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Tax Tip – Right to Privacy

All taxpayers have the right to privacy – it’s the law

One of the IRS’s top priorities is protecting the privacy rights of America’s taxpayers. The agency takes this so seriously that the right to privacy is one of ten rights the Taxpayer Bill of Rights gives all taxpayers.

Taxpayers have the right to expect that any IRS inquiry, audit or enforcement action will comply with the law and be no more intrusive than necessary. Taxpayers can also expect that the IRS will respect all due process rights, including search and seizure protections and provide a collection due process hearing when appropriate.

Here are a few more details about what a taxpayer’s right to privacy means:

  • The IRS cannot seize certain personal items, such as schoolbooks, clothing and undelivered mail.
  • The IRS cannot seize a personal residence without first getting court approval, and the agency must show there is no reasonable alternative for collecting the tax debt.
  • Sometimes, taxpayers submit offers to settle their tax debt that relate only to how much they owe. This is formally known as a Doubt as to Liability Offer in Compromise. Taxpayers who make this offer do not need to submit any financial documentation.
  • During an audit, if the IRS finds no reasonable indication that a taxpayer has no unreported income, the agency will not seek intrusive and extraneous information about the taxpayer’s lifestyle.
  • A taxpayer can expect that the IRS’s collection actions are no more intrusive than necessary. During a collection due process hearing, the Office of Appeals must balance that expectation with the IRS’s proposed collection action and the overall need for efficient tax collection.

Source: IRS – All taxpayers have the right to privacy – it’s the law. https://go.usa.gov/xGhMR

Tax Tip – Backup Withholding

Helpful information for taxpayers on
Backup Withholding


Taxpayers who receive certain types of income may have backup withholding deducted from these payments. Backup withholding can apply to most payments reported on certain Forms 1099 and W-2G.

Here are some facts to help taxpayers understand backup withholding.  

Backup withholding is required on certain non-payroll amounts when certain conditions apply.
The payer making such payments to the payee doesn’t generally withhold taxes, and the payees report and pay taxes on this income when they file their federal tax returns. There are, however, situations when the payer is required to withhold a certain percentage of tax to make sure the IRS receives the tax due on this income.

Backup withholding is set at a specific percentage.
The current percentage is 24 percent.

Payments subject to backup withholding include:
• Interest payments
• Dividends
• Payment card and third-party network transactions
• Patronage dividends, but only if at least half the payment is in money
• Rents, profits or other gains
• Commissions, fees or other payments for work done as an independent contractor
• Payments by brokers
• Barter exchanges
• Payments by fishing boat operators, but only the part that is paid in actual money and that represents a share of the proceeds of the catch
• Royalty payments
• Gambling winnings, if not subject to gambling withholding
• Taxable grants
• Agriculture payments


Examples when the payer must deduct backup withholding
:

• If a payee has not provided the payer a Taxpayer Identification Number.
  – A TIN specifically identifies the payee.
  – TINs include Social Security numbers, Employer Identification Numbers, Individual Taxpayer Identification Numbers and Adoption Taxpayer Identification Numbers. 
• If the IRS notified the payer that the payee provided an incorrect TIN; that is the TIN does not match the name in IRS records. Payees should make sure that the payer has their correct name and TIN to avoid backup withholding.
 

Source: IRS
https://www.irs.gov/newsroom/helpful-information-for-taxpayers-on-backup-withholding

File Extension Due Today

Most taxpayers who requested an extension to file, must file today

Today is the filing extension deadline. Most taxpayers who requested an extension of time to file their 2019 tax return must file today.

Those filing today who also owe taxes should pay as much as possible to reduce interest and penalties. The extension of time to file is not an extension to pay. Taxes must be paid on the original due date to avoid any penalty and interest charges.

Here are a few resources on IRS.gov to help last-minute filers:

Filing for individuals
This page includes a link to IRS Free File, which is available through today. IRS e-file is easy, safe and the most accurate way to file taxes.
 
Paying taxes
Taxpayers should visit IRS.gov/payments to choose a payment option. They can pay online, by phone or with their mobile device and the IRS2Go app.
 
Viewing account Information
Individual taxpayers can visit IRS.gov/account to view their taxes owed, payment history and key information from their most current tax return as originally filed.

There are some groups who still have time to file.

• Members of the military and others serving in combat zones typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.
 
• Taxpayers in federally-declared disaster areas who already had valid extensions may have more time to file.

Source: IRS
https://www.irs.gov/newsroom/most-taxpayers-who-requested-an-extension-to-file-must-file-today

Tax Tip – Filing Status

Tax Tip! Do You Know Your Filing Status?

Taxpayers need to know their correct filing status and be familiar with each option.

Generally, the taxpayer’s filing status depends on whether they are single or married on Dec. 31 and that determines their status for the whole year. However, more than one filing status may apply in certain situations. If this is the case, taxpayers can usually choose the filing status that allows them to pay the least amount of tax.

When preparing and filing a tax return, the filing status affects:

  • If the taxpayer is required to file a federal tax return
  • If they should file a return in order to receive a refund
  • Their standard deduction amount
  • If they can claim certain credits
  • The amount of tax they should pay

Here are the five filing statuses:

  • Single. Normally this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.
  • Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. When a spouse passes away, the widowed spouse can usually file a joint return for that year.
  • Married filing separately. Married couples can choose to file separate tax returns. When doing so it may result in less tax owed than filing a joint tax return.
  • Head of household. Unmarried taxpayers may be able to file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year.
  • Qualifying widow(er) with dependent child. This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply.

Source: https://www.irs.gov/newsroom/taxpayers-should-know-and-understand-their-correct-filing-status