News & Updates

The 2022 Form 1040-ES, Estimated Tax for Individuals, can help taxpayers estimate their first quarterly tax payment.

Income taxes are a pay-as-you-go process. This means, by law, taxes must be paid as income is earned or received during the year. Most people pay their taxes through withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation.

Most often, those who are self-employed or in the gig economy need to make estimated tax payments. Similarly, investors, retirees and others often need to make these payments because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying quarterly estimated taxes will usually lessen and may even eliminate any penalties.

Exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers and fishers, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for more information.

How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. The best way to make a payment is through IRS Online Account. There taxpayers can see their payment history, any pending payments and other useful tax information. Taxpayers can make an estimated tax payment by using IRS Direct Pay; Debit Card, Credit Card or Digital Wallet; or the Treasury Department's Electronic Federal Tax Payment System (EFTPS). If paying by check, taxpayers should be sure to make the check payable to the "United States Treasury."

Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.

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The LITC Program is a federal grants program administered by the Taxpayer Advocate Service, led by National Taxpayer Advocate Erin M. Collins. The Taxpayer Advocate Service operates as an independent organization within the IRS.

"LITCs play an important role in ensuring the voices of low-income and English as a second language-taxpayers are heard," Collins said. "The work they do is strengthened and enhanced by the many volunteers who give their time to help. I strongly encourage interested organizations and volunteers to join the LITC program to assist those in need."

Under Internal Revenue Code Section 7526, the IRS awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand or maintain an LITC. Qualified organizations that are awarded grants ensure the fairness and integrity of the tax system for taxpayers who are low-income or speak English as a second language (ESL) by providing pro bono representation on their behalf in tax disputes with the IRS, educating them about their rights and responsibilities as taxpayers, and identifying and advocating on issues that impact them.

When the application period opens, the IRS will consider applicants from all areas, but is particularly interested in receiving applications from organizations that will provide coverage in unserved areas. Presently, there are no LITCs operating in the states of Montana, Nevada, North Dakota and the territory of Puerto Rico. In addition, there are a few states that have uncovered counties that are in need of LITC representation.

Underserved counties in need of LITC services

• Arizona- Apache, Coconino and Navajo
• Florida- Baker, Bradford, Brevard, Citrus, Clay, Columbia, Dixie, Duval, Flagler, Hamilton, Hernando, Lafayette, Lake, Madison, Nassau, Orange, Osceola, Seminole, St. John's, Sumter, Suwanee, Taylor and Volusia
• Idaho- Ada, Adams, Bannock, Bear Lake, Bingham, Boise, Bonneville, Butte, Canyon, Caribou, Clark, Clearwater, Custer, Franklin, Freemont, Gem, Idaho, Jefferson, Latah, Lemhi, Lewis, Lincoln, Madison, Nez Perce, Oneida, Owyhee, Payette, Power, Teton, Valley and Washington
• North Carolina- Alamance, Anson, Beaufort, Bertie, Bladen, Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Tyrrell, Vance, Wake, Warren, Washington, Wayne and Wilson
• Pennsylvania- Bradford, Clinton, Monroe, Northumberland, Pike, Snyder, Sullivan, Susquehanna, Tioga, Union and Wyoming

Who qualifies as an LITC

Applicants must meet key requirements to be eligible for an LITC grant such as:

• Be an organization, not an individual.
• Provide representation to low-income taxpayers and education to ESL taxpayers.
• Not charge more than a nominal fee for services (except for reimbursement of actual costs incurred).
• Have an approved IRS Employer Identification Number.
• Be an organization registered in the System for Award Management (SAM).

In 2020, LITCs represented nearly 20,000 taxpayers dealing with an IRS tax controversy and provided consultations or advice to another 18,000 taxpayers. They helped taxpayers secure more than $5.8 million in tax refunds and reduced or corrected taxpayers' liabilities by over $116 million. They also brought more than 2,900 taxpayers back into payment compliance.

Through outreach and education activities, LITCs strived to ensure individuals understood their rights as U.S. taxpayers by conducting more than 1,000 educational activities that were attended by nearly 134,000 individuals. Some 1,500 volunteers contributed to the success of LITCs by volunteering over 42,000 hours of their time. Nearly 65% of the volunteers were attorneys, certified public accountants or enrolled agents.

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Taxpayers who need more time to complete their return can request an automatic six-month extension to file. An extension allows for extra time to gather, prepare and file paperwork with the IRS; however, taxpayers should be aware that:

• An extension to file their return doesn't grant them an extension to pay their taxes,
• They should estimate and pay any owed taxes by their regular deadline to help avoid possible penalties and
• They must file their extension no later than the regular due date of their return.

E-file an extension form for free

Individual tax filers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension. The fastest and easiest way to get an extension is through IRS Free File on IRS.gov. Taxpayers can electronically request an extension on Form 4868 PDF. Filing this form gives taxpayers until October 17 to file their tax return. To get the extension, taxpayers must estimate their tax liability on this form and should timely pay any amount due.

Get an extension when making a payment

Other fast, free and easy ways to get an extension include using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card or digital wallet. There's no need to file a separate Form 4868 extension request when making an electronic payment and indicating it's for an extension. The IRS will automatically count it as an extension.

Important reminders on extensions

The IRS reminds taxpayers that a request for an extension provides extra time to file a tax return, but not extra time to pay any taxes owed. Payments are still due by the original deadline. Taxpayers should file even if they can't pay the full amount. By filing either a return on time or requesting an extension by the April 18 filing deadline, they'll avoid the late-filing penalty, which can be 10 times as costly as the penalty for not paying.

Taxpayers who pay as much as they can by the due date, reduce the overall amount subject to penalty and interest charges. The interest rate is currently four percent per year, compounded daily. The late-filing penalty is generally five percent per month and the late-payment penalty is normally 0.5 percent per month.

The IRS will work with taxpayers who cannot pay the full amount of tax they owe. Other options to pay, such as getting a loan or paying by credit card, may help resolve a tax debt. Most people can set up a payment plan on IRS.gov to pay off their balance over time.

Other automatic extensions

Certain eligible taxpayers get more time to file without having to ask for extensions. These include:

• U.S. citizens and resident aliens who live and work outside of the United States and Puerto Rico get an automatic 2-month extension to file their tax returns. They have until June 15 to file. However, tax payments are still due April 18 or interest will be charged.
• Members of the military on duty outside the United States and Puerto Rico also receive an automatic two-month extension to file. Those serving in combat zones have up to 180 days after they leave the combat zone to file returns and pay any taxes due. Details are available in Publication 3, Armed Forces' Tax Guide PDF.
• When the President makes a disaster area declaration, the IRS can postpone certain taxpayer deadlines for residents and businesses in the affected area. People can find information on the most recent tax relief for disaster situations on the IRS website.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states.

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This is the first time the annual limit has increased since the special educator expense deduction was enacted in 2002. For tax-years 2002 through 2021, the limit was $250 per year. This means for people currently filing their 2021 tax returns due in April, the deduction is limited to $250. The limit will rise in $50 increments in future years based on inflation adjustments.

For 2022, an eligible educator can deduct up to $300 of qualifying expenses. If they are married and file a joint return with another eligible educator, the limit rises to $600. But in this situation, not more than $300 for each spouse.

Who qualifies?

Educators can claim this deduction, even if they take the standard deduction. Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide in a school for at least 900 hours during the school year. Both public- and private-school educators qualify.

What's deductible?

Educators can deduct the unreimbursed cost of:

• Books, supplies and other materials used in the classroom.
• Equipment, including computer equipment, software and services.
• COVID-19 protective items to stop the spread of the disease in the classroom. This includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, tape, paint or chalk to guide social distancing, physical barriers, such as clear plexiglass, air purifiers and other items recommended by the Centers for Disease Control and Prevention (CDC).
• Professional development courses related to the curriculum they teach or the students they teach. For these expenses, it may be more beneficial to claim another educational tax benefit, especially the lifetime learning credit. For details, see Publication 970, Tax Benefits for Education, particularly Chapter 3.

Qualified expenses don't include expenses for home schooling or for nonathletic supplies for courses in health or physical education. As with all deductions and credits, the IRS reminds educators to keep good records, including receipts, cancelled checks and other documentation.

Reminder for 2021 tax returns being filed now: Deduction limit is $250

With the tax deadline just around the corner, the IRS reminds any educator still working on their 2021 return that they can claim any qualifying expenses on Schedule 1, Line 11. For 2021, the deduction limit is $250. If they are married and file a joint return with another eligible educator, the limit rises to $500. But in this situation, not more than $250 for each spouse.

Whether a return is self-prepared or prepared with the assistance of a tax professional or trained community volunteer, the IRS urges everyone to file electronically and choose direct deposit for any refund. For details, visit IRS.gov/efile.

In addition, the IRS urges anyone with tax due to choose the speed and convenience of paying electronically, such as with IRS Direct Pay, a free service available only on IRS.gov. For information about this and other payment options, visit IRS.gov/payments.

This year, the tax-filing deadline is:

• Monday, April 18 for most taxpayers.
• Tuesday, April 19 for residents of Maine and Massachusetts.
• Wednesday, June 15 for most Americans who live abroad.

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The payments, called required minimum distributions (RMDs), are normally made by the end of the year. But anyone who reached age 72 after June 30, 2021, is covered by a special rule that allows IRA account owners and participants in workplace retirement plans to wait until as late as April 1, 2022, to take their first RMD. In other words, in general, the special April 1 rule applies to IRA owners and other participants in these plans who were born after June 30, 1949.

Two payments in the same year

The April 1 RMD deadline only applies to the required distribution for the first year. For all later years, the RMD must be made by December 31.

This means that taxpayers who turned 72 after June 30, 2021, and receive their first required distribution (for 2021) in 2022 on or before April 1, must receive their second RMD (for 2022) by December 31, 2022. Even though the first distribution is actually the required 2021 distribution, it's taxable in 2022 and reported on the 2022 tax return - along with the regular 2022 distribution.

Types of retirement plans requiring RMDs

These required distribution rules apply to owners of traditional, SEP and SIMPLE IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans. RMDs don't apply to Roth IRAs.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2021 RMD, required by April 1, 2022, the RMD amount is shown on the 2020 Form 5498, normally issued to the owner during the first part of 2021.

Some can delay RMDs

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD.

Most participants who are still working for that employer can wait until April 1 of the year after they retire to start receiving these distributions, if their workplace plan allows. This RMD exception does not apply to 5% owners of the business sponsoring the retirement plan or to participants in SEP and SIMPLE IRA plans. See Tax on Excess Accumulation in Publication 575 for details.

Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

IRS online tools and publications can help

Many answers to questions about RMDs can be found at RMD FAQs on IRS.gov. Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. Married taxpayers whose spouse is more than 10 years younger and is their only beneficiary use Table II.

Because this and other life expectancy tables were updated for 2022, recipients need to use a different version of this table to figure their 2021 RMD, compared to their 2022 RMD. The required withdrawals in 2022 and future years will generally be smaller.

For a 2021 RMD (due April 1, 2022), use the life expectancy tables in Appendix B of the Publication 590-B PDF used for preparing 2020 returns. As shown in Table III, the RMD for a person age 72 in 2021 will normally be based on a distribution period of 25.6 years. Divide the December 31, 2020, balance by 25.6 to get the RMD for 2021.

For a 2022 RMD (due December 31, 2022), use the revised life expectancy tables in Appendix B of the Publication 590-B PDF used for preparing 2021 returns. As shown in the revised Table III, the RMD for a person age 72 in 2022 will normally be based on a distribution period of 27.4 years. Divide the December 31, 2021, balance by 27.4 to get the RMD for 2022.

Pub. 590-B has worksheets, examples and other information that can help anyone figure their RMD. Visit IRS.gov for more information.

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