Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued in about six to eight weeks from the date IRS receives your return. If you file your return electronically, your refund should be issued in about half the time it would take if you filed a paper return — even faster when you choose direct deposit.
You may not receive your refund as quickly as you expected. A refund can be delayed for a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or to include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.
To check the status of an expected refund, use Check your Federal Refund on the IRS website. Simple online instructions guide you through a process that checks your refund status after providing identifying information from your tax return.
Order copies of tax records, including transcripts of past tax returns, tax account information, wage and income statements, and verification of non-filing letters by visiting the IRS Website.
If you owe taxes to the IRS and are a qualified taxpayer or authorized representative (Power of Attorney), you can apply for a payment plan (including an installment agreement) to pay off your balance over time.
Visit the IRS Website for more information about payment plans.
Although the Social Security tax rate generally does not change yearly, the Social Security taxable wage base does. You can check the current wage base on the Social Security Administration’s website.
April 15 has come and gone, and another year of tax forms and shoeboxes full of receipts is behind you. But what should be done with those documents after your check or refund request is in the mail?
Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe, provided they retain their documents for this period of time.
However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud or you do not file a return, no period of limitation exists.
Download a records retention guide here.
Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties. They have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.
View the Taxpayer Bill of Rights on the IRS website to learn more.
If you can't meet the April 15 deadline to file your tax return, you can get an automatic six-month extension of time to file from the IRS. The extension will give you extra time to get the paperwork into the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.
You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, which is not required to obtain the extension.
To get the automatic extension, file Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 15 deadline or make an extension-related electronic payment. You can file your extension request by computer or mail the paper Form 4868 to the IRS.
The system will give you a confirmation number to verify that the extension request has been accepted. Put this confirmation number on your copy of Form 4868 and keep it for your records.
Don't hesitate to contact us for more detailed information on how to file an extension properly.
You've discovered an error after filing your tax return. What should you do? You may need to amend your return.
The IRS usually corrects math errors or requests missing forms (such as W-2s) or schedules. In these instances, do not amend your return. However, do file an amended return if any of the following were reported incorrectly:
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed paper or electronically-filed Form 1040, 1040A, or 1040EZ return. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, use a separate 1040X for each year and mail each in a separate envelope to the IRS processing center for your state. The 1040X instructions list the addresses for the centers.
Form 1040X has three columns. Column A shows original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. You should explain the items you are changing and the reason for each change on the back of the form.
If the changes involve another schedule or form, attach it to the 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Tax Credit, you must complete and attach a Schedule EIC to the amended return.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for the prior year, Form 1040X must be filed and the tax paid by April 15 of this year to avoid any penalty and interest.
You generally must file Form 1040X to claim a refund within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
You can find that form and more information on the IRS website.
Have you tried everything to resolve a tax problem with the IRS but are still experiencing delays? Are you facing what you consider to be an economic burden or hardship due to IRS collection or other actions? If so, you can seek the assistance of the Taxpayer Advocate Service, an independent organization within the IRS.
Advocates can help if you have tax problems that you can't resolve on your own. The advocate's job is to ensure that every taxpayer is treated fairly and knows and understands their rights.
You can access the Taxpayer Advocate Service by contacting us or the IRS at 1-877-777-4778.
The IRS provides free Spanish language products and services if you need federal tax information. Pages on IRS.gov, tax topics, refund information, tax publications, and toll-free telephone assistance are all available in the Spanish language. The Spanish-language page has links to tax information such as forms and publications, warnings about tax scams that victimize taxpayers, information on Earned Income, child and various other tax credits, and more. Look for a new interactive tool called EITC Assistant to help you learn if you are eligible to receive the Earned Income Tax Credit.
TeleTax is a toll-free, automated telephone service available in English and Spanish. TeleTax provides the status of an amended return and refund information. TeleTax can help you if it has been at least four weeks since you filed your tax return and you want to check on the status of your federal refund. Having a copy of the tax return handy will help you respond to the prompts on the automated system. TeleTax is available 24 hours a day, seven days a week, at 1-800-829-4477.
It's a moment any taxpayer dreads. An envelope arrives from the IRS — and it's not a refund check. But don't panic. Many IRS letters can be dealt with simply and painlessly.
Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice provides specific instructions explaining what you should do if action is necessary to satisfy the inquiry. Most notices also give a phone number to call if you need further information.
Most correspondence can be handled without calling or visiting an IRS office, if you follow the instructions in the letter or notice. However, if you have questions, call the telephone number in the upper right-hand corner of the notice, or call the IRS at 1-800-829-1040. Have a copy of your tax return and the correspondence available when you call so your account can be readily accessed.
Before contacting the IRS, review the correspondence and compare it with the information on your return. If you agree with the correction to your account, no reply is necessary unless a payment is due. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write an explanation why you disagree, and include any documents and information you wish the IRS to consider. Mail your information along with the bottom tear-off portion of the notice to the address shown in the upper left-hand corner of the IRS correspondence. Allow at least 30 days for a response.
Sometimes, the IRS sends a second letter or notice requesting additional information or providing additional information to you. Be sure to keep copies of any correspondence with your records. If you've received a notice and are confused about what to do next, please contact us and we can help!
If you owed tax last year or received a large refund, you may want to adjust your tax withholding. Owing tax at the end of the year could result in penalties being assessed. On the other end, if you had a large refund, you lost out on having the money in your pocket throughout the year. Changing jobs, getting married or divorced, buying a home, or having children can change your tax calculations.
The IRS Tax Withholding Estimator can help compute the proper tax withholding. The worksheets in Publication 505, Tax Withholding and Estimated Tax, can also be used to do the calculation. If the result suggests an adjustment is necessary, you can submit a new W-4, Withholding Allowance Certificate, to your employer.
The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the EITC. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
To see if you qualify for the credit, use the online EITC Assistant.
For more information, visit the IRS website.
When filing your federal tax return, don't forget your contributions to charitable organizations. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize deductions on IRS Form 1040, Schedule A.
Here are a few tips to help make sure your contributions pay off on your tax return:
Visit the IRS Website for more information about charitable giving.
Actually, yes. Many charitable organizations accept car donations, and you can get a deduction should you donate your vehicle to them.
The IRS reminds taxpayers that specific rules apply for taking a tax deduction for donating cars to charities. If the claimed value of the donated motor vehicle, boat, or plane exceeds $500, you can deduct the smaller of the vehicle's FMV on the date of the contribution or the gross proceeds received from the sale of the vehicle.
Before donating, check that the organization is qualified. Taxpayers must make certain that they contribute their car to an eligible organization; otherwise, their donation will not be tax deductible. Taxpayers can use the Exempt Organizations online tool to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and headquarters location, if possible. Churches, synagogues, temples, mosques, and governments are not required to apply for this exemption to be qualified.
The IRS website has more information on vehicle donations.
If you have a high-deductible medical plan, you can open a Health Savings Account (HSA) and make tax-deductible contributions to your account to pay for medical expenses.
For more information about the current IRS regulations on HSAs, refer to Publication 969 on the IRS Website or contact us if you have any questions.
If you participate in a retirement plan, especially if there is a matching component from your employer. You will receive a current tax deduction, and the tax-deferred compounding can boost retirement savings.
There are many types of retirement plans available. Some common plans are:
Contact us if you have any questions. Learn more about retirement plan benefits on the IRS website.
The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may be able to claim an American Opportunity Credit (formerly called the Hope Credit) or Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family (i.e. you, your spouse, or dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit, and the ability to claim the credit phases out at higher income levels.
If you don't qualify for the credit, you may be able to claim the "tuition & fees deduction" for qualified educational expenses. This deduction phases out at higher income levels. You cannot claim this deduction if your filing status is married, filing separately or if another person can claim an exemption for you as a dependent on their tax return.
You may be able to deduct the interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income, so you do not have to itemize your deductions on Schedule A Form 1040. However, this deduction is also phased out at higher income levels.
For more information, see Publication 970, Tax Benefits for Education, on the IRS website.
If you own a home, and you itemize your deductions on Schedule A, you can claim a deduction for the interest paid. To be deductible, the interest you pay must be on a loan secured by your main home or a second home (including a second home that is also rented out for part of the year, so long as the personal use requirement is met). The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. To be deductible, the loan must be secured by your home but the proceeds can be used for other than home improvements. You can refinance and use the proceeds to pay off credit card debt, go on vacation or buy a car and the interest will remain deductible. There are other financial reasons for not wanting to do this but it will not disqualify the deduction.
The interest deduction for home acquisition debt (that is, a loan taken out after October 13, 1987 to buy, build, or substantially improve a qualified home) is limited to debt of $1 million ($500,000 if married filing separately). The interest deduction from your home equity loan is also not unlimited. You can generally deduct interest you pay on the first $100,000 of a home equity loan. Debt which you incurred to buy, build or substantially improve your home that is in excess of the $1 million home acquisition debt limit may also qualify as home equity debt.
In addition to the deduction for mortgage interest, points paid on the original purchase of your residence are also generally deductible. Taxpayers who are required to pay mortgage insurance premiums may also be able to deduct this amount subject to certain income limits. For more information about the mortgage interest deduction, see IRS Publication 936.
You may be able to take the credit for the Elderly or the Disabled if you were age 65 or older at the end of last year or if you are retired on permanent and total disability, according to the IRS. Like any other tax credit, it's a dollar-for-dollar reduction of your tax bill. The maximum amount of this credit is constantly changing.
You can take the credit for the elderly or the disabled if:
Generally, you are a qualified individual for this credit if you are a U.S. citizen or resident at the end of the tax year and you are age 65 or older, or you are under 65, retired on permanent and total disability, received taxable disability income, and did not reach mandatory retirement age before the beginning of the tax year.
If you are under age 65, you can qualify for the credit only if you are retired on permanent and total disability. This means that:
Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your disability. Please contact us for assistance if you feel you might be eligible for this credit.
Yes. The Clean Vehicle Credit (CVC) introduced by the Inflation Reduction Act (IRA) is an update to the previous $7,500 credit for the purchase of a new electric vehicle (EV), with significant changes that phase in over time. The final assembly requirement was one change that went into effect on August 16, 2022. To qualify for the CVC, the final assembly of the EV must occur in North America. Because some EV models are built in multiple locations, there may be EVs on the Department of Energy's list of qualifying vehicles that don't meet the final assembly requirement. For more information contact us or visit the IRS website.
Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.
Generally, for taxpayers who itemize, the points paid to obtain a home mortgage may be deductible as mortgage interest. Depending on the circumstances, points paid to obtain an original home mortgage can be fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.
For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year. For example, a homeowner who paid $2,000 in points and would make 360 payments on a 30-year mortgage could deduct $5.56 per monthly payment, or a total of $66.72 if they made 12 payments in one year.
However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at payoff.
Other closing costs — such as appraisal and non-interest fees—are generally not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.
If you sold your main home, you might be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time you sell your main home, but generally no more frequently than once every two years.
To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use. Longer breaks, such as a one-year sabbatical, do not. You also must not have excluded gain on another home sold during the two years before the current sale.
If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualifies for the exclusion. But you must meet the use test to claim the $500,000 maximum amount.
If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home due to health, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or manmade disaster resulting in a casualty to your home, or an involuntary conversion of your home.
Refer to IRS Publication 523, Selling Your Home, for rules and worksheets.
With more and more United States citizens earning money from foreign sources, the IRS reminds people that they must report all such income on their tax return unless it is exempt under federal law. U.S. citizens are taxed on their worldwide income.
This rule applies whether a person lives inside or outside the United States. The foreign income rule also applies regardless of whether or not the person receives a Form W-2, Wage and Tax Statement, or a Form 1099 (information return).
Foreign source income includes earned income, such as wages and tips, and unearned income, such as interest, dividends, capital gains, pensions, rents, and royalties.
An important point to remember is that citizens living outside the U.S. may be able to exclude up to $112,000 for 2022 and $120,000 for 2023 of their foreign source income if they meet certain requirements. However, the exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S. Please contact us if you feel you may have earned foreign income to learn more.
Did you know that you may be able to deduct certain taxes on your federal income tax return? The IRS says you can if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation. There are four types of deductible non-business taxes:
You can deduct any estimated taxes paid to state or local governments and any prior year's state or local income tax as long as they were paid during the tax year. If deducting sales taxes instead, you may deduct actual expenses or use optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate.
Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for income or sales tax.
Deductible real estate taxes are state, local, or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount paid during the year to the taxing authorities. Your lender will generally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information.
In order to claim a deduction for the personal property tax you paid, the tax must be based on value alone and imposed on a yearly basis. For example, the annual fee for registering your car would be a deductible tax, but only the portion of the fee that was based on the car's value.
If you gave any one person gifts valued at more than $15,000, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift.
The person who received your gift does not have to report the gift to the IRS or pay either gift or income tax on its value.
You make a gift when you give property, including money or the use of or income from property, without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.
There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:
If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.
Do you work at a hair salon, barber shop, casino, golf course, hotel, or restaurant, or drive a taxi? The tip income you receive as an employee from those services is taxable, according to the IRS. As taxable income, these tips are subject to federal income, Social Security, and Medicare taxes and may also be subject to state income tax.
You must keep a daily log of all your tip income and tips paid out. Cash that you receive directly from customers. Tips from credit card charges that your employer pays you. The value of any non-cash tips, such as tickets or passes, you receive. And the amount of tips you paid out to other employees through tip pools or tip splitting and the names of those employees.
You can use IRS Publication 1244, Employee's Daily Record of Tips, and Report of Tips to Employer, to record your tip income. For a free copy of Publication 1244, call the IRS toll-free at 1-800-TAX-FORM (1-800-829-3676).
Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. The IRS says when you sell a capital asset, such as stocks, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only your capital losses on investment property, not personal property.
While you must report all capital gains, you may deduct only your capital losses on investment property, not personal property. A "paper loss" — a drop in an investment's value below its purchase price — does not qualify for the deduction. The loss must be realized through the capital asset's sale or exchange.
Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it for more than one year, your capital gain or loss is long-term. If you hold it for one year or less, your capital gain or loss is short-term. If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return up to an annual limit of $3,000 ($1,500 if you are married filing separately). Unused capital losses can be carried over indefinitely to future years to net against capital gains, however, the annual limit still applies. For more information on the tax rates, refer to IRS Publication 544, Sales and Other Dispositions of Assets.
Capital gains and losses are reported on Form 8949, Sales and Other Dispositions of Capital Assets, summarized on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
The individual mandate is part of the Affordable Care Act. From 2014 through 2018, the IRS assessed a financial penalty for people who didn't comply unless they were eligible for an exemption.
Under the Tax Cuts and Jobs Act, passed December 22, 2017, the individual shared responsibility payment amount is reduced to zero for months beginning after December 31, 2018. Health Coverage Exemptions will no longer be used. You need not make a shared responsibility payment or file Form 8965, Health Coverage Exemptions, with your tax return if you don't have minimum essential coverage for part or all of the year.
The premium tax credit (PTC) is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace. If you bought coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit. To get this credit, you must meet certain requirements and file a tax return with Form 8962, Premium Tax Credit (PTC).
It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold and deposit income, social security, and Medicare taxes from the wages paid to an employee. You must also pay the matching employer portion of social security and Medicare taxes and unemployment tax on wages paid to an employee.
Generally, you do not have to withhold or pay any taxes on payments to independent contractors. Visit the IRS website to determine your status.
A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. People operate a business with the intention of making a profit. Many people engage in hobby activities that turn into a source of income. However, determining if that hobby has grown into a business can be confusing.
To help simplify things, the IRS has established factors taxpayers must consider when determining whether their activity is a business or hobby. Visit the IRS Website to help determine whether your side income is a business or a hobby.
The home office deduction allows qualified taxpayers to deduct certain home expenses when they file taxes. To claim the home office deduction, taxpayers generally must exclusively and regularly use part of their home or a separate structure on their property as their primary place of business.
If you’re self-employed and work from a home office, you may be able to take the home office dedication. Learn more on the IRS website.
Have you just started a new business? Did you know expenses incurred before a business begins operations are not allowed as current deductions? Generally, these start up costs must be amortized over a period of 180 months beginning in the month in which the business begins. However, based on the current tax provisions, you may elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred. The $5,000 deduction is reduced by any start-up or organizational costs which exceed $50,000. If you want to deduct a larger portion of your start up cost in the first year, a new business will want to begin operations as early as possible and hold off incurring some of those expenses until after business begins. Contact us to help determine how you can maximize your deduction for start-up and/or organizational expenses. For additional information on what costs constitute start-up or organizational expenses, refer to IRS publication 535, Business Expenses.
When preparing to file your federal tax return, don't forget your contributions to charitable organizations. Your donations (up to 10% of taxable income) can add up to a nice tax deduction for your corporation.
Here are a few tips to help make sure your contributions pay off on your tax return:
You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance. To be deductible, contributions must be made to qualified organizations. Cash contributions must be substantiated by a bank record, or a receipt, letter or other written communication from the donee organization indicating the name of the organization, the date of the contribution, and the amount of the contribution. In addition, if the contribution is $250 or more, a written acknowledgement showing the amount of cash contributed, any property contributed, and a description and a good faith estimate of the value of any goods or services provided in return for the contribution or statement that no goods or services were provided in return for the contribution, is required. Non-cash contributions over $500 must be supported by an attachment to the return which states the kind of property contributed, along with the method used to determine its fair market value. Form 8283, Non-cash Charitable Contributions is required for contributions with a claimed value of more than $5,000. Contributions which exceed the 10% limitation can be carried over for five years.
Organizations can tell you if they are qualified and if donations to them are deductible. IRS.gov has an Exempt Organizations Select Check online tool to help you see if an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified.
Section 162 of the Internal Revenue Code (IRC) allows you to deduct all the ordinary and necessary expenses you incur during the taxable year in carrying on your trade or business, including the costs of certain materials, supplies, repairs, and maintenance. However, section 263(a) of the IRC requires you to capitalize the costs of acquiring, producing and improving tangible property, regardless of the size or the cost incurred.
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