The home office deduction allows qualified taxpayers to deduct certain home expenses when they file taxes. To claim the home office deduction on their 2021 tax return, taxpayers generally must exclusively and regularly use part of their home or a separate structure on their property as their primary place of business.

Here are some details about this deduction to help taxpayers determine if they can claim it:

(Note: This article was prepared and provided by the IRS. “Tax Tip 2022-10,” January 19, 2022. Refer to your trusted tax advisor before making any tax-related decisions.)

• Employees are not eligible to claim the home office deduction.
   
• The home office deduction, calculated on Form 8829, is available to both homeowners and renters.
   
• There are certain expenses taxpayers can deduct. These may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
   
• Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
   
• The term “home” for purposes of this deduction:
  • Includes a house, apartment, condominium, mobile home, boat or similar property.
  • Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
  • Doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.
     
• Generally, there are two basic requirements for the taxpayer’s home to qualify as a deduction:
  • There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
  • The home must generally be the taxpayer’s principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
     
• Expenses that relate to a separate structure not attached to the home may qualify for a home office deduction. They will qualify only if the structure is used exclusively and regularly for business.
   
• Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
  • The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
  • When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

(Note: This article was prepared and provided by the IRS. “Tax Tip 2022-10,” January 19, 2022. Refer to your trusted tax advisor before making any tax-related decisions.)

This tip was provided by the IRS. See: “Small business advertising and marketing costs may be tax deductible.” IRS Tax Tip 2021-159, October 27, 2021

Advertising and marketing costs must be ordinary and necessary to be tax deductible.

• An ordinary expense is one that is common and accepted in the industry.
• A necessary expense is one that is helpful and appropriate for the trade or business. An expense does not have to be indispensable to be considered necessary.

Here are a few advertising expenses that are usually deductible:

• Reasonable advertising expenses that are directly related to the business activities.
• An expense for the cost of institutional or goodwill advertising to keep the business name before the public if it relates to a reasonable expectation to gain business in the future. For example, the cost of advertising that encourages people to contribute to the Red Cross or to participate in similar causes is usually deductible.
• The cost of providing meals, entertainment, or recreational facilities to the public as a means of advertising or promoting goodwill in the community.

But here are some expenses that are not deductible:

Generally, small businesses can’t deduct amounts they pay to influence legislation, which includes advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate.

More tax-deduction information provided by the IRS

Learn more about business expenses, visit these IRS online resources.

• Small Business and Self-Employed Tax Center
• About Publication 535, Business Expenses

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The Internal Revenue Service has released more of its “Dirty Dozen” tax scams with a warning for people to watch out for predators using tax-related schemes ranging from fake charities to scams targeting seniors and immigrants.

It continues to see a group of ruses by dishonest people who trick others into doing something illegal or which ultimately causes them harm. Predators encourage otherwise honest people to do things they don’t realize are illegal or prey on their goodwill to take something from them.

Several schemes involve fraudsters targeting groups like seniors or immigrants, posing as fake charities impersonating IRS authorities, charging excessive fees for Offers in Compromise, conducting unemployment insurance fraud, and unscrupulously preparing tax returns.

Here are some of this year’s “Dirty Dozen” scams

Fake charity scams

The IRS advises taxpayers to be on the lookout for scammers who set up fake organizations to take advantage of the public’s generosity. They especially take advantage of tragedies and disasters, such as the COVID-19 pandemic.

Scams requesting donations for disaster relief efforts are especially common on the phone. Taxpayers should always check out a charity before they donate, and they should not feel pressured to give immediately.

Taxpayers who give money or goods to a charity may be able to claim a deduction on their federal tax return by reducing the amount of their taxable income. But taxpayers should remember that to receive a deduction, taxpayers must donate to a qualified charity. To check the status of a charity, use the IRS Tax Exempt Organization Search tool. (It’s also important for taxpayers to remember that they can’t deduct gifts to individuals or to political organizations and candidates.)

Here are some tips to remember about fake charity scams:

• Individuals should never let any caller pressure them. A legitimate charity will be happy to get a donation at any time, so there’s no rush. Donors are encouraged to take time to do the research.
• Potential donors should ask the fundraiser for the charity’s exact name, web address and mailing address, so it can be confirmed later. Some dishonest telemarketers use names that sound like large well-known charities to confuse people.
• Be careful how a donation is paid. Donors should not work with charities that ask them to pay by giving numbers from a gift card or by wiring money. That’s how scammers ask people to pay. It’s safest to pay by credit card or check — and only after having done some research on the charity.

For more information about fake charities see the information on fake charity scams on the Federal Trade Commission web site.

Immigrant “senior fraud”

IRS impersonators and other scammers are known to target groups with limited English proficiency as well as senior citizens. These scams are often threatening in nature.

While it has diminished some recently, the IRS impersonation scam remains a common scam. This is where a taxpayer receives a telephone call threatening jail time, deportation, or revocation of a driver’s license from someone claiming to be with the IRS. Taxpayers who are recent immigrants often are the most vulnerable and should ignore these threats and not engage the scammers.

The IRS reminds taxpayers that the first contact with the IRS will usually be through mail, not over the phone. Legitimate IRS employees will not threaten to revoke licenses or have a person deported. These are scare tactics.

As phone scams pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language, the IRS has added new features to help those who are more comfortable in a language other than English. The Schedule LEP PDF allows a taxpayer to select in which language they wish to communicate. Once they complete and submit the schedule, they will receive future communications in that selected language preference.

Additionally, the IRS is providing tax information, forms and publications in many languages other than English. IRS Publication 17, Your Federal Income Tax, is now available in Spanish, Chinese (simplified and traditional), Vietnamese, Korean and Russian.

Seniors beware

Senior citizens and those who care about them need to be on alert for tax scams targeting older Americans. The IRS recognizes the pervasiveness of fraud targeting older Americans, along with the Department of Justice and FBI, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB), among others.

In an effort to make filing taxes easier for seniors, the IRS reminds seniors born before Jan. 2, 1956 that the IRS has re-designed the Form 1040 and its instructions, and that they can use the Form 1040SR and related instructions.

The IRS reminds seniors that the best source for information about their federal taxes is the IRS website.

Offers in compromise “mills”

Offer in Compromise mills contort the IRS program into something it’s not – misleading people with no chance of meeting the requirements while charging excessive fees, often thousands of dollars.

“We’re increasingly concerned that people having trouble paying their taxes are being duped into misleading claims about settling their tax debts for ‘pennies on the dollar’,” said IRS Commissioner Chuck Rettig. “The IRS urges people to take a few minutes to review information on IRS.gov to see if they might be a good candidate for the program – and avoiding costly promoters who advertise on radio and television.”

The IRS reminds taxpayers to beware of promoters claiming their services are needed to settle with the IRS, that their tax debts can be settled for “pennies on the dollar” or that there is a limited window of time to resolve tax debts through the Offer in Compromise (OIC) program.

An “offer,” or OIC, is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax debt. The IRS has the authority to settle, or “compromise,” federal tax liabilities by accepting less than full payment under certain circumstances. However, some promoters are inappropriately advising indebted taxpayers to file an OIC application with the IRS, even though the promoters know the person won’t qualify. This costs honest taxpayers money and time.

Taxpayers should be especially wary of promoters who claim they can obtain larger offer settlements than others or who make misleading promises that the IRS will accept an offer for a small percentage. Companies advertising on TV or radio frequently can’t do anything for taxpayers that they can’t do for themselves by contacting the IRS directly.

Taxpayers can go to IRS.gov and review the Offer in Compromise Pre-Qualifier Tool to see if they qualify for an OIC. The IRS reminds taxpayers that under the First Time Penalty Abatement policy, taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt.

Unscrupulous tax return preparers

Although most tax preparers are ethical and trustworthy, taxpayers should be wary of preparers who won’t sign the tax returns they prepare, often referred to as ghost preparers. For e-filed returns, the “ghost” will prepare the return, but refuse to digitally sign as the paid preparer.

By law, anyone who is paid to prepare, or assists in preparing federal tax returns, must have a valid Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.

Unscrupulous tax return preparers may also:

• Require payment in cash only and will not provide a receipt.
• Invent income to qualify their clients for tax credits.
• Claim fake deductions to boost the size of the refund.
• Direct refunds into their bank account, not the taxpayer’s account.

It’s important for taxpayers to choose their tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

Taxpayers should also remember that they are legally responsible for what is on their tax return even if it is prepared by someone else. Consumers can help protect themselves by choosing a reputable tax preparer.

Unemployment insurance fraud

Unemployment fraud often involves individuals acting in coordination with or against employers and financial institutions to get state and local assistance to which they are not entitled. These scams can pose problems that can adversely affect taxpayers in the long run.

States, employers and financial institutions need to be aware of the following scams related to unemployment insurance:

• Identity-related fraud: Filers submit applications for unemployment payments using stolen or fake identification information to perpetrate an account takeover.
• Employer-employee collusion fraud: The employee receives unemployment insurance payments while the employer continues to pay the employee reduced, unreported wages.
• Misrepresentation of income fraud: An individual returns to work and fails to report the income to continue receiving unemployment insurance payments, or in an effort to receive higher unemployment payments, applicants claim higher wages than they actually earned.
• Fictitious employer-employee fraud: Filers falsely claim they work for a legitimate company, or create a fictitious company, and supply fictitious employee and wage records to apply for unemployment insurance payments.
• Insider fraud: State employees use credentials to inappropriately access or change unemployment claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of unemployment funds to accounts that are not on the application.

Below is a short list of financial red flag indicators of unemployment fraud:

• Unemployment payments are coming from a state other than the state in which the customer reportedly resides or has previously worked.
• Multiple state unemployment payments are made within the same disbursement timeframe.
• Unemployment payments are made in the name of a person other than the account holder or in the names of multiple unemployment payment recipients.
• Numerous deposits or electronic funds transfers (EFTs) are made that indicate they are unemployment payments from one or more states to people other than the account holder(s).
• A higher amount of unemployment payments is seen in the same timeframe compared to similar customers and the amount they received.

2020 | The Dirty Dozen represents the worst of the worst tax scams.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes. Don’t fall prey.

For a detailed description of each scam, please refer to the list below:

• IR-2021-144, IRS wraps up its 2021 “Dirty Dozen” scams list with warning about promoted abusive arrangements
• IR-2021-141, IRS “Dirty Dozen” list warns people to watch out for tax-related scams involving fake charities, ghost preparers and other schemes 
• IR-2021-137, IRS urges caution with email, social media and phones as part of “Dirty Dozen” series
• IR-2021-135, IRS announces “Dirty Dozen” tax scams for 2021 

Prior years information on the IRS Dirty Dozen:

• 2020 — IRS unveils “Dirty Dozen” list of tax scams for 2020; Americans urged to be vigilant to these threats during the pandemic and its aftermath
• 2019 — IRS concludes “Dirty Dozen” list of tax scams for 2019: Agency encourages taxpayers to remain vigilant year-round 
• 2018 — IRS wraps up “Dirty Dozen” list of tax scams for 2018; Encourages taxpayers to remain vigilant
• 2017 — IRS Summarizes “Dirty Dozen” List of Tax Scams for 2017
• 2016 — IRS Wraps Up the “Dirty Dozen” List of Tax Scams for 2016
• 2015 — IRS Completes the “Dirty Dozen” Tax Scams for 2015
• 2014 — IRS Releases the “Dirty Dozen” Tax Scams for 2014

(This advice was developed and provided as an IRS Tax Tip 2021-108, July 27, 2021)

During the summer, many students focus on making money from a summer job. They may want to gain work experience, earn some spending money or help pay for college. Here are some facts all student workers should know about summer jobs and taxes.

Not all the money they earn will make it to their pocket because employers must withhold taxes from their paycheck.

New employees | Employees – including those who are students – normally have taxes withheld from their paychecks by their employer. When anyone gets a new job, they need to fill out a Form W-4, Employee’s Withholding Allowance Certificate, and submit it to their employer. Employers use this form to calculate how much federal income tax to withhold from the new employee’s pay. The Withholding Estimator on IRS.gov can help a taxpayer fill out this form.

Self-employment | Students who take on jobs like baby-sitting, lawn care or gig economy work are generally self-employed. Money earned from self-employment is taxable, and these workers may be responsible for paying taxes directly to the IRS. One way they can do this is by making estimated tax payments during the year.

Tip income |  Students who earn tips as part of their summer income should know tip income is taxable. They should keep a daily log to accurately report tips. They must report cash tips to their employer for any month that totals $20 or more.

Payroll taxes | This tax pays for benefits under the Social Security system. While students may earn too little from their summer job to owe income tax, employers usually must still withhold Social Security and Medicare taxes from their pay. If a student is self-employed, Social Security and Medicare taxes may still be due and are generally paid by the student.

Reserve Officers’ Training Corps pay | If a student is in an ROTC program, and receives pay for activities such as summer advanced camp, it is taxable. Other allowances the student may receive – like food and lodging – may not be taxable. The Armed Forces’ Tax Guide on IRS.gov provides details.

More Information

• Tax Rules for Students
• Is My Tip Income Taxable?
• Do I Have Income Subject to Self-Employment Tax?

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We always recommend that small business owners reach out to their trusted financial, legal, and other trusted advisors to keep them up to speed on changing news and regulations. However, we also know that the Internal Revenue Service is another source of information flow — especially in changing and challenging times. IRS small business tax resources to which you can subscribe. This quarterly collection of IRS information is just one example of information from the IRS insight for small businesses. Indeed, the IRS is willing to send you information on a wide range of tax-related information: IRS.gov/newsroom. Here is information from a current email newsletter for small business owners.

IRS provides guidance for employers claiming the
Employee Retention Credit for first two quarters of 2021

The Internal Revenue Service issued guidance for employers claiming the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). To review these changes, see Notice 2021-23. Additional coronavirus relief information for businesses is available on IRS.gov. At the bottom of the page, you can find links to subscriptions to a range of tax-related newsletters.

1 | Free virtual workshop helps small business owners understand and meet tax obligations

The Small Business Virtual Tax Workshop helps educate small business owners about their taxes. It’s free and available online 24/7. The updated chapters contain direct links to more specific topics within each lesson, like chapters in a book. Viewers can choose the lessons that apply to their small businesses. They can also pause and bookmark lessons so they can review the information later.

2 | The IRS is reallocating taxes on unemployment benefits; refunds to start in May

The IRS will take steps to automatically refund money to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.

The legislation was signed on March 11. The new IRS guidance includes details for those eligible taxpayers who have not yet filed.

3 | IRS, Treasury disburses more Economic Impact Payments under the American Rescue Plan; Non-filer Social Security and other federal beneficiary stimulus payments

As work continues on issuing millions of Economic Impact Payments to Americans, the IRS and Treasury Department announced that they anticipate payments will begin to be issued this weekend to Social Security recipients and other federal beneficiaries who do not normally file a tax return, with the projection that the majority of these payments would be sent electronically and received on April 7, 2021.

Many federal beneficiaries who filed 2019 or 2020 returns or used the Non-Filers tool last year were issued Economic Impact Payments, if eligible, during the last three weeks.

Most Social Security retirement and disability beneficiaries, railroad retirees and recipients of veterans’ benefits who are eligible for an Economic Impact Payment do not need to take any action to receive a payment.

4 | IRS urges employers to take advantage of the Work Opportunity Tax Credit

Giving someone a work opportunity may translate into a business tax credit for you and greater stability for a family. The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment.

5 | Taxable Fringe Benefit Essentials for Employers Webinar

The IRS Tax Exempt and Government Entities Division and the Office of Federal, State and Local Governments would like to invite small businesses to register to watch the free Taxable Fringe Benefit Essentials for Employers Webinar on April 14, 2021 at 1:00 p.m. (ET). This webinar is designed to explain what a fringe benefit is and how to value a fringe benefit. It will cover the most common fringe benefits and explain if those fringe benefits are taxable.

For more information, see Webinars for Tax Exempt & Government Entities.

6 | IRS extends additional tax deadlines for individuals to May 17

The IRS announced that individuals have until May 17, 2021 to meet certain deadlines that would normally fall on April 15, such as making IRA contributions and filing certain claims for refund. This follows a previous announcement that the federal income tax filing due date for individuals for the 2020 tax year was extended from April 15, 2021, to May 17, 2021.

Notice 2021-21 provides details on the additional tax deadlines.

7 | Masks, and other COVID-19 personal protective equipment are tax-deductible

The IRS issued Announcement 2021-7 clarifying that the purchase of personal protective equipment for the primary purpose of preventing the spread of coronavirus are deductible medical expenses. In addition to masks, this includes times such as hand sanitizer and sanitizing wipes.

The amounts paid for personal protective equipment are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).

8 | IRS Criminal Investigation pledges continued
commitment to investigating COVID-19 fraud

The IRS Criminal Investigation Division (IRS-CI) marks the one-year anniversary of the Coronavirus Aid, Relief and Economic Security Act by pledging its continued commitment to investigating COVID-19 fraud.

This includes fraud related to:

• Economic Impact Payments
• Paycheck Protection Program
• Employee Retention Credit

IRS-CI encourages the public to share information regarding known or suspected fraud attempts against any of the programs offered through the CARES Act. Here’s how to report a suspected crime and learn more about COVID-19 scams and other financial schemes.

9 | Low Income Taxpayer Clinic application period now open

The IRS announced it will accept applications for an 18-month Low Income Taxpayer Clinic (LITC) matching grant from all qualified organizations.

The LITC matching grant news release provides more information, including:

• Application period
• Budget and performance period
• Eligibility
• Geographically underserved areas

More IRS Tax Resources for Small Business

Small Business and Self-Employed One-Stop Resource
Small Business Forms & Instructions
Small Business Events
Small Business Webinars
e-File for Businesses and Self-Employed
Businesses with Employees
Small Business Products
Self-Employed Individuals
S Corporations

Other Resources

IRS.gov
Find it Fast!
All Forms and Instructions
Filing Your Taxes
Make a Payment
Taxpayer Advocate Service
Retirement Plans
Tax Information for Charities
and Other Non-Profits
State Links
SSA/IRS Reporter
IRS Social Media

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Links to IRS.gov resources

The links below are for taxpayers who file Form 1040 or 1040-SR, Schedules C, E, F or Form 2106, and small businesses with assets under $10 million. Consider the links as a Table of Contents of information found on the IRS website. Updates can be found at the IRS Small Business and Self-Employed Tax Center. Direct questions there, also.

Trending

• Employer ID Numbers (EINs)
• Forms and Publications
• Self-Employment Taxes
• E-file Employment Taxes

Information For

• Self-Employed
• Independent Contractor or Employee
• Business Structure
• Businesses with Employees
• Industries/Professions

Help for Preparing Your Taxes

• Business Tax Credits
• Deducting Expenses
• Recordkeeping
• Employment Taxes

Filing and Paying Taxes

• Filing and Paying Your Business Taxes
• IRS Tax Calendar for Businesses and Self-Employed
• Filing Past Due Tax Returns
• Information Return Reporting
• Calculate Your Employment Taxes

Stages of Owning a Business

• Starting a Business
• Operating a Business
• Closing a Business
• Changing Address
• Changing Business Name

General Topics

• A-Z Index for Business
• Affordable Care Act (ACA)
• Gig Economy (Sharing Economy)
• Report of Foreign Bank and Financial Accounts (FBAR)
• Small Business Retirement Plan Resources
• Tax Reform Provisions that Affect Businesses

Online Learning

• IRS Video Portal
• Small Business Events
• Online Tools & Educational Products
• Small Business Taxes: The Virtual Workshop
• Subscribe to e-News
• Webinars for Small Businesses
• Tax Cuts and Jobs Act (TCJA) Training Materials

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The following tips are provided by the IRS. SmallBusiness.com is publishing the tips as a public service. (See also, The SmallBusiness.com Guide to the On-demand (Gig) Economy.) Remember: Each small business can have unique tax situations so seek help from your trusted tax advisor, accountant, or other tax advisor.

The gig economy (which is also called many other things, including, the on-demand economy) is an activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.

Here are some things the IRS says Gig economy participants must remember.

• Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is paid in cash.
• Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.

While providing gig economy services, it is important that the taxpayer is correctly classified.

• This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
• Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.

Since income from the gig economy is taxable, it’s important that taxpayers remember to pay the right amount of taxes throughout the year to avoid owing when they file.

• An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe.
  
• Gig economy workers who are not considered employees have two ways to cover their income taxes:
  • Submit a new From W-4 to their employer to have more income taxes withheld from their paycheck, if they have another job as an employee.
  • Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.

The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.

Remember | The tax filing deadline has been postponed to Wednesday, July 15, 2020. The IRS is processing tax returns, issuing refunds and accepting payments. Taxpayers who mailed a tax return will experience a longer wait. There is no need to mail a second tax return or call the IRS.

More Gig Economy Information from the IRS

• Publication 5369 – Gig Economy and your taxes: things to know
• Publication 1779 Independent Contractor or Employee
• Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?

The term “gig economy” (also called “on-demand economy”, “sharing economy,” or “access economy”) refers to activity in which people earn income from providing on-demand work, services or goods. Another term for the gig economy is “small business.” Often, the work seems like a new type of economy because it is coordinated through a digital platform like an app or website.

People involved in the gig economy earn income as a freelancer, independent worker or employee. They use technology to provide goods or services. This includes things like renting out a home or spare bedroom and providing car rides.

The following tax preparation advice and other information from the IRS contain pre-planning help for gig economy participants when it’s time to file their tax return. (As always, because your business can be unique, people are advised to seek advice from their trusted financial and tax advisors.)

Here are some things gig economy participants should know about their taxes:

• Money earned through gig economy work is usually taxable.
   
• There are tax implications for both the company providing the platform and the individual performing the services.
   
• This income is usually taxable even if :
  
  • The taxpayer providing the service doesn’t receive an information return, like Form 1099-MISC, Form 1099-K, or Form W-2.
  • Activity is only part-time or side work.
  • The taxpayer is paid in cash.
     
• People working in the gig economy are generally required to pay these types of taxes.
  
  • Income taxes.
  • Federal Insurance Contribution Act or Self-employment Contribution Act tax.
  • Additional Medicare taxes.
     
• Independent contractors may be able to deduct business expenses. These taxpayers should double-check the rules around deducting expenses related to the use of things like their car or house. They should remember to keep records of their business expenses.
   
• Special rules usually apply to rental property also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
   
• Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:
  
  • Gig economy workers who have another job where their employer withholds taxes from their paycheck can fill out and submit a new Form W-4. The employee does this to request that the other employer withholds additional taxes from their paycheck. This additional withholding can help cover the taxes owed from their gig economy work.
    
  • The gig economy worker can make quarterly estimated tax payments. They do this to pay their taxes and any self-employment taxes owed throughout the year.
    

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Businesses providing certain goods and services that are subject to excise taxes must file a federal Form 720 quarterly. Here is information provided by the IRS that relates to excise taxes.

What are excise taxes?

Excise taxes are taxes made on a specific good, such as gasoline, rather than a tax on your income or sales tax. They are often included in the price of the product you are purchasing. For example, excise taxes (or highway taxes, in this example) are part of the price per gallon charged for gasoline. They can also be taxes on activities, such as wagering (gambling), indoor tanning, airline tickets, and tires.

Excise taxes may be imposed at the time of:..

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

Often, the collected excise tax will go into trust funds earmarked for related capital projects, such as highway and airport improvements.

Since the taxes are typically blended into the price of a product, the seller or manufacturer of the item or service is responsible for filing these tax payments to the IRS — and filing Form 720.

When should an excise a tax be 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 = October 31
• Quarter 4 – October, November, December: Deadline = January 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

While the IRS still accepts paper Forms 720, they encourage businesses to file electronically. To help excise taxpayers do this, the IRS posts the contact information on IRS.gov of all approved e-file transmitters for excise forms. Businesses can submit forms online 24 hours a day.

However, not all excise forms can be filed electronically. Here are the forms you can file electronically.

• 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.

When businesses file a Form 720 electronically, it reduces processing time and errors. However, the business taxpayer’s provider will typically charge a filing fee. In other words, there’s an excise tax on filing an excise tax.

More information:

• Form 720 e-file providers page
• 2290 Modernized e-file Providers
• 8849 Modernized e-file Providers
• Excise Tax Forms and Publication

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(Information in this article is focused on tax-year 2019. While the following information is provided by the IRS, you should always consult with your trusted financial advisors before making any decisions related to businesses or personal taxes.)

Everyone must pay taxes on the income they earn. Taxpayers who earn a paycheck typcially have their employer withhold their federal income tax from their paychecks. However, there are taxpayers whose income is not subject to withholding — certain small business owners or self-employed individuals, for example.

For these individuals, that means making quarterly-estimated tax-payments. As a quarterly taxpayers can tell you from experience, it can be confusing to estimate such payments. This article contains advice for quarterly taxpayers, including information about a new IRS mobile-friendly Tax Withholding Estimator.

IRS tips and advice regarding quarterly estimate tax payments.

• Taxpayers generally must make estimated tax payments if they expect to owe $1,000 or more when they file their 2019 tax return.
• Whether or not they expect to owe next year, taxpayers may have to pay estimated tax for 2019 if their tax was more than zero in 2018.
• Wage earners who also have business income can often avoid having to pay estimated tax. They can do so by asking their employer to withhold more tax from their paychecks.
• Aside from business owners and self-employed individuals, people who need to make estimated payments also includes sole proprietors, partners and S corporation shareholders. It also often includes people involved in the sharing economy.
• Estimated tax requirements are different for farmers and fishermen.
• Corporations generally must make these payments if they expect to owe $500 or more on their 2019 tax return.
• Aside from income tax, taxpayers can pay other taxes through estimated tax payments. This includes self-employment tax and the alternative minimum tax.
• The final two deadlines for paying 2019 estimated payments are Sept. 16, 2019 and Jan. 15, 2020.

More help from SmallBusiness.com | What the IRS wants you to know about car expenses, deductions and taxes, 2019.

The IRS Tax Withholding Estimator

Taxpayers who haven’t yet checked their withholding this year (2019) should do so as soon as possible. All taxpayers can do this by using the new mobile-friendly Tax Withholding Estimator.

According to the IRS, it is a user-friendly, step-by-step tool to help taxpayers effectively adjust the amount of income tax they have withheld from wages and pension payments.

• Using the paycheck checkup can help taxpayers avoid an unexpected year-end tax bill and possibly a penalty when they file their 2019 tax return next year.
  
• The tool allows taxpayers to separately enter pensions and other sources of income. Taxpayers who receive pension income can use the results from the estimator to complete a Form W-4P. They then give that form to their payer.
  
• The tool makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse.
  
• At the end of the process, the tool makes specific withholding recommendations for each job and spouse. It also clearly explains what the taxpayer should do next.

Here are some things the IRS wants you to know about the Tax Withholding Estimator.

More forms, guides and instructions from the IRS

• Pay as you go tax withholding information
• Form 1040 Instructions
• Form 1120 Instructions

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