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Tips for taxpayers who need to file an amended tax return

September 3, 2020

The IRS will correct common errors during processing. However, there are certain situations in which a taxpayer may need to file an amended return to make a correction. Taxpayers can now file some amended electronically. Here are some tips for anyone who discovered they made a mistake or forgot to include something on their tax return.

Use the Interactive Tax Assistant. Taxpayers can use the Should I file an amended return? to help determine if they should file an amended tax return.


Don’t amend for math errors or missing forms. Taxpayers generally don’t need to file an amended return to correct math errors on their original return. The IRS may correct math or clerical errors on a return and may accept it even if the taxpayer forgot to attach certain tax forms or schedules. The IRS will mail a letter to the taxpayer, if necessary, requesting additional information.


Wait until receiving refund for tax year 2019 before filing. Taxpayers who are due refunds from their original tax year 2019 tax return should wait for the IRS to process the return and they receive the refund before filing Form 1040-X to claim an additional refund.


File Form 1040-X to amend. Taxpayers must file using Form 1040-X, Amended U.S. Individual Income Tax Return, to correct their tax return. If they are filing an amend 1040 or 1040-SR for 2019, they can now file electronically using commercial tax-filing software. All other amended returns must still be mailed to the IRS. When filing, taxpayers should indicate the year of the original return and explain all changes made by attaching any forms or schedules. Taxpayers then sign and mail the Form 1040-X to the address listed in the instructions. Taxpayers filing Form 1040-X in response to an IRS letter should mail it to the address shown on the letter.


Amend to correct errors. Taxpayers should correct their return if they find that they should have claimed a different filing status or didn't report some income. Taxpayers who claimed deductions or credits they shouldn't have claimed or didn't claim deductions or credits they could have claimed may need to file an amended return. Changes made on a federal return may also affect state taxes. The taxpayer should contact the state tax agency to see if this is so.

Pay additional tax. Taxpayers who will owe more tax should file Form 1040-X and pay the tax as soon as possible to avoid penalties and interest. They should consider using IRS Direct Pay to pay any tax directly from a checking or savings account for free.


File within three-year time limit. Taxpayers generally have three years from the date they filed their original tax return to file Form 1040-X to claim a refund. They can file it within two years of the date they paid the tax, if that date is later.

Use separate forms if amending more than one tax year. Taxpayers must file a submit a separate Form 1040-X for each tax year to avoid confusion. They should check the box for the calendar year or enter the other calendar year or fiscal year they are amending. The form’s instructions have the mailing address for the amended return.

Track amended return status online. Taxpayers can track the status of their amended tax return in English and Spanish using Where’s My Amended Return? Amended returns take up to 16 weeks to process and up to three weeks from the date of mailing to show up in the system. Before that time, there's no need to call the IRS unless the tool specifically tells the taxpayer to do so.



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14 million taxpayers are about to get an extra check from the IRS. Here’s how to tell if you will

August 28, 2020

Most entrepreneurs are familiar with the term “limited liability company” (often abbreviated as LLC) and the benefits that come with incorporating as an LLC. For anyone unfamiliar with the structure, a limited liability company is an entity designed to provide liability protection to small businesses. Liability protection creates a separation between professional and personal assets. If an unforeseen circumstance should impact the business, such as a lawsuit, having incorporated as an LLC would ensure that the owner’s personal assets, like cars and houses, are not affected.

Incorporating as an LLC turns you, the owner of the business, into a member. You’re still the business owner. Now, you also hold membership interest since you incorporated as a limited liability company. An LLC may have just one member, or it may have multiple members. You may choose to incorporate as an LLC, or decide to form under one these three LLC structures.

Single member LLC

Member managed LLC

Manager managed LLC

What’s the difference between these management structures as opposed to a typical LLC? Let’s unpack each entity and what it means to incorporate under one of these LLCs.

Single Member LLC

One of the biggest differences a single member LLC has from a regular LLC is in its name. A single member LLC only has one member whereas standard LLCs may bring on several members (owners) to run the business.

You would think this would make the entity easier to run, almost like it’s the proverbial sole proprietorship of the LLC family tree. However, a single member LLC faces its own unique series of management challenges. The next greatest difference is that an LLC is treated as a partnership at the federal level. A single member LLC, on the other hand, is not considered to be a partnership.

How To Incorporate As a Single Member LLC

What does that mean for entrepreneurs incorporating as single member LLCs? It is up to the single member to have, and maintain, proof that they run the single member LLC’s operations like an LLC and treat the business like a separate entity. Parts of said proof may include drafting operating agreements and taking minutes during meetings. Failure to do this may result in having your liability protection revoked. It may feel a little silly, even unnecessary, since you are the only member but it’s worth taking the time and effort to maintain a single member LLC.

Each of the 50 states in the United States recognizes single member LLC formations, so you can start a business from any state as a single member LLC. The process for forming a single member LLC is also quite similar to an LLC formation. An entrepreneur files their articles of organization with the designated Secretary of State and pays the associated fee. Keep in mind that articles of organization will ask for all of the LLC’s members. It’s perfectly acceptable to list only yourself — after all, you’re filing as a single member LLC.

Member Managed LLC

Seeking a management structure where every member is given equal treatment? You’ve found it with a member managed LLC.

The members of a member managed LLC are all treated as equals. Each member shares the same amount of responsibility for how the LLC’s operations are run daily. Due to the equality of its members, a member managed LLC does not have a board of directors included with the entity. (As having a board of directors would disrupt the entity’s natural equality balance.)

How To Incorporate As A Member Managed LLC

The ideal business to form a member managed LLC is one where the members (owners) all want to be equally involved with running the company. It’s also a suitable fit for small businesses with limited resources where all members must have their hands on deck.

Before filing to form a member managed LLC, make sure you specify that the business will be member managed on your application forms. Then, you may submit the organizational form and pay the fee. As with a single member LLC, it’s also important that you keep and maintain up-to-date operating agreements. The duties of the members in a member managed LLC may be equal, but they must be documented for the sake of both clarification and posterity in the business.

Manager Managed LLC

We’ve reviewed what to do as a solo member of a single member LLC and as a member that shares equal duties in a member managed LLC. Manager managed LLCs, however, tend to be the most complicated of the three entities.

Manager managed LLCs, unlike their two counterparts, come with a board of managers. This is similar to a board of directors. The board of managers has more control over the business than the members do and take more responsibility for its operations.

How To Incorporate As A Manager Managed LLC

A manager managed LLC is certainly the most structured of the three management structures. However, this can also serve to the members’ benefit in the long run.

If an LLC has too many members and struggles to delegate duties to each one, then it would be extremely helpful to have a board of managers in place for organizational purposes. Conversely, some members of an LLC may not want the responsibility of running the business — and the board in managers is there to step in as needed. A board of managers doesn’t have to be entirely composed of the LLC’s members either. Manager managed LLCs may hire non-members to sit on the board as well.

Much like filing to form a member managed LLC, manager managed LLCs must indicate that their company is manager managed on their paperwork. Once they have made that readily clear, they may submit their formation paperwork in and pay the filing fee.

Which LLC Structure Should I Choose?

Every small business is different, so I cannot advise with certainty whether one of these three management structures — single member LLC, member managed LLC, and manager managed LLC — is the best fit for your company. If you are unsure of which to incorporate as, consult with an attorney or legal professional. Ask them any questions about the process you may have and work together to determine the proper LLC structure for you and your business.

Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Author: Deborah Sweeney | Published: May 22, 2019

Single Member LLC or Member Managed LLC? What's the difference? written by Deborah Sweeney

August 28, 2020

Most entrepreneurs are familiar with the term “limited liability company” (often abbreviated as LLC) and the benefits that come with incorporating as an LLC. For anyone unfamiliar with the structure, a limited liability company is an entity designed to provide liability protection to small businesses. Liability protection creates a separation between professional and personal assets. If an unforeseen circumstance should impact the business, such as a lawsuit, having incorporated as an LLC would ensure that the owner’s personal assets, like cars and houses, are not affected.

Incorporating as an LLC turns you, the owner of the business, into a member. You’re still the business owner. Now, you also hold membership interest since you incorporated as a limited liability company. An LLC may have just one member, or it may have multiple members. You may choose to incorporate as an LLC, or decide to form under one these three LLC structures.

Single member LLC

Member managed LLC

Manager managed LLC

What’s the difference between these management structures as opposed to a typical LLC? Let’s unpack each entity and what it means to incorporate under one of these LLCs.

Single Member LLC

One of the biggest differences a single member LLC has from a regular LLC is in its name. A single member LLC only has one member whereas standard LLCs may bring on several members (owners) to run the business.

You would think this would make the entity easier to run, almost like it’s the proverbial sole proprietorship of the LLC family tree. However, a single member LLC faces its own unique series of management challenges. The next greatest difference is that an LLC is treated as a partnership at the federal level. A single member LLC, on the other hand, is not considered to be a partnership.

How To Incorporate As a Single Member LLC

What does that mean for entrepreneurs incorporating as single member LLCs? It is up to the single member to have, and maintain, proof that they run the single member LLC’s operations like an LLC and treat the business like a separate entity. Parts of said proof may include drafting operating agreements and taking minutes during meetings. Failure to do this may result in having your liability protection revoked. It may feel a little silly, even unnecessary, since you are the only member but it’s worth taking the time and effort to maintain a single member LLC.

Each of the 50 states in the United States recognizes single member LLC formations, so you can start a business from any state as a single member LLC. The process for forming a single member LLC is also quite similar to an LLC formation. An entrepreneur files their articles of organization with the designated Secretary of State and pays the associated fee. Keep in mind that articles of organization will ask for all of the LLC’s members. It’s perfectly acceptable to list only yourself — after all, you’re filing as a single member LLC.

Member Managed LLC

Seeking a management structure where every member is given equal treatment? You’ve found it with a member managed LLC.

The members of a member managed LLC are all treated as equals. Each member shares the same amount of responsibility for how the LLC’s operations are run daily. Due to the equality of its members, a member managed LLC does not have a board of directors included with the entity. (As having a board of directors would disrupt the entity’s natural equality balance.)

How To Incorporate As A Member Managed LLC

The ideal business to form a member managed LLC is one where the members (owners) all want to be equally involved with running the company. It’s also a suitable fit for small businesses with limited resources where all members must have their hands on deck.

Before filing to form a member managed LLC, make sure you specify that the business will be member managed on your application forms. Then, you may submit the organizational form and pay the fee. As with a single member LLC, it’s also important that you keep and maintain up-to-date operating agreements. The duties of the members in a member managed LLC may be equal, but they must be documented for the sake of both clarification and posterity in the business.

Manager Managed LLC

We’ve reviewed what to do as a solo member of a single member LLC and as a member that shares equal duties in a member managed LLC. Manager managed LLCs, however, tend to be the most complicated of the three entities.

Manager managed LLCs, unlike their two counterparts, come with a board of managers. This is similar to a board of directors. The board of managers has more control over the business than the members do and take more responsibility for its operations.

How To Incorporate As A Manager Managed LLC

A manager managed LLC is certainly the most structured of the three management structures. However, this can also serve to the members’ benefit in the long run.

If an LLC has too many members and struggles to delegate duties to each one, then it would be extremely helpful to have a board of managers in place for organizational purposes. Conversely, some members of an LLC may not want the responsibility of running the business — and the board in managers is there to step in as needed. A board of managers doesn’t have to be entirely composed of the LLC’s members either. Manager managed LLCs may hire non-members to sit on the board as well.

Much like filing to form a member managed LLC, manager managed LLCs must indicate that their company is manager managed on their paperwork. Once they have made that readily clear, they may submit their formation paperwork in and pay the filing fee.

Which LLC Structure Should I Choose?

Every small business is different, so I cannot advise with certainty whether one of these three management structures — single member LLC, member managed LLC, and manager managed LLC — is the best fit for your company. If you are unsure of which to incorporate as, consult with an attorney or legal professional. Ask them any questions about the process you may have and work together to determine the proper LLC structure for you and your business.

Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Author: Deborah Sweeney | Published: May 22, 2019

Here’s basic info for businesses filing excise taxes

October 30, 2019

Businesses providing goods and services that are subject to excise tax must file a Form 720 quarterly to report the tax to the IRS.

What is excise tax?

Excise taxes are charged on a wide variety of goods, services and activities. The tax may be imposed at the time of:

Import

Sale by the manufacturer

Sale by the retailer

Use by the consumer

Many excise taxes go into trust funds earmarked for related capital projects, such as highway and airport improvements. Excise taxes are independent of income taxes. People pay excise taxes on things like gasoline, indoor tanning, airline tickets and tires.

Since the excise cost is usually included in the price, the seller or manufacturer is responsible for sending these tax payments to the IRS and filing Form 720.

When to file?

Businesses must file the form for each quarter of the calendar year. Here are the due dates:

Quarter 1 – January, February, March: Deadline = April 30

Quarter 2 – April, May, June: Deadline = July 31

Quarter 3 – July, August, September: Deadline = October 31

Quarter 4 – October, November, December: Deadline = January 31

If the due date for filing a return falls on a Saturday, Sunday or legal holiday, the due date is the next business day.

How to file?

While the IRS still accepts paper Forms 720, they encourage businesses to file electronically. To help excise taxpayers do this, the IRS posts the contact information on IRS.gov of all approved e-file transmitters for excise forms. Businesses can submit forms online 24 hours a day.

That said, not all excise forms can be filed electronically. Those that are available for electronic filing are:

Form 720, Quarterly Federal Excise Tax.

Form 2290, Heavy Highway Vehicle Use Tax.

Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8.

When businesses file Form 720 electronically, they not only get confirmation the IRS received the form, but it reduces processing time and errors. To electronically file Form 720, business taxpayers will have to pay the provider’s fee for online submission.

The child tax credit benefits eligible parents

October 9, 2019

Taxpayers who claim at least one child as their dependent on their tax return may be eligible to benefit from the child tax credit. It’s important for people who might qualify for this credit to review the eligibility rules to make sure they still qualify. Taxpayers who haven’t qualified in the past should also check because they may now be able to claim the credit.

Here are some details about this credit:

• The maximum amount of the credit is $2,000 per qualifying child.

• Taxpayers who are eligible to claim this credit must list the name and Social Security number for each dependent on their tax return.

• The child must be younger than 17 on the last day of the tax year, generally Dec 31.

• The child must be the taxpayer’s son, daughter, stepchild, foster or adopted child, brother, sister, stepbrother, stepsister, half-brother or half-sister. An adopted child includes a child lawfully placed with them for legal adoption. They can also include grandchildren, nieces or nephews.

• The child must have not provided more than half of their own support for the year.

• The taxpayer must claim the child as their dependent on their federal tax return.

• The child cannot file a tax return for the same year with the status married filing jointly, unless the only reason they are filing is to claim a refund.

• The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.

• In most cases, the child must have lived with the taxpayer for more than half of 2019.

• The IRS Interactive Tax Assistant tool Is My Child a Qualifying Child for the Child Tax Credit? helps taxpayers determine if a child qualifies for this credit.

• In some cases, a taxpayer qualifies and gets less than the full credit. These taxpayers must have earned income of at least $2,500 to receive a refund, even if they owe no tax, with the additional child tax credit.

• The credit begins to phase out at $200,000 of modified adjusted gross income. This amount is $400,000 for married couples filing jointly.

• Taxpayers can use the worksheet on page 6 of Publication 972, Child Tax Credit, to determine if they can claim this credit.

Taxpayers whose dependent does not qualify for this credit might be able to the claim the credit for other dependents.

The earned income tax credit can put money in taxpayers’ pockets

October 7, 2019

The earned income tax credit benefits working people with low-to-moderate income. Last year, the average credit was $2,445. EITC not only reduces the amount of tax someone owes, but may also give them a refund, even if they don’t owe any tax at all.

Here are a few things people should know about this credit:

Taxpayers may move in and out of eligibility for the credit throughout the year. This may happen after major life events. Because of this, it’s a good idea for people to find out if they qualify.

To qualify, people must meet certain requirements and file a federal tax return. They must file even if they don’t owe any tax or aren’t otherwise required to file.

Taxpayers qualify based on their income, the number of children they have, and the filing status they use on their tax return. For a child to qualify, they must live with the taxpayer for more than six months of the year.

Here’s a quick look at the income limits for the different filing statuses. Those who work and earn less than these amounts may qualify.

Married filing jointly:

Zero children: $21,370

One child: $46,884

Two children: $52,493

Three or more children: $55,952

Head of household and single:

Zero children: $15,570

One child: $41,094

Two children: $46,703

Three or more children: $50,162

The maximum credit amounts are based on the number of children a taxpayer has. They are the same for all filing statuses:

Zero children: $529

One child: $3,526

Two children: $5,828

Three or more children: $6,557

Taxpayers who file using the status married filing separately cannot claim EITC.

Two education credits help taxpayers with college costs

September 12, 2019

With school back in session, parents and students should look into tax credits that can help with the cost of higher education. They do this by reducing the amount of tax someone owes on their tax return. If the credit reduces tax to less than zero, the taxpayer may get a refund.

Taxpayers who pay for higher education in 2019 can see these tax savings when they file their tax returns next year. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit.

There are two credits available to help taxpayers offset the costs of higher education. The American opportunity tax credit and the lifetime learning credit may reduce the amount of income tax owed. Taxpayers use Form 8863, Education Credits, to claim the credits.

To be eligible to claim the American opportunity tax credit, or the lifetime learning credit, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution.

The American opportunity tax credit is:

• Worth a maximum benefit up to $2,500 per eligible student.

• Only for the first four years at an eligible college or vocational school.

• For students pursuing a degree or other recognized education credential.

• Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.

The lifetime learning credit is:

• Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.

• Available for all years of postsecondary education and for courses to acquire or improve job skills.

• Available for an unlimited number of tax years.

These tax tips can help new business owners find success

August 26, 2019

Starting a business can be very rewarding. It can also be a little overwhelming. From business plans to market strategies, and even tax responsibilities…there are many things to consider. Here’s what new business owners can do to help get off to a good start.

• Choose a business structure. The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:

o Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.

o Partnership: An unincorporated business with ownership shared between two or more people.

o Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.

o S Corporation: A corporation that elects to pass corporate income, losses, deductions, and credits through to the shareholders.

o Limited Liability Company: A business structure allowed by state statute.

• Choose a tax year. A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

o Calendar year: 12 consecutive months beginning January 1 and ending December 31.

o Fiscal year: 12 consecutive months ending on the last day of any month except December.

• Apply for an employer identification number. An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need an EIN.

• Have all employees complete these forms:

o Form I-9, Employment Eligibility Verification

o Form W-4, Employee’s Withholding Allowance Certificate

• Pay business taxes. The form of business determines what taxes must be paid and how to pay them.

Taxpayers interested in starting a business can find information for some industries on the Industries/Professions Tax Centers webpage. Each state has additional requirements for starting and operating a business. Prospective business owners should visit their state's website for info about state requirements.

IRS Video Portal features tax info for small businesses and employers

August 20, 2019

Small business owners and others with tax questions can check out the IRS Video Portal to get more information on a wide range of topics. Taxpayers can visit the site to find videos and recorded webinars on topics such as:

Starting a business

Tips for new businesses

Business taxes for the self-employed

Who needs to file Schedule C and how to do it?

Things to ask an accountant

Avoiding the biggest tax mistakes

Business income

Business income and expenses

Recordkeeping

Tip reporting requirements, including the difference between tips and service charges

Resources on IRS.gov

Reconstructing records after a disaster

Employers

General employment tax issues

Employing family members

Proper worker classification

Tax reform basics for employers

Filing and paying taxes

Child and daycare provider tax compliance

Payment alternatives

Electronic signature options

The IRS also posts videos on the portal for individuals, tax professionals, governments, and charities and non-profits. There’s also a playlist with videos in Spanish.

Here’s what taxpayers should know about making 2019 estimated tax payments

August 13, 2019

Small business owners, self-employed people, and some wage earners should look into whether they should make estimated tax payments this year. Doing so can help them avoid an unexpected tax bill and possibly a penalty when they file next year.

Everyone must pay tax as they earn income. Taxpayers who earn a paycheck usually have their employer withhold tax from their checks. This helps cover taxes the employee owes. On the other hand, some taxpayers earn income not subject to withholding. For small business owners and self-employed people, that usually means making quarterly estimated tax payments.

Here’s some information about estimated tax payments:

Taxpayers generally must make estimated tax payments if they expect to owe $1,000 or more when they file their 2019 tax return.

Whether or not they expect to owe next year, taxpayers may have to pay estimated tax for 2019 if their tax was more than zero in 2018.

Wage earners who also have business income can often avoid having to pay estimated tax. They can do so by asking their employer to withhold more tax from their paychecks. The IRS urges anyone in this situation to do a Paycheck Checkup using the Tax Withholding Estimator on IRS.gov. If the estimator suggests a change, the taxpayer can submit a new Form W-4 to their employer.

Aside from business owners and self-employed individuals, people who need to make estimated payments also includes sole proprietors, partners and S corporation shareholders. It also often includes people involved in the sharing economy.

Estimated tax requirements are different for farmers and fishermen.

Corporations generally must make these payments if they expect to owe $500 or more on their 2019 tax return.

Aside from income tax, taxpayers can pay other taxes through estimated tax payments. This includes self-employment tax and the alternative minimum tax.

The final two deadlines for paying 2019 estimated payments are Sept. 16, 2019 and Jan. 15, 2020.

Taxpayers can check out these forms for details on how to figure their payments:

Form 1040-ES, Estimated Tax for Individuals.

Form 1120-W, Estimated Tax for Corporations.

Taxpayers can visit IRS.gov to find options for paying estimated taxes. These include:

Direct Pay from a bank account.

Paying by credit or debit card or the Electronic Federal Tax Payment System.

Mailing a check or money order to the IRS.

Paying cash at a retail partner.

Anyone who pays too little tax through withholding, estimated tax payments, or a combination of the two may owe a penalty. In some cases, the penalty may apply if their estimated tax payments are late. The penalty may apply even if the taxpayer is due a refund.

For tax year 2019, the penalty generally applies to anyone who pays less than 90 percent of the tax reported on their 2019 tax return.

Taxpayers can follow these three steps to use new Tax Withholding Estimator

August 12, 2019

All taxpayers should use the new Tax Withholding Estimator to do a Paycheck Checkup. This tool helps people make sure their employers are taking out the right amount of tax from the employee’s paychecks. The money withheld from an employee’s paychecks throughout the year should cover the amount of tax they owe.

Taxpayers who haven’t yet checked their withholding can follow these simple steps for using the estimator. Results will include a recommendation of whether the taxpayer should consider submitting a new Form W-4, Employee’s Withholding Allowance Certificate, to any of their employers.

Step 1: Gather documents.

Before beginning, taxpayers should have a copy of their most recent pay stub and tax return. Taxpayers should go to the main Tax Withholding Estimator page on IRS.gov. Once there, they should carefully read all information and click the blue Tax Withholding Estimator button.

Step 2: Answer the questions.

Users will answer a series of questions about their specific tax situation. When they complete each section, they click the blue “Next” button that takes them to the next section.

Step 3: Review the results.

Taxpayers use the estimator’s results to determine if they need to complete a new Form W-4, which they submit to their employer, not to the IRS. The tool helps the user target a tax due amount close to zero or a refund amount.

These summer activities can affect next year’s tax returns

August 9, 2019

Summertime activities often affect the tax returns people file the following year. Here are some things taxpayers do during the summer along with tips they should consider now:

Getting married.

Newlyweds should report any name change to the Social Security Administration. They should also report an address change to the United States Postal Service, their employers, and the IRS. This will help make sure they receive documents and other items they will need to file their taxes.

Sending kids to summer day camp.

Unlike overnight camps, the cost of summer day camp may count towards the child and dependent care credit.

Working part-time.

While summertime and part-time workers may not earn enough to owe federal income tax, they should remember to file a return. They’ll need to file early next year to get a refund for taxes withheld from their checks this year.

Normally, employees receive a Form W-2, Wage and Tax Statement, from their employer to account for the summer’s work. They’ll use this to prepare their tax return. They should receive the W-2 by January 31 next year. Employees will get a W-2 even if they no longer work for the summertime employer.

Summertime workers can avoid higher tax bills and lost benefits if they know their correct status. Employers will determine whether the people who work for them are employees or independent contractors. Independent contractors aren’t subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes.

Improved tool on IRS.gov helps taxpayers check their withholding

August 7, 2019

All employees should make sure their employers are withholding the correct amount of tax from their paychecks. The best way for employees to do this is to use the new IRS Tax Withholding Estimator on IRS.gov.

The IRS just launched this improved tool to help taxpayers check their withholding by doing a Paycheck Checkup. This lets the employee check to see if their employer is taking enough tax from their paycheck to cover the amount of tax they owe. After using the Estimator, if necessary the employee can change the amount of tax their employer takes out of their paycheck. This will help employees avoid an unexpected result at tax time, such as a smaller refund.

After using the new mobile-friendly tool, some taxpayers may find they need to pay more taxes before filing their tax returns in 2020. These folks have a few options for doing so. Here are three ways taxpayers can adjust their withholding:

Change the withholding allowances on Form W-4.

When an employee reduces the number of allowances on their Form W-4, they increase the amount of income tax their employer withholds from their pay. On one hand, this mean a smaller paycheck. On the other hand, the employee is paying more tax upfront. This usually will mean less chance that they employee will see a smaller refund or larger tax bill at tax time.

Have an extra flat-dollar amount withheld from each paycheck.

Employees whose employers are already withholding the least amount of allowances can simply add a specific amount to their withholding. These employees can indicate this amount on a new Form W-4 and submit this to their employer or their employer’s payroll department. For example, an employee can tell their employer to withhold an extra $200 per paycheck. This will allow withholding to occur more evenly throughout the year.

Make estimated tax payments throughout the year.

Estimated payments are another way for taxpayers to pay what they owe in separate payments made throughout the year. For tax year 2019, the remaining estimated tax payments are due from individual taxpayers on September 16, 2019, and January 15, 2020. The fastest and easiest way to make estimated tax payments is electronically using Direct Pay or Electronic Federal Tax Payment System. Taxpayers can visit IRS.gov for other payment options.

More information:

Pay as You Go, So You Won't Owe

Estimated Taxes

Form W-4S, Request for Federal Income Tax Withholding from Sick Pay

Form W-4V, Voluntary Withholding Request

Taxpayers can file Form 2290 electronically to pay heavy highway vehicle use tax

August 6, 2019

Taxpayers who must pay the heavy highway vehicle use tax should remember they can file and pay electronically. While some taxpayers who file Form 2290 are required to file electronically, all 2290 filers can do so. These taxpayers can use e-file software to both file Form 2290 and pay what they owe.

The 2019 deadline to file the Form 2290 return and pay the tax is Tuesday, September 3, for highway motor vehicles used in July. All the information needed to file is on the Trucking Tax Center. Taxpayers can use the friendly URL IRS.gov/trucker.

E-filing is the fastest way to get an IRS-stamped Schedule 1 as proof of payment. In fact, taxpayers who file 2290 can get a stamped Schedule 1 within minutes after the IRS accepts the e-filed form. While, alternatively, taxpayers can still file on paper, delivery of the paper IRS-stamped Schedule 1 can take up to six weeks.

Here are the three steps taxpayers should follow once they’re ready to file:

1. Gather information – Filers will need these things to complete and file their 2290:

Employer identification number. Taxpayers cannot use their Social Security number. Anyone who doesn’t already have an EIN can apply online. It takes the IRS about two weeks to establish a new EIN. Taxpayers should use the same name on their Form 2290 as was assigned to them with their EIN. The name control on Form 2290 must match their EIN.

Vehicle identification number of each vehicle.

Taxable gross weight of each vehicle. Filers can use the table on page 2 of the Form 2290 to calculate their tax for vehicles used in July based on each vehicle's weight. Taxpayers can use the partial-period tax tables in the Form 2290 Instructions to calculate their tax for vehicles first used in a month other than July.

2. File – there are two ways taxpayers can file Form 2290:

E-file. All taxpayers can file electronically for faster processing. Taxpayers who are reporting 25 or more vehicles are required to file electronically.

By paper. Taxpayers can complete Form 2290 and then mail it to the IRS. Filers can go to the Form 2290 Instructions for the correct mailing address.

3. Pay – there are several ways for taxpayers to pay what they owe:

Pay taxes by credit card or debit card. Filers can pay over the internet, by phone, or using their mobile device.

Electronic funds withdrawal. Taxpayers can authorize a direct debit when they file electronically.

Electronic Federal Tax Payment System. Using this system requires advanced enrollment.

Business owners may be able to benefit from the home office deduction

August 5, 2019

Taxpayers who use their home for business may be eligible to claim a home office deduction. It allows qualifying taxpayers to deduct certain home expenses on their tax return. This can reduce the amount of the taxpayer’s taxable income.

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

The home office deduction 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.

Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.

Doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.

There are two basic requirements for the taxpayer’s home to qualify as a deduction:

There must be exclusive use of a portion of the home for conducting business on a regularly 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.

Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.

Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:

The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.

When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

These summer actions might benefit taxpayers who itemize

July 31, 2019

Summer is a season when people have fun, yet get things done. From buying a new house to cleaning their old one, taxpayers who itemize their deductions may be doing things this summer that will affect the tax returns they file next year.

The higher standard deduction means fewer taxpayers are itemizing their deductions. However, taxpayers who still plan to itemize next year should keep these tips in mind:

• Deducting state and local income, sales and property taxes. The deduction that taxpayers can claim for state and local income, sales and property taxes is limited. This deduction is limited to a combined, total deduction of $10,000. It is $5,000 if married filing separately. Any state and local taxes paid above this amount can’t be deducted.

• Refinancing a home. The deduction for mortgage interest is also limited. It’s limited to interest paid on a loan secured by the taxpayer’s main home or second home. For homeowners who choose to refinance, they must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described in the next bullet under “buying a home.”

• Buying a home. People who buy a new home this year can only deduct mortgage interest they pay on a total of $750,000 in qualifying debt for a first and second home. It’s $375,000 if married filing separately. For existing mortgages, if the loan originated on or before Dec. 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

• Donating items and deducting money. Many taxpayers do a good summer clean-out during the warm months. They often find unused items in good condition they can donate to a qualified charity. These donations may qualify for a tax deduction. Taxpayers must itemize deductions to deduct charitable contributions and must have proof of all donations. Taxpayers can use the Interactive Tax Assistant to help determine whether they can deduct their charitable contributions.

• Deducting mileage for charity. Driving a personal vehicle while donating services on a trip sponsored by a qualified charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.

• Reporting gambling winnings and claiming gambling losses. Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings. They can use the Interactive Tax Assistant to find out more about reporting gambling winnings and losses next year.

More information:

Publication 5307, Tax Reform: Basics for Individuals and Families.

Lowering AGI this year can help taxpayers when they file next year

July 30, 2019

A taxpayer’s adjusted gross income is one factor that determines how much tax they owe. Taxpayers who plan today can lower their AGI.

This tip is one in a series about tax planning. These tips focus on steps taxpayers can take now to help them down the road.

Here are a couple things taxpayers can do now to lower their AGI:

Know how adjusted gross income affects taxes

A taxpayer’s AGI and tax rate are important factors in figuring their taxes. AGI is their income from all sources minus any adjustments or deductions to their income. Generally, the higher the AGI, the higher their tax rate, and the more tax they pay.

Tax planning can include making changes during the year that can lower a taxpayer’s AGI. The taxpayer could:

Contribute to a Health Savings Account

Claim educator expenses if they’re a qualifying educator

Pay student loan interest

A full list is on Schedule 1 of Form 1040.

Save for retirement

Retirement savings can also lower AGI.

Contributing money to a retirement plan at work like a 401(k) plan can reduce a taxpayer’s AGI.

Investing in a traditional IRA plan is another way to save for retirement and lower AGI.

Self-employed SEP, SIMPLE, and qualified plans are also retirement options that can lower AGI.

The IRS has several digital tools taxpayers can use to stay updated on important tax information that may help with tax planning. In addition to visiting IRS.gov, they can download the IRS2Go mobile app, watch IRS YouTube videos, and follow the IRS on Twitter and Instagram.

Here’s the 411 on who can deduct car expenses on their tax returns

July 29, 2019

Taxpayers who have deducted the business use of their car on past tax returns should review whether or not they can still claim this deduction. Some taxpayers can. Some cannot.

Here’s a breakdown of which taxpayers can claim this deduction when they file their tax returns.

Business owners and self-employed individuals

Individuals who own a business or are self-employed and use their vehicle for business may deduct car expenses on their tax return. If a taxpayer uses the car for both business and personal purposes, the expenses must be split. The deduction is based on the portion of mileage used for business.

There are two methods for figuring car expenses:

1. Using actual expenses

These include:

Depreciation

Lease payments

Gas and oil

Tires

Repairs and tune-ups

Insurance

Registration fees

2. Using the standard mileage rate

Taxpayers who want to use the standard mileage rate for a car they own must choose to use this method in the first year the car is available for use in their business.

Taxpayers who want to use the standard mileage rate for a car they lease must use it for the entire lease period.

The standard mileage rate for 2018 is 54.5 cents per mile. For 2019, it‘s 58 cents.

There are record-keeping requirements for both methods.

Employees

Employees who use their car for work can no longer take an employee business expense deduction as part of their miscellaneous itemized deductions reported on Schedule A. Employees can’t deduct this cost even if their employer doesn’t reimburse the employee for using their own car. This is for tax years after December 2017. The Tax Cuts and Jobs Act suspended miscellaneous itemized deductions subject to the 2% floor.

However, certain taxpayers may still deduct unreimbursed employee travel expenses, this includes Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials.


Divorce or separation may have an effect on taxes

July 26, 2019

Taxpayers should be aware of tax law changes related to alimony and separation payments. These payments are made after a divorce or separation. The Tax Cuts and Jobs Act changed the rules around them, which will affect certain taxpayers when they file their 2019 tax returns next year.

Here are some facts that will help people understand these changes and who they will impact:

• The law relates to payments under a divorce or separation agreement. This includes:

o Divorce decrees.

o Separate maintenance decrees.

o Written separation agreements.

• In general, the taxpayer who makes payments to a spouse or former spouse can deduct it on their tax return. The taxpayer who receives the payments is required to include it in their income.

• Beginning Jan. 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018.

• If an agreement was executed on or before Dec. 31, 2018 and then modified after that date, the new law also applies. The new law applies if the modification does these two things:

o It changes the terms of the alimony or separate maintenance payments.

o It specifically says that alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.

• Agreements executed on or before Dec. 31, 2018 follow the previous rules. If an agreement was modified after that date, the agreement still follows the previous law as long as the modifications don’t do what’s described above.

Tips to help organizations understand the tax-exempt application process

July 15, 2019

Organizations that want to apply for tax-exempt status under Section 501(c)(3) of the tax code use a Form 1023-series application. Here are some things organizations should know to help them understand the process:

• The application must be complete. It must also include the user fee.

• The application process on IRS.gov includes a step-by-step review of what an organization needs to know and what to do in order to apply for tax-exempt status.

• There are a few types of organizations that do not need to apply for 501(c)(3) status to be tax-exempt. These are churches and their integrated auxiliaries, and also public charities whose annual gross receipts are normally less than $5,000.

• An employer identification number is an organization's account number with the IRS and is required for the organization to apply for tax exempt status. Every tax-exempt organization, including a church, should have an EIN regardless of whether the organization has employees. After getting an EIN, the organization must include it on the application. Organizations may get an EIN by calling 1-800-829-4933 or by applying online.

• Generally, an organization that is required to apply for recognition of exemption must notify the IRS within 27 months from the date it was formed.

• When the IRS determines an organization qualifies for exemption under Section 501(c)(3), it will also be classified as a foundation, unless the organization meets the requirements to be treated as a public charity.

• A charitable organization must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents and its last three annual information returns.

• The organization must provide copies of these documents upon request. The organization may charge a reasonable fee for reproduction and copying costs. Organizations that fail to comply may face penalties.

Taxpayers who need to get a tax transcript should first visit IRS.gov

July 22, 2019

Taxpayers might need a tax transcript for many reasons, like applying for a mortgage or a student loan. The Let Us Help You page on IRS.gov will help taxpayers understand tax transcripts. This page has links to information that will help taxpayers learn about the different types of transcripts and the process of how to get one.

Order a tax transcript

From here, taxpayers can visit the pages where they can request a transcript, either online or by mail. Taxpayers can get different Form 1040-series transcript types from this page.

Transcript types

Depending on why a taxpayer needs a transcript will determine which type they need. This page lists detailed information about what is included in the five different types of transcripts.

Frequently Asked Questions

Taxpayers can visit the Q&A page for specific questions about the Get Transcript Online service. They'll find FAQs about getting a transcript both online and by mail.

However, taxpayers might not need a full transcript. If they only need to find out how much they owe or verify payments they made within the last 18 months, they can visit the view your tax account page.