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Lesson 3 - Filing and paying taxes electronically

Introduction and Benefits of E-Filing



Male Host: Hello and welcome to filing and paying taxes electronically.

Thanks for joining us.

Female Host: In this workshop, we'll describe IRS E-File and its benefits for your individual and business returns, as well as describing electronic payment options, so you can determine which is best for your business.

By the end of this workshop, we hope to convince you of the benefits of filing and paying your taxes, electronically.

Male Host: Before we discuss your specific business situation, let's talk about the benefits of electronic filing.

First, e-filing is convenient.

You'll receive a fast electronic acknowledgement that the IRS has received your return.

Second, e-filing is accurate.

There are few risks of math errors and of receiving a letter from the IRS.

If there are any errors on the return, you'll receive an easy to understand error message in plain language.

Third, e-filing is safe.

Your tax information is secure and only authorized IRS employees have access to the system.

Female Host: Fourth, just as you filed electronically, you can receive a refund electronically by providing your bank's routing number; the type of account, either checking or savings; and your account number.

Finally, if you use tax preparation software, the software performs your calculations and highlights needed forms and schedules.

You can buy your own software or you can choose a tax preparer who is an authorized IRS e-file provider.

You may even be eligible to electronically file your federal returns for free through an IRS partner. And signing your return is simple and electronic. You can choose your own 5-digit personal identification number, or pin, to sign your return. For additional information, go to irs.gov/smallbiz with a "z" and go to the Preparing Your Taxes section and choose employment taxes.

Customize this Lesson for your Business

Now, we have some questions and your answers will help us customize a segment for you.

Please answer the following questions as they pertain to you and your business.

How is your business organized?

Choose one now from the selections on your screen.

Is it a sole proprietor, a partnership, a corporation, charity, or non-profit?

Sole Proprietor

As a self-employed sole proprietor when you do file your form 1040 electronically you'll complete a schedule C to report your business income and expenses.

Schedule C is included in the Form 1040 software package you purchased.

So there's no need to purchase additional business tax software.

This software does all of the math and it even calculates depreciation for you.

And if you use a tax preparer their software can take care of everything too.

Partnership

Large partnerships of over 100 partners are required to file electronically.

All other partnerships, however, may choose to voluntarily file their Form 1065 U.S. Return of Partnership Income, electronically, regardless of the number of partners.

A complete list of approved IRS e-file for business providers who offer the Form 1065 e-file product can be found at www.irs.gov.

Just click on the area for "File" and go to the section for "Business & Self-Employed".

There you will find more information, as well as links to companies' websites.

You may be able to enter your return information online using software provided by the Form 1065 e-file provider of your choice.

The provider will then transmit your Form 1065 and Schedule K-1, Partner's Share of Income, Deductions, Credits, etc. to the IRS.

Corporation

(Music playing) Corporations can electronically file Form 1120 U.S. Corporation Income Tax Return, Form 1120-F U.S. Income Tax Return of a Foreign Corporation and Form 1120-S U.S. Income Tax Return for an S Corporation, as well as associated forms and schedules.

Any business taxpayer who files these forms, may electronically file their return through an authorized IRS e-file provider.

A listing of 1120 Return e-file approved providers is available at www.irs.gov If you are a corporate filer, who would like to participate in 1120, 1120F, or 1120S e-file, talk to your tax preparer to see if they offer it to their clients.

Some corporations are required to file electronically.

Those corporations with $10 million or more in total assets, and that file 250 or more returns a year, are required to electronically file their Form 1120, 1120F, and 1120S.

The total number of returns is determined by aggregating all returns regardless of type, that are required to be filed over the calendar year including income tax returns.

Returns required under Section 6033 of the Internal Revenue Code.

information returns, excise tax returns, and employment tax returns. 

Charity or Non-profit

[music playing] Charities and non-profits can electronically file the following forms through an IRS authorized e-file provider: Form 990, Return of Organization Exempt from Income Tax.

Form 990 EZ, the short form.

Form 1120-POL, US Income Tax Return for Certain Political Organizations.

Form 8868, Application for Extension of Time to File an Exempt to Organization Return.

Form 990-PF, Return of Private Foundation and Form 990-N.

Most small tax-exempt organizations whose annual gross receipts are normally $50,000 or less are required to electronically submit Form 990N, also known as the e-Postcard unless they choose to file a complete Form 990 or Form 990EZ.

To complete Form 990N go to irs.gov/990n and follow the directions to register, create, and send your e-Postcard.

Any exempt organization, may electronically file their return through an approved IRS e-file for business provider.

You can access the continuously updated approved providers at www.irs.gov.

Your organization may even be eligible to electronically file the 990 EZ for free through an IRS partner.

If you're a non-profit who would like to participate in 990 e-file, please talk to your tax preparer to see if they offer electronic filing to their clients.

You can find additional information about electronic filing for charities and nonprofits at www.irs.gov.

It is under the charities and nonprofit section.

Additionally, electronic filing of employment returns is available at irs.gov/businesses.

Look for the employment taxes section.

[END]



 

 










Do you pay your taxes electronically?

[music playing] Now, do you pay your taxes electronically?

[silence]

Benefits of Paying Electronically

[Music playing] There are two ways to pay electronically.

Electronic Funds Withdraw, also known as EFW, and the Electronic Federal Tax Payment System, also known as EFTPS.

Electronic Funds Withdrawal

EFW is a way for you to pay money you owe when you file your taxes.

When you use EFW, you authorize the US Department of Treasury, through a treasury financial agent, to transfer money from your bank account to the Treasury account.

You enter your bank routing number, your bank account number, and the account type such as checking or savings, that you want the payment withdrawn from.

This is instantaneous, and there is no charge, but make sure you check with your financial institution about any fees, it may charge.

The payment date is the same as the date the balance due return is filed, and the funds are withdrawn in a single transaction, not in installments.

You can call the IRS e-file Payment Inquiry and Cancellation Service toll free at 1-888-353-4537 to inquire about payments.

Wait seven to ten days after your return was accepted before making inquiries.

Contact the IRS e-Help Desk immediately at 1-866-255-0654 if there is an error in the amount withdrawn.

Additionally, www.irs.gov/payments provides detailed information on electronic payment of taxes.

 

Electronic Filing Tax Payment System (EFTPS)

More than 12 million taxpayers are currently enrolled in the Electronic Filing Tax Payment System, and it is especially useful to business taxpayers with employees because it makes it easy for them to make deposits of withheld employee income and payroll taxes. Also, you can use EFTPS to pay your own quarterly estimated taxes.

In addition, EFTPS is safe, secure and private. It is also available 24/7. You have the ability to schedule payments when you want and you'll receive immediate confirmation of every transaction. Also, you can check up to 16 months of your EFTPS payment history online or by calling EFTPS customer service. You have two options for enrolling in EFTPS, and both are free. Online enrollment is available at www.eftps.gov. You will receive your Personal Identification Number, or PIN, in the mail within five to seven business days.

If you would like to enroll by mail, you can call EFTPS at 1-888-725-7879, Monday - Friday 9 a.m. to 6 p.m. ET and request the enrollment form by mail. You will then receive your PIN within seven business days after your completed form is received by EFTPS. As soon as you receive your PIN, you can begin scheduling payments. If you use eftps.gov, follow the prompts to set your internet password. If you wish to schedule payments by phone, just call 1-800-555-3453.

Also, if you receive a pre-enrollment letter from EFTPS, you can activate your enrollment by calling the same number. You'll need your financial institution's routing number and your account number. 

EFTPS Payment Methods

[Music playing] There are two primary EFTPS payment methods for business owners.

EFTPS direct and EFTPS through a financial institution.

EFTPS Direct is an electronic payment method that allows you to access EFTPS directly, either by phone or online to pay your taxes.

Make sure that you have your PIN and EIN or SSN.

You will be prompted for any other information necessary to complete your tax payment as you go along.

You'll need to submit your tax payment information by 8 P.M. Eastern Time at least one day prior to your due date at EFTPS.gov or check the EFTPS website for the number to call for payment.

After submitting your information, you will immediately receive an electronic funds transfer acknowledgement number to keep for your records.

If you want to cancel a payment you must do so by 11:59 P.M. Eastern Time at least two business days before the scheduled date.

EFTPS will then debit your designated bank account on the date that you schedule.

Your tax data will be reported to the IRS and your records will be updated automatically.

You may check the status and history of any payment you made using EFTPS in the last 16 months at www.EFTPS.gov In the second method, EFTPS through a financial institution, you instruct your financial institution to electronically move funds from your account to the Treasury account.

Not all financial institutions, however, offer this service, so before selecting this option check with your bank to see if they offer this service, how much it costs and if you're eligible to use it. Remember it's your responsibility to initiate payments or to authorize a trusted third party such as a tax professional or payroll service to initiate the payment for you. If you choose to allow your payroll company to make tax payments on your behalf, check with them for specific fees, deadlines and instructions for enrollment in EFTPS.

If your payroll company is not making all of the tax payments through EFTPS, you will need to enroll in EFTPS to make those payments.

Even if you do enroll in a payroll company to pay all of your taxes, it is still a good idea to enroll in EFTPS separately.

This allows you to check on and ensure that your payroll company is making the payments on your behalf.

It also provides flexibility if you ever need to change payroll companies in the future.

For more information on EFTPS go to www.irs.gov and click on the EFTPS logo or go directly to the EFTPS website at www.eftps.gov.

And don't forget to review IRS Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started.

Summary

[Music Playing] Depending on how you answer the questions at the beginning of the workshop, you've learned quite a lot about filing and paying federal income taxes electronically.

We hope we've given you some very convincing reasons to consider filing and paying electronically.

If you're an employer, please join us for the workshop about filing and paying your employment taxes electronically.

We hope you'll take advantage of our IRS e-file and e-pay options.

You now know that e-file and e-pay streamline the tax process and make things easier for you.

Thank you for joining us for this workshop.

Best wishes for your business.

Resourse: https://www.irsvideos.gov/Business/SBTW/Lesson3

 

When an IRS letter arrives, taxpayers don’t need to panic, but they do need to read it

IRS Tax Tip 2023-55, April 24, 2023



Getting a letter from the IRS can make some taxpayers nervous – but there's no need to panic. The IRS sends notices and letters when it needs to ask a question about a taxpayer's tax return, let them know about a change to their account or request a payment.

When an IRS letter or notice arrives in the mail, here's what taxpayers should do:

Read the letter carefully. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes any steps the taxpayer needs to take. A notice may reference changes to a taxpayer's account, taxes owed, a payment request or a specific issue on a tax return. Taking prompt action could minimize additional interest and penalty charges.

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. Typically, a taxpayer will need to act only if they don't agree with the information, if the IRS asked for more information or if they have a balance due.

Take any requested action, including making a payment. The IRS and authorized private debt collection agencies do send letters by mail. Taxpayers can also view digital copies of select IRS notices by logging into their IRS Online Account. The IRS offers several options to help taxpayers who are struggling to pay a tax bill.



 

 








Reply only if instructed to do so. Taxpayers don't need to reply to a notice unless specifically told to do so. There is usually no need to call the IRS. If a taxpayer does need to call the IRS, they should use the number in the upper right-hand corner of the notice and have a copy of their tax return and letter.

Let the IRS know of a disputed notice. If a taxpayer doesn't agree with the IRS, they should follow the instructions in the notice to dispute what the notice says. The taxpayer should include information and documents for the IRS to review when considering the dispute.

Keep the letter or notice for their records. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when the IRS takes action on a taxpayer's account. Taxpayers should keep records for three years from the date they filed the tax return.

Watch for 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 whether they owe money to the IRS can view their tax account information on IRS.gov.

More information:


Understanding Your IRS Notice or Letter
Tax Scams/Consumer Alerts

Resource: https://www.irs.gov/newsroom/when-an-irs-letter-arrives-taxpayers-dont-need-to-panic-but-they-do-need-to-read-it
 

IRS YouTube Videos


Estimated Tax Payments | ASL


IR-2023-78, April 12, 2023

WASHINGTON — The Internal Revenue Service today reminded people that Tax Day, April 18, is also the deadline for first quarter estimated tax payments for tax year 2023.

These payments are normally made by self-employed individuals, retirees, investors, businesses, corporations and others that do not have taxes withheld or employees that don't have enough taxes withheld by their employers throughout the year.

Income taxes are a pay-as-you-go process. This means, by law, taxes must be paid as income is earned or received during the year. Most people pay their taxes through withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation.

Most often, those who are self-employed or in the gig economy need to make estimated tax payments. Similarly, investors, retirees and others often need to make these payments because a substantial portion of their income is not subject to withholding.

Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying quarterly estimated taxes will usually lessen and may even eliminate any penalties.

Exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers and fishers, those who recently became disabled, recent retirees, those who receive income unevenly during the year and casualty and disaster victims.

Due to recent disasters, eligible taxpayers in California, Alabama and Georgia, for example, have until Oct. 16, 2023, to make 2023 estimated tax payments, normally due on April 18, June 15 and Sept. 15. People in other states may have extended deadlines as well; a full list is available on the Tax Relief in Disaster Situations.

 

 






How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically.

The best way to make a payment is through IRS online account. There taxpayers can see their payment history, any pending payments and other useful tax information. Taxpayers can make an estimated tax payment by using IRS Direct Pay; Debit Card, Credit Card or Digital Wallet; or the Treasury Department's Electronic Federal Tax Payment System (EFTPS).

For information on other payment options, visit IRS.gov/payments. If paying by check, taxpayers should be sure to make the check payable to the "United States Treasury."

Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.

Tax Withholding Estimator

The IRS urges people to use its Tax Withholding Estimator tool to help ensure the right amount of tax is withheld from their paychecks.

Checking taxes withheld periodically helps to protect against having too little tax withheld and possibly facing an unexpected tax bill or penalty at tax time. It also allows people to check taxes withheld up front, resulting in bigger paychecks throughout the year and likely a smaller refund at tax time.

IRS.gov assistance 24/7

Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics and Frequently Asked Questions to get answers to common questions.

The IRS is continuing to expand ways to communicate to taxpayers who prefer to get information in other languages. The IRS has posted translated tax resources in 20 other languages on IRS.gov. For more information, see We Speak Your Language.

US TAX, U.S. TAX
Resource:https://www.irs.gov/newsroom/irs-reminds-taxpayers-of-april-estimated-tax-payment-deadline

IRS Tax Tip 2023-48, April 11, 2023

When a tax return has errors, like typos or math mistakes, it can lead to longer processing times and frustration for taxpayers. Many common errors are easy to avoid by carefully reviewing the tax return.

Before filing their tax return, taxpayers should review their return for a few common issues

Incorrect filing status

If taxpayers are unsure about their filing status, the Interactive Tax Assistant on IRS.gov can help them choose the correct status, especially if more than one filing status applies. Tax software, including IRS Free File, also helps prevent mistakes when selecting a tax return filing status.

Errors in names, birth dates and Social Security numbers

Taxpayers must correctly list the name, date of birth and Social Security number for each person they claim as a dependent on their individual income tax return. They should enter each SSN and name on a tax return exactly as it's printed on the Social Security card.

If a dependent or spouse does not have a Social Security number and isn't eligible to get one, taxpayers can apply for an Individual Tax Identification Number and list that instead.








Not answering the digital assets question

Forms 1040 and 1040-SR for tax year 2022 ask whether, at any time during 2022, the taxpayer received, sold, exchanged, gifted or otherwise disposed of a digital asset or financial interest in any digital asset. Taxpayers must complete this field by checking either "Yes" or "No."

Incorrect routing and account numbers

Taxpayers can request direct deposit of a federal refund into one, two or even three accounts. They should make sure the financial institution routing and account numbers entered on the return are correct. Incorrect numbers can delay a refund or deposit it into the wrong account. Taxpayers should also make sure the name on the account matches the name on the tax return.

Taxpayers can also use their refund to purchase U.S. Savings Bonds.

Not signing and dating the return

If filing a joint return, both spouses must sign and date the return. When taxpayers are self-preparing their taxes and filing electronically, they must sign and validate their electronic tax return by entering their prior year's adjusted gross income (AGI). Taxpayers can review Validating Your Electronically Filed Tax Return if they have questions.

 


Resource: https://www.irs.gov/newsroom/common-errors-on-a-tax-return-can-lead-to-longer-processing-times

IR-2023-76, April 11, 2023

WASHINGTON ― With the April 18 deadline quickly approaching, the Internal Revenue Service wants to debunk common myths with facts about filing taxes, finding refund information and adjusting withholding.

The IRS has a solid tax season underway as the agency continues to process 2022 tax returns and deliver refunds, with nine out of 10 refunds issued in less than 21 days. As of March 31, the IRS sent out almost 63 million refunds worth over $183 billion. This year's average refund so far is $2,910.

Filing myths and facts

Myth: Taxpayers don't need to report income if they didn't receive a Form 1099-K this year.

Fact: All income must be reported unless it's excluded by law. This is true whether or not taxpayers receive a Form 1099-K, or other reporting forms. It is important to report all income to avoid receiving a notice or a bill from the IRS. This includes income from:


Goods created and sold on online platforms.
Investment income.
Part-time or seasonal work.
Self-employment or other business activities.
Services provided through mobile apps.


Money received as a gift or for reimbursement does not require a Form 1099-K. Taxpayers can minimize the chance of receiving one of these forms in error by asking friends or family members to correctly designate those types of electronic payments as a non-business-related transaction when possible. Taxpayers can learn more at Form 1099-K Frequently Asked QuestionsPDF. The IRS will continue to share information about changes to 1099-K reporting for tax year 2023 that will be in effect for the 2024 tax season.

Myth: If a taxpayer requests an extension, they don't need to do anything until Oct. 16.

Fact: It's important to remember that an extension to file is not an extension to pay any tax due. Tax balances are still due on April 18. Taxpayers who request a six-month extension to file their taxes have until Oct. 16, 2023, to file their 2022 federal income tax return. If a taxpayer requests an extension, the IRS encourages them to file their income tax return when they're ready instead of waiting until the Oct. 16 extension deadline.

Any taxpayer, regardless of income, can request an extension to file using IRS Free File at IRS.gov.

If taxpayers are in an area impacted by a FEMA declared disaster, they should check Tax Relief in Disaster Situations to get the latest updates on any postponed deadlines.

Refund myths and facts

Myth: Calling or visiting the IRS in person is the best way to speed up a refund.

Fact: The quickest and best way to check the status of a refund is through the Where's My Refund? tool at IRS.gov or via the IRS2Go mobile app. Although some taxpayers mistakenly believe speaking with the IRS by phone or visiting in-person at an IRS Taxpayer Assistance Center will speed up their tax refund, Where's My Refund? has the most up to date information available about a refund. Those taxpayers with limited internet access can reach Where's My Refund? by calling the automated refund line at 800-829-1954. Taxpayers should call the IRS tax help line (800-829-1040) about refund status only if  Where's My Refund? says to do so.








Myth: Where's My Refund? isn't accurate because there's no deposit date or the refund amount is less than expected.

Fact: The IRS generally issues most refunds in less than 21 days, but it is possible a refund may take longer for various reasons, including if a return is incomplete or needs additional review. This delay could also be caused by transposed numbers or when a tax return is affected by identity theft or fraud. The IRS encourages taxpayers to use the Where's My Refund? tool to check the status of a refund daily. The system generally only updates data once a day – usually overnight.

There are different factors that could cause a tax refund to be smaller or larger than expected. Sometimes it is due to Child Tax Credit amounts, delinquent taxes or past due child support. The IRS will mail taxpayers a letter that explains if these adjustments have been made. The Department of Treasury's Bureau of the Fiscal Service has more information on potential reduced refunds.

Taxpayers should only call the IRS tax help line to talk to a representative if it has been more than 21 days since their tax return was e-filed, or more than six weeks since mailing their return.

Myth: Tax transcripts are a secret way to get a refund deposit date.

Fact: Ordering a tax transcript will not help taxpayers understand the timing of their tax refund, nor will it speed up refund processing. Transcripts are designed to help verify past income and tax filing status for various loan applications and to help with tax preparation. The Where's My Refund? tool remains the fastest and most accurate way to check refund status.

Withholding myth and facts

Myth: Taxpayers don't need to adjust withholding for 2023 if a refund was received this year.

Fact: Taxpayers should frequently check withholding and adjust accordingly. For taxpayers who receive a paycheck from an employer, withholding is the amount of federal income tax withheld from the paycheck. Adjusting tax withholding with an employer is easy and using the Tax Withholding Estimator tool on IRS.gov can help taxpayers determine if they're withholding the right amount.

Taxpayers should also check withholding when there's a change in jobs, income or other life events like marriage or divorce, childbirth, an adoption or home purchase.

The IRS encourages taxpayers to always find the most accurate and up to date information at IRS.gov.

To avoid other common misconceptions about taxes, the IRS also reminds taxpayers to visit the Dirty Dozen tax scams for 2023.


Resource: https://www.irs.gov/newsroom/irs-never-mind-the-myths-find-filing-season-facts-at-irsgov

IR-2023-77, April 11, 2023

WASHINGTON — The Internal Revenue Service said today that taxpayers who filed their federal income taxes early in this year's filing season and reported certain state 2022 tax refunds as taxable income should consider filing an amended return.

On Feb. 10, 2023, the IRS provided details clarifying the federal tax status involving special payments made to taxpayers by 21 states in 2022. During a review, the IRS determined that in the interest of sound tax administration and other factors, taxpayers in many states did not need to report these payments on their 2022 tax returns. Consequently, the IRS will not challenge the taxability of state payments related to general welfare and disaster relief.

This means people in the following states don't need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is in this group as well, but the determination applies only to the special supplemental Energy Relief Payment received.

Taxpayers can see a listing of individual states and the federal tax treatment of their special state refunds or rebates listed on this State Payments chart.








In addition, many people in Georgia, Massachusetts, South Carolina, and Virginia will not include special state 2022 tax refunds as income for federal tax purposes if they meet certain requirements. For these individuals, state payments will not be included for federal tax purposes if the payment is a refund of state taxes paid and the recipient either claimed the standard deduction for tax year 2022 or itemized their tax year 2022 deductions but did not receive a tax benefit.

Taxpayers who filed before Feb. 10 in these areas and meet these requirements should check their tax return to make sure they paid tax on a state refund before filing an amended return. In addition, taxpayers in this situation who used a tax professional can consult with them to determine whether an amended return is necessary.

If an amended return is needed, taxpayers who submitted their original 2022 tax return electronically can also file their amended return electronically and may select direct deposit for any resulting refund. Filing electronically cuts out the mail time and including direct deposit information on an electronically submitted form provides a convenient and secure way to receive refunds faster.

Taxpayers also have the option to submit a paper version of the Form 1040-X, Amended U.S Individual Income Tax Return, and receive a paper check. They should follow the instructions for preparing the paper form, but they should mail it to:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0052

Direct deposit is not available on amended returns submitted on paper.

No matter how a taxpayer files the amended return, they can still use the Where's My Amended Return? online tool to check its status.

More information


Tax Topic 308, Amended Returns
Amended Return Frequently Asked Questions


Resource: https://www.irs.gov/newsroom/irs-early-filers-who-reported-certain-state-tax-refunds-as-taxable-should-consider-filing-amended-returns

IRS Tax Tip 2023-42, March 30, 2023

It's important for taxpayers to file a federal tax return that has a complete and correct reporting of their income – which may mean including income from sources other than regular wages from an employer. Income from gig economy activities and tip income are two common sources of such income.

Gig economy earnings are taxable

The gig economy is activity where people earn income providing on-demand work, services or goods, such as selling goods online, driving a car for deliveries or renting out property. This income is often received through a digital platform like an app or website.

Taxpayers must report income earned from the gig economy on a tax return, even if the income is:


From part-time, temporary or side work.
Paid in any form, including cash, property, goods or digital assets
Not reported on an information return form like a Form 1099-K, 1099-MISC, W-2 or other income statement.


For more information taxpayers should visit the gig economy tax center page of IRS.gov.








Reporting service industry tips

People who work in restaurants, salons, hotels and similar service industries often receive tips for the customer service they provide. Tips are generally taxable income, and it's important for people working in these areas who regularly receive tips to understand the requirements on reporting tips.

Tips are optional cash or noncash payments customers make to employees.


Cash tips include those received directly from customers, electronically paid tips distributed to the employee by their employer and tips received from other employees under any tip-sharing arrangement. All cash tips must be reported to the employer, who must include them on the employee's Form W-2, Wage and Tax Statement.



Noncash tips are those of value received in any medium other than cash, such as: tickets, passes or other goods or commodities a customer gives the employee. Employees don't report noncash tips to their employer, but they must report the value of them on a tax return.



Any cash tips the employee didn't report to the employer must be reported separately on Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to include as additional wages with their tax return. The employee must also pay the employee share of Social Security and Medicare tax owed on those tips.


Employees don't have to report tip amounts of less than $20 per month per employer. For larger amounts, employees must report tips to the employer by the 10th of the month following the month they received the tips.

The employee can use Form 4070, Employee's Report of Tips to Employer, available in Publication 1244, Employee's Daily Record of Tips and Report to Employer, or they can use an employer-provided form or other electronic system used by their employer.

For more information on how to report tips taxpayers should review the Tip Recordkeeping and Reporting page of IRS.gov
Share this tip on social media -- #IRSTaxTip: All income is taxable, including gig economy and tip income. http://ow.ly/XjaX50NuHip


Resource: https://www.irs.gov/newsroom/all-income-is-taxable-including-gig-economy-and-tip-income

Issue Number:    IR-2023-56

Inside This Issue

WASHINGTON – The Internal Revenue Service reaches out in multiple ways to educate taxpayers while ensuring it fairly enforces the nation’s tax laws. There are important factors to keep in mind about when the IRS may initiate direct contact with a taxpayer. 
For people who owe taxes, the IRS provides many different payment options to help taxpayers meet their obligations. Taxpayers can avoid late filing and interest penalties by submitting their tax return and using one of these options to pay what they owe by April 18. 
For those struggling to pay in full by the deadline, the IRS offers several different options. For example, most individual taxpayers qualify for a payment plan and can use the IRS’ Online Payment Agreement to set up a payment plan (including an installment agreement) to pay off an outstanding balance over time. 
People encountering a tax issue, such as an unpaid bill or a question about their taxes, will typically receive multiple letters in the mail from the IRS. People are encouraged to respond to these letters quickly, since interest and penalties can compound quickly.
Most IRS contacts with taxpayers are through regular mail delivered by the United States Postal Service. However, there are limited circumstances when the IRS will come to a home or business as part of a collection investigation, an audit or an ongoing criminal investigation. 
IRS in-person visits
IRS employees that may make face-to-face visits outside an IRS office include revenue officers, revenue agents and IRS Criminal Investigation special agents. IRS employees are trained to respect taxpayer rights, and there are some important facts to keep in mind about the different types of visits. 
Revenue officers are IRS civil enforcement employees who work to resolve compliance issues such as unfiled returns and/or taxes owed – all situations where the taxpayer typically would have received multiple IRS letters in advance. 
These in-person visits may be unscheduled and can be to share information, inform taxpayers of their tax filing and payment obligations and work with taxpayers to resolve their tax issues and bring them into compliance. 
They conduct interviews to gather financial information and provide taxpayers with the necessary steps to become and remain compliant with the tax laws. 






Revenue agents usually conduct in-person field audits that are normally at the taxpayer's home, place of business or accountant's office where the organization’s financial books and records are located. Revenue agents will make contact via mail or phone prior to any visit. 
Revenue officers and agents always carry two forms of official credentials with a serial number and their photo. Taxpayers have the right to see each of these credentials and can also request an additional method to verify their identification. 
Remember, taxpayers should know they have a tax issue before these visits occur since multiple mailings occur. 
More information on identifying legitimate IRS representatives and how to report scams can be found at IRS.gov.  
IRS-CI special agents investigate potential criminal violations of the Internal Revenue Code and related financial crimes. IRS-CI’s investigative jurisdiction includes tax, money laundering and Bank Secrecy Act laws. IRS-CI special agents always present their law enforcement credentials when conducting investigations. 
IRS-CI may visit a taxpayer’s home or business unannounced during an investigation. However, they will not demand any sort of payment. Learn more about IRS-CI on IRS.gov. 
How to report impersonation scams
If a person doesn’t have a previously known tax issue and suspects someone is trying to impersonate an IRS employee, there are a variety of options to report phone, email and other impersonation scams: 


Report impersonation scams to the Treasury Inspector General for Tax Administration on the IRS Impersonation Scam Reporting Taxpayers can also call 800-366-4484 to report impersonation scams. 



Protect your community by reporting fraud, scams and bad business practices. Report phone scams to the Federal Trade Commission at Report Fraud FTC. 



Report an unsolicited email claiming to be from the IRS or an IRS-related system like the Electronic Federal Tax Payment System to the IRS at phishing@irs.gov. 



For a comprehensive listing of recent tax scams, consumer alerts and how to report them, visit Tax Scams/Consumer Alerts.







Resource: https://www.irs.gov/newsroom/important-details-to-understand-when-the-irs-might-contact-a-taxpayer

IRS Tax Tip 2023-37, March 22, 2023

Form 1099-K, Payment Card and Third Party Network Transactions, is an IRS form that is used to report certain payment transactions.

If taxpayers receive a Form 1099-K, they should use that information with their other tax records to determine their correct tax liability. Taxpayers must report all their income on their tax return unless it's excluded by law, regardless of whether they receive a Form 1099-K.

Taxpayers will receive Form 1099-K for business transactions, including income from:


A business the taxpayer owns.
Self-employment.
Activities in the gig economy.
The sale of personal items and assets.


Money received as a gift or for reimbursement does not require a 1099-K. Taxpayers can minimize the chance of an error by asking friends or family members to correctly designate that type of payment as a non-business-related transaction. The taxpayer should also make a note of what the payment was for and who sent it. Good recordkeeping is key.






What to do when a Form 1099-K is incorrect

Some taxpayers may have received a Form 1099-K for the sale of personal items, or Form 1099-K may have been issued in error – such as for transactions between friends and family, or expense sharing.

If the information is incorrect on the Form 1099-K, taxpayers should contact the issuer immediately. The issuing organization's name appears in the upper left corner on the form. Taxpayers should keep a copy of all correspondence with the issuer for their records.

If a taxpayer receives a Form 1099-K in error and the taxpayer cannot obtain a corrected Form 1099-K, the taxpayers should follow the IRS' updated guidance at Understanding Your Form 1099-K.

1099-K reporting threshold for tax year 2023

The American Rescue Plan of 2021 changed the reporting threshold requirement for payment apps, also known as third-party settlement organizations. The IRS announced that the new Form 1099-K reporting threshold will start in tax year 2023.


The old threshold was $20,000 and 200 transactions per year. This applies to tax year 2022 and prior years.
The new threshold is more than $600. This applies to tax year 2023 and future years.


The threshold change means some people may receive a Form 1099-K who have not received one in the past. There are no changes to what counts as income or how tax is calculated.

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Resource: https://www.irs.gov/newsroom/what-taxpayers-should-do-when-they-receive-form-1099-k

Issue Number:    2023-003

Inside This Issue


2020 Individual Information Returns, Line Item Estimates (Publication 5385)
High-Income Tax Returns, Tax Year 2019
Noncash Charitable Contributions, Tax Year 2020
Notice of Data Revision
Notice of Revised Release Dates


1.  2020 Individual Information Returns, Line Item Estimates (Publication 5385)


The 2020 Statistics of Income (SOI) Publication 5385, Individual Information Returns, Line Item Estimates, is now available on SOI's Tax Stats webpage. The publication provides estimates of frequencies and amounts of the entries on the lines of the forms filed for selected information returns that accompany the 2020 SOI Individual Complete Report weighted file. The estimates are based on returns filed in Processing Year 2021 that were sampled statistically and then weighted to estimate the entire 2020 Tax Year.

  2.  High-Income Tax Returns, Tax Year 2019


Detailed data on individual income tax returns with adjusted gross income or expanded income greater than $200,000 are now available on SOI's Tax Stats webpage. This annual study also looks at high-income, nontaxable returns (HINTs) and the reason for nontaxability. For 2019, there were just under 9.2 million individual income tax returns with an expanded income of $200,000 or more, accounting for 5.8 percent of all returns for the year. Of these, 7,391 returns had no worldwide income tax liability. This was a 2.6-percent increase over the number of returns with no worldwide income tax liability for 2018. It was only the third increase in the past 10 years, and well below the peak of 19,551 returns for 2009.


  3.  Noncash Charitable Contributions, Tax Year 2020 

 




Five tables presenting data for all individual income tax returns that reported noncash charitable contributions for Tax Year 2020 on Noncash Charitable Contributions (Form 8283) are now available on SOI's Tax Stats webpage. These tables are also based on data reported on U.S. Individual Income Tax Return (Form 1040) and Itemized Deductions (Schedule A). The data detail the number of returns, number of donations, donor's cost, fair market value, and amount carried to Schedule A. Data are categorized by donation type, donor type, size of adjusted gross income, and donor age.

 4.  Notice of Data Revision


Selected items on the Tax Year 2019 Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., in the 2019 Individual Information Returns, Line Item Estimates (Publication 5385), have been updated. Some data items were placed on the wrong lines. In the revision, they have been moved to the correct lines and are now available on SOI's Tax Stats webpage.

5.  Notice of Revised Release Dates



April 27: Tax-Exempt Organizations Unrelated Business Income Tax, Tax Year 2017
April 27: Individuals, Migration flow data, 2020-2021
April 27: Individual Retirement Arrangement (IRA) Information, Tax Year 2020
May 18: Individuals, Advance Data, Tax Year 2021



For more information on Federal Taxes please visit IRS.gov.

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Resource: https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates-publication-4801
https://www.irs.gov/statistics/soi-tax-stats-individual-high-income-tax-returns
https://www.irs.gov/statistics/soi-tax-stats-individual-noncash-charitable-contributions
https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates-publication-4801
https://www.irs.gov/statistics/soi-tax-stats-whats-new

IRS Tax Tip 2023-33, March 14, 2023

With the 2023 tax filing season in full swing, taxpayers should be sure to visit IRS.gov for updated resources and tools to help with their 2022 tax return.

Things to know before filing


Taxpayers should wait to file until they receive all their proper tax documents, or they risk making a mistake that could cause delays.
They should also review their income documents carefully. If any of the information is inaccurate or missing, taxpayers should contact the payer right away for a correction or to ensure the issuer has their current mailing or email address.
Creating an IRS Online Account can help taxpayers securely access information about their federal tax account, including payments, tax records and more.
Organized tax records make preparing a complete and accurate tax return easier and may help taxpayers find overlooked deductions or credits.
Taxpayers with an Individual Taxpayer Identification Number or ITIN may need to renew it if it's expired and is needed on a U.S. federal tax return. If they don't renew an expiring or expired ITIN, the IRS can still accept their return, but it may delay processing or credits owed.


 




Taxpayers should visit IRS.gov for information and answers to common tax questions


The IRS Interactive Tax Assistant helps taxpayers find answers tax questions based on their specific circumstances. Taxpayers can use it to determine if they must file a tax return, their filing status, if they can claim a dependent, if the type of income they have is taxable, if they're eligible to claim a credit or if they can deduct expenses.
IRS Tax Topics contain general individual and business tax information. If taxpayers don't find the answers to their question, they can check Frequently Asked Questions.
The Let Us Help You page lists many other online resources.
Taxpayers can find IRS forms, instructions and publications they need to file tax return at Forms, Instructions & Publications.
Once a taxpayer has filed their return, they can track the status of their return with the Where's My Refund? tool at IRS.gov/wheresmyrefund.


Subscribe to IRS Tax Tips



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Resource:https://www.irs.gov/newsroom/some-things-taxpayers-getting-ready-to-file-should-know

IR-2023-44, March 9, 2023

WASHINGTON ― With the tax deadline approaching, the IRS reminded taxpayers they can avoid late filing and interest penalties by submitting their tax return and any payments due by April 18. For struggling taxpayers who can't pay by the deadline, the IRS offers several different options to help.

The IRS also provides multiple ways for people to file for an extension, get information to help file their tax return and learn about payment options if they have trouble paying by the April 18 deadline.

Eligible individuals and families who earned $73,000 or less in 2022 can use IRS Free File, available only on IRS.gov, to electronically file their taxes. All taxpayers, regardless of income, who need more time to file a return can use IRS Free File as an easy and quick way to electronically file for a six-month extension before April 18, 2023. An extension will help to avoid penalties and interest for failing to file on time, and gives taxpayers until Oct. 16, 2023, to file. However, they still must pay what they owe by the April 18 deadline.

Except for eligible victims of recent natural disasters who have until Oct. 16 to make various tax payments, taxpayers who can't pay the full amount of taxes they owe by April 18 should file and pay what they can to reduce total penalties and interest.

There are several ways to make electronic payments, and there are options for a payment plan or agreement.

IRS Online Account

An IRS Online Account provides access to important information when preparing to file a tax return, pay a balance or follow up on notices. Taxpayers can view their:


Adjusted Gross Income.
Payment history and any scheduled or pending payments.
Payment plan details.
Digital copies of select notices from the IRS.


Taxpayers can also use their Online Account to securely make a same-day payment for an outstanding 2022 tax balance, pay quarterly estimated taxes for the 2023 tax season or request an extension to file a 2022 return.

Interest and a late payment penalty will apply to any payments made after April 18. Making a payment, even a partial payment, will help limit penalty and interest charges.

Other options to pay electronically

Direct Pay, available only on IRS.gov, is the fastest and easiest way to make a one-time payment without signing into an IRS Online Account.


Direct Pay: Direct Pay is free and allows taxpayers to securely pay their federal taxes directly from their checking or savings account without any fees or preregistration. Taxpayers can schedule payments up to 365 days in advance. After submitting a payment through Direct Pay, taxpayers will receive immediate confirmation.
 
Electronic Funds Withdrawal (EFW): This option allows taxpayers to file and pay electronically from their bank account when using tax preparation software or a tax professional. This option is free and only available when electronically filing a tax return.
 
Electronic Federal Tax Payment System: This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll and for more information, taxpayers can call 800-555-4477 or visit eftps.gov.
 
Debit or credit card or digital wallet: Individuals can pay online, by phone or with a mobile device through any of the authorized payment processors. The processor charges a fee. The IRS doesn't receive any fees for these payments. Authorized card processors and phone numbers are available at IRS.gov/payments.


Other payment options:


Cash: For taxpayers who prefer to pay in cash, the IRS offers a way to pay taxes at one of its Cash Processing Company services. The IRS urges taxpayers choosing this option to start early because it involves a four-step process. Details, including answers to frequently asked questions, are at IRS.gov/paywithcash.
 
Check or money order: Payments made by check or money order should be made payable to the "United States Treasury." To help ensure that the payment gets credited promptly, taxpayers should also enclose a 2022 Form 1040-VPDF payment voucher and print the following on the front of the check or money order:

"2022 Form 1040"
Name
Address
Daytime phone number
Social Security number




For taxpayers who cannot pay in full

The IRS encourages taxpayers who cannot pay in full to pay what they can and consider a variety of payment options available for the remaining balance including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Taxpayers should act as quickly as possible: Tax bills accumulate more interest and fees the longer they remain unpaid. For all payment options, visit IRS.gov/payments.

 




Online self-service payment plans

Most individual taxpayers qualify for a payment plan and can use Online Payment Agreement to set up a payment plan (including an installment agreement) to pay off an outstanding balance over time.

Once the online application is completed, the taxpayer receives immediate notification of whether their payment plan has been approved. Taxpayers can setup a plan using the Online Payment Agreement in a matter of minutes. There's no paperwork and no need to call, write or visit the IRS. Setup fees may apply for some types of plans.

Online payment plan options for individual taxpayers include:


Short-term payment plan – The total balance owed is less than $100,000 in combined tax, penalties and interest. Additional time of up to 180 days to pay the balance in full.



Long-term payment plan (installment agreement) – The total balance owed is less than $50,000 in combined tax, penalties and interest. Pay in monthly payments for up to 72 months. Payments may be set up using direct debit (automatic bank withdraw) which eliminates the need to send in a payment each month, saving postage costs, and reducing the chance of default. For balances between $25,000 and $50,000, direct debit is required.


Qualified taxpayers with existing payment plans may be able to use the Online Payment Agreement to make changes including revising payment dates, payment amounts or bank information for payments made by direct debit. Go to Online Payment Agreement for more information.

Though interest and late-payment penalties continue to accrue on any unpaid taxes after April 18, the failure to pay the tax penalty rate is cut in half while an installment agreement is in effect. Find more information about the costs of payment plans on the IRS' Additional Information on Payment Plans webpage.

Other payment options

Taxpayers struggling to meet their tax obligation may also consider these additional payment options:


Offer in Compromise – Certain taxpayers qualify to settle their tax liabilities for less than the total amount they owe by submitting an Offer in Compromise. To help determine their eligibility, they can use the Offer in Compromise Pre-Qualifier tool. To help taxpayers prepare their own valid Offers in Compromise, the IRS created an Offer in Compromise video playlist – also available in Spanish and Simplified Chinese – that walks them through the necessary paperwork. 



Temporary delay of collection – Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves. Penalties and interest continue to accrue until the full amount is paid.



Other payment plan options – Taxpayers who do not qualify for online self-service should contact the IRS using the phone number or address on their most recent notice for other payment plan options. For individuals and out-of-business sole proprietors who are already working with IRS Campus Collection and who owe $250,000 or less, one available option is to propose a monthly payment that will pay the balance over the length of the Collection Statute (usually 10 years). These payment plans don't require a financial statement, but they do require a determination for the filing of a Notice of Federal Tax Lien still applies.


For more information about payments, see Topic No. 202, Tax Payment Options, on IRS.gov.

Taxpayer Rights

The IRS reminds taxpayers that they have rights and protections throughout the collection process. For details, see Taxpayer Bill of Rights and Publication 1, Your Rights as a TaxpayerPDF.

Taxpayers should know before they owe. The IRS encourages all taxpayers to check their withholding with the IRS Tax Withholding Estimator.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.



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Resource:https://www.irs.gov/newsroom/tax-time-guide-using-electronic-payment-and-agreement-options-for-taxpayers-who-owe-can-help-avoid-penalties-and-interest