Taxpayers can explore several tax help options before visiting an IRS office

Some taxpayers may think they need to visit an IRS office for help in person with their tax issues. However, many of these people may actually find what they need online or by phone. In fact, many questions can be answered without ever having to visit to an IRS Taxpayer Assistance Center.

Finding answers to their tax questions.
Taxpayers can use several resources to find answers:

Checking on their tax refund status.
Taxpayers have two options to check on their refund:

Making a payment.
Taxpayers have several options for submitting a payment to IRS:

Viewing online accounts.
Taxpayers can view account information online at IRS.gov/account. From this page, taxpayers can:

  • View the amount they owe and get the total payoff amount for the current calendar day.
  • Connect to other online tools, such as Direct Pay and Get Transcript, without having to log in again.
  • Get key information about their current year tax return as it was originally filed.

Visiting an IRS office.
If a taxpayer decides they want a face-to-face interaction, they need to first take these two steps:

  • Use the Contact Your Local Office tool on IRS.gov. This tool helps taxpayers find the closest IRS Taxpayer Assistance Center, the days and hours of operation, and a list of services the TAC provides.
  • Make an appointment. The taxpayer will need to call 844-545-5640 to make an appointment. Taxpayers will then receive an email confirming the day and time of their appointment.

IRS finalizes safe harbor to allow rental real estate to qualify as a business for qualified business income deduction

The Internal Revenue Service issued Revenue Procedure 2019-38 that has a safe harbor allowing certain interests in rental real estate, including interests in mixed-use property, to be treated as a trade or business for purposes of the qualified business income deduction under section 199A of the Internal Revenue Code (section 199A deduction).

If all the safe harbor requirements are met, an interest in rental real estate will be treated as a single trade or business for purposes of the section 199A deduction. If an interest in real estate fails to satisfy all the requirements of the safe harbor, it may still be treated as a trade or business for purposes of the section 199A deduction if it otherwise meets the definition of a trade or business in the section 199A regulations.

This safe harbor is available for taxpayers who seek to claim the section 199A deduction with respect to a “rental real estate enterprise.” Solely for purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held to generate rental or lease income. It may consist of an interest in a single property or interests in multiple properties. The taxpayer or a relevant passthrough entity (RPE) relying on this revenue procedure must hold each interest directly or through an entity disregarded as an entity separate from its owner, such as a limited liability company with a single member.

The following requirements must be met by taxpayers or RPEs to qualify for this safe harbor:

  • Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise.
  • For rental real estate enterprises that have been in existence less than four years, 250 or more hours of rental services are performed per year. For other rental real estate enterprises, 250 or more hours of rental services are performed in at least three of the past five years.
  • The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: hours of all services performed; description of all services performed; dates on which such services were performed; and who performed the services.
  • The taxpayer or RPE attaches a statement to the return filed for the tax year(s) the safe harbor is relied upon.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

The filing deadline for extension filers is almost here

It’s almost here…the filing deadline for taxpayers who requested an extension to file their 2018 tax return. This year’s deadline is Tuesday, October 15.

Even though time before the extension deadline is dwindling, there’s still time for taxpayers to file a complete and accurate return. Taxpayers should remember they don’t have to wait until October 15 to file. They can file whenever they are ready.

Taxpayers who did not request an extension and have yet to file a 2018 tax return can generally avoid additional penalties and interest by filing the return as soon as possible and paying the amount owed.

Here are a few tips and reminders for taxpayers who have not yet filed:

Use IRS Free File or other electronic filing options.
Taxpayers can file their tax return electronically for free through IRS Free File. The program is available on IRS.gov through Oct. 15. Filing electronically is easy, safe and the most accurate way to file taxes. Other electronic filing options include using a free tax return preparation sitecommercial software or an authorized e-file provider.

Taxpayers getting a refund should use Direct Deposit.
The fastest way for taxpayers to get their refund is to file electronically and use direct deposit.

There are online payment options.
Taxpayers with extensions should file their tax returns by Oct. 15 and, if they owe, pay as much as possible to reduce interest and penalties. IRS Direct Pay allows individuals to securely pay from their checking or savings accounts. These taxpayers can consider a payment plan, which allows them to pay over time. For other payment options, taxpayers can visit the Paying Your Taxes page on IRS.gov.

There’s more time for the military.
Military members and those serving in a combat zone generally get more time to file. These taxpayers usually have until at least 180 days after they leave the combat zone to file returns and pay any taxes due.

There’s also more time in certain disaster areas.
People who have a valid extension and are in – or affected by – a federally-declared disaster may be allowed more time to file.

Keep a copy of tax return.
Taxpayers should keep a copy of their tax return and all supporting documents for at least three years.

Taxpayers can view their account information.
Individual taxpayers can go to IRS.gov/account and login to:

  • View their balance.
  • See their payment history.
  • Pay their taxes.
  • Access tax records through Get Transcript.

Before setting up an account, taxpayers should review Secure Access: How to Register for Certain Online Self-Help Tools to make sure they have the info needed to verify their identities.

Taxpayers can use 2018 tax return to estimate 2019 withholding amount

Millions of people have filed their 2018 tax return, making this a prime time to consider whether their tax situation came out as expected. If not, taxpayers can use their  finished 2018 return and the Tax Withholding Estimator to do a Paycheck Checkup ASAP and, if needed, adjust their withholding. Having their 2018 return handy can make it easier for taxpayers to estimate deductions, credits and other amounts for 2019. Performing a Paycheck Checkup is a good idea for anyone who:

  • Adjusted their withholding in 2018, especially those who did so later in the year.
  • Owed additional tax when they filed their tax return this year.
  • Had a refund that was larger or smaller than expected.
  • Had life changes such as marriage, childbirth, adoption, buying a home or income changes.

Since most people are affected by the Tax Cuts and Jobs Act all taxpayers should check their withholding. They should do a checkup even if they did one in 2018. This especially includes taxpayers who:

  • Have children and claim credits such as the Child Tax Credit.
  • Have older dependents, including children age 17 or older.
  • Experienced changes to itemized deductions this year.
  • Itemized deductions in the past.
  • Are a two-income family.
  • Have two or more jobs at the same time.
  • Only work part of the year.
  • Have high income or a complex tax return.

This Tax Withholding Estimator works for most taxpayers. Those with more complex situations may need to use Publication 505, Tax Withholding and Estimated Tax, instead of the Tax Withholding Estimator. This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends.

Taxpayers can use the results from the Tax Withholding Estimator to see if they need to complete a new Form W-4, Employee’s Withholding Allowance Certificate, and submit it to their employer. In some instances, the calculator may recommend they have an additional flat-dollar amount withheld each pay period. Taxpayers give this form to their employer and do not send this form to the IRS.

New IRS Tax Withholding Estimator helps workers with self-employment income

Freelancers, others with side jobs in the gig economy may benefit from new online tool

The Internal Revenue Service said that the new Tax Withholding Estimator tool includes a feature designed to make it easier for employees who also receive self-employment income to accurately estimate the right amount of tax to have taken out of their pay.

The estimator is an expanded, mobile-friendly online tool that replaced the Withholding Calculator, which since 2001 had offered workers an online method for checking their withholding. The old calculator lacked features geared to self-employed individuals; the new estimator made changes to address this important group.

The new tool offers self-employed individuals, workers, retirees and other taxpayers a more dynamic and user-friendly way to calculate the amount of income tax they want to have withheld from either wages or pension payments. With only a third of the year remaining, the IRS encourages these taxpayers – and others – to use the estimator to take a Paycheck Checkup as soon as possible to make sure they are having the right amount of tax withheld and avoid a surprise when they file next year.

Among other things, the estimator allows a user to enter any self-employment income, including income from side gigs or the sharing economy, in addition to wages or pensions. The user is then alerted that they may qualify for several special tax benefits, including the self-employment health insurance deduction or the deduction for contributions to a Simplified Employee Pension (SEP), Savings Incentive Match Plans for Employees (SIMPLE) or other qualified retirement plan. The estimator automatically calculates the self-employment tax and the self-employment tax deduction and incorporates these into its overall tax liability estimate.

The enhancement for self-employed people is just one of many new features offered by the Tax Withholding Estimator. Others include:

  • Plain language throughout to improve taxpayer understanding.
  • The ability to target either a tax due amount close to zero or a refund amount.
  • A new progress tracker to help a user know how much more information they need to enter.
  • The ability to go back and forth through the steps, correct previous entries and skip questions that don’t apply.
  • Tips and links to help the user quickly determine if they qualify for various tax credits and deductions.
  • Automatic calculation of the taxable portion of any Social Security benefits.

The new estimator also makes it easier to enter wages and withholding for each job held as well as jobs held by a spouse. Users can separately enter pensions and other sources of income. At the end of the process, the tool makes specific withholding recommendations for each job and spouse’s job, including incorporating any self-employment income entered into the estimator.

The estimator then automatically links to the appropriate withholding form. For employees, the link goes to Form W-4,  Employee’s Withholding Allowance Certificate (PDF) , which they can then fill out and submit to their employer. Similarly, for pension recipients, the link is to Form W-4P, Withholding Certificate for Pension or Annuity Payments, which is submitted to the pension payor. Remember, don’t send these forms to the IRS.

The new tool can help anyone, including self-employed people, doing tax planning for the last few months of the year. The IRS urges everyone to do a Paycheck Checkup and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed earlier this year. It’s also a critical step for those who made withholding adjustments in 2018 or had a major life change, such as marriage, childbirth, adoption or buying a home.

Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as two wage earner households, employees with non-wage sources of income and those with complex tax situations.

Anyone who changes their withholding in the middle or latter part of this year should do another Paycheck Checkup in January of 2020. That will help ensure that they have the right amount of tax withheld, on a full-year basis, for all of 2020.

Tips for taxpayers who make money from a hobby

Many people enjoy hobbies that are also a source of income. From painting and pottery to scrapbooking and soap making, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return.

However, the rules for how to report the income and expenses depend on whether the activity is a hobby or a business.

There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five things to consider:

If the activity is a business or a hobby.
If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby. They should base their determination on all the facts and circumstances of their activity.

Allowable hobby deductions.
Taxpayers can only deduct ordinary and necessary hobby expenses:

  • Ordinary expense is common and accepted for the activity.
  • Necessary expense is appropriate for the activity.

Limits on hobby expenses.
Taxpayers can generally only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

How to deduct hobby expenses.
Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Taxpayers can look into this now to determine if they will itemize their deductions when they file their 2019 tax return next year. Expenses may fall into three types of deductions, and special rules apply to each type.

IRS Withholding Calculator can help workers have right amount of tax withheld following tax law changes

Following the biggest set of tax law changes in more than 30 years, the Internal Revenue Service continues to remind taxpayers to do a Paycheck Checkup to help make sure they are having the right amount of tax withheld.

The Tax Cuts and Jobs Act (TCJA), tax reform legislation enacted in December 2017, changed the way tax is calculated for most taxpayers. By visiting the IRS Withholding Calculator, available on IRS.gov, taxpayers can make adjustments following recent tax laws that may affect them, including the larger standard deduction, the increased Child Tax Credit or Other Dependent Credit.

Most TCJA changes took effect in 2018 and, for most taxpayers, affected the return they filed earlier this year. Those changes will also apply to 2019 tax returns filed in early 2020.

Among other things, the new law suspended the personal and dependency exemptions taxpayers claimed in the past. It also made the Child Tax Credit for dependent children, under the age of 17, available to a broader range of taxpayers by doubling the maximum credit from $1,000 to $2,000 per qualifying child and substantially raising the income limits that apply. Because TCJA nearly doubled the standard deduction, fewer taxpayers need to itemize their deductions and new restrictions apply to many of these deductions, such as state and local taxes, mortgage interest and miscellaneous itemized deductions.

As a result, some taxpayers ended up receiving 2018 refunds that were larger or smaller than expected, while others unexpectedly owed additional tax when they filed earlier this year. Those taxpayers may need to raise or lower the amount of tax they have taken out of their pay throughout the year.

The Withholding Calculator enables taxpayers to get their tax withholding right by making sure these and other tax changes are built into their take-home pay. Taxpayers enter their deductions and credits into this handy online tool, and estimate income from other sources, such as jobs their spouses hold, bank interest, second jobs and gig-economy work. To use the Withholding Calculator most effectively, taxpayers should have a copy of the 2018 tax return due earlier this year, as well as recent paystubs for themselves and their spouses, if married and filing jointly.

The Withholding Calculator will recommend the number of allowances the employee should claim on their Form W-4. In some instances, it will recommend that the employee also have an additional flat-dollar amount withheld from each paycheck.

Though primarily designed for employees who receive wages, the Withholding Calculator can also be helpful to some recipients of pension and annuity income. If the Withholding Calculator suggests a change, the employee should fill out a new Form W-4 and give it to their employer as soon as possible. Similarly, recipients of pensions and annuities can make a change by filling out Form W-4P and giving it to their payer. They should not send these forms to the IRS.

Taxpayers should also check their withholding any time they have a major life change, such as getting married, getting divorced, having a baby, adopting a child, buying a home, retiring or starting college. Anyone who needs to make a withholding change should do so as soon as possible. This way if a tax withholding adjustment is needed, the amount of tax that needs to be withheld can be spread across more paychecks remaining in the year. Waiting means the remaining tax owed will need to be withheld from fewer paychecks so more will have to be taken from each one.