joseph castellano

The 2018 National Small Business Week is April 29 through May 5. This is the perfect time for small business owners and the self-employed to check out many online products to help them understand their tax responsibilities.

Here are a few of the products in the spotlight for this year’s National Small Business Week:

  • Sharing Economy Tax Center.  This web page provides fast answers to tax questions and links and forms about the sharing economy. People who are involved in the sharing economy are those who use online platforms to engage in businesses, such as renting a spare bedroom, providing car rides, and providing other goods and services.
  • Self-Employed Individuals Tax Center.  The Self-Employed Individuals Tax Center is a great resource for sole proprietors and others who are in business for themselves. This site has many handy tips and references to tax rules a self-employed person may need to know. Self-employed taxpayers will find information on topics, including how to make quarterly payments and business structures.
  • Small Business and Self-Employed Tax Center.  This online information center features links to useful tools, including Small Business Taxes: The Virtual Workshop and common IRS forms with instructions. Taxpayers can find help on everything from how to get an Employer Identification Number online to how to engage with the IRS during an audit. A link to the IRS Tax Calendar for Businesses and Self-Employed also provides at-a-glance key tax dates for businesses.

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WASHINGTON — While the federal income tax-filing deadline has passed for most people, there are some taxpayers still facing tax-related issues. This includes people who still haven’t filed, people who haven’t paid their taxes or those who are waiting for their tax refund.

The IRS offers these tips for handling some typical after-tax-day issues:

Didn’t file by April 18?

There is no penalty for filing a late return after the tax deadline if a refund is due. Penalties and interest only accrue on unfiled returns if taxes are not paid by April 18. The IRS provided taxpayers an additional day to file and pay their taxes following system issues that surfaced early on the April 17 tax deadline. Anyone who did not file and owes tax should file a return as soon as they can and pay as much as possible to reduce penalties and interest. For those who qualify, IRS Free File is still available on IRS.gov through Oct. 15 to prepare and file returns electronically.

Filing soon is especially important because the late-filing penalty on unpaid taxes adds up quickly. Ordinarily, this penalty, also known as the failure-to-file penalty, is usually 5 percent for each month or part of a month that a return is late.

But if a return is filed more than 60 days after the April due date, the minimum penalty is either $210 or 100 percent of the unpaid tax, whichever is less. This means that if the tax due is $210 or less, the penalty is equal to the tax amount due. If the tax due is more than $210, the penalty is at least $210.

In some instances, a taxpayer filing after the deadline may qualify for penalty relief. If there is a good reason for filing late, be sure to attach an explanation to the return.

Alternatively, taxpayers who have a history of filing and paying on time often qualify for penalty relief. A taxpayer will usually qualify for this relief if they haven’t been assessed penalties for the past three years and meet other requirements. For more information, see the first-time penalty abatement page on IRS.gov.

“Where’s My Refund?”

The “Where’s My Refund?” tool is available on IRS.gov, IRS2Go and by phone at 800-829-1954. To use this tool, taxpayers need the primary Social Security number on the return, the filing status (Single, Married Filing Jointly, etc.) and the expected refund amount. The tool updates once daily, usually overnight, so checking more frequently will not yield different results.

Changing withholding?

Because of the far-reaching tax changes taking effect this year, the IRS urges all employees, including those with other sources of income, to perform a paycheck checkup now. Doing so now will help avoid an unexpected year-end tax bill and possibly a penalty. The easiest way to do that is to use the newly-revised Withholding Calculator, available on IRS.gov.

Owe taxes or need to make a payment?

Taxpayers who owe taxes can view their balance, pay with IRS Direct Pay, by debit or credit card or apply online for a payment plan, including an installment agreement. Before accessing their tax account online, users must authenticate their identity through the Secure Access process. Several other electronic payment options are available on IRS.gov/payments. They are secure and easy to use. Taxpayers paying electronically receive immediate confirmation when they submit their payment. Also, with Direct Pay and EFTPS, taxpayers can opt in to receive email notifications about their payments.

Need to fix an error on a return?

After filing their return, taxpayers may determine that they made an error or omitted something from their return. Usually an amended return is not necessary if a taxpayer makes a math error or neglects to attach a required form or schedule. Normally the IRS will correct the math error and notify the taxpayer by mail. Similarly, the agency will send a letter requesting any missing forms or schedules. Taxpayers can use the Interactive Tax Assistant — Should I File an Amended Return?— to help determine if they should file an amended return to correct an error or make other changes to their return.

Form 1040X, Amended U.S. Individual Income Tax Return, must be filed by paper and is available on IRS.gov/forms at any time. Those expecting a refund from their original return, should not file an amended return before the original return has been processed. File an amended tax return to change the filing status or to correct income, deductions or credits shown on the originally-filed tax return. Use “Where’s My Amended Return?” tool to track the status of an amended return. Normally, status updates are available starting three weeks after the amended return is filed. Allow up to 16 weeks for processing.

Need help responding to an IRS notice or letter?

An IRS notice or letter will explain the reason for the contact and give instructions on how to handle the issue. Most questions can be answered by visiting “Understanding Your Notice or IRS Letter” on IRS.gov. Taxpayers can call the phone number provided in the notice if they still have questions. If the issue can’t be resolved with the IRS through normal channels, contact the local Taxpayer Advocate Serviceoffice or call 877-777-4778.

Taxpayer Bill of Rights

Taxpayers have fundamental rights under the law. The Taxpayer Bill of Rights presents these rights in 10 categories. These rights protect taxpayers when they interact with the IRS. Publication 1, Your Rights as a Taxpayer, highlights these rights and the agency’s obligations to protect them.

Watch out for scams

The IRS will never make an initial, unsolicited contact via email, text or social media on filing, payment or refund issues. The IRS initiates most contacts through regular mail delivered by the United States Postal Service. Any email that appears to be from the IRS about a refund or tax problem is probably an attempt by scammers to steal personal or financial information. Forward the e-mail to phishing@irs.gov.

Taxpayers who have questions about the Tax Cuts and Jobs Act have several resources that will help answer questions. The legislation, passed in December 2017, changes many areas of the tax law. Here are some of the resources on IRS.gov that will help individual taxpayers, businesses and the tax community:

  • New Tax Reform Web Page. The IRS created the Tax Reform page to highlight what taxpayers need to know about the tax law changes and how they affect taxpayers. This page also links taxpayers and tax professionals to news releases, publications, notices, and legal guidance related to the legislation.
  • Updated Withholding Calculator. The IRS updated the Withholding Calculator to reflect the changes to the withholding tables. The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup,” which is even more important this year because of the tax law changes. The calculator helps taxpayers determine if they’re having the right amount of tax withheld from their paychecks.
  • Updated Form W-4, Employee’s Withholding Allowance Certificate. Taxpayers who determine they need to make changes to their withholding can refer to the new Form W-4, which reflects the tax law changes. Employees will submit the completed Form W-4 to their employers.
  • Frequently Asked Questions. The IRS posted new FAQs to help people understand how to use the Withholding Calculatorand the changes to the Withholding Tables.

More information about the tax law changes will be coming throughout the year. IRS.gov will be updated to reflect changes as they develop.

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WASHINGTON — With the April 17 tax deadline fast approaching, taxpayers can find most answers to their tax questions by taking advantage of the wide variety of easy-to-use online tools available on IRS.gov.

This is the eighth in a series of nine IRS news releases called the Tax Time Guide, designed to help taxpayers navigate common tax issues.

Already this year, visits to IRS.gov have jumped 21 percent over the same time last year. Join the millions of taxpayers who have discovered that the agency’s website offers the fastest way to get last-minute tax help. By taking advantage of the many online tools, taxpayers can quickly check the status of their tax refund, get answers to tax questions or prepare and file their taxes around the clock.

Taxpayers get the same answers on IRS.gov as if they’d called and spoken with an IRS representative, and they can print out the answers to keep for reference and their records. IRS information and many tools are also available in Spanish.

Below are some of the most common tax queries and the tools to find answers:

Where’s my refund?

By using the “Where’s My Refund?” tool available on IRS.gov and on the official IRS mobile app, IRS2Go, taxpayers can easily find the most up-to-date information about their tax refund. Taxpayers can start checking on the status of their return within 24 hours after the IRS acknowledges receipt of a taxpayer’s e-filed return or four weeks after the taxpayer mailed in a paper return. The system is updated daily, so there’s no need to check more often.

Free help preparing a tax return.

Through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA/TCE) programs, eligible taxpayers can get free, local, one-on-one help to prepare and file their taxes. The several thousand community-based sites are staffed by IRS trained and certified volunteers. Low- and moderate-income taxpayers and those age 60 and above can find the nearest site on IRS.gov’s VITA/TCE Site Locator.

Do it yourself for free.

Taxpayers that prefer to do their own taxes can find free tax preparation help on IRS.gov. The IRS Free File program, available only through IRS.gov, offers 12 brand-name tax preparation software packages for free to the 70 percent of taxpayers who earned $66,000 or less in 2017. The software does all the work of finding deductions, credits and exemptions for which the taxpayer qualifies. Taxpayers who earned more than $66,000 in 2017 and are comfortable preparing their own taxes can use Free File Fillable Forms. This electronic version of paper IRS tax forms is also used to file tax returns online.

Searching for a tax professional?

The searchable directory on IRS.gov helps taxpayers find a tax professional in their area. The list can be sorted by credentials and qualifications. Tax return preparers have differing levels of skills, education and expertise, so taxpayers should choose wisely and keep in mind that the taxpayer is ultimately responsible for the accuracy of their return.

Getting a tax return transcript?

Those who need a copy of their tax return can use the online tool, Get Transcript. It’s free and available on IRS.gov. Taxpayers can view, print or download their tax transcripts for the most current tax year after the IRS has processed the tax return.

Instant answers to tax law questions.

Many tax law questions can be answered quickly when using any of several tools on IRS.gov:

Need to make a payment?

IRS Direct Pay offers taxpayers the fastest and easiest way to pay what they owe. This free online system allows individuals to securely pay their tax bills or make quarterly estimated tax payments directly from checking or savings accounts without fees or pre-registration. See IRS.gov/Payments for information on this and other payment options.

Can’t pay a tax bill?

For taxpayers concerned about a tax bill they can’t pay, the Online Payment Agreement tool can help determine if they qualify for a payment plan with the IRS.

The Offer in Compromise Pre-Qualifier can help determine if a taxpayer qualifies for an Offer in Compromise. An Offer in Compromise is an agreement with the IRS that settles a person’s tax liability for less than the full amount owed.

Questions about an amended return?

The “Where’s My Amended Return?” tool provides the status of an amended tax return, Form 1040X. Taxpayers can check on the current year 1040X and up to three prior years. Allow up to three weeks after filing to check on the initial status, and up to 16 weeks for processing.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov 24 hours a day, seven days a week. No appointments required and no waiting on hold.

WASHINGTON — More than 720,000 people get plain-language IRS tax tips sent to their email inbox through a free subscription service available on IRS.gov.

These short and concise tax tips arrive one per business day and cover a wide range of topics to help people with issues pertaining to their taxes. Many tips offer information on money-saving tax credits and deductions that can be easily overlooked and could affect a taxpayer’s refund. IRS tax tips are also available in Spanish, and the IRS also offers an e-subscription service just for Spanish tax tips.

Topics for tax tips include:

  • Responding to notices
  • Beware of tax scams
  • Fastest and safest way to get refunds
  • Tax reform topics
  • Taxpayer Bill of Rights
  • Tax-time errors to avoid
  • IRS Free File
  • Helpful tips for paying taxes

Taxpayers can sign up for this free service to receive IRS tax tips automatically each day via email in English or in Spanish.

The IRS also has a number of other e-subscriptions to which taxpayers, tax professionals and others may subscribe to receive tax information via email from the IRS.

As people are filing their taxes, the IRS reminds taxpayers to hang onto their tax records. Generally, the IRS recommends keeping copies of tax returns and supporting documents at least three years. Taxpayers should keep some documents — such as those related to real estate sales — for three years after filing the return on which they reported the transaction.

Use a Tax Return to Validate Identity
Taxpayers using a tax filing software product for the first time may need their adjusted gross income amount from their prior year’s tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Those who need a copy of their tax return should check with their software provider or tax preparer first, as prior-year tax returns are available from the IRS for a fee.

Order a Transcript
Taxpayers who cannot get a copy of a prior-year return may order a tax transcript from the IRS. A transcript summarizes return information and includes AGI. They’re free and available for the most current tax year after the IRS has processed the return. People can also get them for the past three years.

The IRS reminds people ordering a transcript to plan ahead, because delivery times for online and phone orders typically take five to 10 days from the time the IRS receives the request. Taxpayers who order by mail should allow 30 days to receive transcripts and 75 days for tax returns.

There are three ways for taxpayers to order a transcript:

  • Online Using Get Transcript. They can use Get TranscriptOnline on IRS.gov to view, print or download a copy of all transcript types. Those who use it must authenticate their identity using the Secure Access process. Taxpayers who are unable to register or prefer not to use Get Transcript Online may use Get Transcript by Mail to order a tax return or account transcript type. Please allow five to 10 calendar days for delivery.
  • By phone. The number is 800-908-9946.
  • By mail. Taxpayers can complete and send either Form 4506-Tor Form 4506T-EZ to the IRS to get one by mail. They use Form 4506-T to request other tax records: tax account transcript, record of account, wage and income and verification of non-filing. These forms are available on the Forms, Instructions and Publications page on IRS.gov.

Those who need an actual copy of a tax return can get one for the current tax year and as far back as six years. The fee per copy is $50. Taxpayers can complete and mail Form 4506 to request a copy of a tax return and mail the request to the appropriate IRS office listed on the form.

If taxpayers need information to verify payments within the last 18 months or a tax amount owed, they can view their tax account.

Taxpayers who give money or goods to a charity may be able to claim a deduction on their 2017 federal tax return, which basically reduces the amount of their taxable income. Here are some important facts about charitable donations:

  • Qualified charities. To receive a deduction, taxpayers must donate to a qualified charity. To check the status of a charity, use the IRS Select Check tool. Here are examples of things that taxpayers can’t deduct:
    • Gifts to individuals
    • Donations to political organizations and candidates
  • Itemize deductions. To deduct donations, taxpayers must file Form 1040 and itemize deductions using Schedule A.
  • Benefit in return. Taxpayers can only deduct the amount of their donation that exceeds the fair market value of the benefit received. If taxpayers get something in return for their donation, they may have to reduce their deduction. Examples of benefits include merchandise, meals and tickets to events.
  • Property donation. If taxpayers give property instead of cash, they can normally only deduct the item’s fair market value. Fair market value is generally the price they’d get for the property on the open market. Used clothing and household items donated must generally be in good condition or better. Special rules apply to cars, boats and other types of property donations.
  • Form to File. Taxpayers file Form 8283 for all non-cash gifts totaling more than $500 for the year.
  • Proof of Donation. If taxpayers donated cash or goods of $250 or more, they must have a written statement from the charity. The statement must show:
    • Amount of the donation.
    • Description of any property given.
    • Whether the donor received any goods or services in exchange for the gift.

WASHINGTON – The Internal Revenue Service today advised taxpayers that in many cases they can continue to deduct interest paid on home equity loans.

Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled. The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.

New dollar limit on total qualified residence loan balance

For anyone considering taking out a mortgage, the new law imposes a lower dollar limit on mortgages qualifying for the home mortgage interest deduction. Beginning in 2018, taxpayers may only deduct interest on $750,000 of qualified residence loans. The limit is $375,000 for a married taxpayer filing a separate return. These are down from the prior limits of $1 million, or $500,000 for a married taxpayer filing a separate return.  The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer’s main home and second home.

The following examples illustrate these points.

Example 1:  In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home with a fair market value of $800,000.  In February 2018, the taxpayer takes out a $250,000 home equity loan to put an addition on the main home. Both loans are secured by the main home and the total does not exceed the cost of the home. Because the total amount of both loans does not exceed $750,000, all of the interest paid on the loans is deductible. However, if the taxpayer used the home equity loan proceeds for personal expenses, such as paying off student loans and credit cards, then the interest on the home equity loan would not be deductible.

Example 2:  In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home.  The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home.  Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would not be deductible.

Example 3:  In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home.  The loan is secured by the main home. In February 2018, the taxpayer takes out a $500,000 loan to purchase a vacation home. The loan is secured by the vacation home.  Because the total amount of both mortgages exceeds $750,000, not all of the interest paid on the mortgages is deductible. A percentage of the total interest paid is deductible (see Publication 936).

For more information about the new tax law, visit the Tax Reform page on IRS.gov.

The earned income tax credit provides a boost to workers, their families and the communities where they live. A tax credit usually means more money in the taxpayer’s pocket. Many qualified taxpayers don’t claim this credit simply because they don’t know about it. In fact, every year millions of people are newly eligible for EITC because their family or financial situation changed. Word of mouth is one way to spread information about this credit.

This credit can not only reduce the amount of taxes someone owes, it can also result in a refund. The amount of EITC taxpayers receive is based on their income, family size and filing status. The maximum amount of credit for Tax Year 2017 is:

  • $6,318 with three or more qualifying children
  • $5,616 with two qualifying children
  • $3,400 with one qualifying child
  • $510 with no qualifying children

The IRS encourages taxpayers who have claimed and benefitted from the EITC to help spread awareness about this important credit. Here are a few ways taxpayers can help their friends, family members and neighbors find out about EITC. Tell them about:

  • IRS.gov: Taxpayers who want to learn more about EITC can go to IRS.gov/eitc. They can find information about who qualifies for the credit and how to claim it.
  • Tax help in Foreign Languages: People can pass along information from IRS.gov about EITC in other languages:
  • EITC Assistant: This tool on IRS.gov, available in English or Spanish, walks people through a series of questions to find out if they qualify.
  • IRS on Social media: Share a link on Facebook or Twitter. People can follow the IRS on social media for the latest news and information about tax credits.
  • Free Tax Help from Volunteers: The IRS works with community organizations around the country to train volunteers who prepare taxes for people with low and moderate income. These volunteers can help determine if a taxpayer is eligible to claim the EITC. There are two IRS-sponsored programs:
    • Volunteer Income Tax Assistance: This program is also known as VITA. It offers free tax return preparation to eligible taxpayers who generally earn $54,000 or less.
    • Tax Counseling for the Elderly: TCE is mainly for people age 60 or older, but offers service to all taxpayers. The program focuses on tax issues unique to seniors. AARP participates in the TCE program through AARP Tax-Aide.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

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Grandparents who work and are also raising grandchildren might benefit from the earned income tax credit. The IRS encourages these grandparents to find out, not guess, if they qualify for this credit. This is important because grandparents who care for children are often not aware that they could claim these children for the EITC.

The EITC is a refundable tax credit. This means that those who qualify and claim the credit could pay less  federal tax, pay no tax, or even get a tax refund. Grandparents who are the primary caretakers of their grandchildren should remember these facts about the credit:

  • A grandparent who is working and has a grandchild living with them may qualify for the EITC, even if the grandparent is 65 years of age or older.
  • Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency and qualifying childrequirements for EITC.
  • The rules for grandparents claiming the EITC are the same for parents claiming the EITC.
  • Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC.
  • There are also special rules for individuals receiving disability benefits and members of the military.
  • To qualify for the EITC, the grandparent must have earned income either from a job or self-employment and meet basic rules.
  • The IRS recommends using the EITC Assistant, available in English or Spanish, on IRS.gov, to determine eligibility and estimate the amount of credit.
  • Eligible grandparents must file a tax return, even if they don’t owe any tax or aren’t required to file.

Qualified taxpayers should consider filing electronically. It’s the fastest and most secure way to file a tax return and get a refund.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

More Information:

Publication 596, available on IRS.gov.

Share this tip on social media — #IRSTaxTip: Grandparents Caring for Grandchildren Should Check Their Eligibility for EITC.  https://go.usa.gov/xnfqc

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