IRS helps workers, businesses with new Gig Economy Tax Center

The Internal Revenue Service launched a new Gig Economy Tax Center on IRS.gov to help people in this growing area meet their tax obligations through more streamlined information.

“The IRS developed this online center to help taxpayers in this emerging segment of the economy,” said IRS Commissioner Chuck Rettig. “Whether renting out a spare bedroom or providing car rides, we want people to understand the rules so they can stay compliant with their taxes and avoid surprises down the line.”

The gig economy is also known as the sharing, on-demand or access economy. It usually includes businesses that operate an app or website to connect people to provide services to customers. While there are many types of gig economy businesses, ride-sharing and home rentals are two of the most popular.

Educating gig economy workers about their tax obligations is vital because many don’t receive form W-2s, 1099s or other information returns for their work in the gig economy. However, income from these sources is generally taxable, regardless of whether workers receive information returns. This is true even if the work is fulltime, part-time or if the person is paid in cash. Workers may also be required to make quarterly estimated income tax payments, pay their share of Federal Insurance Contribution (FICA), Medicare and Additional Medicare taxes if they are employees and pay self-employment taxes if they are not considered to be employees.

The Gig Economy Tax Center streamlines various resources, making it easier for taxpayers to  find information about the tax implications for the companies that provide the services and the individuals who perform them.

It offers tips and resources on a variety of topics including:

  • filing requirements
  • making quarterly estimated income tax payments
  • paying self-employment taxes
  • paying FICA, Medicare and Additional Medicare
  • deductible business expenses
  • special rules for reporting vacation home rentals

For more information, check out the new Gig Economy Tax Center on IRS.gov.

Members of the military can take advantage of special offer to file taxes for free

Active duty military personnel have multiple options for free federal tax preparation. IRS Free File allows taxpayers to prepare and file their federal individual income tax return for free using brand name tax-preparation-and-filing software.

While Free File is for individuals or families whose adjusted gross income was $69,000 or less last year, there’s a special offer for active duty military and their spouses. Members of military and their families who meet the income limitation may choose from any of nine companies without regard to additional eligibility requirements.

Active duty military stationed in combat zones also have more time to file their tax returns. However, those with spouses and families may opt to file as soon as they are able to claim various tax benefits for which they may be eligible. If only one spouse is present to file a joint return, they must have proper authorization to file a joint tax return on behalf of their spouse.

With Free File, you can use any digital device, personal computer, tablet or smart phone. Here’s how it works:

  • The taxpayer goes to the Free File page on IRS.gov to see all Free File options.
  • Military personnel who meet the income requirement can select from any of the nine providers that have “Free for Active Military for Adjusted Gross Income of $69,000 or less” in their offer. Nine of the 10 partners are making the offer. Two products are in Spanish.
  • The taxpayer selects a provider and follows the links to their web page to begin their tax return.
  • They then complete and e-File their tax return. They will do so only if they have all the income and deduction records needed to file. The fastest way to get a refund is by filing electronically and selecting direct deposit. If a taxpayer owes, they can use direct pay or electronic options.

Most taxpayers eligible for free federal and free state tax return preparation

Most taxpayers can do both their federal and state tax returns for free online through Free File offered either by the IRS or by states that have a similar public-private partnership.

For 2020, taxpayers whose prior-year adjusted gross income was $69,000 or less, and that’s most people, can use IRS Free File. Generally, taxpayers must complete their federal tax return before they can begin their state taxes.

More than 20 states also have a state Free File program patterned after federal partnership which means many taxpayers are eligible for free federal and free state online tax preparation. Those states are: Arkansas, Arizona, Georgia, Idaho, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, Montana, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, Vermont, Virginia and West Virginia, plus the District of Columbia.

In addition, IRS Free File partners – featuring 10 brand-name online products – offer most or some state tax returns for free as well. Some may also charge so it is important for taxpayers to explore their free options.

Here’s how Free File works:

  1. Go to IRS.gov/FreeFile to see all Free File options.
  2. Browse each of the 10 offers or use a “look up” tool to help you find the right product. Each Free File partner sets its own eligibility standards generally based on income, age and state residency. But if your adjusted gross income was $69,000 or less, you will find at least one free product to use. Two products are in Spanish.
  3. Select a provider and follow the links to their web page to begin your tax return.
  4. Complete and e-File your tax return only if you have all the income and deduction records you need. The fastest way to get a refund is by filing electronically and selecting direct deposit. If you owe, use direct pay or electronic options.

Free File partners will charge a fee for state tax return preparation unless their offer outlines upfront that you can file both federal and state returns for free. If you want to use one of the state Free File program products, go to your state tax agency’s Free File page.

For residents of Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming, IRS Free File may be the only tax product you need. Those states do not have an income tax.

IRS Free File helps seniors and retires do their taxes for free

Seniors and retirees whose income is under $69,000 a year should explore IRS Free File for free online tax preparation.

Seniors are one of the key constituents for Free File which has served 57 million taxpayers and saved them $1.7 billion since the online filing service debuted in 2003.

Free File – which features 10 brand-name tax software providers – also offers the new Form 1040-SR option for seniors over the age of 65.

“When you’re on a fixed income, every penny saved matters. With Free File, you can save lots of pennies. Free File also does all the hard work for you. It finds the right forms, benefits and does all the math,” said Ken Corbin, commissioner of IRS’ Wage and Investment division.

Free File supports all the major forms that can be filed electronically so even if your return is a bit more complex, you can still use a free service.

Here’s how Free File works:

  1. Go to IRS.gov/FreeFile to see all Free File options.
  2. Browse each of the 10 offers or use a “look up” tool to help you find the right product. Each Free File partner sets its own eligibility standards generally based on income, age and state residency. But if your adjusted gross income was $69,000 or less, you will find at least one free product to use. Two products are in Spanish.
  3. Select a provider and follow the links to their web page to begin your tax return.
  4. Complete and e-File your tax return only if you have all the income and deduction records you need. The fastest way to get a refund is by filing electronically and selecting direct deposit. If you owe, use direct pay or electronic options.

Free File providers also offer state tax return preparation, some for free and some for a fee. Again, use the “look up” tool to find the right product. Here’s another plus for Free File: you can use your smart phone or tablet to do your taxes. Just go to IRS.gov/FreeFile on your device. All Free File products are enabled for mobile devices.

Seniors who are not comfortable preparing their own tax return still have other free options. The IRS helps support the Volunteer Income Tax Assistance program and AARP supports the Tax Counseling for the Elderly program. Volunteers will prepare your tax return for you for free. Use the VITA locator tool to find a VITA/TCE location near you.

IRS Free File: Ideal for young and first-time filers

Filing taxes for the first time or working part-time? IRS Free File may be the perfect match for people looking to save money on federal tax preparation.

Most Free File users are under the age of 30 with modest incomes. The Free File adjusted gross income limit for 2020 is $69,000. For those who want to do their own taxes, Free File means free tax preparation, free electronic filing and free direct deposit, which is the fastest way to get a refund.

“Doing your taxes may seem a bit overwhelming, but it’s not. Free File does the hard work for you. The software finds the right forms, finds any tax benefits and does all the math,” said Ken Corbin, commissioner of the IRS’ Wage and Investment division. “Here’s a key tip: have all your income records like your Form W-2 ready before you start.”

Another plus: Free File is mobile enabled. Taxpayers can use their smart phones or tablets to do their taxes.

Free File features 10 brand-name tax software providers who are in a partnership with the IRS to offer their online products for free. Each provider sets additional eligibility requirements, generally based on age, state residency and income.

Here’s how Free File works:

  1. Go to IRS.gov/FreeFile to see all Free File options.
  2. Browse each of the 10 offers or use a “look up” tool to help you find the right product. Each Free File partner sets its own eligibility standards generally based on income, age and state residency. But if your adjusted gross income was $69,000 or less, you will find at least one free product to use. Two products are in Spanish.
  3. Select a provider and follow the links to their web page to begin your tax return.
  4. Complete and e-File your tax return only if you have all the income and deduction records you need. The fastest way to get a refund is by filing electronically and selecting direct deposit. If you owe, use direct pay or electronic options.

If this is the first time that you’ve filed a federal tax return and you are single, here’s what you need before you start:

  • Social Security number.
  • Wage and income information i.e. Form W-2 or Form 1099. Remember: parts of college scholarships or grants may be taxable income.
  • Check with your parents to make sure they are not claiming you as a dependent. You may still file a separate tax return but if you are being claimed as a dependent by others, you cannot claim yourself as a dependent.
  • Documentation for all tax credits and deductions. Remember: the standard deduction has been greatly increased so that itemizing your deductions may not be necessary.
  • For all electronic tax returns, you must use your prior-year adjusted gross income as part of your electronic signature. If you are a first-time filer over the age of 16, simply enter 0 (zero) as your prior-year income for signature purposes. If you filed before, your prior-year tax return will show your adjusted gross income.
  • Bank account and routing number. If you are receiving a refund, and most people do, the fastest way to get a refund is through direct deposit to a financial account.

Free File is available now through October to accommodate extension filers.

Direct deposit fastest way to receive federal tax refund

With tax season beginning soon, the Internal Revenue Service reminds taxpayers that choosing to have their tax refund directly deposited into their checking or savings account is the fastest way to get their money.

It’s simple, safe and secure. Taxpayers can also get their refund deposited into one, two or three different accounts, if desired.

Eight out of 10 taxpayers get their refunds by using direct deposit. The IRS uses the same electronic transfer system to deposit tax refunds that is used by other federal agencies to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.

Direct deposit also avoids the possibility that a refund check could be lost or stolen or returned to the IRS as undeliverable. And it saves taxpayer money. It costs more than $1 for every paper refund issued, but only a dime for each direct deposit.

Easy to use

A taxpayer simply selects direct deposit as the refund method when using tax software or working with a tax preparer, and then types in their account and routing number. It’s important to double check entries to avoid errors.

The IRS reminds taxpayers they should only deposit refunds directly into accounts that are in their name, their spouse’s name or both if it’s a joint account.

Split refunds

By using direct deposit, a taxpayer can split their refund into up to three financial accounts, including a bank or Individual Retirement Account. Part of the refund can even be used to purchase up to $5,000 in U.S. Series I Savings Bonds.

A taxpayer can split their refund by using tax software or by using IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), if they file a paper return. Some people use split refunds as a convenient option for managing their money, sending some of their refund to an account for immediate use and some for future savings.

No more than three electronic tax refunds can be deposited into a single financial account or prepaid debit card. Taxpayers who exceed the limit will receive an IRS notice and a paper refund will be issued for the refunds exceeding that limit.

E-file plus direct deposit yields fastest refunds

The IRS also encourages taxpayers to file electronically. While a person can choose direct deposit whether they file their taxes on paper or electronically, a taxpayer who e-files will typically see their refund in less than 21 days. Taxpayers can track their refund using “Where’s My Refund?” on IRS.gov or by downloading the IRS2Go mobile app.

“Where’s My Refund?” is updated once daily, usually overnight, so there’s no reason to check more than once per day or call the IRS to get information about a refund. Taxpayers can check “Where’s My Refund?” within 24 hours after the IRS has received their e-filed return or four weeks after receipt of a mailed paper return. “Where’s My Refund?” has a tracker that displays progress through three stages: (1) Return Received, (2) Refund Approved, and (3) Refund Sent.

Whether through IRS Free File or commercially available software, electronic filing vastly reduces tax return errors, as the tax software does the calculations, flags common errors and prompts taxpayers for missing information.