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Most taxpayers can deduct up to $300 in charitable contributions without itemizing deductions Following tax law changes, cash donations of up to $300 made this year by December 31, 2020 are now deductible without having to itemize when people file their taxes in 2021.... The Coronavirus Aid, Relief and Economic Security Act includes several temporary tax law changes to help charities. This includes the special $300 deduction designed especially for people who choose to take the standard deduction, rather than itemizing their deductions. This change allows individual taxpayers to claim a deduction of up to $300 for cash donations made to charity during 2020. This deduction lowers both adjusted gross income and taxable income translating into tax savings for those making donations to qualifying tax-exempt organizations. Before making a donation, taxpayers should check the Tax Exempt Organization Search tool on IRS.gov to make sure the organization is eligible for tax deductible donations. Cash donations include those made by check, credit card or debit card. They don't include securities, household items or other property. Though cash contributions to most charitable organizations qualify, some don’t. People should review Publication 526, Charitable Contributions for details. Cash contributions made to supporting organizations are not tax deductible. The CARES Act includes other temporary allowances designed to help charities. These include higher charitable contribution limits for corporations, individuals who itemize their deductions and businesses that give food inventory to food banks and other eligible charities. For more information, visit the Coronavirus Tax Relief page of IRS.gov. By law, recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes getting a receipt or acknowledgement letter from the charity before filing a return and retaining a cancelled check or credit card receipt

Here’s what taxpayers can do now to Get Ready to file taxes in 2021 There are steps people can take now to make sure their tax filing experience goes smoothly in 2021. First, they can visit the Get Ready page on IRS.gov. Here are a few other things people can do now:...Continue reading

New income ranges for IRA eligibility in 2021 There are cost of living adjustments that may affect a taxpayer’s pension plan and other retirement-related savings next year. People should familiarize themselves with these adjustments, so they aren’t caught off guard. Here are some highlights of the 2021 changes:... The income ranges for these actions all increased for 2021: Determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements. Contributing to Roth IRAs. Claiming the saver's credit. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out. This reduction goes until the deduction is eliminated. The amount of the deduction depends on the taxpayer’s filing status and their income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs don’t apply. Here are the traditional IRA phase-out ranges for 2021: $66,000 to $76,000 Single taxpayers covered by a workplace retirement plan. $105,000 to $125,000 Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan. $198,000 to $208,000 A taxpayer not covered by a workplace retirement plan married to someone who’s covered. $0 to $10,000 Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan. Here are the income phase-out ranges for taxpayers making contributions to a Roth IRA: $125,000 to $140,000 Single taxpayers and heads of household. $198,000 to $208,000 Married, filing jointly. $0 to $10,000 Married, filing separately. Here are the income limits for the saver's credit, also called the retirement savings contributions credit: $66,000 Married, filing jointly. $49,500 Head of household. $33,000 Singles and married individuals filing separately.

Tips to help taxpayers avoid post-disaster scams The IRS reminds taxpayers that criminals and scammers often try to take advantage of generous taxpayers who want to help disaster victims. Everyone should be vigilant. These scams often pop up after a hurricane, wildfire or other disaster. How the scams start... These disaster scams normally start with unsolicited contact. The scammer contacts their possible victim by telephone, social media, email or in-person. Scammers also use a variety of tactics to lure information out of people. Here are some tips to help people recognize a scam and avoid becoming a victim: Some thieves pretend they are from a charity. They do this to get money or private information from well-intentioned taxpayers. Bogus websites use names that are similar to legitimate charities. They do this scam to trick people to send money or provide personal financial information. Scammers even claim to be working for or on behalf of the IRS. The thieves say they can help victims file casualty loss claims and get tax refunds. Disaster victims can call the IRS toll-free disaster assistance line at 866-562-5227. Phone assistors will answer questions about tax relief or disaster-related tax issues. Taxpayers who want to make donations can get information to help them on IRS.gov. The Tax Exempt Organization Search helps users find or verify qualified charities. Donations to these charities may be tax-deductible. Taxpayers should always contribute by check or credit card to have a record of the tax-deductible donation. Donors should not give out personal financial information to anyone who solicits a contribution. This includes things like Social Security numbers or credit card and bank account numbers and passwords.

What happens after a disaster that leads to taxpayer relief No matter how devastating a disaster is, before the IRS can authorize any tax relief, FEMA must issue a major disaster declaration and identify areas qualifying for their Individual Assistance program. Here's a list of tax-related things that usually happen after a major disaster strikes:... The IRS gives taxpayers more time to file and pay. Taxpayers whose address of record is located in an area identified by FEMA for their Individual Assistance program will automatically receive extra time from the IRS to file returns and pay taxes. The IRS's disaster assistance page provides disaster updates and links to resources. Information is usually available on the IRS Twitter account as well. Taxpayers can also call the agency’s disaster line at 866-532-5227 with questions. Taxpayers can qualify for a casualty loss tax deduction. People who have damaged or lost property due to a federally declared disaster may qualify to claim a casualty loss deduction. They can claim this on their current or prior-year tax return. This may result in a larger refund. People can apply for a disaster loan or grant. The Small Business Administration offers financial help to business owners, homeowners and renters. This help is for those in a federally declared disaster area. To qualify, a taxpayer must have filed all required tax returns. Taxpayers might need a tax return transcript. People who need a tax transcript to support their disaster claims can obtain free transcripts by using Get Transcript to access their transcripts immediately online or to request mail delivery. They can also call 800-908-9946 to request mail delivery or submit Form 4506-T, Request for Transcript of Tax Return. People who need a copy of their tax return, should file Form 4506, Request for Copy of Tax Return. The IRS waives the usual fees and expedites requests for copies of tax returns for people who need them to apply for disaster-related benefits or to file amended returns claiming disaster-related losses. If filing Forms 4506-T or 4506, the taxpayer should state on the form the request is disaster related and list the state and type of event. This helps speed up the process. People who relocate need to submit a change of address. After a disaster, people might need to temporarily relocate. Those who move should notify the IRS of their new address by submitting Form 8822, Change of Address.

Taxpayers should know and understand their correct filing status Taxpayers need to know their correct filing status and be familiar with each option. Generally, the taxpayer's filing status depends on whether they are single or married on Dec. 31 and that determines their status for the whole year. However, more than one filing status may apply in certain situations. If this is the case, taxpayers can usually choose the filing status that allows them to pay the least amount o...f tax. When preparing and filing a tax return, the filing status affects: If the taxpayer is required to file a federal tax return If they should file a return in order to receive a refund Their standard deduction amount If they can claim certain credits The amount of tax they should pay Here's the five filing statuses: Single. Normally this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law. Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. When a spouse passes away, the widowed spouse can usually file a joint return for that year. Married filing separately. Married couples can choose to file separate tax returns. When doing so it may result in less tax owed than filing a joint tax return. Head of household. Unmarried taxpayers may be able to file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year. Qualifying widow(er) with dependent child. This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply.

Six tips for people starting a new business Understanding the tax responsibilities that come with starting a business venture can save taxpayers money and help set them up for success. IRS.gov has the resources and answers to help people through the process of starting a new business. Here are six tips for new business owners.... Choose a business structure. The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are: Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business. Partnership: An unincorporated business with ownership shared between two or more people. Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders. S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders. Limited Liability Company: A business structure allowed by state statute. Choose a tax year. A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either: Calendar year: 12 consecutive months beginning January 1 and ending December 31. Fiscal year: 12 consecutive months ending on the last day of any month except December. Apply for an employer identification number. An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need one of these numbers. It’s important for a business with an EIN to keep the business mailing address, location and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form. Have all employees complete these forms: Form I-9, Employment Eligibility Verification U.S. Citizenship and Immigration Services Form W-4, Employee’s Withholding Allowance Certificate Pay business taxes. The form of business determines what taxes must be paid and how to pay them. Visit state’s website. Prospective business owners should visit their state's website for info about state requirements.

A tax checklist for newly married couples Marriage changes a lot of things and taxes are on that list. Newlyweds should know how saying I do can affect their tax situation. Here’s a checklist of items for newly married couples to review:... Name and address changes - Name. When a name changes through marriage, it is important to report that change to the Social Security Administration. The name on a person’s tax return must match what is on file at the SSA. If it doesn’t, it could delay any tax refund. To update information, taxpayers should file Form SS-5, Application for a Social Security Card. It is available on SSA.gov, by calling 800-772-1213 or at a local SSA office. - Address. If marriage means a change of address, the IRS and U.S. Postal Service need to know. To do that, people should send the IRS Form 8822, Change of Address. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office. Withholding - After getting married, couples should consider changing their withholding. Newly married couples must give their employers a new Form W-4, Employee's Withholding Allowance within 10 days. If both spouses work, they may move into a higher tax bracket or be affected by the Additional Medicare Tax. They can use the IRS Withholding Estimator on IRS.gov to help complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax for more information. Filing status - Married people can choose to file their federal income taxes jointly or separately each year. While filing jointly is usually more beneficial, it’s best to figure the tax both ways to find out which works best. Remember, if a couple is married as of Dec. 31, the law says they’re married for the whole year for tax purposes. Scams - All taxpayers should be aware of and avoid tax scams. The IRS will never initiate contact using email, phone calls, social media or text messages. First contact generally 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.

People should have tax withheld from unemployment now to avoid a tax-time surprise Due to the Coronavirus pandemic, millions of Americans received or are currently receiving unemployment compensation, many of them for the first time. It’s important for these individuals to know that unemployment compensation is taxable. People can have taxes withheld from this compensation now to help avoid owing taxes on this income when they file their income tax return next year.... By law, these benefits are taxable and must be reported on a federal income tax return for the tax year it was received. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security Act. Withholding is voluntary Federal law allows recipients to choose a flat 10% withholding from these benefits to cover part or all their tax liability. To do this, recipients should complete Form W-4V, Voluntary Withholding Request, and give it to the agency paying their benefits. Don't send the form to the IRS. If the paying agency has its own withholding request form, use it instead. Recipients who don't choose voluntary withholding, or if the withholding isn’t enough, can make quarterly estimated tax payments. The payment for the first two quarters of 2020 was due on July 15. Third quarter is due September 15, 2020 and fourth quarter on January 15, 2021. Taxpayers can visit IRS.gov to view all payment options. Here are other types of payments taxpayers should check for withholding: Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund Railroad unemployment compensation benefits Disability benefits paid as a substitute for unemployment compensation Trade readjustment allowances under the Trade Act of 1974 Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974 Unemployment assistance under the Airline Deregulation Act of 1978 Program Recipients who return to work before the end of the year can use the IRS Tax Withholding Estimator to make sure the right amount of tax is taken out of their pay. This online tool is available only on IRS.gov, and it can help workers or pension recipients avoid or lessen year-end tax bills or can estimate a refund.

Federal benefit recipients with children have more time to get the $500 Economic Impact Payment The IRS has reopened the registration period for individuals who receive Social Security, Supplemental Security Income, Railroad Retirement or veteran’s benefits, but didn't receive $500 per child earlier this year when they received their own Economic Impact Payment. Federal benefit recipients can use the Non-Filers: Enter Payment Info Here tool to get a catch-up payment for a qua...lifying child if they have NOT done one of the following: already used the Non-Filers tool to provide information about their qualifying child filed their 2019 or 2018 tax return The Non-Filers tool is available on IRS.gov in both English and Spanish. Eligible individuals can use the tool until Wednesday, September 30 to enter information about their qualifying children to receive a catch-up $500 payment per child. This payment will be issued in October. Those unable to access the Non-Filers tool, may file a simplified paper return following the instructions in this FAQ on IRS.gov. Anyone who misses the September 30 deadline will need to wait until next year and claim the payment as a credit on their 2020 federal income tax return. Those who received their original Economic Impact Payment by direct deposit will also have any catch-up payment direct deposited to the same account. Others will receive a check. Federal benefit recipients who used the Non-Filers tool after May 5, don’t need to take any further action. Social Security, SSI, Department of Veterans Affairs and Railroad Retirement Board beneficiaries who have already used the Non-Filers tool to provide information on children don’t need to take any further action. The IRS will automatically send a payment in October. Get a payment status at IRS.gov Eligible recipients can check the status of their catch-up payment using the Get My Payment tool on IRS.gov. They will also receive another Notice 1444 in the mail stating after the payment is issued that should be kept with their tax records.

Tips for taxpayers who need to file a new W-4 All taxpayers should review their withholding annually. They can use the IRS Tax Withholding Estimator to check and make sure they’re not having too little or too much federal tax withheld. This tool offers workers, retirees and self-employed individuals a step-by-step method to help figure out if they should adjust their withholding. Those who need to adjust their withholding should submit a new Form W-4, Employee’s Withholding C...ertificate to their employer. People who should check their withholding include those: who are part of two-income families working two or more jobs or who only work for part of the year with children who claim credits such as the child tax credit with older dependents, including children age 17 or older who itemized deductions on their 2019 tax return with high incomes and more complex tax returns with large tax refunds or large tax bills for 2019 who received unemployment at any time during the year The IRS Tax Withholding Estimator can help taxpayers check their withholding. This tool will help determine if they should complete a new Form W-4. It will also help users determine what information to put on a new Form W-4. It will save them time because they don’t need to complete the form worksheets. The Estimator does the worksheet calculations. Taxpayers who complete a new Form W-4 should submit it to their employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step sooner, rather than later. People should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If adjustments aren’t made for these situations, they will likely owe additional tax and possibly penalties when filing their tax return. On the other hand, people should generally decrease their withholding if they are eligible for income tax credits or deductions other than the basic standard deduction. Having the most recent pay statements, information for other income sources and the most recent income tax return can help taxpayers use the Withholding Estimator to figure out their correct withholding. They might also need to adjust their state or local withholding. They can contact their state's department of revenue to learn more.

Earning side income: Is it a hobby or a business? Whether it’s something they’ve been doing for years or something they just started to make extra money, taxpayers must report income earned from hobbies in 2020 on next year’s tax return. What the difference between a hobby and a business? A business operates to make a profit. People engage in a hobby for sport or recreation, not to make a profit.... Here are nine things taxpayers must consider when determining if an activity is a hobby or a business: Whether the activity is carried out in a businesslike manner and the taxpayer maintains complete and accurate books and records. Whether the time and effort the taxpayer puts into the activity show they intend to make it profitable. Whether they depend on income from the activity for their livelihood. Whether any losses are due to circumstances beyond the taxpayer’s control or are normal for the startup phase of their type of business. Whether they change methods of operation to improve profitability. Whether the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business. Whether the taxpayer was successful in making a profit in similar activities in the past. Whether the activity makes a profit in some years and how much profit it makes. Whether the taxpayers can expect to make a future profit from the appreciation of the assets used in the activity

Here’s what taxpayers need to know about the home office deduction The home office deduction allows qualifying taxpayers to deduct certain home expenses on their tax return. With more people working from home than ever before, some taxpayers may be wondering if they can claim a home office deduction when they file their 2020 tax return next year. Here are some things to help taxpayers understand the home office deduction and whether they can claim it:... Employees are not eligible to claim the home office deduction. The home office deduction Form 8829 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 regular 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.

Dirty Dozen part 2: Thieves are constantly coming up with ways to scam taxpayers This is the second of two tips exploring the IRS Dirty Dozen tax scam list. Tax scams tend to rise during tax season or during times of crisis. Scam artists are using the COVID-19 pandemic to try to steal money and information from taxpayers. Taxpayers should watch out for these scams....Continue reading

Dirty Dozen part 1: Taxpayers should be on the lookout for these scams All tax scams put taxpayers at risk. This is the first of two tips taking a closer look at the IRS Dirty Dozen tax scam list. This year, taxpayers should be especially, watchful for aggressive schemes related to COVID-19 relief, including Economic Impact Payments. Here is a recap of the first six scams in this year's Dirty Dozen.... Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers through email about a tax bill, refund or Economic Impact Payment. Don't click on links claiming to be from the IRS. Be wary of emails and websites they may be nothing more than scams to steal personal information. Fake charities: Criminals frequently target natural disasters and other situations, such as COVID-19, by setting up fake charities to steal from well-intentioned people trying to help in times of need. Fraudulent schemes normally start with unsolicited contact by phone, text, social media, email or in-person using a variety of tactics. Threatening impersonator phone calls: IRS impersonation scams come in many forms. A common one remains fake threatening phone calls from a criminal claiming to be with the IRS. The agency will never threaten a taxpayer or surprise them with a demand for immediate payment. Scam phone calls include those threatening arrest, deportation or license revocation if the victim doesn't pay a fake tax bill. Social media scams: Taxpayers need to protect themselves against social media scams, which frequently use events such as COVID-19 to try tricking people. Social media enables anyone to share information with anyone else on the Internet. Scammers use this information as ammunition for a wide variety of scams. These include emails where scammers impersonate someone's family, friends or co-workers. Economic Impact Payment or refund theft: This year, criminals turned their attention to stealing Economic Impact Payments. Many of these scams are identity theft-related. Criminals file false tax returns or supply false information to the IRS to divert refunds to wrong addresses or bank accounts. Senior fraud: Senior citizens, their friends and family need to be on alert for tax scams targeting older taxpayers. Their growing comfort with technology, including social media, gives scammers another means of taking advantage of them. Phishing scams linked to COVID-19 have been a major threat this year. Seniors should be on alert for a continuing surge of fake emails, text messages, websites and social media attempts to steal personal information.

All taxpayers should know the telltale signs of common tax scams Every year scammers add new twists to well-known tax-related scams and 2020 is no exception. Taxpayers should remember that the IRS generally first mails a bill to a taxpayer who owes taxes. There are special circumstances when the IRS will call or come to a home or business.... Here are some tips to help taxpayers spot scams and avoid becoming a victim. Email phishing scams The IRS does not initiate contact with taxpayers by email to request personal or financial information. For ways to avoid these scams read tips from the Department of Homeland Security. For additional tips, check out Taxes. Security. Together. Taxpayers should report IRS, Treasury or tax-related suspicious online or email phishing scams to [email protected]. They should not open any attachments, click on any links, reply to the sender or take any other actions that could put them at risk. Phone scams The IRS and its authorized private collection agencies will never: Leave pre-recorded, urgent or threatening messages. Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying, deported or revoke their licenses. Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The agency doesn’t use these methods for tax payments. Ask for checks to third parties. The agency has specific instructions on how to pay taxes. Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed. Criminals can fake or spoof caller ID numbers to appear to be anywhere in the country. Scammers can even spoof an IRS office phone number or the numbers of various local, state, federal or tribal government agencies. If a taxpayer receives an IRS or Treasury-related phone call, but doesn’t owe taxes and has no reason to think they do, they should: Hang up immediately. Contact the Treasury Inspector General for Tax Administration to report the call. Report the caller ID and callback number to the IRS by sending it to [email protected]. The subject line should include IRS Phone Scam. Report the call to the Federal Trade Commission. If a taxpayer owes tax or thinks they do, they should: View tax account information online at IRS.gov to see the actual amount owed. Review their payment options. Call the number on any billing notice they receive or call the IRS at 800-829-1040.

How taxpayers can quickly and easily check their refund status Taxpayers can use the Where’s My Refund? tool to start checking on the status of refund 24 hours after the IRS acknowledges receipt of the taxpayer’s e-filed tax return. Currently, the IRS is experiencing delays in processing paper tax returns due to limited staffing as a result of COVID-19. The IRS is processing tax returns, issuing refunds and accepting payments. Taxpayers who filed a paper tax return and expect... a refund may experience a significant delay beyond the normal time frame of four to six weeks from the time they mailed the return. The IRS will process these returns in the order received and there is no need to file a second tax return or call the IRS. Taxpayers can access the Where’s My Refund? tool two ways: Visiting IRS.gov Downloading the IRS2GO app To use the tool, taxpayers will need: Their Social Security number or Individual Taxpayer Identification Number Tax filing status The exact amount of the refund claimed on their tax return The tool displays progress in three phases: Return received Refund approved Refund sent The tool is updated once every 24 hours, usually overnight, so there’s no need to check the status more often. Where’s My Refund? follows a tax return from receipt to completion. It will tell the taxpayer when their return is in received status and if the refund is in approved or sent status. When the status changes to approved, it means the IRS is preparing to send the refund as a direct deposit to the taxpayer’s bank account or directly to the taxpayer in the mail by check to the address used on their return. Taxpayers should wait five days after the IRS sends the refund as a direct deposit to check with their bank. It could take several weeks before a refund check is received by mail.