Here are some simple things taxpayers can do throughout the year to make filing season less stressful.

Organize tax records. Create a system that keeps all important information together. Taxpayers can use a software program for electronic recordkeeping or store paper documents in clearly labeled folders. They should add tax records to their files as they receive them. Organized records will make tax return preparation easier and may help taxpayers discover overlooked deductions or credits.

Identify filing status. A taxpayer’s filing status determines their filing requirements, standard deduction, eligibility for certain credits and the correct amount of tax they should pay. If more than one filing status applies to a taxpayer, they can get help choosing the best one for their tax situation with the IRS’s Interactive Tax Assistant, What Is My Filing Status. Changes in family life — marriage, divorce, birth and death — may affect a person’s tax situation, including their filing status and eligibility for certain tax credits and deductions.

Understand adjusted gross income (AGI). AGI and tax rate are important factors in figuring taxes. AGI is the taxpayer’s income from all sources minus any adjustments. Generally, the higher a taxpayer’s AGI, the higher their tax rate and the more tax they pay. Tax planning can include making changes during the year that lower a taxpayer’s AGI.

Check withholding. Since federal taxes operate on a pay-as-you-go basis, taxpayers need to pay most of their tax as they earn income. Taxpayers should check that they’re withholding enough from their pay to cover their taxes owed, especially if their personal or financial situations change during the year. To check withholding, taxpayers can use the IRS Withholding Estimator. If they want to change their tax withholding, taxpayers should provide their employer with an updated Form W-4.

Make address and name changes. Taxpayers should notify the United States Postal Service, employers and the IRS of any address change. To officially change a mailing address with the IRS, taxpayers must compete Form 8822, Change of Address, and mail it to the correct address for their area. For detailed instructions, see page 2 of the form. Report any name change to the Social Security Administration. Making these changes as soon as possible will help make filing their tax return easier.

Save for retirement. Saving for retirement can also lower a taxpayer’s AGI. Certain contributions to a retirement plan at work and to a traditional IRA may also reduce taxable income.

 

Whether someone is a current homeowner or buying a new home this summer owning a home can be expensive. There are tax benefits that can help taxpayers save money and offset some of the costs that come with homeownership. Homeowners should review the tax deductions, programs and housing allowances to see if they are eligible.

Deductible house-related expenses
Most home buyers take out a mortgage to buy their home and then make monthly payments to the mortgage holder. This payment may bundle other costs of owning a home.

The costs the homeowner can deduct are:

Taxpayers must itemize their deductions to deduct homeownership expenses.

Homeowners can’t deduct any of the following items:

  • Insurance including fire and comprehensive coverage and title insurance.
  • The amount applied to reduce the principal of the mortgage.
  • Wages paid to domestic help.
  • Depreciation.
  • The cost of utilities, such as gas, electricity or water.
  • Most settlement or closing costs.
  • Forfeited deposits, down payments or earnest money.
  • Internet or Wi-Fi system or service.
  • Homeowners’ association fees, condominium association fees or common charges.
  • Home repairs.

Mortgage Interest Credit
The Mortgage Interest Credit helps people with lower income afford homeownership. Those who qualify can claim the credit each year for part of the home mortgage interest paid. A homeowner may be eligible for the credit if they were issued a qualified Mortgage Credit Certificate from their state or local government. A certificate is issued only for a new mortgage for the purchase of a main home.

Ministers and military housing allowance Ministers and members of the uniformed services who receive a nontaxable housing allowance can still deduct their real estate taxes and home mortgage interest. They don’t have to reduce their deductions based on the allowance.

More information:

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IRS sends notices and letters when it needs to ask a question about a taxpayer’s federal tax return, let them know about a change to their account or request a payment. Don’t panic if something comes in the mail from the IRS – they’re here to help.

When a taxpayer receives mail from the IRS, they should:

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 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

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Every taxpayer has fundamental rights when working with the IRS. Collectively their rights are known as the Taxpayer Bill of Rights. One of these is the right to challenge the IRS’s position and be heard.

Here’s what this right means for taxpayers.

Taxpayers have the right to:

  • Raise objections.
  • Provide additional documentation in response to formal or proposed IRS actions.
  • Expect the IRS to consider their timely objections.
  • Have the IRS consider any supporting documentation promptly and fairly.
  • Receive a response if the IRS does not agree with their position.

Here are some specific things this right provides taxpayers:

  • In some cases, the IRS will notify a taxpayer that their tax return has a math or clerical error. If this happens, the taxpayer:
    • Has 60 days to tell the IRS that they disagree.
    • Should provide copies of any records that may help correct the error.
    • May call the number listed on the letter or bill for assistance.
    • Can expect the agency to make the necessary adjustment to their account and send a correction if the IRS upholds the taxpayer’s position.  

  • Here’s what will happen if the IRS does not agree with the taxpayer’s position:
    • The agency will issue a notice proposing a tax adjustment. This is a letter that comes in the mail.
    • This notice provides the taxpayer with a right to challenge the proposed adjustment.
    • The taxpayer makes this challenge by filing a petition in U.S. Tax Court. The taxpayer must generally file the petition within 90 days of the date of the notice, or 150 days if it is addressed outside the United States.

  • Taxpayers can submit documentation and raise objections during an audit. If the IRS does not agree with the taxpayer’s position, the agency issues a notice explaining why it is increasing the tax. Prior to paying the tax, the taxpayer has the right to petition the U.S. Tax Court and challenge the agency’s decision.

  • In some circumstances, the IRS must provide a taxpayer with an opportunity for a hearing before an independent Office of Appeals. The agency must do this before taking enforcement actions to collect a tax debt.
    • These actions include levying the taxpayer’s bank account. Immediately after filing a notice of federal tax lien in the appropriate state filing location.
    • If the taxpayer disagrees with the decision of the Appeals Office, they can petition the U.S. Tax Court.

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El IRS envía avisos y cartas cuando necesita hacer una pregunta acerca de la declaración de impuestos federales de un contribuyente, informarle acerca de un cambio a su cuenta, o solicitar un pago. No entre en pánico si recibe algo por correo del IRS: están aquí para ayudarle.

Cuando un contribuyente recibe correo del IRS, debe:

Leer la carta con atención. La mayoría de las cartas y avisos del IRS tratan sobre declaraciones de impuestos federales o cuentas de impuestos. Cada aviso trata un tema específico e incluye los pasos que el contribuyente debe seguir. Un aviso puede hacer referencia a cambios en la cuenta de un contribuyente, impuestos adeudados, una solicitud de pago o un problema específico en una declaración de impuestos. Tomar medidas inmediatas podría minimizar los intereses y multas adicionales.

Revise la información. Si una carta trata sobre una declaración de impuestos modificada o corregida, el contribuyente debe revisar la información y compararla con la declaración original. Si el contribuyente está de acuerdo, debe tomar notas sobre las correcciones en su copia personal de la declaración de impuestos y conservarla para sus registros. Por lo general, un contribuyente deberá actuar solo si no está de acuerdo con la información, si el IRS solicitó más información o si tiene un saldo adeudado.

Realice cualquier acción solicitada, incluyendo realizar un pago. El IRS y las agencias privadas autorizadas de cobro de deudas envían cartas por correo. Los contribuyentes también pueden ver copias digitales de avisos seleccionados del IRS a través de su cuenta en línea del IRS. El IRS ofrece varias opciones para ayudar a los contribuyentes que tienen dificultades para pagar una factura de impuestos.

Responda sólo si se le indica que lo haga. Los contribuyentes no necesitan responder a un aviso a menos que se les indique específicamente que lo hagan. Generalmente no es necesario llamar al IRS. Si un contribuyente necesita llamar al IRS, debe usar el número que se encuentra en la esquina superior derecha del aviso y tener una copia de su declaración de impuestos y su carta.

Informe al IRS sobre un aviso en disputa. Si un contribuyente no está de acuerdo con el IRS, debe seguir las instrucciones del aviso para disputar lo que dice el aviso. El contribuyente debe incluir información y documentos para que el IRS los revise al considerar la disputa.

Conserve la carta o aviso para sus registros. Los contribuyentes deben conservar los avisos o cartas que reciben del IRS. Estos incluyen avisos de ajuste cuando el IRS toma medidas sobre la cuenta de un contribuyente. Los contribuyentes deben conservar registros durante tres años a partir de la fecha en que presentaron la declaración de impuestos.

Esté atento a las estafas. El IRS nunca se comunicará con un contribuyente mediante las redes sociales o mensajes de texto. El primer contacto del IRS suele llegar por correo. Los contribuyentes que no estén seguros de si deben dinero al IRS pueden ver la información de su cuenta tributaria en IRS.gov.

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Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly. This is one of 10 basic rights known collectively as the Taxpayer Bill of Rights.

The right to pay no more than the correct amount of tax means that taxpayers can:

  • File for a refund if they believe they overpaid their taxes.
  • Contact the IRS if they believe there is an error on a notice or bill.
  • File an amended tax return if an error is discovered after the original return was filed.
  • Sign into IRS Online Account and request that any amount owed be removed if it exceeds the correct amount due.
  • Request that the IRS remove interest from the account if the agency caused unreasonable errors or delays.
  • Submit an Offer in Compromise to ask the IRS to accept less than the full amount of tax debt. Taxpayers do this if they believe all or part of the debt is not owed.

More information:

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Taxpayers who can’t pay their tax bill by the April 15, 2024, deadline shouldn’t panic – the IRS is here to help. There are several options to help taxpayers meet their obligations.

It’s important for taxpayers to file their tax return or request an extension of time to file at IRS.gov/extension by the April 15, 2024, deadline – even if they can’t pay their full tax bill. This will help them avoid a failure to file penalty.

This extension applies only to the filing deadline, not the payment deadline. Except for eligible victims of recent natural disasters who have until Oct. 15 to make various tax payments, taxpayers who can’t pay the full amount of taxes they owe by April 15 should file and pay what they can. Making a payment, even a partial payment, will help limit penalty and interest charges.

Help for taxpayers who can’t pay in full
The IRS has options available to help those who owe a tax obligation and can’t pay all or part of it. Those struggling to meet their tax obligation may consider these options to resolve their tax bill.

Online payment plans
Taxpayers who owe but can’t pay in full by April 15 don’t have to wait for a tax bill to set up a payment plan. They can apply for a payment plan at IRS.gov/paymentplan. These plans can be short- or long-term.

Short-term payment plan – The payment period is 180 days or less, and the total amount owed is less than $100,000 in combined tax, penalties and interest.
Long-term payment plan – The payment period is longer than 180 days, paid in monthly payments, and the amount owed is less than $50,000 in combined tax, penalties and interest.

Offer in compromise
An offer in compromise lets taxpayers settle their tax debt for less than the full amount they owe. It may be an option if they can’t pay their full tax liability or doing so creates a financial hardship. The IRS considers a taxpayer’s unique set of facts and circumstances when deciding whether to accept an offer.

Taxpayers can see if they’re eligible and prepare a preliminary proposal with the Offer in Compromise Pre-Qualifier Tool.

Penalty relief to eligible taxpayers
Taxpayers may qualify for penalty relief if they tried to comply with tax laws but were unable due to circumstances beyond their control.

Penalties may apply
Taxpayers who owe tax and don’t file on time may be charged a failure to file penalty. This penalty is usually five percent of the tax owed for each month or part of a month that the tax return is late, up to 25 percent. The failure-to-pay penalty applies if a taxpayer doesn’t pay the taxes they report on their tax return by the due date.

Interest is based on the amount of tax owed and for each day it’s not paid in full. The interest is compounded daily, so it’s assessed on the previous day’s balance plus the interest. Interest rates are determined every three months and can vary based on type of tax — for example, individual or business tax liabilities. More information is available on the interest page of IRS.gov.

More information
IRS.gov/Payment
What If I Can’t Pay My Taxes?
What Is the Due Date of My Federal Tax Return or Am I Eligible to Request an Extension?
Tax Topic 653, IRS Notices and Bills, Penalties, and Interest Charges

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A tax credit is an amount taxpayers claim on their tax return generally to reduce their income tax. Eligible taxpayers can use them to potentially reduce their tax bill and increase their refund.

Refundable vs. nonrefundable tax credits

Some tax credits are refundable. If a taxpayer’s tax bill is less than the amount of a refundable credit, they can get the difference back in their refund. Some taxpayers who aren’t required to file may still want to do so to claim refundable tax credits. Not all tax credits are refundable, however. For nonrefundable tax credits, once a taxpayer’s liability is zero, the taxpayer won’t get any leftover amount back as a refund.

There are a wide range of tax credits, and the amount and types available can vary by tax year. Taxpayers should carefully review current tax credits when preparing their federal tax return.

Earned Income Tax Credit

One refundable tax credit for moderate- and low-income taxpayers is the Earned Income Tax Credit (EITC). The IRS estimates four out of five eligible workers claim the EITC, which means millions of taxpayers are putting EITC dollars to work for them. Unfortunately, there are millions of workers who qualify but don’t claim the EITC – missing out on thousands of dollars every year. This includes workers who are:

  • Grandparents raising their grandchildren.
  • Native Americans.
  • Veterans.
  • Self-employed.
  • Without a qualifying child.
  • Recently divorced, unemployed or experienced other changes to their marital, financial or parental status.
  • Below the filing requirement with earnings.
  • Not proficient in English.
  • Living in rural areas.
  • Receiving certain disability pensions or have children with disabilities.

Taxpayers can find detailed information in Publication 596, Earned Income Credit, or use the EITC Assistant to learn if they’re eligible for the tax credit.

Child Tax Credit and Child and Dependent Care Tax Credit

The Child Tax Credit is nonrefundable and reduces the taxpayer’s tax liability. To qualify, the child must:

  • Be a U.S. citizen, U.S. national, or U.S. resident under age 17.
  • Have a Social Security number.
  • Be claimed as a dependent on the taxpayer’s tax return.

Qualifying children may include foster children or extended family members if they meet other criteria. Dependents not eligible for the Child Tax Credit may qualify a taxpayer for the credit for other dependents.

Taxpayers who paid someone to care for their child, spouse or dependent so they can work, be a full-time student or look for work may be able to reduce their tax by claiming the Child and Dependent Care Credit.

Publication 503, Child and Dependent Care Expenses, has detailed information.

American Opportunity Tax Credit

The American Opportunity Tax Credit is for qualified education expenses paid by or on behalf of an eligible student for the first four years of higher education. It is partially refundable. If the credit reduces the amount of tax a taxpayer owes to zero, they can get a refund of 40% of any remaining amount of the credit, up to $1,000. Taxpayers can get a maximum annual credit of $2,500 per eligible student. The amount of the credit is 100% of the first $2,000 and 25% of the next $2,000 of qualified education expenses a taxpayer paid for each eligible student.

To claim the full credit, a taxpayer’s income must be $80,000 or less ($160,000 or less for married filing jointly). The credit phases out entirely for taxpayers with income over $90,000 ($180,000 for joint filers).

Publication 970, Tax Benefits for Education, has detailed information.

Other tax credits

There are many other tax credits for which a taxpayer may be eligible. Taxpayers can review the credits and deductions page on IRS.gov to see which credits they may be able to claim, including:

  • Family and Dependent Credits
  • Income and Savings Credits
  • Homeowner Credits
  • Electric Vehicle Credits
  • Health Care Credits

Interactive Tax Assistant can help with tax credit questions

The Interactive Tax Assistant is a tool that provides answers to many common tax law questions based on an individual’s specific circumstances. User information is anonymous, and the system discards it when the user exits a topic. The assistant uses information to answer taxpayer questions and won’t share or store it, nor can it identify individuals. It can help taxpayers with these tax credit-related questions:

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If a taxpayer sold goods or services in 2023 and received payments through certain payment apps or online marketplaces or accepted payment cards, they could have received a third party reporting document Form 1099-K, Payment Card and Third Party Network Transactions.

Following feedback from taxpayers, tax professionals and payment processors, and to reduce taxpayer confusion, the IRS announced Notice 2023-74, which delayed the new federal law $600 reporting threshold for tax year 2023 on Form 1099-K, Payment Card and Third Party Network Transactions. The previous reporting thresholds remained in place for 2023, which are more than $20,000 in payments and over 200 transactions. Taxpayers could have still received forms below the threshold.

It’s important to know that regardless of if a taxpayer received a Form 1099-K or not, they must report their income. This includes payments they receive in cash, property, goods, digital assets or foreign sources or assets.

The Form 1099-K should not report personal payments like gifts and reimbursements.

What to do when filing taxes

It’s important to understand why an individual received a Form 1099-K. Taxpayers can then use it with their other tax records when it’s time to file their return. The form provides the gross amount of payment card/third party network transactions and may include a combination of different kinds of total payments received.

It’s important to note, just because a payment is reported on a Form 1099-K does not mean it’s taxable.

Taxpayers should review the form or forms, determine if the amount is correct, and determine any deductible expenses associated with the payment they may be able to claim when they file their taxes.

Selling personal items at a loss

If an individual sold items at a loss, which means they paid more for the items than for what they sold them, there is not a tax liability. They’ll be able to zero out the payment on their tax return by reporting both the payment and an offsetting adjustment on a Schedule 1 (Form 1040)PDF. This will ensure if they received these forms, they don’t have to pay taxes they don’t owe.

Selling personal items at a gain

If an individual sold items at a gain, which means they paid less than for what they sold it, they will have to report that gain as income, and it’s taxable.

See IRS.gov What to do with Form 1099-K for specific instruction on how to report personal item sales.

What to do with a Form 1099-K received in error

People may get a Form 1099-K when they shouldn’t have if it:

  • Reports personal payments from family or friends like gifts or reimbursements.
  • Doesn’t belong to them.
  • Duplicates a Form 1099-K or other information reporting form they already received.

If this happens:

  • Contact the issuer immediately – see “Filer” on the top left corner of Form 1099-K to find out the name and contact information of the issuer.
  • Ask for a corrected Form 1099-K that shows a zero amount.
  • Keep a copy of the original form and all correspondence with the issuer for your records.
  • Don’t wait to file taxes. File even if a corrected Form 1099-K is unavailable.

What to do with an incorrect Form 1099-K

If the payee Taxpayer Identification Number (TIN) or gross payment amount is incorrect taxpayers should request a corrected form from the issuer.

  • See “Filer” on the top left corner of Form 1099-K to find the name and contact information of the issuer. If a taxpayer doesn’t recognize the issuer, they should contact the Payment Settlement Entity (PSE) identified on the bottom left corner of the form above their account number.
  • Keep a copy of the corrected Form 1099-K with other tax records, along with any correspondence from the issuer or PSE.
  • Don’t contact the IRS. The IRS can’t correct a Form 1099-K from an issuer.

Don’t wait to file taxes. To file a tax return, take these steps:

  • If the Payee Taxpayer Identification Number (TIN) is incorrect report payments from the Form 1099-K and any sources of income on the appropriate tax return you normally file.
  • If the gross payment amount is incorrect report the amount from your incorrect Form 1099-K on Schedule 1 (Form 1040), Additional Income and Adjustments to IncomePDF.

More information

See What to do with Form 1099-K for more information on how to report an incorrect Form 1099-K.

See Understanding your Form 1099-K and Form 1099-K FAQs for more information.

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When a small business decides to bring in a tax professional, they should know what to expect and how to select a reputable practitioner. The IRS has information and resources to make choosing a tax professional easier.

What a small business can expect from a tax professional
Tax professionals are often able to advise a small business on the most effective way to structure their business. For instance, they can help a business owner decide whether their business interests would be better protected as a sole proprietorship or if another business structure, such as a partnership or S corporation, would serve them better.

Many tax professionals inspect books and records to help a business make sure that it is reporting all income. They can also make sure the business claims all the deductions and credits available to it.

A tax professional can help small business taxpayers answer other questions as well, such as whether they are subject to excise taxes or need to file employment tax returns.

A qualified tax professional may be able to represent the business if it’s contacted by the IRS regarding a tax matter.

A knowledgeable practitioner is also aware of many tax-related scams, like phishing, unclaimed refunds, ghost preparers and others described on the Tax Scams and Consumer Alerts page of IRS.gov.  A practitioner knows that if something sounds too good to be true, it probably is, and they can help businesses avoid and report such scams.

Find a small business tax professional
Taxpayers are responsible for all the information on their income tax return no matter who prepares the return, so it’s important to find a reputable preparer. The IRS offers these tips to small businesses looking for a tax professional:

  • Check the IRS Directory of Preparers. It lists preparers who hold professional credentials recognized by the IRS or a Record of Completion in the IRS’s Annual Filing Season Program.
  • Check the preparer’s history with the Better Business Bureau or verify the enrolled agent’s status on IRS.gov.
  • Ask about the practitioner’s fees up front.
  • Find out if the preparer is an authorized e-file provider.
  • Ensure the preparer is available throughout the year to help address any questions about the preparation of the tax return.
  • Always review the business tax return before signing it.
  • Ensure the preparer signs the tax return and includes their 9-digit Preparer Tax Identification Number. All paid preparers must have a PTIN to prepare tax returns.

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