News & Updates

Secure key documents and make copies

Taxpayers should place original documents such as tax returns, birth certificates, deeds, titles and insurance policies inside waterproof containers in a secure space. Duplicates of these documents should be kept with a trusted person outside the area of the taxpayer. Scanning them for backup storage on electronic media such as a flash drive is another option that provides security and portability.

Document valuables and equipment

Current photos or videos of a home or business's contents can help support claims for insurance or tax benefits after a disaster. All property, especially expensive and high value items, should be recorded. The IRS disaster-loss workbooks in Publication 584 can help individuals and businesses compile lists of belongings or business equipment.

Employers should check fiduciary bonds

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. The IRS reminds employers to carefully choose their payroll service providers.

Rebuilding documents

Reconstructing records after a disaster may be required for tax purposes, getting federal assistance or insurance reimbursement. Those who have lost some or all their records during a disaster can visit IRS's Reconstructing Records webpage as one of their first steps.

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During National Small Business Week, May 1 to 7, the IRS is highlighting tax benefits and resources tied to the theme for this year's celebration: "Building a Better America through Entrepreneurship." With next year's filing deadline nearly a year away, any entrepreneur still has time to identify possible tax benefits, take action to qualify for them and then claim them when they file in 2023.

Enhanced business meal deduction

For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.

To qualify for the higher limit, the business owner or an employee of the business must be present when food or beverages are provided. Moreover, the expense cannot be lavish or extravagant. Restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.

For this purpose, grocery stores, convenience stores and other businesses that primarily sell pre-packaged goods not for immediate consumption, do not qualify as restaurants. Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if they are operated under contract by a third party.

For more information about this provision, as well as details on the special recordkeeping rules that apply to business meals, see IRS Publication 463, Travel, Gift, and Car Expenses.

Home office deduction

With a growing number of business owners now working from home, many may qualify for the home office deduction, also known as the deduction for business use of a home.

Usually, a business owner must use a room or other identifiable portion of the home exclusively for business on a regular basis. Exceptions to the exclusive-use standard apply to home-based daycare facilities and to portions of the home used for business storage, where the home is the only fixed location for that business.

Those eligible can figure the deduction using either the regular method or the simplified method.

To choose the regular method, fill out and attach Form 8829, Expenses for Business Use of Your Home. In general, this form divides the expenses of operating the home between personal and business use. Direct business expenses are fully deductible. On the other hand, the business portion of indirect expenses, such as real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs, is figured on this form, based on the percentage of the home used for business.

Alternatively, instead of filling out the 44-line Form 8829, business owners can choose the simplified method, based on a 6-line worksheet found in the instructions to Schedule C, the tax form for sole proprietors. This method has a prescribed rate of $5 a square foot for business use of the home. The maximum deduction is $1,500, based on business use of at least 300 square feet.

Though homeowners choosing the simplified option cannot depreciate the portion of their home used for business, they can still claim allowable home mortgage interest, real estate taxes and casualty losses as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees, are still fully deductible.

Under both the regular and simplified methods, business expenses in excess of the gross income limitation are not deductible. For more information about this limit along with other details on the home office deduction and both methods for figuring it, see Publication 587, Business Use of Your Home.

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Mandatory electronic filing

Electronic filing provides fast acknowledgement that the IRS has received the return and reduces processing time, making compliance with reporting requirements easier.

Organizations filing a Form 990, 990-EZ, 990-PF or 990-T for CY2021 must file their returns electronically. Private foundations filing a Form 4720 for CY 2021 must file the form electronically. Charities and other tax-exempt organizations can file these forms electronically through an IRS Authorized e-File Provider.

Organizations eligible to submit Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard) on IRS.gov.

"To help exempt organizations comply with their filing requirements, the IRS provides a series of pre-recorded online workshops," said Robert Malone, Exempt Organizations and Government Entities Director. "These workshops are designed to assist officers, board members and volunteers with the steps they need to take to maintain their tax-exempt status, including filing annual information returns."

Common errors

The IRS also reminds organizations to submit complete and accurate returns. If an organization's return is incomplete or the wrong return for the organization, the return will be rejected. Common errors include missing or incomplete schedules.

Extension of time to file

Tax-exempt organizations that need additional time to file beyond the May 16 deadline can request a 6-month automatic extension by filing Form 8868, Application for Extension of Time To File an Exempt Organization ReturnPDF. In situations where tax is due, extending the time for filing a return does not extend the time for paying tax. The IRS encourages organizations requesting an extension to electronically file Form 8868.

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Families who don't owe taxes to the IRS can still file their 2021 tax return and claim the Child Tax Credit for the 2021 tax year at any point until April 15, 2025, without any penalty. This year also marks the first time in history that many families with children in Puerto Rico will be eligible to claim the Child Tax Credit, which has been expanded to provide up to $3,600 per child.

Some taxpayers automatically qualify for extra time to file and pay taxes due without penalties and interest, including:

• Members of the military who served or are currently serving in a combat zone. They may qualify for an additional extension of at least 180 days to file and pay taxes.
• Support personnel in combat zones or a contingency operation in support of the Armed Forces. They may also qualify for a filing and payment extension of at least 180 days.
• Taxpayers outside the United States. U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico, including military members on duty who don't qualify for the combat zone extension, may qualify for a 2-month filing and payment extension.
• Some disaster victims. Those who qualify have more time to file and pay what they owe.

File without penalty to get a tax refund

Some people may choose not to file a tax return because they didn't earn enough money to be required to file. But they may miss out on receiving a refund. The only way to get a refund is to file a tax return. There's no penalty for filing after the April 18 deadline if a refund is due. Taxpayers are encouraged to use electronic filing options including IRS Free File which is available on IRS.gov through October 17 to prepare and file 2021 tax returns electronically.

While most tax credits can be used to reduce the tax owed, there are a few credits that allow taxpayers to receive money beyond what they owe. The most common examples of these refundable credits are the Earned Income Tax Credit, Child and Dependent Care Credit and Child Tax Credit. Those who don't usually file and didn't qualify for a third-round Economic Impact Payment or got less than the full amount may be eligible to claim the 2021 Recovery Rebate Credit when they file their 2021 tax return. Taxpayers often fail to file a tax return and claim a refund for these credits and others for which they may be eligible.

Generally, the IRS issues nine out of 10 refunds in less than 21 days for taxpayers who e-file and choose direct deposit. However, it's possible a tax return may require additional review or take longer. The IRS processes paper tax returns in the order they are received.

Taxpayers can track their refund using the Where's My Refund? tool on IRS.gov, IRS2Go or by calling the automated refund hotline at 800-829-1954. Taxpayers need the primary Social Security number on the tax return, the filing status and the expected refund amount. The refund status information updates once daily, usually overnight, so there's no need to check more frequently.

File to reduce penalties and interest

Taxpayers should file their tax return and pay any taxes they owe as soon as possible to reduce penalties and interest. An extension to file is not an extension to pay. An extension to file provides an additional six months with a new filing deadline of October 17. Penalties and interest apply to taxes owed after April 18 and interest is charged on tax and penalties until the balance is paid in full.

Filing and paying as much as possible is key because the late-filing penalty and late-payment penalty add up quickly.

Even if a taxpayer can't afford to immediately pay the full amount of taxes owed, they should still file a tax return to reduce possible delayed filing penalties. The IRS offers a variety of options for taxpayers who owe the IRS but cannot afford to pay.

Usually, the failure to file penalty is 5% of the tax owed for each month or part of a month that a tax return is late, up to five months, reduced by the failure to pay penalty amount for any month where both penalties apply. If a return is filed more than 60 days after the due date, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less.

The failure to pay penalty rate is generally 0.5% of unpaid tax owed for each month or part of a month until the tax is fully paid or until 25% is reached. The rate is subject to change. For more information see the Penalties page on IRS.gov.

Taxpayers may qualify for penalty relief if they have filed and paid timely for the past three years and meet other important requirements, including paying or arranging to pay any tax due. For more information, see the first time penalty abatement page on IRS.gov.

Pay taxes due electronically on IRS.gov/payments

Those who owe taxes can pay quickly and securely via their Online Account, IRS Direct Pay, debit or credit card or digital wallet, or they can apply online for a payment plan (including an installment agreement). Taxpayers paying electronically receive immediate confirmation when they submit their payment. With Direct Pay and the Electronic Federal Tax Payment System (EFTPS), taxpayers can receive email notifications about their payments.

Selecting a tax professional

The IRS offers tips to help taxpayers choose a Tax Professional to assist in tax return preparation.

The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help taxpayers find tax return preparers who hold a professional credential recognized by the IRS or who have completed IRS requirements for the Annual Filing Season Program.

Taxpayer Bill of Rights

Taxpayers have fundamental rights under the law that protect them when they interact with the IRS. The Taxpayer Bill of Rights presents these rights in 10 categories. IRS Publication 1, Your Rights as a Taxpayer, highlights these rights and the agency's obligation to protect them.

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An extension of time to file will also automatically process when taxpayers pay all or part of their taxes electronically by this year's original due date of April 18, 2022. Although taxpayers can file up to six months later when they have an extension, taxes are still owed by the original due date.

Here's more about those who get automatic extensions:

Disaster victims

Victims of the December 2021 tornadoes and flooding in Arkansas, Illinois, Kentucky and Tennessee have until May 16, 2022, to file their 2021 returns and pay any tax due, as do victims of Colorado wildfires and straight-line winds that began Dec. 30. In addition, victims of severe storms, flooding and landslides that began on Feb. 4 in Puerto Rico will have until June 15, 2022, to file and pay.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in a federally declared disaster area when at least one area qualifies for FEMA's Individual Assistance program. Ordinarily, this means that taxpayers need not contact the IRS to get disaster tax relief.

This relief also includes more time for making 2021 contributions to IRAs and other plans and making 2022 estimated tax payments. In some cases, relief is also available to people living outside the disaster area if, for example, they have a business located in the disaster area, have tax records located in the disaster area or are assisting in disaster relief. For details on all available relief, visit the Around the Nation page on IRS.gov.

Combat zone taxpayers

Military service members and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any tax due. This includes those serving in Iraq, Afghanistan and other combat zones. A complete list of designated combat zone localities can be found in Publication 3, Armed Forces' Tax Guide, available on IRS.gov.

Combat zone extensions also give affected taxpayers more time for a variety of other tax-related actions, including contributing to an IRA. Various circumstances affect the exact length of the extension available to taxpayers. Details, including examples illustrating how these extensions are calculated, are in the Extensions of Deadlines section in Publication 3.

Taxpayers outside the United States

U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico have until June 15, 2022, to file their 2021 tax returns and pay any tax due.

The special June 15 deadline also applies to members of the military on duty outside the U.S. and Puerto Rico who do not qualify for the longer combat zone extension. Affected taxpayers should attach a statement to their return explaining which of these situations apply.

Though taxpayers abroad get more time to pay, interest — currently at the rate of 4% per year, compounded daily — applies to any payment received after this year's April 18 deadline. For more information about the special tax rules for U.S. taxpayers abroad, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, on IRS.gov.

Everyone else

Taxpayers who don't qualify for any of these three special situations can still get more time to file by submitting a request for an automatic extension. This will extend their filing deadline until Oct. 17, 2022. But because this is only a tax-filing extension, their 2021 tax payments are still due by April 18.

An easy way to get the extra time is through IRS Free File on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an extension on Form 4868. To get the extension, taxpayers must estimate their tax liability on this form.

Another option is to pay electronically and get a tax-filing extension. The IRS will automatically process an extension when a taxpayer selects Form 4868 and makes a full or partial federal tax payment by the April 18 due date using their Online Account, Direct Pay, the Electronic Federal Tax Payment System (EFTPS) or a debit, credit card or digital wallet. Under this option, there is no need to file a separate Form 4868. Taxpayers must register for EFTPS before using. Electronic payment options are available at Pay Online.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states.

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