Taxpayer Advocate Service News Taxpayer Advocate Service News

  • NTA Blog: Don’t Let Delays in IRS Processing Impact Your Advance Payments of the Premium Tax Credit to Help Pay for Your Health Insurance
    on November 25, 2020 at 3:02 pm

    Subscribe to the NTA’s Blog and receive updates on the latest blog posts from National Taxpayer Advocate Erin M. Collins. Additional blogs can be found at www.taxpayeradvocate.irs.gov/blog.   If you are a recipient of Advance Payments of the Premium Tax Credit (APTC) and: you received a warning notice from your Marketplace telling you you’re in jeopardy of losing APTC benefits next year; your 2019 income tax return has not yet been processed by the IRS; or you have received notification from the IRS about your Form 8962. You should self-attest on your Marketplace’s website to show that you have complied with your tax filing obligations for tax year 2019.  If you do not complete the self-attestation by the end of the open enrollment period (December 15 for the federal Marketplace), you could be in jeopardy of losing your APTC starting in January 2021.   Individuals Should Self-Attest Now to Prevent Losing Advanced Payments of the Premium Tax Credit to Buy Health Insurance: Taxpayers should self-attest to continue receiving APTC uninterrupted until the IRS provides the necessary information to the Marketplace in the spring. Self-attestation can be completed by logging onto your particular Marketplace and following instructions there.   The Premium Tax Credit (PTC) helps eligible individuals and families with low or moderate incomes afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange.  When you enroll in the Marketplace for insurance, you can choose to receive the PTC in advance throughout the year to subsidize the monthly cost of your insurance.  Having the monthly insurance premiums reduced by the APTC may be the difference between affording insurance or going without insurance for individuals or their families.  By the end of the open enrollment period (typically December 15), the Marketplace needs to know which recipients of the APTC have (1) complied with the requirement to file a tax return and (2) reconciled the APTC they received with what they should have received.  Completion of this two-pronged reconciliation process enables the Marketplace to provide APTC to eligible individuals by January 1 of the following year.     To self-attest, you should log into your Marketplace account and check the box indicating that you’ve reconciled your advance payments of the premium tax credit.       Taxpayers use IRS Form 8962, Premium Tax Credit (PTC), to show their APTC reconciliation to the IRS.  If a taxpayer fails to attach Form 8962 to his or her tax return, or if the amounts shown on Form 8962 do not match information the IRS received, the IRS sends the taxpayer a Letter 12C requesting more information.  For tax year 2019, the IRS issued more than 1.8 million such letters, asking taxpayers to respond by mail or by fax.  However, due to challenges imposed by the COVID-19 pandemic (including office closures and reduced staffing), the IRS has fallen behind in processing its correspondence this year, with three million pieces of mail still unopened, approximately one million returns waiting to be processed and approximately 6.8 million individual returns  in process.  As a result, the information the IRS is reporting to the Marketplace may be inaccurate or incomplete because the IRS has not yet processed the taxpayer’s 2019 tax return or taxpayer correspondence replying to Letter 12C.   The consequence of IRS’s failure to report all of the information a taxpayer may have provided to the IRS – the tax return and the response to the Letter 12C – is that the taxpayer may lose the APTC temporarily or for the entirety of 2021, even though the taxpayer did everything the IRS requested.  The IRS Commissioner recently testified (see 1:13:36 mark) that the IRS is aware of the potential impact the backlog in correspondence may have on taxpayers’ ability to continue receiving the APTC and agreed to look into the issue.     What You Can Do to Ensure You Do Not Have a Lapse in Receiving the APTC  Taxpayers who are at risk should act now to prevent any disruption of the APTC.  Taxpayers who have received correspondence warning that they are in jeopardy of losing APTC benefits should self-attest by logging into the Marketplace where they purchased their health insurance coverage (www.healthcare.gov, or a state-run exchange).  To self-attest, taxpayers need to check the box on the online enrollment stating their 2019 income estimate has been reconciled with their filed 2019 tax return — even if the IRS has not processed it yet.      Taxpayers who complete the self-attestation will continue to receive the APTC while the Marketplace verifies the taxpayers’ tax records with the IRS.  Taxpayers who fail to self-attest may lose their APTC benefits and must pay the full premium or lose insurance coverage if they cannot afford it without the subsidy.  Even if taxpayers responded to the IRS Letter 12C, they may have to pay the full health insurance premium until their marketplace receives confirmation from the IRS that the taxpayer is in compliance, at which point the APTC may begin to subsidize insurance costs for the upcoming months.     Timely self-attestation may preserve your APTC subsidy in 2021.   Taxpayer Advocate Service  TAS case receipts are often a good barometer of the impact on taxpayers.  From October 1 through November 14, 2020, TAS received over 3,000 premium tax credit cases, which is 20 times the number of cases we received during the same period last year.  Many of these cases involve taxpayers who have attempted to respond to an IRS letter requesting more information to complete their APTC reconciliation.   TAS has been working with the IRS to explore options to mitigate the impact on taxpayers, but the volume of APTC-related work from TAS has far exceeded the IRS’s capacity to handle it.  As a result, some taxpayers are in jeopardy of losing their health insurance for calendar year 2021 if they are denied APTC and are unable to afford unsubsidized health insurance premiums.     Conclusion  If you are requesting the APTC for your 2021 Marketplace coverage, we strongly encourage you to log onto the Marketplace and self-attest that you’ve filed your tax return and attached Form 8962 to ensure continued APTC benefits.  And an added benefit of logging onto the Marketplace website — you can update your expected 2021 income and personal information. There is no need to contact the IRS if you have already filed your 2019 tax return, unless you have received a Letter 12C from the IRS asking for information.   For additional information and guidance, refer to the following resources: Affordable Care Act (ACA) Tax Provisions Health Insurance Marketplace – Technical Assistance Resources – Tax information 2019 health coverage & your federal taxes   The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

  • TAS Tax Tip: Is the Person at Your Door Really From the IRS?
    on November 20, 2020 at 6:30 pm

    In certain situations, the IRS may send an employee out to your residence or place of business to collect past due taxes or conduct an audit of your return. With in-person scams continuing to take place across the country, the Taxpayer Advocate Service wants you to know how and when the IRS may contact you in person to help you protect yourself against possible in-person scams. Eight things to know about in-person contacts from the IRS: The IRS initiates most contacts through regular mail delivered by the United States Postal Service. There are special circumstances when the IRS will come to your home or business. These include: When you have an overdue tax bill; When the IRS needs to secure a delinquent tax return or a delinquent employment tax payment; To tour a business as part of an audit; or As part of a criminal investigation. Revenue Officers are IRS employees who work cases that involve an amount owed or a delinquent tax return. Generally, Revenue Officer home or business visits are unannounced. Revenue Officers carry two forms of official identification, a pocket commission and a HSPD-12 card. Both forms of ID have a photo of the employee and serial numbers. You can (and should) ask to see both IDs before discussing any sensitive or personal information. You may also call the IRS at a phone number provided by the Revenue Officer to confirm his or her identity. The IRS can assign certain cases to private collection agencies (PCAs) after notifying you in writing. These PCAs will never visit you at your home or business. The IRS will not ask you to make a payment to anyone other than to the U.S. Department of the Treasury. Revenue Agents are IRS employees conducting audits. They may call you to set up appointments, but not without having first notified you by mail. Therefore, by the time a Revenue Agent visits you at your home or business, you will be aware of the audit. An IRS Criminal Investigator may visit your home or business unannounced while conducting an investigation. However, these are federal law enforcement agents and they will not demand any sort of payment. When interacting with you, Revenue Officers have the responsibility to educate you about the Taxpayer Bill of Rights (TBOR) and identify economic hardships if you have an outstanding federal tax debt and payment creates a hardship. They also have the responsibility to consider other means of resolving tax debts, including installment agreements and offers in compromise. IRS employees do not: Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. Threaten to bring in local police, immigration officers, or other law-enforcement to have you arrested for not paying. The IRS cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes. If you believe you were visited by someone impersonating the IRS, you can find information on how to report scams here. Need help with a specific tax problem? The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers' rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn't working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778. Read more about the kinds of problems TAS handles and how we may be able to assist you with yours. For current information about IRS operations during the COVID-19 pandemic, please visit irs.gov. Taxpayer Rights: The Right to Be Informed The Right to Quality Service The Right to Privacy The Right to Retain Representation For More Resources and Information: IRS Is that the IRS contacting you – or is it a scam? How to Know if the Knock on Your Door is Actually Someone from the IRS IRS Provides Tips on Determining If It’s Really The IRS At Your Door How to know it’s really the IRS calling or knocking on your door How To Know it’s Really the IRS Calling or Knocking on Your Door: Collection How to know it’s really the IRS calling or knocking on your door: Audits Taxpayer Advocate Service I need help resolving my balance due I can't pay my taxes Payment Plans Offer in Compromise Currently Not Collectible Installment Agreements Audits by Mail Audits in Person Audit Reconsiderations You can also visit the TAS Tax Tips page throughout the tax filing season to get helpful information.

  • November 10 is National EIP Registration Day: Millions of Americans still need to register no later than November 21 to get an Economic Impact Payment
    on November 9, 2020 at 8:00 pm

    Did you miss the deadline to register online for the Economic Impact Payment? You may still be eligible to receive a payment in 2021 if: You did not register online, by mail and did not get a payment in 2020 or, You received a payment, but it wasn’t the full amount of the Economic Impact Payment. The maximum credit is $1,200, or $2,400 if married filing jointly, plus $500 for each qualifying child. Then: When you file a 2020 Form 1040, U.S. Individual Income Tax Return, or 1040-SR, U.S. Tax Return for Seniors, you may be eligible for the Recovery Rebate Credit. Save your IRS letter - Notice 1444 Your Economic Impact Payment - with your 2020 tax records. You’ll need the amount of the payment in the letter when you file in 2021. Attention non-filers – the cutoff to register for an Economic Impact Payment (EIP) is fast approaching. To claim your EIP, you should register using the Non-Filers: Enter Payment Info Here tool by 3 p.m. (Eastern Time) on November 21. Taxpayers who normally are not required to file a federal tax return have more time to claim the EIP this year. Taxpayers with incomes below $24,400 for married couples, and $12,200 for single individuals who cannot be claimed as a dependent by someone else, do not typically have a filing requirement. For more details about filing requirements in general, see Table 1-1 in IRS Publication 17. IRS Nov. 10 ‘National EIP Registration Day’ (link) If you are unable to use the Non-Filers: Enter Payment Info Here tool, watch IRS.gov for more information about support from IRS partner groups inside and outside of the tax community, including those that work with low-income and underserved communities for available help options. Low Income Taxpayer Clinics Some Low Income Taxpayer Clinics (LITCs) may be able to help individuals whose household income does not exceed 250 percent of the Federal Poverty Guidelines with completing the IRS Non-Filers tool or filing a 2019 tax return in order to claim the EIP. These LITCs have stepped forward to provide assistance to eligible taxpayers for claiming the EIP, subject to availability of services. Some LITCs serve only specific geographic areas, so it is recommended that taxpayers contact an LITC near them, when possible. Anyone who is not required to file a federal tax return but is eligible for an EIP, did not already register for an EIP, and did not already receive an EIP, must use the Non-Filers: Enter Payment Info Here tool to claim a payment by 3 p.m. (Eastern Time) on November 21. The IRS cannot issue EIPs after December 31, 2020. Using the tool and requesting direct deposit is recommended, so the IRS has time to process the information and issue EIPs to eligible taxpayers prior to that date. The extended claim date also applies to: Social Security, Railroad Retirement and Department of Veteran Affairs benefit recipients, who already received a $1,200 payment, but who wish to register for a payment for their spouse or qualifying child. For more information, see Topic H: Social Security, Railroad Retirement and Department of Veteran Affairs benefit recipients. Incarcerated individuals –for the most up to date information about incarcerated individuals and EIP claim options, see Economic Impact Payment Information Center — Topic A: EIP Eligibility. Anyone using the Non-Filers tool can speed up the arrival of their payment by choosing to receive it by direct deposit. Those not choosing this option will get a check. Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool. If you miss this deadline, you will need to wait until next year and claim the payment as a credit (known as the Recovery Rebate Credit) by filing a 2020 tax return. Alternative claim submission instructions If you can't or don't want to submit the information online using the Non-Filers: Enter Payment Info Here tool, you can still use the tool to enter the required information and then print and mail in the document. Do not submit the information twice. If you submit a printed form, double-check that “EIP 2020” is at the top of the document. Mail the printed document to the IRS address for your state, without payment. The IRS won’t have the information necessary to issue you a payment unless you provide some basic information about yourself, your spouse, and any qualifying child under age 17. Entering your bank account information will allow the IRS to deposit your payment directly in your account. Otherwise, your payment will be mailed to you. Help Spread the Word If you have already received your EIP, you may be able to help your relatives and friends to receive theirs. If you’re reading this article and know others who may be in this particular position, as described above, and have not received their EIPs, let them know there is still time. Spread the word!

  • TAS Tax Tip: Renew Individual Taxpayer Identification Numbers before they expire
    on November 9, 2020 at 6:00 pm

    Earlier this year, the IRS issued a reminder to certain Individual Taxpayer Identification Numbers (ITIN) holders whose ITINs expire on December 31, 2020. An individual taxpayer’s failure to timely renew an ITIN may result in a delay of a refund claimed on a 2020 federal income tax return. The renewal process can take up to sixty days or more, so it is critical to begin the process of renewal now. Who needs to renew? Taxpayers who expect to file a federal tax return during 2021 and whose ITIN contains the middle digits 88 (For example: 9NN-88-NNNN) or 90, 91, 92, 94, 95, 96, 97, 98, or 99. Note: Taxpayer ITINs need to be renewed even if the taxpayer has used it in the last three years. The IRS may have already sent you a notice about this, but if you did not take action yet, please do so to avoid problems later. How do I renew an ITIN? To renew an ITIN, a taxpayer must complete a Form W-7 and submit all required documentation. Taxpayers submitting a Form W-7 to renew their ITIN are not required to attach a federal tax return. However, taxpayers must still note a reason for needing an ITIN on the Form W-7. See the Form W-7 instructions for detailed information. Taxpayers with an expiring ITIN have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family's ITINs together, even if family members have an ITIN with middle digits that have not been identified for expiration. Family members include the tax filer, spouse and any dependents claimed on the tax return. See our Getting An ITIN help page or the IRS’s reminder page for more information about ways to submit the Form W-7 application package. How do I avoid errors? Double check your Form W-7 for missing entries. Ensure you attach all required documentation (e.g., medical records, school records, identification documents like a valid passport, etc.). Ensure all required signatures are on the Form W-7. Resources IRS ITIN Information Form W-7 Instructions for Form W-7 Getting An ITIN Taxpayer Advocate Service Help The Taxpayer Advocate Service (TAS) is uniquely positioned to assist all taxpayers (and their representatives), including individuals, businesses, and exempt organizations. If you qualify for our help, an advocate will be with you at every turn and do everything possible to assist through the process. Currently, TAS is open to virtually serve taxpayers who find themselves in hardship situations or dealing with IRS tax problems they’ve been unable to resolve directly with the IRS. Visit our Contact Us page to learn more. You can also follow the Taxpayer Advocate Service across social media: Twitter, Facebook, LinkedIn and YouTube for the latest news

  • Blog de la NTA: ¿Cuáles son las consecuencias tributarias para los padres y trabajadores contratados para ayudar con el aprendizaje o el cuidado de niños? a distancia
    on November 6, 2020 at 9:18 pm

    Suscríbase al Blog de la NTA y reciba actualizaciones sobre las últimas publicaciones del blog de la Defensora Nacional del Contribuyente Erin M. Collins. Se pueden encontrar blogs adicionales en www.taxpayeradvocate.irs.gov/blog. In English Debido a la pandemia, muchas escuelas tradicionales han cambiado a la enseñanza a distancia. Sin embargo, por diversas razones, el aprendizaje a distancia puede no ser una opción adecuada para todas las familias. Para abordar las necesidades y circunstancias particulares de cada familia, como los problemas de salud, algunos han recurrido a los grupos de educación en el hogar (pequeños grupos de niños que comparten un espacio de aprendizaje dirigido por un instructor de grupo) o han contratado niñeras para cuidar a los niños más pequeños. Los padres que contratan instructores de grupos, niñeras y trabajadores domésticos similares pueden no estar familiarizados con los requisitos de presentación y retención de impuestos. Como resultado, pueden encontrarse con obligaciones o multas tributarias inesperadas. Es importante entender las consecuencias tributarias de contratar a un trabajador doméstico, incluso si  un trabajador es tratado como un “empleado” o un “contratista independiente” para los informes tanto federales como estatales. ¿Empleado o contratista independiente? Para los propósitos tributarios, los padres deben determinar si un instructor de grupo o una niñera es un empleado o un contratista independiente. Los padres deben considerar el grado de control que ejercen sobre el instructor de grupo o la niñera. Para ayudar a tomar esta determinación, el IRS emitió la Resolución Administrativa Tributaria (Rev. Rul.) 87-41, que enumera 20 factores que los contribuyentes deben considerar. Para simplificar el análisis, el IRS ha agrupado estos factores en tres categorías (consulte la Publicación 15-A del IRS, Employer’s Supplemental Tax Guide (Guía tributaria suplementaria del empleador), en inglés: control de comportamiento; control financiero y la relación entre las partes. En resumen, un trabajador se considera un empleado si el padre o madre conserva el derecho de controlar qué trabajo se realiza y cómo se hace. Por ejemplo, un empleado puede recibir instrucciones para trabajar en un horario determinado y recibir instrucciones específicas sobre cómo realizar su trabajo. Por el contrario, un contratista independiente conserva un control sustancial sobre la manera y los medios a través de los cuales se entrega un servicio o producto. Al aplicar los factores del IRS a una niñera o a un instructor de grupo con base en los hechos específicos, una niñera es más a menudo un empleado, mientras que un instructor de grupo es más probable que sea un contratista independiente. Esto se debe a que los padres generalmente establecen restricciones o instrucciones específicas dentro de las cuales opera la niñera, como la programación, las actividades diarias y los métodos disciplinarios. Mientras tanto, los instructores de grupos generalmente mantienen el control de instrucción sobre el entorno de aprendizaje en términos de lo que se enseña y cómo se realiza. Sin embargo, los resultados pueden variar según las circunstancias. Por ejemplo, los padres no pueden confiar en esta regla general si sus niñeras tienen más autonomía o si los instructores de grupos están microgestionados. (Y vale la pena señalar que un tutor contratado para brindar instrucción complementaria en una materia como álgebra o química generalmente se trataría como un contratista independiente). Los padres deben examinar quién establece el horario, quién proporciona los materiales educativos y de cuidado infantil, y cómo manejan específicamente los detalles del trabajo de su niñera o instructor de grupo. Cuanto más control ejerce un padre o madre sobre el acuerdo, más probable es que el trabajador sea un empleado. Después de considerar y aplicar todos los factores a la situación, los padres deberán decidir si la niñera o el instructor de grupo debe clasificarse como un empleado o un contratista independiente. La situación de cada padre o madre puede ser diferente. Tenga en cuenta que si un instructor de grupo o una niñera proporciona sus servicios a través de una empresa, la empresa generalmente se considera el empleador, no los padres. Al igual que los padres, los instructores de grupos tienen interés en cómo se clasifican, ya que su clasificación generará diferentes consecuencias tributarias para sí mismos. Las autoridades tributarias estatales pueden tener reglas específicas que también deben tenerse en cuenta. Los padres y los instructores de grupos que deseen más certeza pueden buscar ayuda del IRS para determinar la clasificación de los trabajadores completando y enviando el Formulario SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (Determinación de la condición de trabajador para fines de impuestos federales sobre el empleo y retención de impuestos sobre los ingresos), en inglés. Como informó anteriormente el Defensor Nacional del Contribuyente, este proceso puede ser bastante largo y agobiante. Sin embargo, recibir una decisión oficial, aunque demorada, puede ser útil para resolver disputas entre padres e instructores de grupos. ¿Consecuencias tributarias para los padres, la niñera o el instructor de grupo?  Es fundamental que los contribuyentes consideren cuidadosamente sus hechos y circunstancias particulares. No existe una respuesta única para todos. Si los padres consideran que la niñera o el instructor de grupo es un contratista independiente, deben mantener registros y recibos cuidadosos de todas las cantidades pagadas. Los contratistas independientes son responsables de pagar todos los impuestos sobre el trabajo por cuenta propia y  presentar correctamente sus declaraciones. Los padres pueden referir a los contratistas independientes al Centro de Impuestos para Trabajadores Independientes del IRS, en inglés, para obtener más información sobre cómo hacer esto. Sin embargo, si los padres consideran que la niñera o el instructor de grupo es un empleado, deberán considerar cómo presentar los formularios necesarios ante el IRS y retener y pagar los impuestos requeridos.Aquí hay algunas cosas clave que debe hacer de inmediato: Las siguientes son algunas cosas clave que debe hacer de inmediato: Primero, los padres deben solicitar un Número de identificación del empleador (EIN, por sus siglas en inglés), que debe incluirse en todas las presentaciones futuras ante el IRS. Segundo, los padres deberán determinar si cumplen con el requisito de límite para pagar los impuestos sobre la nómina. Para 2020, si se paga al menos $2,200 en salarios en efectivo a un empleado doméstico, deberá pagar los impuestos al Seguro Social y al Medicare. Para cualquier trimestre calendario en 2019 o 2020, si se paga al menos $1,000 en salarios en efectivo a un empleado doméstico, deberá pagar los impuestos federales por desempleo. Los padres también deben consultar con su estado sobre los requisitos y procedimientos para pagar el impuesto estatal por desempleo. Después, los padres tendrán que hablar si ellos, como el empleador, retendrán y pagarán los impuestos, o si el empleado pagará los impuestos. Si los padres harán la retención, el empleado deberá presentar al empleador un Formulario W-4(SP) , Certificado de Retenciones del Empleado. En general, los impuestos sobre la nómina se calculan como el 15.3 por ciento del salario, con el 7.65 por ciento pagado por el empleador y el 7.65 por ciento retenido por el empleador del salario del empleado. La retención de los impuestos federales sobre los ingresos se puede calcular, en inglés, utilizando un Formulario W-4(SP) debidamente completado. Por otro lado, los padres también deben verificar la ley estatal para determinar si están obligados a obtener el seguro de compensación laboral a través de un proveedor de seguro privado en caso de que un empleado se lesione mientras trabaja. Una vez que finalice el año tributario: Los padres deberán presentar un Formulario W-2, Wage and Tax Statement (Declaración de salarios e impuestos), en inglés, ante el IRS y un Formulario W-3,Transmittal of Wage and Tax Statements  (Transmisión de declaraciones de salarios e impuestos), en inglés, ante la Administración del Seguro Social, y entregar el Formulario W-2 al empleado antes del 31 de enero. Durante la temporada de presentación de impuestos, los padres deberán completar y presentar un Anexo H, Household Employment Taxes (Impuestos sobre el empleo doméstico), en inglés, con sus propias declaraciones, que se utilizará para calcular los impuestos sobre el empleo doméstico adeudados que se pagarán para el 15 de abril. Para obtener instrucciones más detalladas, los padres pueden consultar el Manual de Impuestos Internos (IRM, por sus siglas en inglés) 4.23.10.10.5, Household Employment Taxes (Impuestos sobre el empleo doméstico) y la Publicación 926 del IRS, Household Employer’s Tax Guide (Guía tributaria para los empleadores de trabajadores domésticos), en inglés. A medida que todos navegamos por las nuevas circunstancias provocadas por la pandemia de la COVID-19, es posible que los impuestos no sean la primera preocupación de los padres. Sin embargo, los padres deben ser conscientes de las consecuencias tributarias federales (y estatales) de sus entornos de cuidado infantil o aprendizaje a distancia y deben consultar con un asesor tributario si es necesario. Las familias deben mantener registros y recibos cuidadosos y considerar el uso de una Cuenta de Gastos Flexibles (FSA, por sus siglas en inglés) para el cuidado de dependientes patrocinada por el empleador o la elegibilidad para el Crédito tributario por cuidado de hijos o dependientes, en inglés. Los padres que contraten instructores de grupos o niñeras deben estar informados sobre las consecuencias tributarias y deben estar preparados para cumplir con todos los requisitos tributarios. Para obtener más información, consulte la Publicación 926 del IRS, Household Employer’s Tax Guide (Guía tributaria para los empleadores de trabajadores domésticos), en inglés, y otras fuentes de información citadas en este blog. Enlace a esta publicación: https://go.usa.gov/x79KS, en inglés Las opiniones expresadas en este blog son únicamente las del Defensor Nacional del Contribuyente. El Defensor Nacional del Contribuyente presenta una perspectiva de contribuyente independiente que no necesariamente refleja la posición del IRS, el Departamento del Tesoro o la Oficina de Administración y Presupuesto.

  • TAS Tax Tip: Taxpayers not normally required to file should register for an Economic Impact Payment by November 21, 2020
    on November 6, 2020 at 8:00 pm

    Did you miss the deadline to register online for the Economic Impact Payment? You may still be eligible to receive a payment in 2021 if: You did not register online, by mail and did not get a payment in 2020 or, You received a payment, but it wasn’t the full amount of the Economic Impact Payment. The maximum credit is $1,200, or $2,400 if married filing jointly, plus $500 for each qualifying child. Then: When you file a 2020 Form 1040, U.S. Individual Income Tax Return, or 1040-SR, U.S. Tax Return for Seniors, you may be eligible for the Recovery Rebate Credit. Save your IRS letter - Notice 1444 Your Economic Impact Payment - with your 2020 tax records. You’ll need the amount of the payment in the letter when you file in 2021. Taxpayers who normally are not required to file a federal tax return have more time to claim the Economic Impact Payment (EIP) this year. Taxpayers with incomes below $24,400 for married couples, and $12,200 for single individuals who cannot be claimed as a dependent by someone else, do not typically have a filing requirement. For more details about filing requirements in general, see Table 1-1 in IRS Publication 17. Anyone who is not required to file a federal tax return but is eligible for an EIP, did not already register for an EIP, and did not already receive an EIP, must use the Non-Filers: Enter Payment Info Here tool to claim a payment by 3 p.m. (Eastern Time) on November 21. The IRS cannot issue EIPs after December 31, 2020. Using the tool and requesting direct deposit is recommended, so the IRS has time to process the information and issue EIPs to eligible taxpayers prior to that date. The extended claim date also applies to: Social Security, Railroad Retirement and Department of Veteran Affairs benefit recipients, who already received a $1,200 payment, but who wish to register for a payment for their spouse or qualifying child. For more information, see Topic H: Social Security, Railroad Retirement and Department of Veteran Affairs benefit recipients. Incarcerated individuals –for the most up to date information about incarcerated individuals and EIP claim options, see Economic Impact Payment Information Center — Topic A: EIP Eligibility. Anyone using the Non-Filers tool can speed up the arrival of their payment by choosing to receive it by direct deposit. Those not choosing this option will get a check. Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool. If you miss this deadline, you will need to wait until next year and claim the payment as a credit (known as the Recovery Rebate Credit) by filing a 2020 tax return. Alternative claim submission instructions If you can't or don't want to submit the information online using the Non-Filers: Enter Payment Info Here tool, you can still use the tool to enter the required information and then print and mail in the document. Do not submit the information twice. If you submit a printed form, double-check that “EIP 2020” is at the top of the document. Mail the printed document to the IRS address for your state, without payment. The IRS won’t have the information necessary to issue you a payment unless you provide some basic information about yourself, your spouse, and any qualifying child under age 17. Entering your bank account information will allow the IRS to deposit your payment directly in your account. Otherwise, your payment will be mailed to you. Available Help Options Low Income Taxpayer Clinics Some Low Income Taxpayer Clinics (LITCs) may be able to help individuals whose household income does not exceed 250 percent of the Federal Poverty Guidelines with completing the IRS Non-Filers tool or filing a 2019 tax return in order to claim the EIP. These LITCs have stepped forward to provide assistance to eligible taxpayers for claiming the EIP, subject to availability of services. Some LITCs serve only specific geographic areas, so it is recommended that taxpayers contact an LITC near them, when possible. IRS Nov. 10 ‘National EIP Registration Day’ If you are unable to use the Non-Filers: Enter Payment Info Here tool, watch IRS.gov for more information about support from IRS partner groups inside and outside of the tax community, including those that work with low-income and underserved communities for available help options. Help Spread the Word If you have already received your EIP, you may be able to help your relatives and friends to receive theirs. If you’re reading this article and know others who may be in this particular position, as described above, and have not received their EIPs, let them know there is still time. Spread the word!

  • NTA Blog: What are the tax consequences for parents and workers hired to help with remote learning or childcare?
    on November 6, 2020 at 12:02 pm

    Subscribe to the NTA’s Blog and receive updates on the latest blog posts from National Taxpayer Advocate Erin M. Collins. Additional blogs can be found at www.taxpayeradvocate.irs.gov/blog. en Español Because of the pandemic, many brick and mortar schools have shifted to remote instruction. However, for a variety of reasons, remote learning may not be a suitable option for every family. To address the particular needs and circumstances of each family, such as health concerns, some have turned to homeschooling pods (small groups of children sharing a learning space led by a pod instructor) or have hired nannies to care for younger children. Parents hiring pod instructors, nannies, and similar household workers may be unfamiliar with tax filing and withholding requirements. As a result, they may find themselves with unexpected tax liabilities or penalties. It is important to understand the tax consequences of hiring a household worker, including whether a worker is treated as an “employee” or an “independent contractor” for both federal and state reporting. Employee or independent contractor? For tax purposes, parents need to determine whether a pod instructor or nanny is an employee or an independent contractor. Parents should consider the degree of control they exercise over the pod instructor or nanny. To assist in making this determination, the IRS issued Rev. Rul. 87-41, which lists 20 factors for taxpayers to consider. To simplify the analysis, the IRS has grouped these factors into three categories (see IRS Publication 15-A, Employer’s Supplemental Tax Guide): behavioral control; financial control; and the relationship of the parties. In summary, a worker is considered an employee if the parent retains the right to control what work is done and the way it is done. For example, an employee may be directed to work on a certain schedule and specifically instructed in how to perform his or her work. By contrast, an independent contractor retains substantial control over the manner and means through which a service or product is delivered.   When applying the IRS factors to a nanny or a pod instructor based upon the specific facts, a nanny most often is an employee, whereas a pod instructor is more likely to be an independent contractor. This is because parents typically establish specific constraints or instructions that the nanny operates within, such as scheduling, day-to-day activities, and disciplinary methods. Meanwhile, pod instructors generally retain instructional control over the learning environment in terms of what is being taught and how.  However, results may vary depending on the circumstances. For example, parents cannot rely on this rule of thumb if their nannies have more autonomy or pod instructors are micromanaged. (And it is worth noting that a tutor hired to provide supplemental instruction in a subject like algebra or chemistry would generally be treated as an independent contractor.)  Parents should examine who sets the schedule, who provides the educational and childcare materials, and how specifically they manage the details of their nanny’s or pod instructor’s work. The more control a parent exerts over the arrangement, the more likely the worker is an employee. After considering and applying all the factors to the situation, parents will need to decide whether the nanny or pod instructor should be classified as an employee or an independent contractor. Each parent’s situation may be different. Note that if a pod instructor or nanny provides their services through a company, the company is usually considered the employer, not the parents. Like parents, pod instructors have an interest in how they are classified, as their classification will generate differing tax consequences for themselves. State taxing authorities may have specific rules that should be considered as well. Parents and pod instructors who want more certainty can seek assistance from the IRS in determining worker classification by completing and submitting Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. As previously reported by the National Taxpayer Advocate, this process can be quite long and burdensome. Nevertheless, receiving an official decision, although delayed, may be helpful in resolving disputes between parents and pod instructors. Tax consequences for the parents, nanny, or pod instructor? It is critical for taxpayers to carefully consider their particular facts and circumstances. There is no one-size-fits-all answer. If parents deem the nanny or pod instructor to be an independent contractor, they should keep careful records and receipts of all amounts paid. Independent contractors are responsible for paying all self-employment taxes and properly filing their returns. Parents may refer independent contractors to the IRS Self-Employed Individuals Tax Center for more information on how to do this. However, if parents deem the nanny or pod instructor to be an employee, they will need to consider how to file the necessary forms with the IRS and withhold and pay the required taxes. Here are a few key things to do immediately: First, parents should apply for an Employer Identification Number (EIN) , which should be included on all future filings with the IRS. Second, parents will need to determine whether they meet the threshold requirement to pay employment taxes. For 2020, if at least $2,200 in cash wages is paid to a household employee, they will need to pay Social Security and Medicare taxes. For any calendar quarter in 2019 or 2020, if at least $1,000 in cash wages is paid to a household employee, they will need to pay federal unemployment taxes. Parents should also check with their state of residence regarding requirements and procedures to pay state unemployment tax. Next, parents will need to discuss whether they, as the employer, will withhold and pay the taxes, or whether the employee will pay the taxes. If the parents will withhold, the employee will need to submit a Form W-4, Employees Withholding Certificate, to the employer. In general, payroll taxes are calculated as 15.3 percent of pay, with 7.65 percent paid by the employer and 7.65 percent withheld by the employer from the employee’s wages. Withheld federal income taxes can be calculated using a completed Form W-4. As an aside, parents should also check state law to determine whether they are required to obtain worker’s compensation insurance through a private carrier in case an employee is injured while working. Once the tax year ends: Parents will need to file a Form W-2, Wage and Tax Statement, with the IRS and a Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration, and give the Form W-2 to the employee by January 31. During the tax filing season, parents will need to complete and file a Schedule H, Household Employment Taxes, with their own returns, which will be used to calculate the household employment taxes due to be paid by April 15. For more detailed instruction, parents can refer to Internal Revenue Manual (IRM) 4.23.10.10.5, Household Employment Taxes, and IRS Publication 926, Household Employer’s Tax Guide. As we all navigate the novel circumstances brought about by the COVID-19 pandemic, taxes may not be a parent’s first concern. However, parents need to be mindful of the federal (and state) tax consequences of their childcare or remote learning environments and should consult with a tax advisor as necessary. Families should keep careful records and receipts and consider the use of an employer Dependent Care Flexible Spending Account (FSA) or Child or Dependent Care Tax Credit eligibility. Parents hiring pod instructors or nannies should be informed about the tax consequences and should be equipped to comply with all tax requirements. For more information, see IRS Publication 926, Household Employer’s Tax Guide, and other sources of information cited in this blog. The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

  • TAS Tax Tip: 2020 IRS Nationwide Tax Forum Webinars Available for CPE Credit
    on November 4, 2020 at 6:00 pm

    Although the 2020 IRS Nationwide Tax Forums could not be held in person this year, the Forums proceeded virtually. You can still earn continuing professional education (CPE) credits for many of these courses by viewing the courses virtually. Eighteen new interactive, self-study courses are now available for view at the IRS Nationwide Tax Forums Online site, including downloadable PowerPoint slides and transcripts for each seminar. Registration is required to earn CPE credit. Courses are available in a variety of tax topics and IRS procedures for free if you do not need CPE credit. Topics for this year include: Diligence in Practice before the IRS: Record-Keeping, Federal Ethics for the Tax Professionals: Office of Professional Responsibility (OPR) and Circular 230, Keys to Mastering Due Diligence Requirements and Audits, and Tax Cuts and Jobs Act (TCJA) Update: Qualified Business Income Deduction. Other topics include: Be Tax Ready – Understanding Eligibility Rules for EITC, AOTC, CTC and Head of Household Filing Status, Charities & Tax-Exempt Organizations Update, TAS seminar on Advocating for Immigrant Taxpayers, TAS seminar on Advocating for Taxpayers with Collection Information Statements and more. The IRS Nationwide Tax Forums Online site also offers many seminars from prior-year Forums. Previous TAS seminars that may be of interest are Advocating for your Client Using the Taxpayer Bill of Rights and CDP Balancing Test: Advocating for your Client before the IRS Office of Appeals in Collection Due Process Hearings. Resources For more information, visit www.irstaxforumsonline.com. Taxpayer Advocate Service Help The Taxpayer Advocate Service (TAS) is uniquely positioned to assist all taxpayers (and their representatives), including individuals, businesses, and exempt organizations. If you qualify for our help, an advocate will be with you at every turn and do everything possible to assist through the process. Currently, TAS is open to virtually serve taxpayers who find themselves in hardship situations or dealing with IRS tax problems they’ve been unable to resolve directly with the IRS. Visit our Contact Us page to learn more. You can also follow the Taxpayer Advocate Service across social media: Twitter, Facebook, LinkedIn and YouTube for the latest news.

  • TAS Tax Tip: Newly expanded ‘Closing a Business’ information provides step-by-step actions
    on October 20, 2020 at 5:00 pm

    Closing your business can be a difficult and challenging task. The Taxpayer Advocate Service (TAS) partnered with IRS to expand its Closing a Business page to help business owners understand the specific actions needed, from a federal tax perspective, for each type of business. However, before you make the decision to close, if it is due to financial reasons related to the coronavirus, please use TAS’s COVID-19 Business Tax Relief Tool to see if you qualify for new employer tax credits that may help you stay in business. Read more about the benefits of this tool before you try. If ultimately you do need to close your business, whether you have a sole proprietorship, partnership or corporation, the information on this page will help you understand: What forms you need to file; How to report the income you receive; and, How to claim the expenses you incur before closing your business. Remember to also check your state responsibilities when closing a business. TAS Resources COVID-19 Business Tax Relief Tool Coronavirus (COVID-19) Tax Relief Taxpayer Advocate Service Help The Taxpayer Advocate Service (TAS) is uniquely positioned to assist all taxpayers (and their representatives), including individuals, businesses, and exempt organizations. If you qualify for our help, an advocate will be with you at every turn and do everything possible to assist through the process. Currently, TAS is open to virtually serve taxpayers who find themselves in hardship situations or dealing with IRS tax problems they’ve been unable to resolve directly with the IRS. Visit our Contact Us page to learn more. You can also follow the Taxpayer Advocate Service across social media: Twitter, Facebook, LinkedIn and YouTube for the latest news

  • TAS Tax Tip Unemployment Compensation is Taxable - Explore Your Options Now
    on October 15, 2020 at 9:00 pm

    Unemployment compensation, including special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, must generally be included in gross income. If you are receiving unemployment benefits, the benefits are taxable. Do you know you can have tax withheld so you may not owe when you file your tax return next year? How this may affect you If you receive unemployment compensation this year, you must report it on your tax return. Tax is not withheld automatically from unemployment benefits. Even if you have returned to work, you may not have enough tax withheld between now and the end of the year to cover the tax due on your unemployment compensation. If you don’t have enough tax withheld, you may also have to pay penalties and interest. Unemployment compensation is considered unearned income, so it doesn’t count when calculating the Earned Income Tax Credit (EITC). This means your EITC may be less than you expect, depending on how much unemployment compensation you receive. What you can do now so you won’t owe at tax time If you currently receive unemployment compensation, you may choose to have a flat ten percent withheld from your unemployment benefits to cover part or all of your tax liability. You should contact the agency paying you benefits to see if it has its own form you need to fill out for voluntary withholding. If not, you should fill out Form W-4V, Voluntary Withholding Request, and give it to that agency. Don’t send it to the IRS. If you were unemployed but have returned to work, you may increase the tax withheld on your paychecks or make estimated tax payments. The estimated tax payment for the first two quarters of 2020 was due on July 15. The third quarter payment was due on September 15, 2020, and the fourth quarter payment is due on January 15, 2021. More information is available here.  Other things you should know If you receive unemployment benefits in 2020, you should receive a Form 1099-G, Certain Government Payments, in late January or early February 2021. You can find the amount of unemployment compensation you received in 2020 in Box 1 of the form. Be sure to report this income on your 2020 tax return. You can find the amount of tax withheld in Box 4 of the form. Be sure to claim this withholding on your 2020 tax return, along with any tax withheld from your paycheck or any other sources. If you have too much tax withheld, you may either request a refund on your 2020 tax return or have it applied to 2021 taxes. The choice is yours. Taxpayer Advocate Service Help Currently, the Taxpayer Advocate Service (TAS) is open to virtually serve taxpayers who find themselves in hardship situations or dealing with IRS tax problems they’ve been unable to resolve directly with the IRS. Visit our Contact Us page to see who qualifies for TAS assistance. We will also be posting updated operational status information there as well. Follow the Taxpayer Advocate Service across social media: Twitter, Facebook, LinkedIn and YouTube. More Resources: Take Action Now on Your Tax Withholding Unemployment compensation is taxable; Have tax withheld now and avoid a tax-time surprise Form W-4V, Voluntary Withholding Request Form 1040-ES, Estimated Tax for Individuals Publication 505, Tax Withholding and Estimated Tax