For those who make estimated federal tax payments, the first quarter deadline is Monday, April 18

April 12, 2022 by Christie

The Internal Revenue Service today reminds those who make estimated tax payments such as self-employed individuals, retirees, investors, businesses, corporations and others that the payment for the first quarter of 2022 is due Monday, April 18.

The 2022 Form 1040-ES, Estimated Tax for Individuals, can help taxpayers estimate their first quarterly tax payment.

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, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for more information.

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). 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.

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.

Estimated Tax Payments | ASL

SOURCE: IR-2022-77, April 6, 2022

IRS: 7 Tips for making filing easier

April 12, 2022January 14, 2022 by Christie

7 Tips to make filing easier

Organize and gather 2021 tax records including Social Security numbers, Individual Taxpayer Identification Numbers, Adoption Taxpayer Identification Numbers, and this year’s Identity Protection Personal Identification Numbers valid for calendar year 2022.
Check IRS.gov for the latest tax information, including the latest on reconciling advance payments of the Child Tax Credit or claiming a Recovery Rebate Credit for missing stimulus payments. There is no need to call.
Set up or log in securely at IRS.gov/account to access personal tax account information including balance, payments, and tax records including adjusted gross income.
Make final estimated tax payments for 2021 by Tuesday, January 18, 2022, to help avoid a tax-time bill and possible penalties.
Individuals can use a bank account, prepaid debit card or mobile app to use direct deposit and will need to provide routing and account numbers.
Learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool.
File a complete and accurate return electronically when ready and choose direct deposit for the quickest refund.

Millions of taxpayers receive a tax refund interest payment

August 31, 2020August 31, 2020 by Christie

IRS TAX TIP

COVID Tax Tip 2020-111, August 31, 2020

In mid-August interest payments were sent to nearly 14 million individual taxpayers. People who got these payments filed their 2019 federal income tax returns by the July 15 deadline and were owed refunds.

These interest payments averaged about $18. The IRS issued most of the payments separately from tax refunds.

Most taxpayers who received their refund by direct deposit had their interest payment sent to the same account. Everyone else received a check. A note on the check reads “INT Amount.” This identifies it as a refund interest payment.

These interest payments are taxable. Taxpayers who received a payment must report it on their 2020 federal income tax return next year. The IRS will send a Form 1099-INT in January 2021, to anyone who gets a payment of at least $10.

This interest payment is due to the IRS postponing this year’s filing deadline to July 15. The new deadline was related to COVID-19 and is considered a disaster-related postponement. Therefore, the law requires the IRS to pay interest calculated from the original April filing deadline. The taxpayer must have filed their 2019 federal income taxes by the July 15, 2020, deadline to get an interest payment.

This refund interest only applies to individual taxpayers. Businesses aren’t eligible.

Visit IRS.gov for details on how the interest payments are figured.

Originally posted: https://www.irs.gov/newsroom/millions-of-taxpayers-receive-a-tax-refund-interest-payment

Earning side income: Is it a hobby or a business?

August 31, 2020August 25, 2020 by Christie

IRS Tax Tip 2020-108, August 25, 2020

Whether it’s something they’ve been doing for years or something they just started to make extra money, taxpayers must report income earned from hobbies in 2020 on next year’s tax return.

What the difference between a hobby and a business? A business operates to make a profit. People engage in a hobby for sport or recreation, not to make a profit.

Here are nine things taxpayer must consider when determining if an activity is a hobby or a business:

Whether the activity is carried out in a businesslike manner and the taxpayer maintains complete and accurate books and records.
Whether the time and effort the taxpayer puts into the activity show they intend to make it profitable.
Whether they depend on income from the activity for their livelihood.
Whether any losses are due to circumstances beyond the taxpayer’s control or are normal for the startup phase of their type of business.
Whether they change methods of operation to improve profitability.
Whether the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business.
Whether the taxpayer was successful in making a profit in similar activities in the past.
Whether the activity makes a profit in some years and how much profit it makes.
Whether the taxpayers can expect to make a future profit from the appreciation of the assets used in the activity.

The IRS has many resources to help taxpayers report their income correctly. See the more information section below for additional guidance.

More Information:

Originally Published Here: https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business