News & Updates

Just because a taxpayer filed a tax return doesn't mean they should forget taxes until next year. What a taxpayer does now may affect the tax they owe or the refund they may receive next year.

Here are some simple year-round tax planning pointers for all taxpayers.

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

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

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

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

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

Save for retirement. Saving for retirement can also lower a taxpayer's AGI. Contributing money to a retirement plan at work and to a traditional IRA also reduces taxable income.

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The gig economy - also called sharing economy or access economy - is a popular way for people to earn income by providing on-demand work, goods or services. Some people take up gig work on a part-time basis, and for others the job is done full-time. Income from gig work – such as driving a car for booked rides, selling goods online, renting out property or providing other on-demand work – is taxable and must be reported as income on the worker's tax return.

Gig work is taxable

• Earnings from gig economy work are taxable regardless of whether an individual receives information returns. Due to reporting requirementsPDF, gig economy workers may get a Form 1099-K if their income exceeds $600.
• Earnings from gig work include payments by credit card, cash, property, goods or virtual currency.
• Gig workers may be required to make quarterly estimated tax payments.
• If gig workers are self-employed, they must pay all Social Security and Medicare taxes on their income from the gig activity.

Proper worker classification

It's important that the taxpayer is correctly classified while they provide gig economy services. Gig workers may be classified as independent contractors by digital platforms that match workers' services with customer needs.

• This means the business, or the platform, must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers should review the worker classification information on IRS.gov to see how they should be classified.
• Independent contractors may be able to deduct business expenses depending on tax limits and rules. It's important for taxpayers to keep records of their business expenses.

Paying the right amount of taxes throughout the year

• Good recordkeeping is important to navigate tax rules successfully and avoid mistakes when doing gig work.
• An employer typically withholds income taxes from their employees' pay to help cover income taxes their employees owe.
• Gig economy workers who aren't considered employees have two ways to cover their income taxes:
• If they have another job as an employee, submit a new Form W-4 to their employer to have more income taxes withheld from their paycheck.
• Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.

The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.

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Many people move during the summer. Taxpayers who are selling their home may qualify to exclude all or part of any gain from the sale from their income when filing their tax return.

When selling a home, homeowners should think about:

Ownership and use

To claim the exclusion, the taxpayer must meet ownership and use tests. During the five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.

Gains

Taxpayers who sell their main home for a capital gain may be able to exclude up to $250,000 of that gain from their income. Taxpayers who file a joint return with their spouse may be able to exclude up to $500,000. Homeowners excluding all the gain do not need to report the sale on their tax return unless a Form 1099-S was issued.

Losses

Some taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.

Multiple homes

Taxpayers who own more than one home can exclude the gain only on the sale of their main home. They must pay taxes on the gain from selling any other home.

Reported sale

Taxpayers who don't qualify to exclude all of the taxable gain from their income must report the gain from the sale of their home when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return. Taxpayers who receive Form 1099-S, Proceeds from Real Estate Transactions, must report the sale on their tax return even if they have no taxable gain.

Mortgage debt

Generally, taxpayers must report forgiven or canceled debt as income on their tax return. This includes people who had a mortgage workout, foreclosure or other canceled mortgage debt on their home. Taxpayers who had debt discharged, in whole or in part on a qualified principal residence can't exclude that debt from income unless it was discharged before January 1, 2026, or a written agreement for the debt forgiveness was in place before January 1, 2026.

Possible exceptions

There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military or intelligence community and Peace Corps workers.

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Scammers sometimes use stolen Social Security numbers to file fraudulent tax returns and collect refunds. To prevent this, the IRS scans every tax return for signs of fraud. If the system finds a suspicious tax return, the IRS reviews the return and sends a letter to the taxpayer letting them know about the potential ID theft. The IRS won't process the suspicious tax return until the taxpayer responds to the letter.

The IRS may send these identify fraud letters to taxpayers:

• Letter 5071C, Potential Identity Theft with Online Option: This tells the taxpayer to use an online tool to verify their identity and tax return information. If the taxpayer didn't file, they can let the IRS know with the online tool.
• Letter 4883C, Potential Identity Theft: This tells the taxpayer to call the IRS to verify their identity and tax return information. If the taxpayer didn't file, they can call the Taxpayer Protection Program hotline number on the letter.
• Letter 5747C, Potential Identity Theft In Person Appointment: This tells the taxpayer to verify their identity and tax return information in person at a local Taxpayer Assistance Center. If the taxpayer didn't file, they can call the Taxpayer Protection Program hotline number on the letter.
• Letter 5447C, Potential Identity Theft Outside the U.S.: This tells the taxpayer to use an online tool or to call the IRS to verify their identity and tax return information. If the taxpayer didn't file, they can let the IRS know with the online tool.

Taxpayers should follow the steps in the letter

The identity theft letter will tell the taxpayer the steps they need to take. Taxpayers should follow those steps to resolve the matter with the IRS.

Victims of identity theft can find more resources on reporting and recovering from ID theft with the Federal Trade Commission: IdentityTheft.gov.

If the taxpayer received an IRS identity theft letter, they don't need to file an identity theft affidavit

If taxpayers need to give the IRS a heads up that they're a victim of identity theft or that they think they may be a victim, they can file Form 14039, Identity Theft Affidavit. If a taxpayer has already received an IRS letter about identity theft, they don't need to file an affidavit.

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Good news for small business owners — improvements to IRS phone service and online options are coming as a result of the Inflation Reduction Act. These customer service upgrades will make it easier and more convenient to file online and respond to notices.

Here's what small business taxpayers can expect to see in the near future.

Expanded online service tools

Before next filing season, the IRS will launch Business Online Accounts designed with small business taxpayers in mind. Small businesses can use their online account to:

• See tax information, and schedule and track payments
• Access business tax transcripts in an easy-to-read format

The IRS will add more features to Business Online Account through 2024.

More ways to respond to notices and file documents

The IRS recently launched an online portal for businesses to file Form 1099 series information returns electronically. Businesses used to have to submit these forms by mail.

Later this summer, small business owners will be able to respond to certain notices online such as LTR0143C, Signature Missing. The IRS will continue to improve and expand these features.

By 2024, small business owners will be able to respond to correction of self-employment income, employment-related identity theft notifications and dozens of other online notices. The IRS will also update the notices with clear instructions on what taxpayers need to do.

Simplified, mobile-friendly forms

Small business owners who file their own taxes will save time with new simplified tax forms. The IRS will improve tax forms that small businesses use most frequently including Forms 940, 941 and 944. The updated forms will be mobile-friendly and available in multiple languages.

Improved processing times and faster refunds

Small business taxpayers will save money, see improved processing times and get faster refunds as the IRS:

• Automates paper-based processes
• Makes more forms available online
• Stays on track to scan millions of tax returns in 2023

Some of the forms that the IRS plans to make available online include popular forms such as Forms 1040 and 941.

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