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IRS Tax Tips
Issue Number: IR-2023-15
Businesses must electronically file Form 8300, Report of Cash Payments Over $10,000, beginning January 1, 2024
WASHINGTON —The Internal Revenue Service today announced that starting Jan. 1, 2024, businesses are required to electronically file (e-file) Form 8300, Report of Cash Payments Over $10,000, instead of filing a paper return. This new requirement follows final regulations amending e-filing rules for information returns, including Forms 8300.
Businesses that receive more than $10,000 in cash must report transactions to the U.S. government. Although many cash transactions are legitimate, information reported on Forms 8300 can help combat those who evade taxes, profit from the drug trade, engage in terrorist financing or conduct other criminal activities. The government can often trace money from these illegal activities through payments reported on Forms 8300 that are timely filed, complete and accurate.
The new requirement for e-filing Forms 8300 applies to businesses mandated to e-file certain other information returns, such as Forms 1099 series and Forms W-2. Electronic filing and communication options will be simpler and will make it easier to interact with the IRS. Beginning with calendar year 2024, businesses must e-file all Forms 8300 (and other certain types of information returns required to be filed in a given calendar year) if they’re required to file at least 10 information returns other than Form 8300.
For example, if a business files five Forms W-2 and five Forms 1099-INT, then the business must e-file all their information returns during the year, including any Forms 8300. However, if the business files fewer than 10 information returns of any type, other than Forms 8300, then that business does not have to e-file the information returns and is not required to e-file any Forms 8300. However, businesses not required to e-file may still choose to do so.
A business may file a request for a waiver from electronically filing information returns due to undue hardship. For more information businesses can refer to Form 8508, Application for a Waiver from Electronic Filing of Information Returns. If the IRS grants a waiver from e-filing any information return, that waiver automatically applies to all Forms 8300 for the duration of the calendar year. A business may not request a waiver from filing only Forms 8300 electronically.
The business must include the word “Waiver” on the center top of each Form 8300 (Page 1) when submitting a paper filed return.
If a business is required to file fewer than 10 information returns, other than Forms 8300, during the calendar year, the business may file Forms 8300 in paper form without requesting a waiver.
If a business files less than 10 information returns, it can still choose to e-file the Forms 8300 electronically if it chooses to do so.
If using the technology required to e-file conflicts with a filer’s religious beliefs, they are automatically exempt from filing Form 8300 electronically. The filer must include the words “RELIGIOUS EXEMPTION” on the center top of each Form 8300 (page 1) when submitting the paper filed return.
A business must self-identify late returns. A business must file a late Form 8300 in the same way as a timely filed Form 8300, either electronically or on paper. A business filing a late Form 8300 electronically must include the word “LATE” in the comments section of the return. A business filing a late Form 8300 on paper must write “LATE” on the center top of each Form 8300 (page 1).
A business must keep a copy of every Form 8300 it files, as well as any supporting documentation and the required statement it sends to customers, for five years from the date filed.
Filing electronically will provide a confirmation that the form was filed; however, e-file confirmation e-mails alone don’t meet the record keeping requirement. When e-filing, filers must also save a copy of the form prior to finalizing the form submission. They should associate the confirmation number with the saved copy. Prior to finalizing the form for submission, businesses should save a copy of the form electronically or print a copy of the form.
Many businesses have already found the free and secure e-filing system to be a more convenient and cost-effective way to meet the reporting deadline of 15 days after a transaction. They get free email acknowledgment of receipt of the form when they e-file. Businesses can batch e-file their reports, which is especially helpful to those required to file many forms.
To file Forms 8300 electronically, a business must set up an account with the Financial Crimes Enforcement Network’s BSA E-Filing System. The IRS will ensure the privacy and security of all taxpayer data.
For more information, interested businesses can call the Bank Secrecy Act E-Filing Help Desk at 866-346-9478 or email them at BSAEFilingHelp@fincen.gov. For more information about the BSA E-Filing System, businesses can complete a technical support request at Self Service Help Ticket (treas.gov). The help desk is available Monday through Friday from 8 a.m. to 6 p.m. EST.
For more information about the reporting requirement, see FS-2023-19 on IRS.gov.
To help businesses prepare and file reports, the IRS created a video – How to Complete Form 8300 – Part I, Part II. The short video points out sections of Form 8300 for which the IRS commonly finds mistakes and explains how to accurately complete those sections.
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 18 to 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 deposit instead of submitting a paper tax return. Taxpayers may use IRS Free File on 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 file an 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 information and answers to tax questions. Setting up an Online Account on 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 Assistant can 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 status or pay taxes. No wait time or appointment needed — online tools and resources are available 24 hours a day.
Other free options for help: IRS Free File is 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 Forms may be a good option. MilTax is 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 page for 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
- 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.
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.
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.
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 2023-59Small 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
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.
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.
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.
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.
IRS Taxpayers Bill of Rights
Secure tax payment options
Report phishing and online 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 2021-141
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
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.
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.
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:
- Questions and answers
- Get Transcript
- Private Collection of Overdue Taxes YouTube Video
- Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency (.pdf).
- Understanding Your CP40 Notice
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?
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.
- They carry on a trade or business as a sole proprietor or an independent contractor.
• They are a member of a partnership that carries on a trade or business.
• They are otherwise in business for themselves, including a part-time business.
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 2021-181
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:
- Child Tax Credit Update Portal
- Online Account
- Get Transcript Online
- Get an Identity Protection PIN
- Online Payment Agreement
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 using Tax 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
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.
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
Here is a video tax tip from the IRS:
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:
Subscribe today: The IRS YouTube channels provide short, informative videos on various tax related topics in English, Spanish and ASL.