News & Updates

Imitation may be the sincerest form of flattery, but when scammers pose as the IRS it means trouble for taxpayers. Identity thieves may contact taxpayers through fraudulent calls, emails, texts or social media messages pretending to be the IRS. Here are tips to help taxpayers know when the IRS is contacting them.

Letters and notices

A letter or notice is usually the first way the IRS will contact a taxpayer. When a taxpayer receives a suspicious letter or notice, they can check to see if it's really the IRS:

• Log in to their secure IRS Online Account to see if a copy of the notice or letter is in their file.
• Review common IRS letters and notices at the Understanding Your IRS Notice or Letter page on IRS.gov.
• Contact IRS customer service directly to authenticate it, if they weren't able to authenticate in their online account.
• Verify that any collection notice from a private collection agency has the same Taxpayer Authentication Number as the Notice CP40 the taxpayer received from the IRS. Taxpayers can visit Private Debt Collection Frequently Asked Questions to learn more about verifying a private collection agency.

Phone calls

After first mailing a notice or letter to a taxpayer, IRS agents may call to confirm an appointment or discuss items for a scheduled audit. Taxpayers should know that:

• The IRS doesn't leave pre-recorded, urgent or threatening messages. Scammers will tell victims that if they do not call back, a warrant will be issued for their arrest. Anyone making threats is a scammer.
• Private collection agencies contracted by the IRS may call taxpayers to collect certain outstanding inactive tax liabilities, but only after the taxpayer and their representative have received written notice.
• The IRS and its authorized private collection agencies will never ask a taxpayer to pay using any form of pre-paid card, store or online gift card. Taxpayers can review the IRS payments page at IRS.gov/payments for all legitimate ways to make a payment.

Email, text and social media

The IRS doesn't first contact taxpayers by email, text message or social media channels to request personal or financial information. Some common electronic scams that thieves use are:

• Sending phishing emails to taxpayers.
• Posing as an IRS social media account to contact taxpayers about a fake bill or refund.
• Texting taxpayers about fake "tax credits" or "stimulus payments."

These messages will often direct taxpayers to click fraudulent links they claim are IRS websites or other online tools. Again, the IRS will mail a letter or notice before calling or emailing, and it will never contact a taxpayer by social media or text message.

In person visits

The IRS recently ended most unannounced visits to taxpayers by agency revenue officers. Ending these unannounced visits to taxpayers will improve overall safety for taxpayers and IRS employees.

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Starting a new business can seem overwhelming for new entrepreneurs or even seasoned professionals. The IRS has resources to help new business owners understand the tax responsibilities of running a business.

Here are a few things any entrepreneur needs to do when starting their business.

Choose a business structure

The form of business determines which income tax return a business needs to file. The most common business structures are:

• Sole proprietorship: An unincorporated business owned by an individual. There's no distinction between the taxpayer and their business.
• Partnership: An unincorporated business with ownership shared between two or more members.
• Corporation: Also known as a C corporation. It's a separate entity owned by shareholders.
• S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
• Limited Liability Company: A business structure allowed by state statute. If a single-member LLC does not elect to be treated as a corporation, the LLC is a "disregarded entity," and the LLC's activities should be reflected on its owner's federal tax return as a sole proprietorship.

Choose a tax year

A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

• Calendar year: 12 consecutive months beginning January 1 and ending December 31.
• Fiscal year: 12 consecutive months ending on the last day of any month except December.

If an individual files their first tax return using the calendar tax year and later begins business as a sole proprietor, becomes a partner in a partnership, or becomes a shareholder in an S corporation, they must continue to use a calendar tax year unless they get IRS approval to change it or meet one of the exceptions listed in the instructions to Form 1128, Application To Adopt, Change, or Retain a Tax Year.

Apply for an Employer Identification Number

An EIN is also called a Federal Tax Identification Number. It's used to identify a business. Most businesses need one of these numbers, but some don't. For example, a sole proprietor without employees who doesn't file any excise or pension plan tax returns doesn't need an EIN. The EIN checklist on IRS.gov can help business owners know if they need an EIN.

It's important for a business with an EIN to keep the business mailing address, location and responsible party up to date. EIN holders should report changes in the responsible party to the IRS within 60 days.

Have all employees complete these forms:

• I-9, Employment Eligibility Verification U.S. Citizenship and Immigration ServicesPDF
• W-4, Employee's Withholding Certificate

Pay business taxes

The form of business determines what taxes should be paid and how to pay them.

Visit the state's website

Prospective business owners should visit their state's website for info about state tax requirements.

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Many military spouses run businesses or do gig work, and whether it's a side hustle or a major operation, the IRS has tax resources, tools and information to help them keep things running smoothly.

Tax resources on IRS.gov

• Small Business and Self-Employed Tax Center – Available at IRS.gov/smallbiz, this page has resources for taxpayers who file Form 1040 or 1040-SR, Schedules C, E, F or Form 2106, as well as small businesses with assets under $10 million.
  
• Gig Economy Tax Center –The gig economy, also called sharing economy or access economy, is activity where people earn income providing on-demand work, services or goods. Often, it's through a digital platform like an app or website. The Gig Economy Tax Center at IRS.gov/gigeconomy has information for gig workers trying to manage their taxes.
  
• Tax Information for Businesses – Tax information, tools and resources for businesses and self-employed individuals are available at IRS.gov/businesses.
  
• Employer Identification Number – Generally, businesses need an EIN, even if they don't have employees. An EIN – also known as a Federal Tax Identification Number – identifies a business entity. Businesses can apply online at IRS.gov/ein.

Tools to stay on top of tax deadlines and payments

• Online Tax Calendar – The Online Tax Calendar at IRS.gov/taxcalendar, shows due dates and actions for each month. Business owners can see all events or filter them by monthly depositor, semi-weekly depositor, excise or general event types. They can also have calendar reminders sent to their email or import the calendar into their calendar program.
  
• Electronic Federal Tax Payment System – Businesses can pay their federal taxes online or by phone with EFTPS, a free tax payment system, by visiting IRS.gov/eftps.

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Organizations applying for tax-exempt status must be organized and operated exclusively for any of these purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals.

Organizations that want to apply for recognition of tax-exempt status under IRC 501(c)(3) will complete and file a Form 1023-series application.

The application process on IRS.gov includes a step-by-step guide explaining how to apply for tax-exempt status.

Here are some key things to know about this process.

• Form 1023-series applications for recognition of exemption must be submitted electronically online at Pay.gov. The application must be complete and include the user fee.
• Some types of organizations don't need to apply for Section 501(c)(3) status to be tax exempt. These include churches and their integrated auxiliaries, and public charities with annual gross receipts normally no more than $5,000.
• Every tax-exempt organization needs an employer identification number (EIN), even if they don't have any employees. An EIN is a nine-digit number the IRS assigns for tax filing and reporting purposes. An organization must include their EIN on the application. Organizations can apply for an EIN online.
• The effective date of an organization's tax-exempt status depends on their approved Form 1023. If they submit this form within 27 months after the month they legally formed, the effective date of the organization's exempt status is the legal date of its formation. If an organization doesn't submit this form within those 27 months, the effective date of its exempt status is the date it files Form 1023.
• An organization that qualifies for tax-exempt status under IRC 501(c)(3) will be classified as a private foundation unless the organization meets the requirements to be treated as a public charity.
• A charitable organization must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents and its last three annual information returns. See Publication 557, Tax Exempt Status For Your Organization for additional information on public inspection requirements.

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When couples separate or divorce, the change in their relationship status affects their tax situation. The IRS considers a couple married for tax filing purposes until they get a final decree of divorce or separate maintenance.

Update tax withholding

When a taxpayer divorces or separates, they usually need to update their proper tax withholding by filing with their employer a new Form W-4, Employee's Withholding Certificate. If they receive alimony, they may have to make estimated tax payments. Taxpayers can figure out if they're withholding the correct amount with the Tax Withholding Estimator on IRS.gov.

Tax treatment of alimony and separate maintenance

• Amounts paid to a spouse or a former spouse under a divorce decree, a separate maintenance decree or a written separation agreement may be alimony or separate maintenance for federal tax purposes.
• Certain alimony or separate maintenance payments are deductible by the payer spouse, and the recipient spouse must include it in income.

Rules related to dependent children and support

Generally, the parent with custody of a child can claim that child on their tax return. If parents split custody fifty-fifty and aren't filing a joint return, they'll have to decide which parent claims the child. If the parents can't agree, taxpayers should refer to the tie-breaker rules in Publication 504, Divorced or Separated Individuals. Child support payments aren't deductible by the payer and aren't taxable to the payee.

Not all payments under a divorce or separation instrument – including a divorce decree, a separate maintenance decree or a written separation agreement – are alimony or separate maintenance. Alimony and separate maintenance doesn't include:

• Child support
• Noncash property settlements – whether in a lump-sum or installments
• Payments that are your spouse's part of community property income
• Payments to keep up the payer's property
• Use of the payer's property
• Voluntary payments

Child support is never deductible and isn't considered income. Additionally, if a divorce or separation instrument provides for alimony and child support and the payer spouse pays less than the total required, the payments apply to child support first. Only the remaining amount is considered alimony.

Report property transfers, if needed

Usually, if a taxpayer transfers property to their spouse or former spouse because of a divorce, there's no recognized gain or loss on the transfer. People may have to report the transaction on a gift tax return.

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