top of page

TAX TIPS

BUSINESS
PERSONAL
Home Office

Good Recordkeeping is Just Good Business

 

Recordkeeping is an important part of running a small business. In fact, keeping good records helps business owners make sure their business stays successful.

Here are some things small business owners should remember about recordkeeping:

  • Good records will help business owners:

    • Monitor the progress of their business

    • Prepare financial statements

    • Identify income sources

    • Keep track of expenses

    • Prepare tax returns and support items reported on tax returns

  • Small business owners may choose any recordkeeping system that fits their business. They should choose one that clearly shows income and expenses. Except in a few cases, the law does not require special kinds of records.

  • How long an owner should keep a document depends on several factors. These factors include the action, expense and event recorded in the document. The IRS generally suggests taxpayers keep records for three years.

  • A good recordkeeping system includes a summary of all business transactions. Businesses usually record these transactions in books called journals and ledgers, which business owners can buy at an office supply store, or keep them electronically. All requirements that apply to hard copy books and records also apply to electronic business records.

  • The responsibility to validate information on tax returns is known as the burden of proof. Small business owners must be able to prove expenses to deduct them.

  • Business owners should keep all records of employment taxes for at least four years.

  • Businesses that keep paper records should keep them in a secure location, preferably under lock and key, such as a desk drawer or a safe.
     

  • Businesses that keep records electronically on a computer should always have an electronic back-up, in case the hard drive crashes.

Share this tip on social media -- #IRSTaxTip: Good recordkeeping is just good business. https://go.usa.gov/xp4c9

​

​

Business Owners May Be Able to Benefit From the Home Office Deduction

Taxpayers who use their home for business may be eligible to claim a home office deduction. It allows qualifying taxpayers to deduct certain home expenses on their tax return. This can reduce the amount of the taxpayer’s taxable income.

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

  • The home office deduction is available to both homeowners and renters.

  • There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

  • Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.

  • The term "home" for purposes of this deduction:

    • Includes a house, apartment, condominium, mobile home, boat or similar property.

    • Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.

    • Doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.

  • There are two basic requirements for the taxpayer’s home to qualify as a deduction:

    • There must be exclusive use of a portion of the home for conducting business on a regularly basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.

    • The home must be the taxpayer’s principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home, but also uses their home to conduct business may still qualify for a home office deduction.

  • Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.

  • Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction: 

    • The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.

    • When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses.  Direct expenses are deducted in full.

​

​

These Summer Actions Might Benefit Taxpayers Who Itemize

Summer is a season when people have fun, yet get things done. From buying a new house to cleaning their old one, taxpayers who itemize their deductions may be doing things this summer that will affect the tax returns they file next year.

The higher standard deduction means fewer taxpayers are itemizing their deductions. However, taxpayers who still plan to itemize next year should keep these tips in mind:

  • Deducting state and local income, sales and property taxes. The deduction that taxpayers can claim for state and local income, sales and property taxes is limited. This deduction is limited to a combined, total deduction of $10,000. It is $5,000 if married filing separately. Any state and local taxes paid above this amount can’t be deducted.

  • Refinancing a home. The deduction for mortgage interest is also limited. It’s limited to interest paid on a loan secured by the taxpayer’s main home or second home. For homeowners who choose to refinance, they must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described in the next bullet under “buying a home.”

  • Buying a home. People who buy a new home this year can only deduct mortgage interest they pay on a total of $750,000 in qualifying debt for a first and second home. It’s $375,000 if married filing separately. For existing mortgages, if the loan originated on or before Dec. 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

  • Donating items and deducting money. Many taxpayers do a good summer clean-out during the warm months. They often find unused items in good condition they can donate to a qualified charity. These donations may qualify for a tax deduction. Taxpayers must itemize deductions to deduct charitable contributions and must have proof of all donations. Taxpayers can use the Interactive Tax Assistant to help determine whether they can deduct their charitable contributions.

  • Deducting mileage for charity. Driving a personal vehicle while donating services on a trip sponsored by a qualified charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.

  • Reporting gambling winnings and claiming gambling losses.Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings. They can use the Interactive Tax Assistant to find out more about reporting gambling winnings and  losses next year.


More information:
Publication 5307, Tax Reform: Basics for Individuals and Families.

​

​

Here’s How Individual Taxpayers Can View Their Tax Account Info

Taxpayers with questions about their federal tax accounts can hop over to IRS.gov for answers. Individual taxpayers can login to the View Your Account Information page to view specific details about their federal tax account information.

Taxpayers can view:

  • Their payoff amount, which is updated for the current day.

  • The balance for each tax year for which they owe taxes.

  • Their payment history.

  • Key information from the their most current tax return as originally filed.

After viewing their information, a taxpayer can:

  • Select an electronic payment option.

  • Set up an online payment agreement.

  • Go directly to Get Transcript.

Taxpayer’s balance will update no more than once every 24 hours, usually overnight. Taxpayers should also allow 1 to 3 weeks for payments to show up in the payment history.

To access their information online, taxpayers must register through Secure Access. This is the agency’s two-factor authentication process that protects personal info. Taxpayers can review the Secure Access page process prior to starting registration.

Taxpayers can also visit IRS.gov to use many other self-service tools and helpful resources. These include “Where’s My Refund?” and the IRS2Go app. These are the best ways for taxpayers to check the status of their tax refund. These tools are updated no more than once a day, so taxpayers don’t need to check more often.

Share this tip on social media -- #IRSTaxTip: Here’s how individual taxpayers can view their tax account info   https://go.usa.gov/xyNzP

 

 

Five Facts about Charitable Contributions

With the holidays around the corner, many people will be making donations to benefit charitable organizations. However, come tax time, the person who made the donation might also benefit. That’s because taxpayers who donate to a charity may be able to claim a deduction for the donation on their federal tax return.

 

Here are five facts about charitable donations:

Qualified Charities. A taxpayer must donate to a qualified charity to deduct their contributions. Gifts to individuals, political organizations, or candidates are not deductible. To check the status of a charity, taxpayers can use Exempt Organizations Select Check on IRS.gov.

​

Itemize Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and itemize their deductions. To do this, taxpayers complete Schedule A, Itemized Deductions. They file this form with their tax return.

 

Getting Something in Return. Taxpayers may receive something in return for their donation. This includes things such as merchandise, meals, and event tickets. Taxpayers can only deduct the amount of the donation that’s more than the fair market value of the item they received. To figure their deduction, a taxpayer would subtract the value of the item received from the amount of their donation.

​

Type of Donation. For donations of property instead of cash, a taxpayer can only deduct the fair market value of the donated item. Fair market value is generally the price they would get if they sold the item on the open market. If they donate used clothing and household items, those items generally must be in good condition. Special rules apply to certain types of property donations, such as cars and boats.

​

Donations of $250 or More. If a taxpayer donates $250 or more in cash or goods, they must have a written receipt from the charity. The statement must show: • The amount of the donation. • A description of any property given. • Whether the taxpayer received any goods or services in exchange for their gift, and, if so, must provide a description and good faith estimate of the value of those goods or services.

​

Taxpayers can also use the Interactive Tax Assistant, Can I Deduct my Charitable Contributions? This tool helps determine if charitable contribution is deductible.

5 facts charitable
View Tax Info
Summer
recordkeeping

Four Things to Know about Taxes and Starting a Business

​

New business owners have tax-related things to do before launching their companies. IRS.gov has resources to help. Here are some items to consider before scheduling a ribbon-cutting event.

Choose a business structure when starting a business, an owner must decide what type of entity it will be. This type determines which tax forms a business needs to file. Owners can learn about business structures at IRS.gov. The most common forms of businesses are:

 

Determine business tax responsibilities 

The type of business someone operates determines what taxes they need to pay and how to pay them. There are the five general types of business taxes.

  • Income tax – All businesses except partnerships must file an annual income tax return. They must pay income tax as they earn or receive income during the year.

  • Estimated taxes – If the amount of income tax withheld from a taxpayer’s salary or pension is not enough, or if the taxpayer receives income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, they may have to make estimated tax payments.

  • Self-employment tax – This is a Social Security and Medicare tax. It applies primarily to individuals who work for themselves.

  • Employment taxes – These are taxes an employer pays or sends to the IRS for its employees. These include unemployment tax, income tax withholding, Social Security, and Medicare taxes.

  • Excise tax – These taxes apply to businesses that:

    • Manufacture or sell certain products

    • Operate certain kinds of businesses

    • Use various kinds of equipment, facilities, or products

    • Receive payment for services

 

Choose a tax year accounting period

Businesses typically figure their taxable income based on a tax year of 12 consecutive months. A tax year is an annual accounting period for keeping records and reporting income and expenses. The options are:

  • Calendar year: Jan. 1 to Dec. 31.

  • Fiscal year:12 consecutive months ending on the last day of any month except December.

Set up recordkeeping processes

Being organized helps businesses owners be prepared for other tasks. Good recordkeeping helps a business monitor progress. It also helps prepare financial statements and tax returns. See IRS.gov for recordkeeping tips.

 

Additional Resources:

 

For information on state requirements for starting and operating a business, refer to a state's website

Four things for new business
College Tax Benefits

Reminder for Parents, Students: Check Out College Tax Benefits

 

With back-to-school season in full swing, the Internal Revenue Service reminds parents and students about tax benefits that can help with the expense of higher education.

Two college tax credits apply to students enrolled in an eligible college, university or vocational school. Eligible students include the taxpayer, their spouse and dependents.

 

American Opportunity Tax Credit

The American Opportunity Tax Credit, (AOTC) can be worth a maximum annual benefit of $2,500 per eligible student. The credit is only available for the first four years at an eligible college or vocational school for students pursuing a degree or another recognized education credential. Taxpayers can claim the AOTC for a student enrolled in the first three months of 2018 as long as they paid qualified expenses in 2017.

 

Lifetime Learning Credit

The Lifetime Learning Credit, (LLC) can have a maximum benefit of up to $2,000 per tax return for both graduate and undergraduate students. Unlike the AOTC, the limit on the LLC applies to each tax return rather than to each student. The course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. The credit is available for an unlimited number of tax years.

​

To claim the AOTC or LLC, use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). Additionally, if claiming the AOTC, the law requires taxpayers to include the school’s Employer Identification Number on this form.

Form 1098-T, Tuition Statement, is required to be eligible for an education benefit. Students receive this form from the school they attended. There are exceptions for some students.

​

Other education benefits

Other education-related tax benefits that may help parents and students are:

  • Student loan interest deduction of up to $2,500 per year.

  • Scholarship and fellowship grants. Generally, these are tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.

  • Savings bonds used to pay for college. Though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years of age.

  • Qualified tuition programs, also called 529 plans, are used by many families to prepay or save for a child’s college education. Contributions to a 529 plan are not deductible, but earnings are not subject to federal tax when used for the qualified education expenses.

 

To help determine eligibility for these benefits, taxpayers should use tools on the Education Credits Web page and IRS Interactive Tax Assistant tool on IRS.gov.

Options For Small Business

IRS Has Options to Help Small Business Owners

​

Small business owners often have a running list of things to do. These include deadlines, sales calls, employee issues, banking, advertising – and taxes. The IRS can help with the last one.

Here are seven resources to help small businesses owners with common topics:

  • Looking at the Big Picture: The Small Business and Self-Employed Tax Center brings information on IRS.gov to one common place.

  • Organizing Tasks: The IRS Tax Calendar for Businesses and Self-Employed helps  owners stay organized. It includes tax due dates and actions for each month. Users can subscribe to calendar reminders or import the calendar to their desktop or calendar on their mobile device.

  • Searching for Topics: The A-to-Z Index for Business helps people easily find small business topics on IRS.gov.

  • Getting Information by Email: Small business owners can sign up for e-News for Small Businesses. The free, electronic service gives subscribers information on deadlines, emerging issues, tips, news and more. 

  • Watching Videos: The IRS Video Portal  offers learning events and informational videos on many business topics.

  • Finding Forms: The Small Business Forms and Publications page helps business owners find the documents they need for the type of business they own. It lists tax forms, instructions, desk guides and more.

  • Meeting in Person or Online: Small business workshops, seminars and meetings are held throughout the country. They’re sponsored by IRS partners that specialize in federal tax topics. Topics vary from overviews to more specific topics such as retirement plans and recordkeeping.

More Information:

Small Business and Self-Employed Tax Center

Tax TimeTips IRS

Ten Tax-Time IRS Tips to Consider

​

For those who have yet to file, the IRS has 10 quick ideas to help:

​

  1. Gather Records. Good recordkeeping is important. It helps to ensure that nothing gets overlooked. Records such as receipts and cancelled checks also provide expense documentation.

  2. Use IRS Online Tools. The IRS has many useful online tools. The Interactive Tax Assistant tool provides answers to many tax questions. It gives the same answers that an IRS representative would give over the phone.

  3. File Electronically. Most taxpayers file electronically these days. It offers ease and convenience. The tax software guides people through the entire process. There are no forms to fill out. Electronic filing is also a more accurate way to file.

  4. Use IRS Free File. Free File is available only on IRS.gov. Taxpayers earning $64,000 or less last year can use free name-brand tax software to file a federal tax return. Free File Fillable Forms, an electronic version of IRS paper forms, is available for those who earned more than $64,000. People can use Free File to get an automatic six-month extension to file. An extension to file a tax return, however, is not an extension to pay any taxes owed. April 18 is still the deadline for any taxes owed.Taxpayers can now use their cell phone or tablet to prepare and e-file a federal tax return through IRS Free File. Access Free File two ways: Use the IRS app, IRS2Go, which has a link to the Free File Software Lookup Tool, or use the device’s browser to go to www.IRS.gov/freefile and select the “Free File Software Lookup Tool” or “Start Free File Now” to find the software product desired. The IRS2Go app is available for Android and iOS devices.  

  5.  Report All Income. Taxpayers must report all of their income from Forms W-2, Wage and Tax Statements, and Forms 1099. Other income may be reportable as well, even if the taxpayer does not receive a statement. 

  6. Choose Direct Deposit. The fastest and safest way to a refund is to file electronically and choose Direct Deposit. The IRS issues most refunds in less than 21 days.

  7. Visit IRS.gov. IRS.gov is an excellent resource. Taxpayers can click on the "Filing" icon for links to filing tips, answers to frequently asked questions and IRS forms and publications. The IRS Services Guide outlines the many ways to get help on IRS.gov.

  8. Explore Filing Options. Taxpayers have many options to file. Self-prepare or use a tax preparer. Millions are eligible for free help from a Volunteer Income Tax Assistance or Tax Counseling for the Elderly site. The IRS Directory of Federal Tax Return Preparers provides information on tax professionals including their qualifications and credentials. IRS tools are available 24/7.

  9. Check out IRS Publication 17, Your Federal Income Tax, is a complete tax resource. This 300-page guide is available as an eBook as well.

  10. Avoid Errors. Taxpayers should take extra time to review their return to file accurately the first time. Mistakes slow down refunds. IRS e-file is the most accurate way to file as using it eliminates many common errors. Paper return filers should check all names, Social Security numbers and sign the tax return.

​

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year 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.

Six Tax Tips For Self Employed

Six Tax Tips for the Self-Employed

​

Self-employed taxpayers normally earn income by carrying on a trade or business. Here are six important tips from the IRS for the self-employed:

​

  1. Self-Employed Taxpayers. Sole proprietors and independent contractors are two types of self-employment. Taxes can be complex for the self-employed. Check out the IRS Self Employed Individuals Tax Center.

  2. Estimated Tax. Self-employed taxpayers generally need to make quarterly estimated tax payments. IRSPublication 505, Tax Withholding and Estimated Tax, has details on making those payments.

  3. Schedule C or C-EZ. Self-employed taxpayers must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040. For expenses less than $5,000, use Schedule C-EZ. Each form’s instructions provide the rules for which form to use.

  4. SE Tax. For those making a profit, self-employment and income tax may need to be paid. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax.

  5. Allowable Deductions. Taxpayers can deduct expenses paid to run a business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in the industry. A necessary expense is one that is helpful and proper for a trade or business.

  6. When to Deduct. In most cases, taxpayers can deduct expenses in the year paid or incurred. Some costs must be ‘capitalized,’ however. This means deducting the cost over a number of years.

Capital Gains & Losses

Capital Gains and Losses – 10 Helpful Facts to Know

​

When a person sells a capital asset, the sale normally results in a capital gain or loss. A capital asset includes inherited property or property someone owns for personal use or as an investment.

​

Here are 10 facts that taxpayers should know about capital gains and losses:

  1. Capital Assets. Capital assets include property such as a home or a car. It also includes investment property, like stocks and bonds.

  2. Gains and Losses. A capital gain or loss is the difference between the basis and the amount the seller gets when they sell an asset. The basis is usually what the seller paid for the asset. For details about inherited property, see IRS Publication 544, IRS Publication 550 and IRS Publication 551.

  3. Net Investment Income Tax. Taxpayers must include all capital gains in their income. Capital gains may be subject to the Net Investment Income Tax if the taxpayer’s income is above certain amounts. The rate of this tax is 3.8 percent. For details, visit IRS.gov.

  4. Deductible Losses. Taxpayers can deduct capital losses on the sale of investment property but can’t deduct losses on the sale of property they hold for their personal use.

  5. Limit on Losses. If a taxpayer’s capital losses are more than their capital gains, they can deduct the difference as a loss on their tax return. This loss is limited to $3,000 per year, or $1,500 if married and filing a separate return.

  6. Carryover Losses. If a taxpayer’s total net capital loss is more than the limit they can deduct, they can carry it over to next year’s tax return.

  7. Long and Short Term. Capital gains and losses are either long-term or short-term. It depends on how long the taxpayer holds the property. If the taxpayer holds it for one year or less, the gain or loss is short-term.

  8. Net Capital Gain.  If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain. If the net long-term capital gain is more than the net short-term capital loss, the taxpayer has a net capital gain.

  9. Tax Rate. The tax rate on a net capital gain usually depends on the taxpayer’s income. The maximum tax rate on a net capital gain is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gain.

  10. Forms to File. Taxpayers often will need to file Form 8949, Sales and Other Dispositions of Capital Assets. Taxpayers also need to file Schedule D, Capital Gains and Losses, with their tax return.

For more on this topic, see Schedule D instructions. Taxpayers can visit IRS.gov to get tax forms and documents anytime.

​

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year 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.

Income Tax & Selling A Home

Tips to Keep in Mind on Income Taxes and Selling a Home

​

Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home.

Below are tips to keep in mind when selling a home:

Ownership and Use. To claim the exclusion, the homeowner must meet the ownership and use tests. This means that during the five-year period ending on the date of the sale, the homeowner must have:

​

  • Owned the home for at least two years  

  • Lived in the home as their main home for at least two years    Gain.  If there is a gain from the sale of their main home, the homeowner may be able to exclude up to $250,000 of the gain from income or $500,000 on a joint return in most cases. Homeowners who can exclude all of the gain do not need to report the sale on their tax return

Loss.  A main home that sells for lower than purchased is not deductible.

Reporting a Sale.  Reporting the sale of a home on a tax return is required if all or part of the gain is not excludable. A sale must also be reported on a tax return if the taxpayer chooses not to claim the exclusion or receives a Form 1099-S, Proceeds from Real Estate Transactions.

Possible Exceptions.  There are exceptions to the rules above for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others. More information is available in Publication 523, Selling Your Home.

Worksheets.  Worksheets are included in Publication 523, Selling Your Home, to help you figure the:

  • Adjusted basis of the home sold

  • Gain (or loss) on the sale

  • Gain that can be excluded

Items to Keep In Mind:

  • Taxpayers who own more than one home can only exclude the gain on the sale of their main home. Taxes must paid on the gain from selling any other home.

  • Taxpayers who used the first-time homebuyer credit to purchase their home have special rules that apply to the sale. For more on those rules, see Publication 523. Use the First Time Homebuyer Credit Account Look-up to get account information such as the total amount of your credit or your repayment amount.

  • Work-related moving expenses might be deductible, see Publication 521, Moving Expenses.

  • Taxpayers moving after the sale of their home should update their address with the IRS and the U.S. Postal Service by filing Form 8822, Change of Address.

  • Taxpayers who purchased health coverage through the Health Insurance Marketplace should notify the Marketplace when moving out of the area covered by the current Marketplace plan.

Social Security Benefts Taxable

Are Social Security Benefits Taxable?

​

If taxpayers receive Social Security benefits, they may have to pay federal income tax on part of those benefits. These IRS tips will help taxpayers determine if they need to do so.

​

  • Form SSA-1099.  If taxpayers received Social Security benefits in 2016, they should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of their benefits.

  • Only Social Security.  If Social Security was a taxpayer’s only income in 2016, their benefits may not be taxable. They also may not need to file a federal income tax return. If they get income from other sources, they may have to pay taxes on some of their benefits.

  • Free File.  Taxpayers may use IRS Free File to prepare and e-file their tax returns for free. If they earned $64,000 or less, they can use brand-name software. The software does the math for them, which helps avoid mistakes. If taxpayers earned more, they can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It’s best for people who are used to doing their own taxes. Free File is available only by going toIRS.gov/freefile.

  • Interactive Tax Tools.  Taxpayers can get answers to their tax questions with this helpful tool, Are My Social Security or Railroad Retirement Tier I Benefits Taxable, to see if any of their benefits are taxable. They can also visit IRS.gov and use the Interactive Tax Assistant tool.

  • Tax Formula.  Here’s a quick way to find out if a taxpayer must pay taxes on their Social Security benefits: Add one-half of the Social Security income to all other income, including tax-exempt interest. Then compare that amount to the base amount for their filing status. If the total is more than the base amount, some of their benefits may be taxable.

  • Base Amounts. The three base amounts are:

    • $25,000 – if taxpayers  are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from their spouse for all of 2016

    • $32,000 – if they are married filing jointly

    • $0 – if they are married filing separately and lived with their spouse at any time

Medical & Dental Expenses

Medical and Dental Expenses May Impact Your Taxes 

​

Medical expenses can trim taxes. Keeping good records and knowing what to deduct make all the difference. Here are some tips to help taxpayers know what qualifies as medical and dental expenses:

​

  • Itemize. Taxpayers can only claim medical expenses that they paid for in 2016 if they itemize deductions on a federal tax return.

  • Qualifying Expenses. Taxpayers can include most medical and dental costs that they paid for themselves, their spouses and their dependents including:

    • The costs of diagnosing, treating, easing or preventing disease.

    • The costs paid for prescription drugs and insulin.

    • The costs paid for insurance premiums for policies that cover medical care.

    • Some long-term care insurance costs.

Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction. More examples of what costs taxpayers can and can’t deduct are in IRS Publication 502, Medical and Dental Expenses.

  • Travel Costs Count. It is possible to deduct travel costs paid for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. For use of a car, deduct either the actual costs or the standard mileage rate for medical travel. The rate is 19 cents per mile for 2016.

  • No Double Benefit. Don’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from these plans are usually tax-free.

  • Use the Tool. Taxpayers can use the Interactive Tax Assistant tool on IRS.gov to see if they can deduct their medical expenses.

Tax Benefits For Parents

Check Out These Tax Benefits for Parents

​

Taxpayers with children may qualify for certain tax benefits. Parents should consider child-related tax benefits when filing their federal tax return:

​

  • Dependent. Most of the time, taxpayers can claim their child as a dependent. Use the Interactive Tax Assistant to help determine who can be claimed as a dependent. Taxpayers can generally deduct $4,050 for each qualified dependent. If the taxpayer’s income is above a certain limit, this amount may be reduced. For more on these rules, see Publication 501, Exemptions, Standard Deduction and Filing Information.

  • Child Tax Credit.  Generally, taxpayers can claim the Child Tax Credit for each qualifying child under the age of 17. The maximum credit is $1,000 per child. Taxpayers who get less than the full amount of the credit may qualify for the Additional Child Tax Credit. Use the Interactive Tax Assistant to determine if a child qualifies for the Child Tax Credit. For more information, see Schedule 8812 and Publication 972, Child Tax Credit.

  • Child and Dependent Care Credit. Taxpayers may be able to claim this credit if they paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. Taxpayers must have paid for care so that they could work or look for work. Use the Interactive Tax Assistant to determine if a child qualifies for the Child Tax Credit. See Publication 503, Child and Dependent Care Expenses, for more on this credit.  

  • Earned Income Tax Credit. Taxpayers who worked but earned less than $53,505 last year should look into the EITC. They can get up to $6,269 in EITC. Taxpayers may qualify with or without children. Use the 2016 EITC Assistant tool at IRS.gov or see Publication 596, Earned Income Tax Credit, to learn more.

EITC and ACTC Refunds. Because of new tax-law change, the IRS cannot issue refunds before Feb. 15 returns that claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). This applies to the entire refund, even the portion not associated with these credits. The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS expects the earliest of these refunds to be available in bank accounts or debit cards during the week of Feb. 27, as long as there are no processing issues with the tax return and the taxpayer chose direct deposit. Read more about refund timing for early EITC/ACTC filers.

  • Adoption Credit. It is possible to claim a tax credit for certain costs paid to adopt a child. For details, see Form 8839, Qualified Adoption Expenses.

  • Education Tax Credits. An education credit can help with the cost of higher education. Two credits are available: the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits may reduce the amount of tax owed. If the credit cuts a taxpayer’s tax to less than zero, it could mean a refund. Taxpayers may qualify even if they owe no tax. Complete Form 8863, Education Credits, and file a return to claim these credits. Taxpayers can use the Interactive Tax Assistant tool on IRS.gov to see if they can claim them. Visit the IRS’sEducation Credits web page to learn more on this topic. Also, see Publication 970, Tax Benefits for Education.  

  • Student Loan Interest. Taxpayers may be able to deduct interest paid on a qualified student loan. They can claim this benefit even if they do not itemize deductions. Use the Interactive Tax Assistant to determine if interest paid on a student or educational loan is deductible. For more information, see Publication 970.

  • Self-employed Health Insurance Deduction. Taxpayers who were self-employed and paid for health insurance may be able to deduct premiums paid during the year. See Publication 535, Business Expenses, for details.   

Get related forms and publications on IRS.gov.

Wheres My Refund Tool

Use the “Where’s My Refund?” Tool

​

Taxpayers who have not yet received their income tax refunds can use “Where’s My Refund?” app to check the status. Find it on IRS.gov or the free IRS mobile app IRS2Go.

Here are five tips to know about “Where’s My Refund?”:

​

1. Some Refunds Delayed. Beginning in 2017, certain taxpayers will get their refunds later. By law, the IRS cannot issue refunds before February 15 for any tax return claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). The IRS must hold the entire refund, not just the part related to the EITC or ACTC. The IRS began releasing delayed 2016 EITC and ACTC refunds on February 15.

These refunds likely won’t arrive in bank accounts or on debit cards until the week of February 27. This is true as long as there are no processing issues with the tax return and the taxpayer chose direct deposit. Banking and financial systems need time to process deposits, which can take several days.

Where’s My Refund? will be updated on February 18 for the vast majority of early filers who claimed the Earned Income Tax Credit or Additional Child Tax Credit. Before February 18, some taxpayers may see a projected date or a message that indicates the IRS is processing their return. “Where’s My Refund?” remains the best way to check the status of a refund.

2. Timely Access. Information will normally be available within 24 hours after the IRS receives the taxpayer’s e-filed return, or four weeks for a paper return. The system updates once every 24 hours, usually overnight, so there is no need to check more often.

3. Gather Basic Information. Taxpayers should have their Social Security number, filing status and exact refund amount when using "Where’s My Refund?”. Those without Internet access can call 800-829-1954 anytime, to access the audio version of this tool.

4. What to Expect. “Where’s My Refund?” includes a tracker that displays progress through three stages: Return Received, Refund Approved and Refund Sent. When the IRS processes a tax return and approves the refund, taxpayers can see their expected refund date. Even though the IRS issues most refunds in less than 21 days, tax returns may need further review and take longer.

5. When to Call: Taxpayers should call the IRS to check on a refund only when:

  • it has been 21 days or more since they e-filed,

  • more than six weeks since the return was mailed,

  • the “Where’s My Refund?” tool directs them to contact IRS.

​

A tax transcript will not help taxpayers find out when they will get their refund. The IRS notes that the information on a transcript does not necessarily reflect the amount or timing of a refund. While taxpayers can use a transcript to validate past income and tax filing status for mortgage, student and small business loan applications, and to help with tax preparation they should use “Where’s My Refund?” to check the status of their refund.

Scammers

Be Alert to Scammers Who Pose as the IRS

​

Scammers pretending to be from the IRS continue to target taxpayers. These scams take many different forms. Among the most common are phone calls and fake emails. Thieves use the IRS name, logo or a fake website to try and steal money from taxpayers. Identity theft can also happen with such scams.

Taxpayers need to be cautious of phone calls or automated messages from scammers who claim to be from the IRS. These criminals often say the taxpayer owes money. They also demand immediate payment. Scammers also lie to taxpayers and say they are due a refund. They do this to lure their victims into giving their bank account information over the phone. The IRS warns taxpayers not to fall for these scams.

Below are tips that will help avoid becoming a victim during the summer months and throughout the year:

The IRS will NOT:

  • Call to demand immediate payment using specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS first mails a bill to taxpayers who owe taxes. If the IRS assigns a case to a Private Debt Collector (PCA), both the IRS and the authorized collection agency send a letter to the taxpayer. Payment is always to the United States Treasury.

  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.

  • Demand payment of taxes without giving the taxpayer the opportunity to question or appeal the amount owed.

  • Ask for credit or debit card numbers over the phone.

If a taxpayer does not owe any tax, they should:

If a taxpayer is not sure whether they owe any tax, they can view their tax account information on IRS.gov to find out.

Taxpayers should also watch out for emails and websites looking to steal personal information. An IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. Criminals often use fake refunds, phony tax bills or threats of an audit. Some emails link to fake websites that look real. The scammers’ goal is to lure victims to give up their personal and financial information. If they’re successful, they use it to steal a victim’s money and their identity.

For  taxpayers who get a ‘phishing’ email, the IRS offers this advice:

  • Don’t reply to the message.

  • Don’t give out personal or financial information.

  • Forward the email to phishing@irs.gov. Then delete it.

  • Do not open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on IRS.gov/phishing.

Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Starting A Business

Starting a Business This Summer?  Here’s Five Tax Tips

​

If summer plans include starting a business, be sure to visit IRS.gov. The IRS website has answers to questions on payroll and income taxes, credits and deductions plus more.

New business owners may find the following five IRS tax tips helpful:

1. Business Structure.  An early choice to make is to decide on the type of structure for the business. The most common types are sole proprietor, partnership and corporation. The type of business chosen will determine which tax forms to file.

2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax a business pays depends on the type of business structure set up. Taxpayers may need to make estimated tax payments. If so, use IRS Direct Pay to make them. It’s the fast, easy and secure way to pay from a checking or savings account.

3. Employer Identification Number (EIN).  Generally, businesses may need to get an EIN for federal tax purposes. Search “EIN” on IRS.gov to find out if the number is necessary. If needed, it’s easy to apply for it online.

4. Accounting Method.  An accounting method is a set of rules used to determine when to report income and expenses. Taxpayers must use a consistent method. The two most common are the cash and accrual methods:

a. Under the cash method, taxpayers normally report income and deduct expenses in the year that they receive or pay them.

b. Under the accrual method, taxpayers generally report income and deduct expenses in the year that they earn or incur them. This is true even if they get the income or pay the expense in a later year.

Get all the basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center.

Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Identity Theft

Eight Tips to Protect Taxpayers from Identity Theft

​

Identity theft happens when someone steals personal information for financial gain. Tax-related identity theft happens when someone uses another person’s stolen Social Security number (SSN) or Employer Identification Number (EIN) to file a tax return to obtain a fraudulent refund.

Many people first find out they are victims of identity theft when they submit their tax returns. That’s because the IRS lets them know someone else already used their SSN to file.

The IRS continues to work hard to stop identity theft with a strategy of prevention, detection and victim assistance. So far, the agency has stopped millions of dollars from getting into the hands of thieves.

Check out these eight tips on how to protect against identity theft:

1. Taxes. Security. Together. The IRS, the states and the tax industry need everyone’s help. The IRS launched The Taxes. Security. Together. awareness campaign in 2015 to inform people about ways to protect their personal, tax and financial data. Learn more at www.IRS.gov/TaxesSecurityTogether.

2. Protect Personal and Financial Records. Taxpayers should not carry their Social Security card in their wallet or purse. They should only provide their Social Security number if it’s necessary. Protect personal information at home and protect personal computers with anti-spam and anti-virus software. Routinely change passwords for online accounts.

3. Don’t Fall for Scams.  Criminals often try to impersonate banks, credit card companies and even the IRS hoping to steal personal data. Learn to recognize and avoid those fake communications. Also, the IRS will not call a taxpayer threatening a lawsuit, arrest or to demand immediate payment. Beware of threatening phone calls from someone claiming to be from the IRS.

4. Report Tax-Related ID Theft. Here’s what taxpayers should do if they cannot e-file their return because someone already filed using their SSN:

  • File a tax return by paper and pay any taxes owed.

  • File an IRS Form 14039, Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. Include it with the paper tax return and/or attach a police report describing the theft if available.

  • File a report with the Federal Trade Commission using the FTC Complaint Assistant.

  • Contact Social Security Administration at www.ssa.gov and type in “identity theft” in the search box.

  • Contact financial institutions to report the alleged identity theft.   

  • Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on the affected account.

  • Check with the applicable state tax agency to see if there are additional steps to take at the state level.

5. IRS Letters. If the IRS identifies a suspicious tax return with a taxpayer’s stolen SSN, that taxpayer may receive a letter asking them verify their identity by calling a special number or visiting an IRS Taxpayer Assistance Center.

6. IP PIN. If a taxpayer is a confirmed ID theft victim, the IRS may issue them anIP PIN. The IP PIN is a unique six-digit number that the taxpayer uses to e-file their tax return. Each year, they will receive an IRS letter with a new IP PIN.

7. Report Suspicious Activity. If taxpayers suspect or know of an individual or business that is committing tax fraud, they can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.

8. Service Options. Information about tax-related identity theft is available online. The IRS has a special section on IRS.gov devoted to identity theft and information for victims to obtain assistance.

For more on this Topic, see the Taxpayer Guide to Identity Theft.

Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional IRS Resources:

IRS YouTube Videos:

Share this tip on social media -- #IRSTaxTip: Eight Tips to Protect Taxpayers from Identity Theft.  https://go.usa.gov/xRPJW

bottom of page