IRS: Check tax withholdings now as the last quarter of 2020 begins

WASHINGTON — The Internal Revenue Service today reminded taxpayers that now is the perfect time to review their tax withholding and payments to avoid a surprise when filing next year.

An adjustment or two made now may boost take home pay or allow taxpayers to pay more in the last quarter of 2020 to avoid a surprise tax bill.

Some things to consider that will affect taxes owed in 2020 include:

• Coronavirus tax relief – Tax help for taxpayers, businesses, tax-exempt organizations and others – including health plans – affected by coronavirus (COVID-19).
• Disasters such as wildfires and hurricanes – Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area.
• Unemployment compensation – Millions of Americans got taxable unemployment compensation, many of them for the first time. Taxes can be withheld from their benefits.
• Job loss – IRS Publication 4128, Tax Impact of Job Loss, explains how this unfortunate circumstance can create new tax issues.
• Workers moving into the gig economy due to the pandemic – IRS advises people earning income in the gig economy to consider quarterly estimated tax payments to stay current.
• Life changes such as marriage or childbirth – Getting married or having a child are just a couple of life events that can affect your refund or how much you owe.

Pay as you go

Taxes are generally paid throughout the year whether from salary withholding, quarterly estimated tax payments or a combination of both. About 70% of taxpayers, however, over withhold their taxes every year which typically results in a refund. The average refund in 2020 was well over $2,400.

Taxpayers can pay electronically, throughout the year, online, by phone or with a mobile device and the IRS2Go app. They can choose an electronic payment option to schedule estimated tax payments and receive email notifications about their payments.

Taxpayers can also visit IRS.gov/account to view their taxes owed, payment history and key tax return information from their most recent tax return as originally filed and, if they have one, they’ll see details about their payment plan.

Regarding Refunds

IRS reminds people that there are many factors that affect the timing of a refund. The fastest way to get a tax refund is by filing electronically and choosing Direct Deposit. IRS issues most refunds in less than 21 days, but it’s possible it can take longer.

Tax withholding estimator

The IRS launched an improved Tax Withholding Estimator tool last summer to make it easier for everyone to have the right amount of tax withheld during the year. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It’s also an important step for those who made withholding adjustments in 2020, had a major life change or were adversely affected by the pandemic.

The tool offers workers, as well as retirees, self-employed individuals and other taxpayers, a more user-friendly step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.

The tax withholding estimator has several key features for ease of use:

• Plain language throughout the tool to improve comprehension.
• The ability to more effectively target at the time of filing either a tax due amount close to zero or a refund amount.
• A progress tracker to help users see how much more information they need to input.
• The ability to move back and forth through the steps, correct previous entries and skip questions that don’t apply.
• Enhanced tips and links to help the user quickly determine if they qualify for various tax credits and deductions.
• Self-employment tax for a user who has self-employment income in addition to wages or pensions.
• Automatic calculation of the taxable portion of any Social Security benefits.
• A mobile-friendly design.

In addition, the new Tax Withholding Estimator makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse, as well as separately entering pensions and other sources of income. At the end of the process, the tool makes specific withholding recommendations for each job and each spouse and clearly explains what the taxpayer should do next.

An overview of excise tax

In general, an excise tax is a tax is imposed on the sale of specific goods or services, or on certain uses. Federal excise tax is usually imposed on the sale of things like fuel, airline tickets, heavy trucks and highway tractors, indoor tanning, tires, tobacco and other goods and services.

Businesses that are subject to excise tax generally must file a Form 720, Quarterly Federal Excise Tax Return to report the tax to the IRS.

Excise taxes are imposed on a wide variety of goods, services and activities. The tax may be imposed at the time of

• Import
• Sale by the manufacturer
• Sale by the retailer
• Use by the manufacturer or consumer

Many excise taxes go into trust funds for projects related to the taxed product or service, such as highway and airport improvements. Excise taxes are independent of income taxes. Often, the retailer, manufacturer or importer must pay the excise tax to the IRS and file the Form 720. They may pass the cost of the excise tax on to the buyer.

Some excise taxes are collected by a third party. The third party then sends the tax to the IRS and files the Form 720. For example, the tax on an airline ticket generally is paid by the purchaser and collected by the airline.

When to file
Businesses must file the form for each quarter of the calendar year. Here are the due dates:

• Quarter 1 – January, February, March: deadline, April 30
• Quarter 2 – April, May, June: deadline, July 31
• Quarter 3 – July, August, September: deadline, Oct. 31
• Quarter 4 – October, November, December: deadline, Jan. 31

If the due date for filing a return falls on a Saturday, Sunday or legal holiday, the due date is the next business day.

How to file
The IRS does accept paper excise tax returns. However, electronic filing is strongly encouraged, when possible. To make this process easier for taxpayers, the contact information for all approved e-file transmitters of excise forms is listed on IRS.gov. Businesses can submit forms online 24 hours a day.

When businesses e-file, they get confirmation that the IRS received their form. Also, e-filing reduces processing time and errors. To electronically file, business taxpayers will have to pay the provider’s fee for online submission.

The excise tax forms available for electronic filing are:

• Form 720, Quarterly Federal Excise Tax.
• Form 2290, Heavy Highway Vehicle Use Tax.
• Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8.

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Oct. 15 deadline nears for taxpayers who requested tax filing extensions

Taxpayers should file electronically and request direct deposit for refunds

WASHINGTON – The Internal Revenue Service today reminds taxpayers who filed an extension that the Oct. 15 due date to file their 2019 tax return is near. Taxpayers should file their tax returns on or before the Oct. 15 deadline. For those who still owe, pay as soon as possible to reduce any penalties and interest.

Convenient electronic filing options, including IRS Free File, are still available. Taxpayers and tax professionals should continue to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments.

Although Oct. 15 is the last day for most people to file, some taxpayers may have more time. They include:

• Members of the military and others serving in a combat zone. They typically have 180 days after they leave the combat zone to file returns and pay any taxes due.
• Taxpayers in federally declared disaster areas who already had valid extensions. For details, see the disaster relief page on IRS.gov.

Choose direct deposit for refunds
The safest and fastest way for taxpayers to get their refund is to have it electronically deposited into their bank or other financial account. Taxpayers can use direct deposit to deposit their refund into one, two or even three accounts. Direct deposit is much faster than waiting for a paper check to arrive in the mail.

After filing, use the Where’s My Refund? tool on IRS.gov or download the IRS2Go mobile app to track the status of a refund.

Pay federal taxes electronically
Taxpayers can make their federal tax payments online, by phone or with their mobile device and the IRS2Go app. When paying federal taxes electronically, taxpayers should remember:

• Electronic payment options are the optimal way to make a tax payment.
• They can pay when they file electronically using tax software online. If using a tax preparer, taxpayers should ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account.
• IRS Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance.
• Taxpayers can choose to pay with a credit card, debit card or digital wallet option through a payment processor. No fees go to the IRS.
• The IRS2Go app provides the mobile-friendly payment options, including Direct Pay and Card Payment Providers on mobile devices.
• Taxpayers may also enroll in the Electronic Federal Tax Payment System and have a choice of paying online or by phone by using the EFTPS Voice Response System.
• Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, access their tax records online, review their payment history and view key tax return information for the most recent tax return as originally filed.

Can’t pay full amount?
Several payment options are available on IRS.gov/payments to help taxpayers who can’t pay in full and some can offer taxpayers smaller penalties. Taxpayers should know:

• Though interest and late-payment penalties continue to accrue on any unpaid taxes after the original July 15 due date, the failure to pay tax penalty rate is cut in half while an installment agreement is in effect.
• The usual penalty rate of 0.5% per month is reduced to 0.25% per month. For the calendar quarter beginning Oct. 1, 2020, the interest rate for underpayment is 3%.

Economic Impact Payments: Non-Filers can still get one; must act by Nov. 21
Though most Americans − more than 160 million in all − have already received their Economic Impact Payments, the IRS reminds anyone with little or no income who is not required to file a tax return that they may be eligible to receive an Economic Impact Payment.

Available in both English and Spanish, the Non-Filers tool on IRS.gov is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles. This includes couples and individuals who are experiencing homelessness. People must enter their information by Nov. 21 to get a payment this year.

People can qualify for a payment, even if they don’t work or have no earned income. But low- and moderate-income workers and working families eligible to receive special tax benefits, such as the Earned Income Tax Credit or Child Tax Credit, cannot use this tool. They will need to file a regular return as soon as possible. The IRS will use their tax return information to determine and issue any EIP for which they are eligible.

 

Business owners should visit IRS.gov for help with tax actions when closing a business

Closing a business is always a difficult decision regardless of the circumstances. With this in mind, the IRS redesigned the closing a business page of IRS.gov to help business owners navigate the federal tax steps when closing a business.

Small businesses and self-employed taxpayers will find a variety of information on the page including:

• What forms to file
• How to report revenue received in the final year of business
• How to report expenses incurred before closure

The page also details steps all business owners should take when closing.

• File a final tax return and related forms. The type of return to file and related forms depends on the type of business.
• Take care of employees. Business owners with one or more employees must pay any final wages or compensation, make final federal tax deposits and report employment taxes.
• Pay taxes owed. Even if the business closes now, tax payments may be due next filing season.
• Report payments to contract workers. Businesses that pay contractors at least $600 for services including parts and materials during the calendar year in which they go out of business, must report those payments.
• Cancel EIN and close IRS business account. Business owners should notify the IRS so they can to close the IRS business account.
• Keep business records. How long a business needs to keep records depends on what’s recorded in each document.

The page also provides helpful information for business owners declaring bankruptcy, selling their business and terminating retirement plans.

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Taxpayers should know and understand their correct 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’s 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.

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Local IRS Offices

York
2670 Industrial Hwy, York, PA 17402
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:30pm)
(717) 757-4977

Harrisburg
228 Walnut St, Harrisburg, PA 17101
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm) (717) 777-9650

Lancaster
1720 Hempstead Rd, Lancaster, PA 17601
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm)
(717) 291-1994










NATP

National Association of Tax Professionals