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Filing taxes 101: Common errors taxpayers should avoid


IRS Tax Tip 2020-20

Filing a tax return electronically reduces errors because the tax software does the math, flags common errors and prompts taxpayers for missing information.

Using a reputable tax preparer – including certified public accountants, enrolled agents or other knowledgeable tax professionals – can also help avoid errors. Mistakes can result in a processing delay, which can mean it takes more time to get a refund.

Here are some common errors to avoid when preparing a tax return:

Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.

Misspelled names. Likewise, a name listed on a tax return should match the name on that person’s Social Security card.

Incorrect filing status. Some taxpayers choose the wrong filing status. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status especially if more than one filing status applies. Tax software also helps prevent mistakes with filing status.

Math mistakes. Math errors are one of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software does it automatically.

Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit, and the standard deduction. Taxpayers should always follow the instructions carefully. For example, a taxpayer who’s 65 or older, or blind, should claim the correct, higher standard deduction if they’re not itemizing. The Interactive Tax Assistant can help determine if a taxpayer is eligible for tax credits or deductions. Attach any required forms and schedules.

Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for a taxpayer to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.

Unsigned forms. An unsigned tax return isn’t valid…period. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.

Filing with an expired individual tax identification number. If a taxpayer’s ITIN is expired, they should go ahead and file using the expired number. The IRS will process that return and treat it as a return filed on time. However, the IRS won’t allow any exemptions or credits to a return filed with an expired ITIN. Taxpayers will receive a notice telling the taxpayer to renew their number. Once the taxpayer renews the ITIN, the IRS will process return normally.
 

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Know the difference between standard and itemized deductions

IRS Tax Tip 2020-17

It’s a good idea for people to find out if they should file using the standard deduction or itemize their deductions. Deductions reduce the amount of taxable income when filing a federal income tax return. In other words, they can reduce the amount of tax someone owes.

Individuals should understand they have a choice of either taking a standard deduction or itemizing their deductions. Taxpayers can use the method that gives them the lower tax. Due to tax law changes in the last couple years, people who itemized in the past might not want to continue to do so, so it’s important for all taxpayers to look into which deduction to take.

Here are some details about the two methods to help people understand which they should use:

Standard deduction

The standard deduction amount adjusts every year and can vary by filing status. The standard deduction amount depends on the taxpayer’s filing status, whether they are 65 or older or blind, and whether another taxpayer can claim them as a dependent. Taxpayers who are age 65 or older on the last day of the year and don’t itemize deductions are entitled to a higher standard deduction.

Most filers who use Form 1040 or Form 1040-SR, U.S. Tax Return for Seniors, can find their standard deduction on the first page of the form.

Taxpayers who can’t use the standard deduction include:

*A married individual filing as married filing separately whose spouse itemizes deductions.

*An individual who files a tax return for a period of less than 12 months. This could be due to a change in their annual accounting period.

*An individual who was a nonresident alien or a dual-status alien during the year. However, nonresident aliens who are married to a U.S. citizen or resident alien can take the standard deduction in certain situations.

Itemized deductions 

Taxpayers may need to itemize deductions because they can’t use the standard deduction. They may also itemize deductions when this amount is greater than their standard deduction.

Taxpayers who itemize file Schedule A, Form 1040, Itemized Deductions or Form 1040-SR, U.S. Tax Return for Seniors.

A taxpayer may benefit by itemizing deductions for things that include:

*State and local income or sales taxes

*Real estate and personal property taxes

*Mortgage interest

*Mortgage insurance premiums

*Personal casualty and theft losses from a federally declared disaster

*Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income

Individual itemized deductions may be limited. Schedule A, Form 1040 Instructions can help determine what limitations may apply.

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Jan. 31 filing deadline for employers, other businesses to file wage statements


WASHINGTON — With just a few days remaining until the deadline, the Internal Revenue Service reminds employers and other businesses that January 31 is the filing deadline for submitting wage statements and forms for independent contractors with the government.

Employers must file their copies of Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by January 31. The January 31 deadline also applies to certain Forms 1099-MISC, Miscellaneous Income, filed with the IRS to report non-employee compensation to independent contractors.

This deadline helps the IRS fight tax fraud by making it easier to verify income reported on individual tax returns. The IRS no longer grants an automatic extension of time to file Form W-2. Requests for more time to file must be submitted before the due date. Only certain reasons, such as a death or natural disaster are allowed. Details can be found on the instructions for Form 8809, Application for Extension of Time To File Information Returns.

Failure to file these forms correctly and timely may result in penalties. The IRS recommends employers and other businesses to e-file as the quickest, most accurate and convenient way to file these forms.

Taxpayers: Steps to take if no W-2

Most taxpayers get their Form W-2, Wage and Tax Statement, by the end of January. Taxpayers need their W-2s to file accurate tax returns, as the form shows an employee’s income and taxes withheld for the year.

Taxpayers who haven’t received their W-2 by the end of February should, as a first step, contact their employer. Taxpayers should ask their current or former employer for a copy of their W-2. Be sure the employer has the correct address. Additional information for taxpayers is available at IRS.gov.

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Improved Tax Withholding Estimator


Helps workers target the refund they want; shows how to fill out new 2020 W-4

WASHINGTON—The Internal Revenue Service has launched a new and improved Tax Withholding Estimator, designed to help workers target the refund they want by having the right amount of federal income tax taken out of their pay.

The Tax Withholding Estimator, now available on IRS.gov, incorporates the changes from the redesigned Form W-4, Employee’s Withholding Certificate, that employees can fill out and give to their employers this year.

The IRS urges everyone to see if they need to adjust their withholding by using the Tax Withholding Estimator to perform a Paycheck Checkup. If an adjustment is needed, the Tax Withholding Estimator gives specific recommendations on how to fill out their employer’s online Form W-4 or provides the PDF form with key parts filled out.

To help workers more effectively adjust their withholding, the improved Tax Withholding Estimator features a customized refund slider that allows users to choose the refund amount they prefer from a range of different refund amounts. The exact refund range shown is customized based on the tax information entered by that user.

Based on the refund amount selected, the Tax Withholding Estimator will give the worker specific recommendations on how to fill out their W-4. This new feature allows users who seek either larger refunds at the end of the year or more money on their paychecks throughout the year to have just the right amount withheld to meet their preference.

The new Tax Withholding Estimator also features several other enhancements, including one allowing anyone who expects to receive a bonus to indicate whether tax will be withheld. In addition, improvements added last summer continue to be available, including mobile-friendly design, handling of pension income, Social Security benefits and self-employment tax.

Starting in 2020, income tax withholding is no longer based on an employee’s marital status and withholding allowances, tied to the value of the personal exemption. Instead, income tax withholding is generally based on the worker’s expected filing status and standard deduction for the year. In addition, workers can choose to have itemized deductions, the Child Tax Credit and other tax benefits reflected in their withholding for the year.

It is important for people with more than one job at a time (including families in which both spouses work) to adjust their withholding to avoid having too little withheld. Using the Tax Withholding Estimator is the most accurate way to do this. As in the past, employees can also choose to have an employer withhold an additional flat-dollar amount each pay period to cover, for example, income they receive from the gig economy, self-employment, or other sources that is not subject to withholding.

For more information about the updated Tax Withholding Estimator and the redesigned 2020 Form W-4, visit IRS.gov.

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Reasons for people to file a 2019 tax return


While many people are required to file a tax return, it’s a good idea for everyone to determine if they should file. Some people with low income are not required to file, but will need to do so if they can get a tax refund.

Here are five tips for taxpayers who are deciding whether to file a tax return:

Find out the general reasons to file

In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. There are other reasons when a taxpayer must file. The Interactive Tax Assistant can help someone determine if they the need to file a return.

Look at tax withheld or paid

Here are a few questions for taxpayers to ask themselves:

Did the taxpayer’s employer withhold federal income tax from their pay?

Did the taxpayer make estimated tax payments?

Did they overpay last year and have it applied to this year’s tax?

If the answer is “yes” to any of these questions, they could be due a refund. They must file a tax return to get their money.

Look into whether they can claim the earned income tax credit

A working taxpayer who earned less than $55,592 last year could receive the EITC as a tax refund. They must qualify and may do so with or without a qualifying child. They can check eligibility by using the 2019 EITC Assistant on IRS.gov. Taxpayers need to file a tax return to claim the EITC.

Child tax credit or credit for other dependents

Taxpayers can claim the child tax credit if they have a qualifying child under the age of 17 and meet other qualifications. Other taxpayers may be eligible for the credit for other dependents. This includes people who have:

Dependent children who are age 17 or older at the end of 2019

Parents or other qualifying individuals they support

The Child-Related Tax Benefits tool can help people determine if they qualify for these two credits.

Education credits

There are two higher education credits that reduce the amount of tax someone owes on their tax return. One is the American opportunity tax credit and the other is the lifetime learning credit. The taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period to qualify. The taxpayer may qualify for one of these credits even if they don’t owe any taxes. Form 8863, Education Credits is used to claim the credit when filing the tax return.

More information:

Publication 972, Child Tax Credit https://www.irs.gov/forms-pubs/about-publication-972

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IRS opens 2020 filing season for individual filers on Jan. 27


WASHINGTON ― The Internal Revenue Service confirmed that the nation’s tax season will start for individual tax return filers on Monday, January 27, 2020, when the tax agency will begin accepting and processing 2019 tax year returns.

The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

“As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS stands ready to help,” said IRS Commissioner Chuck Rettig. “We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov. The IRS and the nation’s tax community are committed to making this another smooth filing season.”

The IRS set the January 27 opening date to ensure the security and readiness of key tax processing systems and to address the potential impact of recent tax legislation on 2019 tax returns.

While taxpayers may prepare returns through the IRS’ Free File program as well as many tax software companies and tax professionals before the start date, processing of those returns will begin after IRS systems open later this month.

“The IRS encourages everyone to consider filing electronically and choosing direct deposit,” Rettig said. “It’s fast, accurate and the best way to get your refund as quickly as possible.”

Filing electronically flags common errors and prompts taxpayers for missing information. Taxpayers can get free help preparing and filing taxes through IRS Free File online or free tax help from trained volunteers at community sites around the country. The IRS also reminds taxpayers that they don’t have to wait until January 27 to start their tax return or contact a reputable tax preparer.

In addition, IRS tax help is available 24 hours a day on IRS.gov, the official IRS website, where people can find answers to tax questions and resolve tax issues online. The Let Us Help You page helps answer most tax questions, and the IRS Services Guide (PDF) links to these and other IRS services.

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Taxpayers who can’t pay their taxes should still file on time


With the April tax filing due date just a few days away, taxpayers should remember to both file and pay any taxes they owe by the deadline. Taxpayers who do not file and pay timely will see their tax debt grow. In fact, penalties and interest can cause a taxpayer’s debt to grow by more than thirty percent in just a few months.

Here are some tips for taxpayers who owe tax, but who can’t immediately pay their tax bill. Taxpayers should:

File their tax return or request an extension of time to file by the April deadline. 

Taxpayers who owe tax and do not file their return on time or request an extension may face a failure-to-file penalty for not filing on time.

Pay as much as possible by the April due date. 

Whether they are filing a return or requesting an extension, taxpayers must pay their bill in full by the April filing deadline. Taxpayers who do not pay their taxes on time will face a failure-to-pay penalty. Taxpayers should remember that an extension of time to file is not an extension of time to pay.

Set up a payment plan as soon as possible. 

Taxpayers who owe, but cannot pay in full by the deadline don’tt have to wait for a tax bill to request a payment plan. Taxpayers can apply for a payment plan on IRS.gov. Taxpayers can also submit a payment plan request in writing using Form 9465, Installment Agreement Request.

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Tax Time Guide wrap-up

Tips on payment options, penalty waivers, refunds and more

WASHINGTON—The Internal Revenue Service urges taxpayers to file an accurate tax return on time, even if they owe but can’t pay in full. The IRS also recommends that taxpayers do a Paycheck Checkup early in 2019 to avoid having too much or too little tax withheld.

Most taxpayers are being affected by major tax law changes. While most will get a tax refund, others may find that they owe taxes. Those who owe may qualify for a waiver of the estimated tax penalty that normally applies. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for details.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.

The filing deadline to submit 2018 tax returns is Monday, April 15, 2019, for most taxpayers. Because of the Patriot’s Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17 to file their returns.

Checking on refunds

The IRS issues nine out of 10 refunds in less than 21 days. Using the “Where’s My Refund?” online tool, taxpayers can start checking on the status of their return within 24 hours after the IRS receives an e-filed return or four weeks after the taxpayer mailed a paper return. The tool has a tracker that displays progress through three phases: (1) Return Received; (2) Refund Approved; and (3) Refund Sent.

All that is needed to use “Where’s My Refund?” is the taxpayer’s Social Security number, tax filing status (such as single, married, head of household) and exact amount of the tax refund claimed on the return.

“Where’s My Refund?” is updated no more than once every 24 hours, usually overnight, so there’s no need to check the status more often.

Check withholding

The IRS encourages taxpayers to review their tax withholding using the IRS Withholding Calculator and make any needed adjustments early in 2019. Taxpayers should check their withholding each year and when life changes occur, such as marriage, childbirth, adoption or buying a home. Doing a Paycheck Checkup can help taxpayers avoid having too little or too much tax withheld from their paychecks. The IRS reminds taxpayers that they can generally control the size of their tax refund by adjusting their tax withholding.

For 2019, it’s important to review withholding and do a Paycheck Checkup. This is especially true for taxpayers who adjusted their withholding in 2018, specifically in the middle or later parts of the year. And it’s also important for taxpayers who received a tax bill when they filed this year or want to adjust the size of their tax refund for next year.

How to make a tax payment

Taxpayers should visit the “Pay tab” on IRS.gov to see their payment options. Most tax software products give taxpayers various payment options, including the option to withdraw the funds from a bank account. These include:

*IRS Direct Pay offers taxpayers a free, fast, secure and easy way to make an electronic payment from their bank account to the U.S. Treasury.

*Use an approved payment processor to pay by credit or debit card for a fee.

*Mail checks or money orders made out to the U.S. Treasury.

*Make monthly or quarterly tax payments using IRS Direct Pay or through the Electronic Federal Tax Payment System.

Can’t pay a tax bill?

Everyone should file their 2018 tax return by the tax-filing deadline regardless of whether they can pay in full. Taxpayers who can’t pay all their taxes have options including:

Online Payment Agreement: Individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in payroll tax and have filed all tax returns may qualify for an Online Payment Agreement. Most taxpayers qualify for this option and an agreement can usually be set up on IRS.gov in a matter of minutes.

Installment Agreement: Installment agreements are paid by direct deposit from a bank account or a payroll deduction.

Delaying Collection: If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves.

Offer in Compromise (OIC): Taxpayers who qualify enter into an agreement with the IRS that settles their tax liability for less than the full amount owed.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed at home, at work or on the go.

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Things taxpayers should know about claiming dependents

As they are preparing their 2018 tax returns, taxpayers should remember that personal exemptions are suspended for 2018. Taxpayers cannot claim a personal exemption for anyone on their tax return. This means that an exemption can no longer be claimed for a tax filer, spouse or dependents.

Here are some quick key things for these taxpayers to know about claiming dependents on their 2018 tax return:

Claiming dependents 

A dependent is either a child or a qualifying relative who meets a set of tests. Taxpayers should remember to list the name and Social Security number for each dependent on their tax return.

Dependents cannot claim dependents. Taxpayers cannot claim any dependents if someone can claim the taxpayer or their spouse, if filing jointly, as a dependent.

Dependents may have to file a tax return. This depends on certain factors like total income, whether they’re married and if they owe certain taxes.

Child Tax Credit. Taxpayers may be able to claim this credit for each qualifying child under age 17 at the end of the year, if the taxpayer claimed that child as a dependent.

Credit for Other Dependents. Taxpayers may be able to claim this credit for qualifying relatives and children who don’t qualify for the Child Tax Credit.

Taxpayers can get answers to questions about claiming dependents, such as Whom May I Claim as a Dependent, by using the Interactive Tax Assistant tool at www.irs.gov.

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Earned income tax credit helps millions of Americans


All individual taxpayers and families should claim tax credits for which they are eligible. Tax credits cannot only reduce the amount of taxes owed, but some can result in a tax refund. The earned income tax credit is such a credit. It benefits millions of taxpayers by putting more money in their pockets.

The IRS encourages taxpayers who have claimed the credit to help their friends, family members and neighbors find out about EITC. They can go to IRS.gov/eitc or use the EITC Assistant tool on IRS.gov, available in English and Spanish. Word of mouth is a great way to help people who may be eligible for this credit in 2019 for the first time. People often become eligible for the credit when their family or financial situation changed in the last year.

Based on income, family size and filing status, the maximum amount of EITC for Tax Year 2018 is:

$6,431 with three or more qualifying children

$5,716 with two qualifying children

$3,461 with one qualifying child

$519 with no qualifying children

Every year, millions of taxpayers don’t claim the EITC because they don’t know they’re eligible. Here are some groups the IRS finds often overlook this valuable credit:

American Tribal communities

People living in rural areas

Working grandparents raising grandchildren

Taxpayers with disabilities

Parents of children with disabilities

Active duty military and/or veterans

Healthcare and Hospitality workers

Free tax help from volunteers:

The IRS works with community organizations around the country to offer free tax preparation services. They train volunteers who prepare taxes for people with low and moderate income. These volunteers can help determine if a taxpayer is eligible to claim the EITC. There are two IRS-sponsored programs:

Volunteer Income Tax Assistance: This program, also known as VITA, offers free tax return preparation to eligible taxpayers who generally earn $55,000 or less.

Tax Counseling for the Elderly: TCE is mainly for people age 60 or older but offers service to all taxpayers. The program focuses on tax issues unique to seniors. AARP participates in the TCE program through AARP Tax-Aide.

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