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Get ready for taxes: Here’s what to know about the amount of a tax refund

After filing their tax return, a taxpayer will know whether they are receiving a refund. Sometimes, however, a taxpayer’s refund will be for a different amount than they expect.

Here are some reasons a taxpayer’s refund might be less than they thought it would be:

Financial transactions happening late in the year can have an unexpected tax impact if a taxpayer’s 2019 federal income tax withholding unexpectedly falls short of their tax liability for the year. Certain transactions can affect 2019 tax withholding and influence the taxpayer’s anticipated refund next year. This includes things like:

   o Year-end and holiday bonuses.
   o Stock dividends.
   o Capital gain distributions from mutual funds and
      stocks.
   o Real estate or other property sold at a profit.

If this happens, taxpayers can still make a quarterly estimated tax payment directly to the IRS for tax year 2019. The deadline for making a payment for the fourth quarter of 2019 is Wednesday, Jan. 15, 2020. Form 1040-ES includes a worksheet to help taxpayers figure the right amount of estimated taxes to pay.
A taxpayer’s refund can be used to pay other debts a taxpayer owes. All or part of a refund can go to pay a taxpayer’s:

   o Past-due federal tax.
   o State income tax.
   o State unemployment compensation debts.
   o Child and spousal support.
   o Other federal nontax debts, such as student loans.

A taxpayer receives a notice if their debt meets the criteria for an offset. The IRS issues any remaining refund in a check or direct deposit as the taxpayer originally requested on the return.

More Information:

Publication 505, Tax Withholding and Estimated Tax

Taxpayers can start to Get Ready now for filing their taxes next year

Most people don’t usually start thinking about their taxes until January. However, it’s not too early to start now. In fact, taxpayers can get ready for the upcoming tax filing season by doing a few simple things.

First things first…they can visit the newly updated Get Ready page on IRS.gov. It highlights the steps taxpayers can take before they file their 2019 tax return in 2020.

These steps include:

Organizing tax records
Checking withholding and making adjustments or tax payments
Renewing an expired individual taxpayer identification number

IRS.gov tools and resources help taxpayers understand their tax obligations and filing options. Aside from English, taxpayers will find info in several other languages on IRS.gov. They will find it under the language drop-down menu at the top of each page.

Here are some of the pages taxpayers can visit now to help them get ready for filing:

Electronic filing options for individuals: Filing electronically is easy, safe and the most accurate way to file taxes. There are several free electronic filing options for most taxpayers. Taxpayers can electronically file using IRS Free File or Fillable Forms.
Let Us Help You: This page features links to information and resources on a wide range of tax topics.
Free tax return preparation for qualifying taxpayers: Taxpayers can also consider having their tax returns prepared at a Volunteer Income Tax Assistance or Tax Counseling for the Elderly site. The IRS and its community partners are looking for people around the country to become IRS-certified volunteers. Many IRS partners are still accepting new volunteers to join one of these programs for the 2020 filing season.

Here’s where taxpayers can find answers to questions about their tax refund

As taxpayers with filing extensions submit their returns this summer and fall, some of them may have questions about their refunds. These taxpayers can use the Let Us Help You page to find answers to those questions. This page has links to information and resources that will let them know when to:

Expect their refund
Check the status of their refund

Here are some other links users will find on the Let Us Help You page about refunds:

Where’s My Refund?

This tool allows taxpayers to track their money and find out when they will get it.

Refund less than expected

Some taxpayers may receive less money in their refund than they expected. This links to a page that helps taxpayers understand why this happened.

Received a refund but wasn’t expecting one

When this happens, the taxpayer will need to return the money. This link takes the user to a page that explains how to do this.

Lost refund

This link has information to help taxpayers trace their lost refund.

Frequently Asked Questions

This page has Q&As that cover a wide range of topics related to federal tax refunds.

Extension filers: Don’t panic, just go to IRS.gov for help

IRS.gov

The deadline for taxpayers who requested an extension to file is going to be here before they know it. The deadline for these filers to submit their 2018 tax returns is Tuesday, October 15, 2019. Taxpayers who have not yet filed can find many helpful resources on IRS.gov Here are a few of them:

IRS Free File
Taxpayers with yearly income of $66,000 or less can file using free brand-name tax software. Those who earned more can use Free File Fillable Forms, the electronic version of IRS paper forms. Either way, everyone has a free e-file option. Filing electronically is the easiest, safest and most accurate way to file taxes.

Interactive Tax Assistant and IRS Tax Map
These tools can answer many common tax questions.

Directory of Tax Return Preparers
For taxpayers who don’t want to do their own taxes, this tool can help find a tax professional in their area.

Where’s My Refund?
Taxpayers can check the status of their refund within 24 hours after the IRS has received their e-filed return. Those who file a paper return can check the refund status four weeks after mailing it. Once the IRS approves a refund, this tool will give the taxpayer a date by which to expect it. The IRS updates refund statuses once a day.

Taxpayers can also find helpful information on their smart phones through the IRS2Go app.

Taxpayers can file earlier but should file by October 15 to avoid a potential late filing penalty. Penalties and Interest might apply if taxpayers owe taxes and do not pay in a timely manner. The IRS offers a variety of ways for taxpayers to pay their taxes, including IRS Direct Pay.

Taxpayers can still get help tax help this summer

Taxpayers who received an extension but haven’t filed or those otherwise unable to file their return by the April deadline should visit IRS.gov if they need help completing and filing their return. These taxpayers must file by October 15.

Interactive Tax Assistant

Taxpayers can find answers to their tax questions with this tool. The ITA is a tax law resource that asks users a series of questions and immediately provides answers on a variety of tax law topics. It can help taxpayers determine if:

Their income is taxable
They’re eligible to claim certain credits
They can deduct expenses on your tax return

Free File

Taxpayers can prepare and e-file their taxes for free with IRS Free File. Taxpayers who made $66,000 or less qualify to use this free tax software. Those with income above $66,000 can use Free File Fillable Forms.

Find a tax preparer

Taxpayers can use the Directory of Tax Return Preparers to find a list of preparers near them.

Check refund status

Taxpayers can track their federal tax refund using “Where’s My Refund?” on IRS.gov or through the IRS2Go app. They can begin checking its status within 24 hours after the IRS receives their e-filed return or four weeks after they mailed their paper return. Where’s My Refund? is only updated every 24 hours. However, some tax returns may take longer to process.

Make payments electronically

The IRS offers several easy payment options for taxpayers. These include electronic funds withdrawal, payment by debit or credit card, and IRS Direct Pay.

EITC Assistant

Taxpayers who worked and earned less than $54,884 in 2018 may be eligible for the earned income tax credit of up to $6,431.To help determine their eligibility, taxpayers can use the EITC Assistant, available in English and Spanish.

View Account Information

Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. Here they can view:

The amount they owe
Payment history
Key information for their most recent tax return

If your business receives a backup withholding notice

If you are a taxpayer receiving certain types of income payments, the IRS requires the payer of these payments to report them on an information return (see types of payments below). The person or business paying you doesn’t generally withhold taxes from these types of payments, as it is assumed you will report and pay taxes on this income when you file your federal income tax return.

What is backup withholding?

There are situations when the payer is required to withhold at the current rate of 24 percent. This 24 percent tax is taken from any future payments to ensure the IRS receives the tax due on this income.

This is known as Backup Withholding (BWH) and may be required:

Under the BWH-B program because you failed to provide a correct taxpayer identification number (TIN) to the payer for reporting on the required information return. A TIN can be either your social security number (SSN), employer identification number (EIN), or individual taxpayer identification number (ITIN); or
Under the BWH-C program because you failed to report or underreported interest and dividend income you received on your federal income tax return; or you failed to certify that you’re not subject to BWH for underreporting of interest and dividends.

Payments subject to backup withholding

BWH can apply to most kinds of payments reported on Forms 1099 and W-2G, including:

Interest payments (Form 1099-INT)
Dividends (Form 1099-DIV)
Payment Card and Third Party Network Transactions (Form 1099-K)
Patronage dividends, but only if at least half the payment is in money (Form 1099-PATR)
Rents, profits, or other gains (Form 1099-MISC)
Commissions, fees, or other payments for work you do as an independent contractor (Form 1099-MISC)
Payments by brokers/barter exchanges (Form 1099-B)
Payments by fishing boat operators, but only the part that is in money and that represents a share of the proceeds of the catch (Form 1099-MISC)
Royalty payments (Form 1099-MISC)
Gambling winnings (Form W-2G) may also be subject to backup withholding.
Original issue discount reportable on (Form 1099-OID), Original Issue Discount, if the payment is in cash
Certain Government Payments, Form 1099-G

Rules for receiving 1099-related payments

When you open a new account, make an investment, or begin to receive payments reportable on Form 1099, you must furnish your TIN in writing to the bank or other business and certify under penalties of perjury that it’s correct. In some cases, the bank or business will give you Form W-9, Request for Taxpayer Identification Number and Certification (PDF), or a similar form.

If your account or investment will earn interest or dividends, you must also certify that you’re not subject to backup withholding due to previous underreporting of interest and dividends.

How to prevent or stop backup withholding

To stop backup withholding, you’ll need to correct the reason you became subject to backup withholding. This can include providing the correct TIN to the payer, resolving the underreported income and paying the amount owed, or filing the missing return(s), as appropriate.

Credit for backup withholding

If you had income tax withheld under the backup withholding rule, report the federal income tax withholding (shown on Form 1099 or W-2G) on your return for the year you received the income.

Payments excluded from backup withholding

Payments that are excluded from backup withholding:

Real estate transactions
Foreclosures and abandonments
Cancelled debts
Distributions from Archer MSAs
Long term care benefits
Distributions from any retirement account
Distributions from an employee stock ownership plan
Fish purchases for cash
Unemployment compensation
State or local income tax refunds
Qualified tuition program earnings

For Small Business Week: Backup withholding rate now 24 percent, bonuses 22 percent; workers urged to do a Paycheck Checkup

WASHINGTON — The Internal Revenue Service today reminded small businesses that recent tax reform legislation lowered the backup withholding tax rate to 24 percent and the withholding rate that usually applies to bonuses and other supplemental wages to 22 percent. The agency also urged employers to encourage their employees to check their withholding using the IRS Withholding Calculator. [Read more…]

Dirty Dozen part 1: Taxpayers should be aware of these tax scams

Dirty Dozen part 1: Taxpayers should be aware of these tax scams

The tax filing deadline has come and gone, but tax scammers continue to work. Again this year, the IRS highlights the twelve top scams in its “Dirty Dozen” list. These scams are often aggressive and happen throughout the year.

The schemes run the gamut from simple refund inflation scams to complex tax shelter deals. A common theme throughout all: scams put taxpayers at risk.

Here is a recap of the first six scams in this year’s Dirty Dozen. Each one includes a link where taxpayers can go to learn more about that scam. This is the first tip of two tips recapping the list of all 12 scams. [Read more…]

With the filing deadline close, here’s why taxpayers should e-File

With the filing deadline close, here’s why taxpayers should e-File

A few taxpayers still use the old-school method of filing their tax returns: on paper. For these people, now is the time to consider filing electronically. With the April tax deadline right around the corner, it’s the perfect time to use IRS e-File.

Here are the top six reasons why taxpayers should file electronically in 2019:

It’s accurate and easy. E-File helps taxpayers avoid mistakes, such as a transposed Social Security number. Taxpayers who e-File receive an acknowledgement from the IRS within minutes, telling them their return has been accepted. If a return is rejected, the acknowledgement will detail why the IRS rejected the tax return.

It’s secure.
E-file meets strict security guidelines. It uses modern encryption technology to protect tax returns. The IRS continues to work with states and tax industry leaders to protect tax returns from tax-related identity theft. This effort has helped put strong safeguards in place to make electronic tax filing a safe and secure option.

It’s convenient.
Taxpayers can buy commercial tax software to e-File right from their home computer. They can also ask their tax preparer to e-file their tax return.

It means faster refunds. When taxpayers e-File and use direct deposit for their refund, they can get their money in less than 21 days in most cases. On the other hand, if they mail a paper tax return to the IRS and request a refund check in the mail, it can take up to six weeks. Also, since e-Filed returns are generally more accurate, there probably won’t be additional delays. They delays can be caused when the IRS finds mistakes that must be fixed before the IRS can send a refund.

It’s often free. Most taxpayers can e-file for free through IRS Free File. Free File is only available on IRS.gov. Some taxpayers may also qualify to have their taxes e-filed for free through IRS volunteer programs. Volunteer Income Tax Assistance offers free tax preparation to people who generally earned $55,000 or less. Tax Counseling for the Elderly generally helps people who are age 60 or older.

It can be used whether a taxpayer is getting a refund or needs to make a payment. Taxpayers who owe taxes can e-File early and set up an automatic payment on any day until the April deadline. They can pay electronically from their bank account with IRS Direct Pay. Taxpayers can visit IRS.gov for information on other payment options.

IRS urges businesses to e-file cash transaction reports; It’s fast, easy and free

IRS urges businesses to e-file cash transaction reports; It’s fast, easy and free

WASHINGTON — The Internal Revenue Service today urged businesses required to file reports of large cash transactions to take advantage of the speed and convenience of filing these reports electronically.

Although businesses have the option of filing Form 8300, Report of Cash Payments Over $10,000, on paper, many have already found that e-filing is a faster, more convenient and cost-effective way to meet the reporting deadline. The form is due 15 days after a transaction and there’s no charge for the e-file option.

Electronically filing Form 8300 is a secure way for businesses to send sensitive information to the IRS. Although many cash transactions are legitimate, information reported on this form can help stop those who evade taxes, profit from the drug trade and engage in terrorist financing and other criminal activities. The government can often trace money from these illegal activities through the payments reported on this and other cash reporting forms.

Businesses that file Form 8300 electronically get free, automatic acknowledgment of receipt when they file. In addition, electronic filing is more accurate, reducing the need for follow-up correspondence with the IRS.

To file Form 8300 electronically, a business must set up an account with the Financial Crimes Enforcement Network’s BSA E-Filing System. For more information, interested businesses can call the BSA E-Filing Help Desk at 866-346-9478 or email them at BSAEFilingHelp@fincen.gov. The help desk is available Monday through Friday from 8 a.m. to 6 p.m. Eastern time.

For more informationabout the reporting requirement, see FS-2019-1, available on IRS.gov. Among other things, the fact sheet includes reporting scenarios for specific businesses, such as automobile dealerships, taxi companies, landlords, colleges and universities, homebuilders and bail-bonding agents. It also lists other resources on IRS.gov related to reporting cash transactions of more than $10,000.