WASHINGTON – The Internal Revenue Service today urged small businesses to take advantage of the accuracy, speed and convenience of filing their payroll tax returns and making tax payments electronically.

During National Small Business Week, May 1 to 7, the IRS is highlighting tax benefits and resources tied to the theme for this year’s celebration: “Building a Better America through Entrepreneurship.” Filing and paying taxes electronically helps entrepreneurs leave more time for what they really want to do—build their businesses.

What are payroll taxes?
Also known as employment taxes, payroll taxes include federal income tax withheld from employee wages, as well as both the employer and employee portions of Social Security and Medicare taxes. In addition, payroll taxes include the Federal Unemployment Tax, also known as FUTA, which most employers need to pay but is not withheld from employee wages.

In some cases, backup withholding applies to payments made to nonemployees, usually because the recipient failed to provide their correct Taxpayer Identification Number (TIN), to the business making the payments. A TIN can be either a social security number, employer identification number or individual taxpayer identification number. For more information about backup withholding see Tax Topic No. 307.

Why e-file?
All of the returns reporting these taxes can either be filed electronically or on paper. Though the number of payroll tax returns e-filed has grown steadily in recent years—more than doubling in the last decade alone, more than 40% of them are still filed on paper.

Paper filers are missing out on all the advantages of electronic filing. E-file saves time, and it’s secure and accurate. Plus, the IRS acknowledges receipt of an electronically filed return within 24 hours. That doesn’t happen with paper filing.

It’s much easier to make a mistake on paper. With electronic filing, any mistake is often discovered and fixed quickly. With paper filing, it may take weeks or even months to discover and correct a mistake.

How to e-file
Employers have two options: Do it themselves or have a tax pro do it for them. Those choosing to do it themselves will need to purchase IRS-approved software. Alternatively, the Authorized IRS e-file Providers Locator Service, an online database, can help any employer find a suitable tax professional.

For more information about both options, visit IRS.gov/employmentefile.

Pay taxes electronically
Though some employers, especially those with small payrolls, can choose to pay their taxes when they file their payroll tax returns, most need to deposit them regularly with the Treasury Department instead. Federal tax deposits must be made by electronic funds transfer (EFT).

The fastest and easiest way to do that is through the Electronic Federal Tax Payments System (EFTPS), a free service available from the Treasury Department. Payments can be made either online or by phone. Any business or individual can also use EFTPS to pay other federal taxes, including quarterly estimated taxes.

Enrollment is required. To enroll or for more information, visit EFTPS.gov or call 800-555-4477 or TDD: 800-733-4829.

More information about the tax rules that apply to employers can be found in Publication 15, (Circular E), Employer’s Tax Guide, available on IRS.gov.

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Preparing for Disasters – English |Spanish | ASL

WASHINGTON —The Internal Revenue Service reminded taxpayers today that May includes National Hurricane Preparedness Week and is National Wildfire Awareness Month. This is a good time to create or review an emergency preparedness plan, including steps to protect important tax-related information.

In 2021, the Federal Emergency Management Agency (FEMA) declared major disasters following hurricanes, tropical storms, tornados, severe storms, straight-line winds, flooding, landslides and mudslides, wildfires and winter storms. Given the impact these events can have on individuals, organizations and businesses, now is the time to make or update an emergency plan. The following tips are intended to help taxpayers prepare for a natural disaster.

Secure key documents and make copies
Taxpayers should place original documents such as tax returns, birth certificates, deeds, titles and insurance policies inside waterproof containers in a secure space. Duplicates of these documents should be kept with a trusted person outside the area of the taxpayer. Scanning them for backup storage on electronic media such as a flash drive is another option that provides security and portability.
 
Document valuables and equipment
Current photos or videos of a home or business’s contents can help support claims for insurance or tax benefits after a disaster. All property, especially expensive and high value items, should be recorded. The IRS disaster-loss workbooks in Publication 584 can help individuals and businesses compile lists of belongings or business equipment.
 
Employers should check fiduciary bonds
Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. The IRS reminds employers to carefully choose their payroll service providers.
 
Rebuilding documents
Reconstructing records after a disaster may be required for tax purposes, getting federal assistance or insurance reimbursement. Those who have lost some or all their records during a disaster can visit IRS’s Reconstructing Records webpage as one of their first steps. 

IRS stands ready to help
After FEMA issues a disaster declaration, the IRS may postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. There is no need to call the IRS to request this relief. The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief. Those impacted by a disaster with tax-related questions can contact the IRS at 866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Taxpayers who do not reside in a covered disaster area but suffered impact from a disaster should call 866-562-5227 to find out if they qualify for disaster tax relief and to discuss other available options.

Find complete disaster assistance and emergency relief details for both individuals and businesses on our Around the Nation webpage on IRS.gov. The FEMA Prepare for Disasters webpage includes information to Build a Kit of emergency supplies.

Related items:

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Estimated Tax Payments – English | Spanish | ASL

WASHINGTON — The Internal Revenue Service reminds all businesses, including self-employed and gig workers, to make estimated tax payments quarterly, and that making them electronically is fast, easy and safe.

During National Small Business Week, May 1 to 7, the IRS is highlighting tax benefits and resources tied to the theme for this year’s celebration: “Building a Better America through Entrepreneurship.” Paying estimated tax payments quarterly throughout the year is important for business owners.

Individuals and businesses alike are required to pay taxes as income is earned or received throughout the year, either through withholding or estimated tax payments. That’s why those who are self-employed or in the gig economy usually need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.

If a taxpayer doesn’t pay enough tax through withholding and estimated tax payments, they may be charged a penalty. They also may be charged a penalty if estimated tax payments are late, even if the taxpayer is due a refund when they file their tax return. However, generally, paying quarterly estimated taxes will lessen or even eliminate any penalties.

Estimated tax requirements are different for farmers, fishers and certain higher income taxpayers. In addition, special rules apply to some groups of taxpayers, such as casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. Publication 505, Tax Withholding and Estimated Tax, provides more information about these special estimated tax rules.

Who must pay estimated tax
Individuals, including sole proprietors, partners, and S corporation shareholders, generally must make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. Corporations generally must make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.

Taxpayers may have to pay estimated tax for the current year if their tax was more than zero in the prior year. See the worksheet in Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations, for more details on who must pay estimated tax.

Who does not have to pay estimated tax
Self-employed people and gig workers who also receive salaries and wages from an employer can generally avoid having to pay estimated tax by asking their employer to withhold more tax from their paycheck. This usually requires the filing of a new Form W-4, Employee’s Withholding Certificate, with the employer. A special line on Form W-4 allows a taxpayer to enter an additional amount to be withheld.

Taxpayers receiving a paycheck can check the Tax Withholding Estimator on IRS.gov to determine if the right amount of tax is being withheld from their paycheck.

Also, individuals don’t have to pay estimated tax for the current year if they meet all three of the following conditions:

An individual has no tax liability for the prior year if their total tax was zero or they didn’t have to file an income tax return. Additional information on how to figure estimated tax is available in Publication 505, Tax Withholding and Estimated Tax.

How to figure estimated tax
Individuals, including sole proprietors, partners and S corporation shareholders, generally use Form 1040-ES, Estimated Tax for Individuals, to figure estimated tax.

To figure estimated tax, individuals must figure their expected adjusted gross income, taxable income, taxes, deductions and credits for the year. When figuring estimated tax for the current year, taxpayers will often find it helpful to use income, deductions and credits from the prior year as a starting point.
 
Corporations generally use Form 1120-W, Estimated Tax for Corporations, to figure estimated tax.

When and how to pay estimated tax
For estimated tax purposes, the year is divided into four payment periods. However, some taxpayers may find it easier to pay estimated taxes weekly, bi-weekly or monthly. Alternative payment periods are allowed if enough tax is paid in by the end of the quarter.

Using an electronic payment option available on irs.gov/payments is the easiest way for individuals, small businesses, self-employed individuals and gig workers to pay federal taxes. It’s fast, easy and secure.

The 2022 Form 1040-ES, Estimated Tax for Individuals, can help taxpayers estimate their first quarterly tax payment. While electronic filing is strongly encouraged, taxpayers may also send estimated tax payments with Form 1040-ES by mail.

Corporations must deposit payments using EFTPS. Additional information is available in Publication 542, Corporations.

24/7 help at IRS.gov
Small business owners, self-employed individuals and gig workers will find valuable resources at IRS.gov available 24/7. The resources include publications, forms, tax products and tips to help small business owners avoid tax troubles and succeed.

The IRS is also reaching out to taxpayers in other languages through online resources for small businesses and individuals. The IRS has posted translated tax resources in 20 languages on IRS.gov. For more information see We Speak Your Language.

Resources:

WASHINGTON – The Internal Revenue Service today urged business taxpayers to begin planning now to take advantage of the enhanced 100% deduction for business meals and other tax benefits available to them when they file their 2022 federal income tax return.

During National Small Business Week, May 1 to 7, the IRS is highlighting tax benefits and resources tied to the theme for this year’s celebration: “Building a Better America through Entrepreneurship.” With next year’s filing deadline nearly a year away, any entrepreneur still has time to identify possible tax benefits, take action to qualify for them and then claim them when they file in 2023.

Enhanced business meal deduction
For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.

To qualify for the higher limit, the business owner or an employee of the business must be present when food or beverages are provided. Moreover, the expense cannot be lavish or extravagant. Restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.

For this purpose, grocery stores, convenience stores and other businesses that primarily sell pre-packaged goods not for immediate consumption, do not qualify as restaurants. Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if they are operated under contract by a third party.

For more information about this provision, as well as details on the special recordkeeping rules that apply to business meals, see IRS Publication 463, Travel, Gift, and Car Expenses.

Home office deduction
With a growing number of business owners now working from home, many may qualify for the home office deduction, also known as the deduction for business use of a home.

Usually, a business owner must use a room or other identifiable portion of the home exclusively for business on a regular basis. Exceptions to the exclusive-use standard apply to home-based daycare facilities and to portions of the home used for business storage, where the home is the only fixed location for that business.

Those eligible can figure the deduction using either the regular method or the simplified method.

To choose the regular method, fill out and attach Form 8829, Expenses for Business Use of Your Home. In general, this form divides the expenses of operating the home between personal and business use. Direct business expenses are fully deductible. On the other hand, the business portion of indirect expenses, such as real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs, is figured on this form, based on the percentage of the home used for business.

Alternatively, instead of filling out the 44-line Form 8829, business owners can choose the simplified method, based on a 6-line worksheet found in the instructions to Schedule C, the tax form for sole proprietors. This method has a prescribed rate of $5 a square foot for business use of the home. The maximum deduction is $1,500, based on business use of at least 300 square feet.

Though homeowners choosing the simplified option cannot depreciate the portion of their home used for business, they can still claim allowable home mortgage interest, real estate taxes and casualty losses as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees, are still fully deductible.

Under both the regular and simplified methods, business expenses in excess of the gross income limitation are not deductible. For more information about this limit along with other details on the home office deduction and both methods for figuring it, see Publication 587, Business Use of Your Home.

Other tax benefits
From business start-up expenses to the qualified business income deduction to the health-insurance deduction for self-employed individuals, there are a variety of other tax benefits that are often available to entrepreneurs and other business owners.

For details on these and other tax benefits, see Publication 535, Business Expenses. Details on another major expense for most businesses, depreciation of buildings, equipment and other assets, can be found in Publication 946, How to Depreciate Property. Yet another worthwhile resource for any small business is the agency’s Tax Guide for Small Business, Publication 334. All these publications are available on IRS.gov.

Notice 2022-23 sets forth proposed changes to the qualified intermediary (QI) withholding agreement (QI agreement) described in §1.1441-1(e)(5) and (6) that will permit a QI to assume withholding and reporting responsibilities for purposes of sections 1446(a) and (f). Generally, the notice sets forth proposed changes to the QI agreement that apply to a QI effecting a transfer of an interest in a publicly traded partnership (PTP) or receiving a distribution made by a PTP on behalf of an account holder of the QI.

Notice 2022-23 will be in IRB: 2022-20, dated 05/16/2022.

WASHINGTON — The Internal Revenue Service today announced the opening of the application period for Low Income Taxpayer Clinic (LITC) matching grants for calendar year 2023. Applications will be accepted from May 2 to June 16, 2022.

The LITC Program is a federal grant program administered by the Taxpayer Advocate Service (TAS), which is led by National Taxpayer Advocate (NTA) Erin M. Collins.

“LITCs are often the last resort for taxpayers who have nowhere else to turn, said National Taxpayer Advocate Erin M. Collins in a recent blog. “Through their powers of persuasion and vociferous advocacy, the employees and volunteers at LITCs help ensure justice and uphold taxpayer rights for thousands of taxpayers across the country. You can serve your community in a meaningful way by applying for an LITC grant.”

Under Internal Revenue Code (IRC) Section 7526, the IRS awards matching grants up to $100,000 per year to qualifying organizations to develop, expand or maintain an LITC. An LITC must provide services for free or for no more than a nominal fee (except for reimbursement of actual costs incurred). Although LITCs receive partial funding from the IRS, LITCs, their employees and volunteers are independent from the IRS.

Qualified organizations that are awarded LITC 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 these taxpayers.

The IRS is committed to achieving maximum access to representation for taxpayers under the terms of the LITC Program. In awarding LITC grants for calendar year 2023, the IRS will continue to work toward providing coverage nationwide. Although the IRS welcomes all applicants and will give each application due consideration, the IRS is particularly interested in applications from organizations in the following underserved geographic areas and counties that have limited or no LITC services.

Underserved geographic areas include:

LITC grants are funded by federal appropriations. The clinics, their employees and their volunteers operate independently of the IRS. Examples of qualifying organizations include:

The IRS is authorized to award multi-year grants not to exceed three years. For an organization not currently receiving a grant for 2022, an organization that received a single-year grant for 2022 or an organization whose multi-year grant ends in 2022, the organization must electronically submit a full grant application.

An organization currently receiving a grant for 2022 that is requesting funding for the second or third year of a multi-year grant must electronically submit a request for continued funding. All organizations must use the funding number TREAS-GRANTS-052023-001.

Both full applications and non-competing continuation requests must be submitted by 11:59 p.m. Eastern Time on June 16, 2022.

Contact the LITC Program Office at 202-317-4700 (not a toll-free call) or by email at litcprogramoffice@irs.gov for general questions about the LITC Program or grant application process. In addition, applicants with specific questions may contact Bill Beard by email at beard.william@irs.gov.

More information about LITCs and the work they do to represent, educate and advocate on behalf of low-income and ESL taxpayers is available in IRS Publication 5066, LITC 2021 Program Report. A complete overview of the requirements to be an LITC can be found in Publication 3319, LITC Grant Application Package and Guidelines. A short video about the LITC program is also available.

Interested applicants may join LITC Program Office staff for a webinar, where staff will provide information about the LITC Program and the application process. For details on the date and time of the webinar, please check the LITC page on the TAS website.

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IRS Small Business Self-Employed Tax Center – English | ASL

WASHINGTON - During National Small Business Week, May 1 to 7, the IRS is highlighting tax benefits and resources tied to the Small Business Administration theme for this year’s celebration: “Building a Better America through Entrepreneurship.”

During National Small Business Week, the Internal Revenue Service wants taxpayers to know there are free resources on IRS.gov for those that are starting a business. Small businesses play a pivotal role in the nation's economy. The IRS has a variety of resources available to help employers meet their tax responsibilities as well as help their employees.

Selecting a business structure
When beginning a business, taxpayers must decide what form of business entity to establish. The form of business determines which income tax return form must be filed. The most common business structures are:

Understanding business taxes
The form of business being operated determines what taxes must be paid and how to pay them. The following are the four general types of business taxes:

Note: Generally, business owners must pay taxes on income, including self-employment tax, by making regular payments of estimated tax during the year.

Knowing when to get an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number and is used to identify a business entity. Generally, businesses need an EIN. This is a free service offered by the Internal Revenue Service and business owners can get their EIN immediately.

Keeping good records
Maintaining adequate records will help small businesses monitor their progress, prepare financial statements, identify sources of income, keep track of deductible expenses, keep track of their basis in property, prepare their tax returns and support items reported on their tax returns. Taxpayers should maintain their records for at least 3 years.

Choosing the business year
Small businesses must figure their taxable income on the basis of a tax year. A “tax year” is an annual accounting period for reporting income and expenses. Tax years small businesses can use are:

More information

• Small Business and Self-Employed Tax Center
• Hobby or Business? IRS Offers Tips to Decide
• Small Business Tax Workshop
• 10 Steps to start your business
• Industries/Professions Web page

Revenue Procedure 2022-24 provides the 2023 inflation adjusted amounts for Health Savings Accounts (HSAs) as determined under § 223 of the Internal Revenue Code and the maximum amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs) provided under § 54.9831-1(c)(3)(viii) of the Pension Excise Tax Regulations.

Revenue Procedure 2022-24 will be in IRB 2022-20, dated 05/16/2022.

WASHINGTON - The Internal Revenue Service is accepting applications for the Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) grant programs, which will allow some organizations to apply for annual funding for up to three years.

Grants.gov will accept applications beginning May 1 through May 31, 2022, for the TCE and VITA grant opportunities. Application packages and guidelines for 2022 are now available on the IRS website. The IRS, in the past year, awarded 34 TCE grantees $11 million and 300 VITA grantees $25 million. Last year, the two grant programs filed nearly 1.6 million returns nationwide.

The IRS established the TCE program in 1978 to provide tax counseling and return preparation to persons aged 60 or older and to give training and technical assistance to the volunteers who provide free federal income tax assistance within elderly communities across the nation. For more information on the TCE program, visit the IRS’s TCE web page.

The VITA Grant program was established in 2007 to supplement the VITA program created in 1969. VITA provides free tax filing assistance to underserved communities. The grant program enables VITA to extend these services to underserved populations in hardest-to-reach, urban and non-urban areas; increase the capacity of targeted taxpayers to file returns electronically; enhance training of volunteers and improve the accuracy rate of returns prepared at VITA sites.

More information on the VITA grant program is available on IRS.gov

WASHINGTON, DC — The IRS today issued a revised set of frequently asked questions for tax year 2021 and filing season 2022 for the Child Tax Credit. These frequently asked questions (FAQs) are released to the public in Fact Sheet 2022-28 PDF, April 27, 2022.

The revision adds Topic F:  Commonly Asked Filing Season Questions, Questions 1 through 6.

More information about reliance is available.