By Bill
What You Need to Know if You Get a Letter in the Mail from the IRS
Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from us:
- Don’t panic. You can usually deal with a notice simply by responding to it.
- Most IRS notices are about federal tax returns or tax accounts. Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do.
- Your notice will likely be about changes to your account, taxes you owe or a payment request. However, your notice may ask you for more information about a specific issue.
- If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return.
- If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.
- If you don’t agree with the notice, you need to respond. Write a letter that explains why you disagree, and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub. Allow at least 30 days for a response.
- For most notices, you won’t need to call or visit a walk-in center. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call.
- Always keep copies of any notices you receive with your tax records.
- Be alert for tax scams. The IRS sends letters and notices by mail. We don’t contact people by email or social media to ask for personal or financial information. If you owe tax, you have several payment options. The IRS won’t demand that you pay a certain way, such as prepaid debit or credit card.
- For more on this topic, visit IRS.gov. Click on the link ‘Responding to a Notice’ at the bottom center of the home page. Also, see Publication 594, The IRS Collection Process. You can get it on IRS.gov/forms at any time.
If you need to make a payment visit IRS.gov/payments or use the IRS2Go app to make payment with Direct Pay for free, or by debit or credit card through an approved payment processor for a fee.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
By Bill
Tip Income
If you get income from tips, you should know some things about tips and taxes. Here are a few tips from the IRS to help you file and report your tip income correctly:
- Show all tips on your return. You must report tip income. This includes the value of non-cash tips such as tickets, passes or other items.
- All tips are taxable. You must pay tax on all tips you received during the year. This includes tips directly from customers and tips added to credit cards. This also includes your share of tips received from a tip-splitting agreement with other employees.
- Report tips to your employer. If you receive $20 or more in any one month, you must report your tips for that month to your employer by the 10th day of the next month. Only include cash and check and credit card tips you received. Your employer must withhold federal income, Social Security and Medicare taxes on the reported tips.
- Keep a daily log of tips. Use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips. This will help you report the correct amount of tips on your tax return.
For more on this topic, see Publication 531, Reporting Tip Income. You can get it on IRS.gov.
By Bill
Must-Know Tips about the Home Office Deduction
If you use your home for business, you may be able to deduct expenses for the business use of your home. If you qualify, you can claim the deduction whether you rent or own your home. You may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction:
1. Regular and Exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:
- Your principal place of business, or
- A place where you meet clients or customers in the normal course of business, or
- A separate structure not attached to your home. Examples could include a garage or a studio.
2. Simplified Option. If you use the simplified option, multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the rules for claiming a home office deduction.
3. Regular Method. This method includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.
4. Deduction Limit. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.
5. Self-Employed. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.
6. Employees. You must meet additional rules to claim the deduction if you are an employee. For example, your business use must also be for the convenience of your employer. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.
For more on this topic, see Publication 587, Business Use of Your Home. You can view, download and print IRS tax forms and publications on IRS.gov/forms anytime.