normally, a taxpayer must check the “Yes” box if they: 

  • Received digital assets as payment for property or services provided; 
  • Transferred digital assets for free (without receiving any consideration) as a bona fide gift; 
  • Received digital assets resulting from a reward or award; 
  • Received new digital assets resulting from mining, staking and similar activities; 
  • Received digital assets resulting from a hard fork (a branching of a cryptocurrency’s blockchain that splits a single cryptocurrency into two); 
  • Disposed of digital assets in exchange for property or services; 
  • Disposed of a digital asset in exchange or trade for another digital asset; 
  • Sold a digital asset; or 
  • Otherwise disposed of any other financial interest in a digital asset. 

How to report digital asset income 
Besides checking the “Yes” box, taxpayers must report all income related to their digital asset transactions. For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2022 must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses, or Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, in the case of gift. 

If an employee was paid with digital assets, they must report the value of assets received as wages. Similarly, if they worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C is also used by anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business. 

When to check ‘No’ 
Normally, a taxpayer who merely owned digital assets during 2022 can check the “No” box as long as they did not engage in any transactions involving digital assets during the year. They can also check the “No” box if their activities were limited to one or more of the following: 

  • Holding digital assets in a wallet or account; 
  • Transferring digital assets from one wallet or account they own or control to another wallet or account they own or control; or 
  • Purchasing digital assets using U.S. or other real currency, including through electronic platforms such as PayPal and Venmo. 

For more information, see page 15 of the Tax Year 2022 1040 (and 1040-SR) Instructions. For a set of frequently asked questions (FAQs) and other details, visit the Digital Assets page on IRS.gov. 

Issue Number:    IR-2022-234

WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 2023-03 contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

 

WASHINGTON – The Internal Revenue Service encouraged taxpayers to take important actions this month to help them file their 2022 federal tax returns. 

This is the second in a series of reminders to help taxpayers get ready for the upcoming tax filing season. A ”Get Ready” page, updated and available on IRS.gov, outlines steps taxpayers can take now to make tax filing easier in 2023. 

Here’s what’s new and some key items for taxpayers to consider before they file next year. 

Reporting rules changed for Form 1099-K. Taxpayers should receive Form 1099-K, Payment Card and Third Party Network Transactions, by Jan. 31, 2023, if they received third party payments in tax year 2022 for goods and services that exceeded $600. 

There’s no change to the taxability of income. All income, including from part-time work, side jobs or the sale of goods is still taxable. Taxpayers must report all income on their tax return unless it’s excluded by law, whether they receive a Form 1099-K, a Form 1099-NEC, Nonemployee Compensation, or any other information return. 

Prior to 2022, Form 1099-K was issued for third party networks transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. The American Rescue Plan Act of 2021 lowered the reporting threshold for third party networks that process payments for those doing business. 

Now a single transaction exceeding $600 can require the third party platform to issue a 1099-K. Money received through third party payment networks from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable. 

The IRS cautions people in this category who may be receiving a Form 1099 for the first time – especially “early filers” who typically file a tax return during the month of January or early February – to be careful and make sure they have all of their key income documents before submitting a tax return. A little extra caution could save people additional time and effort related to filing an amended tax return. And if they have untaxed income on a Form 1099 that isn’t reflected on the tax return they initially file, that could mean they need to submit a tax payment with an amended tax return.
 
If the information is incorrect on the 1099-K, taxpayers should contact the payer immediately, whose name appears in the upper left corner on the form. The IRS cannot correct it. 

Some tax credits return to 2019 levels. This means that affected taxpayers will likely receive a significantly smaller refund compared with the previous tax year. Changes include amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Child and Dependent Care Credit. 

    •    Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 for the 2022 tax year. 

    •    For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022. 

    •    The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021. 

Visit Credits and Deductions for more details. 

No above-the-line charitable deductions. During COVID, taxpayers could take up to a $600 charitable donation tax deduction on their tax returns. However, in 2022, those who take a standard deduction may not take an above-the-line deduction for charitable donations. 

More people may be eligible for the Premium Tax Credit. For tax year 2022, taxpayers may still qualify for temporarily expanded eligibility for the premium tax credit. 

Eligibility rules changed to claim a tax credit for clean vehicles. Review the changes under the Inflation Reduction Act of 2022 to qualify for a Clean Vehicle Credit. 

Avoid refund delays and understand refund timing
Many different factors can affect the timing of a refund after the IRS receives a return. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2022 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer to process if IRS systems detect a possible error, the return is missing information or there is suspected identity theft or fraud. 

Also, the IRS cannot issue refunds for people claiming the EITC or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund – not just the portion associated with EITC or ACTC. 

Last quarterly payment for 2022 is due on Jan. 17, 2023
Taxpayers may need to consider estimated or additional tax payments due to non-wage income from unemployment, self-employment, annuity income or even digital assets. The Tax Withholding Estimator on IRS.gov can help wage earners determine if there is a need to consider an additional tax payment to avoid an unexpected tax bill when they file. 

Gather 2022 tax documents
Taxpayers should develop a recordkeeping system − electronic or paper − that keeps important information in one place. This includes year-end income documents like Forms W-2 from employers, Forms 1099 from banks or other payers, Form 1099-K from third party payment networks, Form 1099-NEC for nonemployee compensation, Form 1099-MISC for miscellaneous income, or Form 1099-INT if you were paid interest, as well as records documenting all digital asset transactions. 

Ensuring their tax records are complete before filing helps taxpayers avoid errors that lead to processing delays. When they have all their documentation, taxpayers are in the best position to file an accurate return and avoid processing or refund delays or IRS letters.  

Sign in to Online Account
An IRS Online Account lets taxpayers securely access their personal tax information, including tax return transcripts, payment history, certain notices, prior year adjusted gross income and power of attorney information. Filers can log in to verify if their name and address are correct. They should notify IRS if their address has changed. They must notify the Social Security Administration of a legal name change to avoid a delay in processing their tax return. 

Get banked to speed refunds with direct deposit
The fastest way to get a tax refund is by filing electronically and choosing direct deposit. Direct deposit is faster than waiting for a paper check in the mail. It also avoids the possibility that a refund check could be lost, stolen or returned to the IRS as undeliverable. 

Don’t have a bank account? Learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool. Veterans should see the Veterans Benefits Banking Program (VBBP) for access to financial services at participating banks. 

Prepaid debit cards or mobile apps may allow direct deposit of tax refunds. They must have routing and account numbers associated with them that can be entered on a tax return. Taxpayers can check with the mobile app provider or financial institution to confirm which numbers to use. 

Bookmark resources
Taxpayers can download Publication 5348, Get Ready to File, or Publication 5349, Year-Round Tax Planning is for Everyone, for more information to help them get ready to file. 

 

Many people take up gig work on a part-time or full-time basis, often through a digital platform like an app or website. Gig work, such driving a car for booked rides, selling goods online, renting out property, or providing other on-demand work, is taxable and must be reported as income on the worker’s tax return.

Here are some things gig workers should know to stay on top of their tax responsibilities:

Gig work is taxable:

  • Earnings from gig economy work is taxable, regardless of whether an individual receives information returns. The reporting requirement for issuance of Form 1099-K changed for payments received in 2022 to totals exceeding $600, regardless of the total number of transactions. This means some gig workers will now receive an information return. This is true even if the work is full-time or part-time.
  • Gig workers may be required to make quarterly estimated tax payments.
  • If they are self-employed, gig workers must pay all their Social Security and Medicare taxes on their income from the gig activity

Proper worker classification:

While providing gig economy services, it is important that the taxpayer is correctly classified.

  • This means the business, or the platform, 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 should be 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.

Paying the right amount of taxes throughout the year:

  • An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe.
  • Gig economy workers who aren’t considered employees have two ways to cover their income taxes:
    • Submit a new Form 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.

The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.


More information:
Publication 5369, Gig Economy and your taxes: things to know
Publication 1779, Independent Contractor or Employee
Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?

Issue Number: Tax Tip 2022-68

Small business owners who want to learn about their tax obligations should watch the Small Business Virtual Tax Workshop. This online workshop is an easy way for new small business owners to dive in and for experienced small business owners to brush up on topics relevant to their business. It’s free and available 24/7.

People can watch the video lessons in any order. The topics include:

Federal taxes and your new business
Schedule C and other small business taxes
Filing and paying taxes electronically
Business use of your home
Federal taxes when hiring employees or independent contractors
Managing payroll to withhold the correct amount of taxes
Tax deposits and filing a return to report payroll taxes
Hiring people who live in the U.S. who aren’t citizens

Each lesson links to more specific topics within that lesson, like chapters in a book. Viewers can choose the lessons that apply to their small business. They can also pause and bookmark lessons so they can review information later.

In addition to English, the workshop is also available in Spanish, Chinese Traditional, Chinese Simplified, Korean, Russian, Vietnamese, and Haitian Creole. Transcripts and closed caption options are also available.

Business owners can watch the workshop at IRS.gov.

Share this tip on social media — #IRSTaxTip: Small business owners shouldn’t miss this free recorded workshop. https://go.usa.gov/xuPqf

Issue Number: IR-2021-161

WASHINGTON – Calling it a key security issue, the Internal Revenue Service today urged those entities with Employer Identification Numbers (EINs) to update their applications if there has been a change in the responsible party or contact information.
IRS regulations require EIN holders to update responsible party information within 60 days of any change by filing Form 8822-B, Change of Address or Responsible Party – Business. It is critical that the IRS have accurate information in cases of identity theft or other fraud issues related to EINs or business accounts.
The data around the “responsible parties” for business-type entities is often outdated or incorrect, meaning that the IRS does not have accurate records of who to contact for identity theft issues. This means a time-consuming process to identify the point of contact so the IRS can inquire about a suspicious filing.

As a result, the IRS intends to step up its awareness efforts aimed at businesses, partnerships, trusts and estates, charities and other entities that are EIN holders. Starting in August, the IRS will begin sending letters to approximately 100,000 EIN holders where it appears the responsible party is outdated.

All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (Social Security number, Individual Taxpayer Identification Number or EIN) of the true principal officer, general partner, grantor, owner or trustor.

The IRS defines the responsible party as the individual or entity who "controls, manages, or directs the applicant entity and the disposition of its funds and assets.”

Unless the applicant is a government entity, the responsible party must be an individual, not an entity. If there is more than one
responsible party, the entity may list whichever party the entity wants the IRS to recognize as the responsible party.
EINs are to be used strictly for tax administration purposes. Entities with EINs that are no longer in use should close their IRS tax accounts and follow steps outlined at Canceling an EIN – Closing Your Account.
Video – Five Things to Know about the Employer Identification Number

Issue Number: Tax Tip 2021-112

America’s taxpayers have specific rights when they interact with the IRS. These ten rights are known collectively as the Taxpayer Bill of Rights. 

These rights cover a wide range of topics and issues and lay out what taxpayers can expect in the event they need to work with the IRS on a personal tax matter. This includes when a taxpayer is filing a return, paying taxes, responding to a letter, going through an audit or appealing an IRS decision. 

Here are the rights outlined in the Taxpayer Bill of Rights 

1. The Right to Be Informed 
2. The Right to Quality Service 
3. The Right to Pay No More than the Correct Amount of Tax 
4. The Right to Challenge the IRS’s Position and Be Heard 
5. The Right to Appeal an IRS Decision in an Independent Forum 
6. The Right to Finality 
7. The Right to Privacy 
8. The Right to Confidentiality 
9. The Right to Retain Representation 
10. The Right to a Fair and Just Tax System 

More Information: 
Publication 1, You Rights as a Taxpayer  
Taxpayer Advocate Service 

Share this tip on social media — #IRSTaxTip: Excise tax filers should give e-file a try https://go.usa.gov/xFKB2 

Issue Number:  Tax Tip 2021-111 

The IRS encourages taxpayers who file federal excise taxes to file electronically. The following excise forms can be e-filed: 

  •  Form 720, Quarterly Federal Excise Tax Return
    • Form 2290, Heavy Highway Vehicle Use Tax
    • Form 8849, Claim for Refund of Excise Taxes Return; Schedules 1, 2, 3, 5, 6 and 8 only 

Advantages of excise e-file. 

  •  E-filing excise tax returns is safe, secure, easy, and accurate.
    • Form 720 e-file is convenient, plus taxpayers receive faster service and an acknowledgment from the IRS that the agency accepted their e-filed Form 720.
    • Form 8849 e-file offers faster refunds than through paper filing. Form 8849 Schedules 1, 2, 3, 5, 6 and 8 may be e-filed. 
    • Form 2290 e-file provides taxpayers their Form 2290 Schedule 1 almost immediately after the IRS receives the e-filed form. 

Excise tax e-file facts. 

  •  Only providers who have passed the IRS Assurance Testing System requirements for software developers of electronic IRS Excise returns are listed on the excise tax e-file providers’ pages.
    • IRS-approved excise tax e-file providers do charge a fee. This fee is not part of the excise tax payment.
    • Filers must have an Employer Identification Number to e-file excise tax returns. Taxpayers who don’t already have an EIN can learn how to apply for one on IRS.gov. 
    • Service is available 24/7.  
    • Filers reporting 25 or more trucks on Form 2290 must e-file. 
    Paying the excise taxes completes the filing process, and there are multiple ways to pay any excise tax due, including electronic methods. 

More information:  
Excise Tax e-file for Forms 720, 2290 and 8849 
Frequently Asked Questions – Form 8849, Claim for Refund of Excise Taxes 
Frequently Asked Questions – Form 720, Quarterly Federal Excise Tax Return e-file 
FAQs for Truckers Who e-file 

Share this tip on social media — #IRSTaxTip: Excise tax filers should give e-file a try  https://go.usa.gov/xFKB4 

Issue Number: Tax Tip 2021-115

After a natural disaster, having access to personal financial, insurance, medical and other records can help people starting the recovery process quickly. There are a few things taxpayers can do to help protect their financial safety in a disaster situation.  

Here are some financial preparedness tips.  
 
Update emergency plans. A disaster can strike at any time. Personal and business situations are constantly evolving, so taxpayers should review their emergency plans annually.    
 
Create electronic copies of documents. Taxpayers should keep documents in a safe place. This includes bank statements, tax returns and insurance policies. This is especially easy now since many financial institutions provide statements and documents electronically. If original documents are available only on paper, taxpayers can use a scanner and save them on a USB flash drive, CD or in the cloud.  
 
Document valuables. Documenting valuables by taking pictures or videoing them before a disaster strikes makes it easier to claim insurance and tax benefits, if necessary. IRS.gov has a disaster loss workbook that can help taxpayers compile a room-by-room list of belongings.    
 
Understand tax relief is available in disaster situations. Information on Disaster Assistance and Emergency Relief for Individuals and Businesses is available at IRS.gov. Taxpayers should also review the itemized deduction for casualty and theft losses. Net personal casualty and theft losses are deductible only to the extent they’re attributable to a federally declared disaster. Claims must include the FEMA code assigned to the disaster.    
 
Taxpayers who live in a federally declared disaster, can visit Around the Nation on IRS.gov and click on their state to review the available disaster tax relief. Those who live in counties qualifying for disaster relief receive automatic filing and payment extensions for many currently due tax forms and don’t need to contact the agency to get relief. People with disaster-related questions can call the IRS at 866-562-5227 to speak with an IRS specialist trained to handle disaster issues. They can request copies of previously filed tax returns and attachments by filing Form 4506, order transcripts showing most line items through Get Transcript on IRS.gov or call 800-908-9946 for transcripts. 

More information:  
Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook  
Publication 547, Casualties, Disasters, and Thefts  
Publication 5307, Tax Reform: Basics for Individuals and Families Publication 583, Starting a Business and Keeping Records 

 
Share this tip on social media — #IRSTaxTip: Financial safety: The often forgotten piece of disaster preparedness. https://go.usa.gov/xFRA2 

Issue Number: Tax Tip 2021-116  

The IRS and its Security Summit partners recently kicked off their annual summer campaign. This year’s theme, Boost Security Immunity: Fight Against Identity Theft, urges tax pros to step up their efforts to protect client data. An IP PIN is a valuable tool that can help in this effort and it is now available to anyone who can verify their identity. 

An Identity Protection PIN is six-digit number eligible taxpayers get to help prevent their Social Security number or Individual Taxpayer Identification Number from being used to file fraudulent federal income tax returns. This number helps the IRS verify a taxpayer’s identity and accept their tax return. The Get An IP PIN tool  enables anyone who has an SSN or ITIN to get an IP PIN after they verify their identity through a rigorous authentication process. Taxpayers should review the Secure Access requirements before they try to use the Get An IP PIN tool.  

For security reasons, tax pros can’t get an IP PIN on behalf of clients.  

Tax pros who experience data theft can help clients by urging them to get an IP PIN quickly. Even if a thief already filed a fraudulent return, an IP PIN would still offer protections for later years and prevent taxpayers from being repeat victims of tax-related identity theft. 

More things taxpayers should know about the IP PIN: 

  • It’s a six-digit number known only to the taxpayer and the IRS. 
  • The opt-in program is voluntary. 
  • The IP PIN should be entered onto the electronic tax return when prompted by the software product or onto a paper return next to the signature line. 
  • The IP PIN is valid for one calendar year.  
  • For security reasons, enrolled participants get a new IP PIN each year 
  • Spouses and dependents are eligible for an IP PIN if they can verify their identities  
  • IP PIN users should never share their number with anyone but the IRS and their trusted tax preparation provider. The IRS will never call, email or text a request for the IP PIN. 

Currently, taxpayers can get an IP PIN for 2021, which should be used when filing any federal tax returns during the year including prior year returns. New IP PINs will be available starting in January 2022. 

Taxpayers who are unable to validate their identity online and have income of $72,000 or less, can file Form 15227, Application for an Identity Protection Personal Identification Number. The IRS will call the phone number the taxpayer provided on Form 15227 to validate the taxpayer’s identity. However, for security reasons, the IRS will assign an IP PIN for the next filing season and the taxpayer cannot use the IP PIN for the current filing season. 

Taxpayers who cannot validate their identity online, or by the phone, or who are ineligible to file a Form 15227 can make an appointment at a Taxpayer Assistance Center. They will need to bring one current government-issued picture ID and another identification document to prove their identity. Once verified, the taxpayer will receive an IP PIN in the mail usually within three weeks. 

More Information:  
Publication 5367 (EN-SP), IP PIN Opt-In Program for Taxpayers  
Publication 4557, Safeguarding Taxpayer Data  
Publication 5293, Data Security Resource Guide for Tax Professionals  Small Business Information Security: The Fundamentals   
Identity Theft Central  

 
Share this tip on social media — #IRSTaxTip: Tax security tip: Get an IP PIN to help stop identity thieves. https://go.usa.gov/xFRAT 

Issue Number: Tax Tip 2021-124 

If the IRS does call a taxpayer, it should not be a surprise because the agency will generally send a notice or letter first. Understanding how the IRS communicates can help taxpayers protect themselves from scammers who pretend to be from the IRS with the goal of stealing personal information. 

Here are some facts about how the IRS communicates with taxpayers: 

  • The IRS doesn’t normally initiate contact with taxpayers by email. Do not reply to an email from someone who claims to be from the IRS because the IRS email address could be spoofed or fake. Emails from IRS employees will end in irs.gov. 
  • The agency does not send text messages or contact people through social media. Fraudsters will impersonate legitimate government agents and agencies on social media and try to initiate contact with taxpayers.  
  • When the IRS needs to contact a taxpayer, the first contact is normally by letter delivered by the U.S. Postal Service. Debt relief firms send unsolicited tax debt relief offers through the mail. Fraudsters will often claim they already notified the taxpayer by U.S. mail. 
  • Depending on the situation, IRS employees may first call or visit with a taxpayer. In some instances, the IRS sends a letter or written notice to a taxpayer in advance, but not always. Taxpayers can search IRS notices by visiting Understanding Your IRS Notice or Letter. However, not all IRS notices are searchable on that site and just because someone references an IRS notice in email, phone call, text, or social media, does not mean the request is legitimate. 
  • IRS revenue agents or tax compliance officers may call a taxpayer or tax professional after mailing a notice to confirm an appointment or to discuss items for a scheduled audit. The IRS encourages taxpayers to review, How to Know it’s Really the IRS Calling or Knocking on Your Door: Collection. 
  • Private debt collectors can call taxpayers for the collection of certain outstanding inactive tax liabilities, but only after the taxpayer and their representative have received written notice. Private debt collection should not be confused with debt relief firms who will call, send lien notices via U.S. mail, or email taxpayers with debt relief offers. Taxpayers should contact the IRS regarding filing back taxes properly. 
  • IRS revenue officers and agents routinely make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed, delinquent tax returns or a business falling behind on payroll tax deposits. IRS revenue officers will request payment of taxes owed by the taxpayer. However, taxpayers should remember that payment will never be requested to a source other than the U.S. Treasury. 
  • When visited by someone from the IRS, the taxpayers should always ask for credentials. IRS representatives can always provide two forms of official credentials: a pocket commission and a Personal Identity Verification Credential. 

 
More Information: 
IRS Taxpayers Bill of Rights 
Secure tax payment options 
Consumer alerts 
Report phishing and online scams 
Phone scams 
 
 
Share this tip on social media — #IRSTaxTip: Important additional guidance for employers claiming the employee retention credit. https://go.usa.gov/xFATS 

Issue Number: Tax Tip 2021-144

The credit for other dependents is a tax credit available to taxpayers for each of their qualifying dependents who can’t be claimed for the child tax credit. The maximum credit amount is $500 for each dependent who meets certain conditions. These include: 

  • Dependents who are age 17 or older. 
  • Dependents who have individual taxpayer identification numbers. 
  • Dependent parents or other qualifying relatives supported by the taxpayer. 
  • Dependents living with the taxpayer who aren’t related to the taxpayer. 

The credit begins to phase out when the taxpayer’s income is more than $200,000. This phaseout begins for married couples filing a joint tax return at $400,000. 

A taxpayer can claim this credit if: 

  • They claim the person as a dependent on the taxpayer’s return. 
  • They cannot use the dependent to claim the child tax credit or additional child tax credit. 
  • The dependent is a U.S. citizen, national or resident alien. 

Taxpayers can claim the credit for other dependents in addition to the child and dependent care credit and the earned income credit. 

Taxpayers can use the worksheet in Publication 972, Child Tax Credit and Credit for Other Dependents. This worksheet will help them determine if they can claim the credit for other dependents. 

More Information: 
Whom May I Claim as a Dependent? 
Publication 501, Exemptions, Standard Deduction and Filing Information 

Share this tip on social media — #IRSTaxTip: Taxpayers who aren’t eligible for the child tax credit should look into the credit for other dependents. https://go.usa.gov/xME8r 

Issue Number:    Tax Tip 2021-141 

Taxpayers have the right to appeal an IRS decision in an independent forum. This is one of ten basic rights — known collectively as the Taxpayer Bill of Rights — that all taxpayers have when dealing with the IRS. 

The IRS Independent Office of Appeals handles a taxpayer’s case must be separate from the IRS office that initially reviewed that case. Generally, this office will not discuss a case with the IRS to the extent that those communications appear to compromise the independence of Appeals. 

Here are some points to remember about the right to appeal a decision in an independent forum: 

  •   A statutory notice of deficiency is an IRS letter proposing additional tax. Taxpayers who receive this notice and who then timely file a petition with the United States Tax Court may dispute the proposed adjustment before they must pay the tax.

    •  Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties. 
     
    •  Taxpayers have the right to receive a written response regarding a decision from the IRS Office of Appeals. 
     
    •  When taxpayers don’t agree with the IRS’s decisions, they can refer to Publication 5, Your Appeal Rights and How To Prepare a Protest If You Don’t Agree, for details on how to appeal. 
     
    •  Generally, taxpayers may file a refund suit in a United States district court or the United States Court of Federal Claims if: 

 o  They have fully paid the tax and the IRS has denied their tax refund claim. 
 o  No action is taken on the refund claim within six months. 
 o  It’s been less than two years since the IRS mailed them a notice denying the refund 

More Information: 
Publication 1, Your Rights as a Taxpayer 
Taxpayer Advocate 
United States Tax Court 
Online Videos and Podcasts of the Appeals Process 

Issue Number:    IR-2021-191 

WASHINGTON — The Internal Revenue Service has awarded new contracts to three private-sector collection agencies for collection of overdue tax debts. The new contracts begin Thursday following today’s expiration of the old contracts. 

Beginning Thursday, Sept. 23, 2021, taxpayers with unpaid tax bills may be contacted by one of the following three agencies: 
 
Notification by IRS and the private collection agencies 
The IRS will always notify a taxpayer before transferring their account to a private collection agency (PCA). 

  • First, the IRS will send a letter to the taxpayer and their tax representative informing them that their account was assigned to a PCA and giving the name and contact information for the PCA. This mailing will include a copy of Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency (.pdf). 
  • Following IRS notification, the PCA will send its own letter to the taxpayer and their representative confirming the account transfer. To protect the taxpayer’s privacy and security, both the IRS letter and the PCA’s letter will contain information that will help taxpayers identify the tax amount owed and assure taxpayers that future collection agency calls they may receive are legitimate. 

How it works 
The private collectors will identify themselves as contractors collecting taxes on behalf of the IRS. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act, and like IRS employees, must be courteous and must respect taxpayer rights. 

Private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy. 

Payment options 
The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made directly to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. To find out more about available payment options, visit IRS.gov/Payments. 

More information 
The IRS established the Private Debt Collection program in 2016, as authorized under federal law, and contracted with several agencies to collect certain unpaid tax debts on the government’s behalf. To learn more about the private debt collection program, visit the Private Debt Collection page on IRS.gov. Additional information can be found at the following links: 

Issue Number:    Tax Tip 2021-140  

It is critical for business owners to correctly determine whether the individuals providing services are employees or independent contractors. 

An employee is generally considered anyone who performs services, if the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker’s services are performed. Independent contractors are normally people in an independent trade, business or profession in which they offer their services to the public. Doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers or auctioneers are generally independent contractors. 

Independent contractor vs. employee 
Whether a worker is an independent contractor, or an employee depends on the relationship between the worker and the business. Generally, there are three categories to consider. 

  •   Behavioral control − Does the company control or have the right to control what the worker does and how the worker does the job?
    •  Financial control − Does the business direct or control the financial and business aspects of the worker’s job. Are the business aspects of the worker’s job controlled by the payer? Things like how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.
    •  Relationship of the parties − Are there written contracts or employee type benefits such as pension plan, insurance, vacation pay? Will the relationship continue and is the work performed a key aspect of the business? 

Misclassified worker  
Misclassifying workers as independent contractors adversely affects employees because the employer’s share of taxes is not paid, and the employee’s share is not withheld. If a business misclassified an employee without a reasonable basis, the business can be held liable for employment taxes for that worker. Generally, an employer must withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes. Workers who believe they have been improperly classified as independent contractors can use Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report their share of uncollected Social Security and Medicare taxes due on their compensation. 

Voluntary Classification Settlement Program 
The Voluntary Classification Settlement Program is an optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future employment tax purposes. This program offers partial relief from federal employment taxes for eligible taxpayers who agree to prospectively treat their workers as employees. Taxpayers must meet certain eligibility requirements and apply by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS. 

Who is self-employed? 
Generally, someone is self-employed if any of the following apply to them. 

Self-employed individuals, including those who earn money from gig economy work, are generally required to file an tax return and make estimated quarterly tax payments. They also generally must pay self-employment tax which is Social Security and Medicare tax as well as income tax. These taxpayers qualify for the home office deduction if they use part of a home for business. 

Issue Number: Tax Tip 2021-136 

Many Americans have been working from home due to the pandemic, but only certain people will qualify to claim the home office deduction. This deduction allows qualifying taxpayers to deduct certain home expenses on their tax return when they file their 2021 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, reported on 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:   
  • Includes a house, apartment, condominium, mobile home, boat or similar property which provide basic living accommodations. 
  • A separate structure on the property such as an unattached garage, studio, barn or greenhouse. 
  • Any portion of a home used exclusively as a hotel, motel, inn or similar establishment does NOT qualify as a “home” and, therefore, does not qualify for a home office deduction.   
  • Generally, there are two basic requirements for the taxpayer’s home to qualify as a deduction:   
  • 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. 
  • 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. 
  • A portion of a home that is used exclusively for conducting business on a regular basis but not used as the principal place of business, will qualify for a home office deduction if either patients, clients or customers are met in the home or there is a separate structure that is used exclusively for conducting business on a regular basis.   
  • Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:   
  • Using the simplified method consisting of a rate of $5 per square foot for business use of the home which is limited to a maximum size of 300 square feet and a maximum deduction $1,500. 
  • Using the regular method whereby deductions for a home office are based on the percentage of the home devoted to business use. Any use a whole room or part of a room for conducting their business will involve figuring out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full. 

More information: 
Publication 587, Business Use of Your Home, Including Use by Daycare Providers 

Issue Number: Tax Tip 2021-181 

The IRS recently launched an improved identity verification and sign-in process that enables more people to securely access and use IRS online tools and applications. 

Taxpayers using the new mobile-friendly verification process can access several IRS online services including: 

Additional applications will transition to the new process over the next year. 

The new process reaches more people through the expanded use of identity documents and increased help desk assistance for taxpayers who encounter a problem when attempting to verify their identity online. 

The IRS is using ID.me to provide verification services. The new process part of the IRS’s ongoing commitment to ensure that taxpayer information is only provided to the person who has a legal right to the data. 

The IRS integrated this new account-creation process into some applications used by tax professionals, including those they use to request powers of attorney or tax information authorizations online usingTax Pro Account or to submit Forms 2848 and 8821 online. 
 
Accessing IRS tools 
Taxpayers will be asked to sign in with an ID.me account. If they already have IRS usernames, they can use their credentials from the old system to sign-in until summer 2022. However, they should create an ID.me account as soon as possible. Anyone with an existing ID.me account from the Child Tax Credit Update Portal, or from another government agency, can sign in with their existing credentials. 

To verify their identity with ID.me, taxpayers must do two things: 

  • Provide a photo of a driver’s license, state ID or passport. 
  • Take a selfie using a smartphone or a computer with a webcam. 

Once their identity is verified, they can securely access IRS online services. 

Taxpayers who need help verifying their identity or submitting a support ticket should visit the ID.me IRS Help Site 

IRS COVID Tax Tips

Issue Number: COVID Tax Tip 2021-119

Every year the IRS mails letters or notices to taxpayers for many different reasons. Typically, it’s about a specific issue with a taxpayer’s federal tax return or tax account. A notice may tell them about changes to their account or ask for more information. It could also tell them they need to make a payment. This year, people might have also received correspondence about Economic Impact Payments or an advance child tax credit outreach letter.  

Here are some do’s and don’ts for anyone who receives mail from the IRS: 

  • Don’t ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do  
  • Don’t throw it away. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when an action is taken on the taxpayer’s account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit.They may need to refer to these when filing their 2021 tax return in 2022. In general, the IRS suggests that taxpayers keep records for three years from the date they filed the tax return.   
  • Don’t panic. The IRS and its authorized private collection agencies do send letters by mail. Most of the time, all the taxpayer needs to do is read the letter carefully and take the appropriate action.   
  • Don’t reply unless instructed to do so. There is usually no need for a taxpayer to reply to a notice unless specifically instructed to do so. On the other hand, taxpayers who owe should reply with a payment. IRS.gov has information about payment options.   
  • Do take timely action. A notice may reference changes to a taxpayer’s account, taxes owed, a payment request or a specific issue on a tax return. Acting timely could minimize additional interest and penalty charges.   
  • Do review the information. If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records.   
  • Do respond to a disputed notice. If a taxpayer doesn’t agree with the IRS, they should mail a letter explaining why they dispute the notice. They should mail it to the address on the contact stub included with the notice. The taxpayer should include information and documents for the IRS to review when considering the dispute.   
  • Do remember there is usually no need to call the IRS. If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. The taxpayer should have a copy of their tax return and letter when calling the agency.   
  • Do avoid scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure if they owe money to the IRS can view their tax account information on IRS.gov. 

 

More Information:  
Understanding Your IRS Notice or Letter  
Tax Topic 651,  Notices – What to Do  
Tax Topic 653, IRS Notices and Bills, Penalties, and Interest Charges  
Tax Topic 654, Understanding Your CP75 or CP75A Notice Request for Supporting Documentation  
Here’s why some people got more than one notice about their Economic Impact Payments  

Share this tip on social media — #IRSTaxTip: What people should and should not do if they get mail from the IRS. https://go.usa.gov/xFVSu 

Miscellaneous

Here is a video tax tip from the IRS:  

Here’s What To Do if You Must Close Your Business English | Spanish | Chinese 

Subscribe today: The IRS YouTube channels provide short, informative videos on various tax related topics in English, Spanish and ASL. 

 

 

Here is a video tax tip from the IRS:  

Get an Identity Protection PIN  English | Spanish | ASL 

Subscribe today: The IRS YouTube channels provide short, informative videos on various tax related topics in English, Spanish and ASL. 

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