Simplified Option for Home Office Deduction

Do you work from home? If so, you may be familiar with the home office deduction, available for taxpayers who use their home for business. Beginning this year, there is a new, simpler option to figure the business use of your home.

This simplified option does not change the rules for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements. The new option can save you a lot of time and will require less paperwork and recordkeeping. 

Here are six facts the IRS wants you to know about the new, simplified method to claim the home office deduction.

1. You may use the simplified method when you file your 2013 tax return next year. If you use this method to claim the home office deduction, you will not need to calculate your deduction based on actual expenses. You may instead multiply the square footage of your home office by a prescribed rate.

2. The rate is $5 per square foot of the part of your home used for business. The maximum footage allowed is 300 square feet. This means the most you can deduct using the new method is $1,500 per year.

3. You may choose either the simplified method or the actual expense method for any tax year. Once you use a method for a specific tax year, you cannot later change to the other method for that same year.

4. If you use the simplified method and you own your home, you cannot depreciate your home office. You can still deduct other qualified home expenses, such as mortgage interest and real estate taxes. You will not need to allocate these expenses between personal and business use. This allocation is required if you use the actual expense method. You’ll claim these deductions on Schedule A, Itemized Deductions.

5. You can still fully deduct business expenses that are unrelated to the home if you use the simplified method. These may include costs such as advertising, supplies and wages paid to employees.

6. If you use more than one home with a qualified home office in the same year, you can use the simplified method for only one in that year. However, you may use the simplified method for one and actual expenses for any others in that year.

Visit IRS.gov for more about this easier way to deduct your home office.

Additional IRS Resources:

• Simplified Option for Home Office Deduction
• Home Office Deduction
• Publication 587, Business Use of Your Home (Including Use by Daycare Providers)

IRS YouTube Videos:

• Simplified Home Office Deduction – English | Spanish
• Home Office Deduction – English | Spanish | ASL

IRS Podcasts:

• Simplified Home Office Deduction – English | Spanish

Tips for Employers Who Outsource Payroll Duties

Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers and reporting agents. Reputable third-party payers can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.
Though most of these businesses provide very good service, there are, unfortunately, some who do not have their clients’ best interests at heart. Over the past few months, a number of these individuals and companies around the country have been prosecuted for stealing funds intended for the payment of payroll taxes. Examples of these successful prosecutions can be found on IRS.gov.
Like employers who handle their own payroll duties, employers who outsource this function are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee’s share of social security and Medicare taxes. This is true even if the employer forwards tax amounts to a PSP or RA to make the required deposits or payments. For an overview of how the duties and obligations of agents, reporting agents and payroll service providers differ from one another, see the Third Party Arrangement Chart on IRS.gov.
Here are some steps employers can take to protect themselves from unscrupulous third-party payers.
Enroll in the Electronic Federal Tax Payment System  and make sure the PSP or RA uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their third-party payer is properly carrying out their tax deposit responsibilities. It also gives them the option of making any missed deposits themselves, as well as paying other individual and business taxes electronically, either online or by phone. To enroll or for more information, call toll-free 800-555-4477or visit www.eftps.gov.
Refrain from substituting the third-party’s address for the employer’s address. Though employers are allowed to and have the option of making or agreeing to such a change, the IRS recommends that employer’s continue to use their own address as the address on record with the tax agency. Doing so ensures that the employer will continue to receive bills, notices and other account-related correspondence from the IRS. It also gives employers a way to monitor the third-party payer and easily spot any improper diversion of funds.
Contact the IRS about any bills or notices and do so as soon as possible. This is especially important if it involves a payment that the employer believes was made or should have been made by a third-party payer. Call the number on the bill, write to the IRS office that sent the bill, contact the IRS business tax hotline at 800-829-4933 or visit a local IRS office. See Receiving a Bill from the IRS on IRS.gov for more information.
For employers who choose to use a reporting agent, be aware of the special rules that apply to RAs. Among other things, reporting agents are generally required to use EFTPS and file payroll tax returns electronically. They are also required to provide employers with a written statement detailing the employer’s responsibilities including a reminder that the employer, not the reporting agent, is still legally required to timely file returns and pay any tax due. This statement must be provided upon entering into a contract with the employer and at least quarterly after that. See Reporting Agents File on IRS.gov for more information.
Become familiar with the tax due dates that apply to employers, and use the Small Business Tax Calendar to keep track of these key dates.

How to Get a Transcript or Copy of a Prior Year Tax Return

There are many reasons why you should keep a copy of your federal tax return. For example, you may need it to answer an IRS inquiry. You may also need it to apply for a student loan or a home mortgage. If you can’t find your tax return, the IRS can provide a copy or give you a transcript of the tax information you need.

Here’s how to get your federal tax return information from the IRS:

1. Transcripts are free and you can get them for the current year and the past three years. In most cases, a transcript includes all the information you need.

2. A tax return transcript shows most line items from the tax return you originally filed. It also includes items from any accompanying forms and schedules you filed. It does not reflect any changes made after you filed your original return.

3. A tax account transcript shows any changes either you or the IRS made to your tax return after you filed it. This transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income.

4. You can get transcripts on the web, by phone or by mail. To request transcripts online, go to IRS.gov and use the Order a Transcript tool. To order by phone, call 800-908-9946 and follow the prompts.

5. To request a 1040, 1040A or 1040EZ tax return transcript by mail or fax, complete Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses and individuals who need a tax account transcript should use Form 4506-T, Request for Transcript of Tax Return.

6. If you order online or by phone, you should receive your tax return transcript within five to 10 calendar days. You should allow 30 calendar days for delivery of a tax account transcript if you order by mail.

7. If you need an actual copy of a filed and processed tax return, it will cost $57 for each tax year. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. Please allow 60 days for delivery. 

8. If you live in a Presidentially declared disaster area, the IRS may waive the fee to obtain copies of your tax returns. Visit IRS.gov and select the ‘Disaster Relief’ link in the lower left corner of the page for more about IRS disaster assistance.

9. Forms 4506, 4506-T and 4506T-EZ are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Order a Transcript tool
• Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript
• Form 4506-T, Request for Transcript of Tax Return
• Form 4506, Request for Copy of Tax Return

IRS YouTube Videos:

• How to Request a Copy of Your Tax Return – English |Spanish | ASL

Renting Your Vacation Home

A vacation home can be a house, apartment, condominium, mobile home or boat. If you own a vacation home that you rent to others, you generally must report the rental income on your federal income tax return. But you may not have to report that income if the rental period is short.

In most cases, you can deduct expenses of renting your property. Your deduction may be limited if you also use the home as a residence.

Here are some tips from the IRS about this type of rental property.

• You usually report rental income and deductible rental expenses on Schedule E, Supplemental Income and Loss.

You may also be subject to paying Net Investment Income Tax on your rental income.

• If you personally use your property and sometimes rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. The number of days used for each purpose determines how to divide your costs.

Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.

• If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about this rule, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

• If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income.

Get Publication 527 for more details on this topic. It is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Publication 527, Residential Rental Property (Including Rental of Vacation Homes)
• Tax Topic 415 - Renting Residential and Vacation Property

IRS YouTube Videos:

• Renting Your Vacation Home – English | Spanish | ASL

IRS Podcasts:

• Renting Your Vacation Home – English | Spanish

Keep Tax and Financial Records Safe in Case of a Natural Disaster

Hurricanes, tornadoes, floods and other natural disasters are more common in the summer. The IRS encourages you to take a few simple steps to protect your tax and financial records in case a disaster strikes.

Here are five tips from the IRS to help you protect your important records:

1. Backup Records Electronically.  Keep an extra set of electronic records in a safe place away from where you store the originals. You can use an external hard drive, CD or DVD to store the most important records. You can take these with you to keep your copies safe. You may want to store items such as bank statements, tax returns and insurance policies.

2. Document Valuables.  Take pictures or videotape the contents of your home or place of business. These may help you prove the value of your lost items for insurance claims and casualty loss deductions. Publication 584, Casualty, Disaster and Theft Loss Workbook, can help you determine your loss if a disaster strikes.

3. Update Emergency Plans.  Review your emergency plans every year. You may need to update them if your personal or business situation changes.

4. Get Copies of Tax Returns or Transcripts.  Visit IRS.gov to get Form 4506, Request for Copy of Tax Return, to replace lost or destroyed tax returns. If you just need information from your return, you can order a transcript online.

5. Count on the IRS.  The IRS has a Disaster Hotline to help people with tax issues after a disaster. Call the IRS at 1-866-562-5227 to speak with a specialist trained to handle disaster-related tax issues.

In the event of a disaster, the IRS stands ready to help. Visit IRS.gov to get more information about IRS disaster assistance. Click on the “Disaster Relief” link in the lower left corner of the home page. You can also get forms and publications anytime at IRS.gov or order them by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Preparing for a Disaster
• Disaster Relief
• Publication 584, Casualty, Disaster and Theft Loss Workbook
• Publication 552, Recordkeeping for Individuals
• Publication 583, Starting a Business and Keeping Records
• Order a Transcript online
• Form 4506, Request for Copy of Tax Return
• Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript
• Form 4506-T, Request for Transcript of Tax Return

IRS YouTube Videos:

• Preparing for Disasters – English | Spanish | ASL
• How to Request a Copy of Your Tax Return – English |Spanish | ASL

IRS Podcasts:

• Disaster Assistance – English | Spanish

IRS Offers Information, Support and Services for Small Businesses

Do you own or operate a small business? Or do you plan to start a business someday soon? If you answered yes to either question, the IRS has online information, support and services that may be helpful to you.

Small Business Week Webinars.  During National Small Business Week 2013, the IRS is hosting two free, live small business webinars. Go online to learn about the many tax benefits available to businesses. You will also learn how to avoid common mistakes made by small businesses. IRS staff will answer questions during each webinar. 

• Attend the free live webinars on June 18 and June 20 at 2 p.m. (ET).
• Register for the events at IRS Webinars for Small Businesses.
• Although tax professionals will not get continuing education credits, they will receive lots of useful information.

If you’re unable to attend the live events, you can view the archived versions on the IRS Video Portal. They’ll be available about three weeks after the broadcasts.

Online Support Anytime.  The IRS offers many online products and services for small businesses. They’re available any day of the week throughout the year on IRS.gov. Here are just a few examples of the business resources the IRS offers:

• The Online Learning and Educational Products page features useful small business tools. The Online Tax Calendar helps you keep track of important tax deadlines. You can subscribe to e-News for Small Businesses to help you stay on top of the latest tax news affecting small businesses.
• The Self-Employed Individuals Tax Center is for sole proprietors, independent contractors, members of partnerships, and others who are in business for themselves. Check it out for self-employed tax information and more tools.
• The Small Business and Self-Employed Tax Center is for small businesses with assets under $10 million. Visit this page for resources like Small Business Taxes: the Virtual Workshop. This popular class helps you learn the basics of federal taxes. It offers nine lessons to help you navigate tax issues so your small business can thrive.

Visit IRS.gov for more information and federal tax news for small businesses. You can also get small business forms and publications on the IRS website or by calling 800-TAX-FORM (800-829-3676).

2013 FILING SEASON STATISTICS

More taxpayers e-file from home in 2013

WASHINGTON — The Internal Revenue Service today provided updated statistics showing continued growth in electronic filing of tax returns. So far in 2013, more than 43 million people have self-prepared and e-filed their tax returns from home, an increase of more than 4 percent compared to the prior year.

Through May 10, the IRS received more than 43.6 million self-prepared e-file returns, up from 41.7 million a year earlier. E-filed returns from tax professionals increased slightly, reaching almost 70.4 million. In all, almost 114 million tax returns came in through e-file this year, up from 112.1 million at this point last year.

Other highlights from the new filing season statistics show:

• During 2013, the IRS issued more than 101 million refunds worth almost $268 billion.

• Almost 80 percent of refunds used direct deposit.

• More people are using IRS.gov to get answers, file their returns and resolve issues. So far in 2013, the IRS web site has been accessed more than 300 million times, up almost 25 percent compared to the same time last year.

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Cumulative statistics comparing 5/11/12 and 5/10/13
Individual Income Tax Returns:	2012		2013		% Change
Total Receipts	135,473,000		134,349,000		-0.8
Total Processed	130,261,000		129,674,000		-0.5
E-filing Receipts:
TOTAL	112,089,000		113,954,000		1.7
Tax Professionals	70,344,000		70,380,000		0.1
Self-prepared	41,745,000		43,574,000		4.4
Web Usage:
Visits to IRS.gov	255,269,615		318,408,842		24.7
Total Refunds:
Number	102,522,000		101,082,000		-1.4
Amount	$277.180	Billion	$267.946	Billion	-3.3
Average refund	$2,704		$2,651		-2.0
Direct Deposit Refunds:
Number	79,308,000		79,880,000		0.7
Amount	$231.656	Billion	$228.467	Billion	-1.4
Average refund	$2,921		$2,860		-2.1

Reminder: IRS To Be Closed June 14 Due to Budget and Sequester; Filing and Payment Deadlines Unchanged

WASHINGTON — The Internal Revenue Service today reminded taxpayers that, due to the current budget situation including the sequester, the agency will be shut down on Friday, June 14.

As was the case on May 24, the first furlough day, all IRS operations will again be closed on June 14. This means that all IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency’s nearly 400 taxpayer assistance centers nationwide, will be closed.

IRS employees will be furloughed without pay. No tax returns will be processed and no compliance-related activities will take place. In addition, the online preparer tax identification number PTINsystem for tax professionals will also be shut down.

The IRS noted that taxpayers should continue to file their returns and pay any taxes due as usual. This includes the June 17 deadline for those making a second-quarter estimated tax payment. It also includes the June 17 filing deadline for taxpayers abroad and the June 30 deadline for filing foreign financial account reports FBARTaxpayers needing to contact the IRS about these or other upcoming returns or payments should be sure to take this Friday’s closure into account.

Because none of the furlough days are considered federal holidays, the shutdown will have no impact on any tax-filing or tax-payment deadlines. The IRS will be unable to accept or acknowledge receipt of electronically-filed returns on any day the agency is shut down.

The only tax-payment deadlines coinciding with any of the furlough days relate to employment and excise tax deposits made by business taxpayers. These deposits must be made through the Treasury Department’s Electronic Federal Tax Payment System (EFTPS), which will operate as usual.

On the other hand, the agency will give taxpayers extra time to comply with a request to provide documents to the IRS. This includes administrative summonses, requests for records in connection with a return examination, review or compliance check, or document requests related to a collection matter. No additional time is given to respond to other agencies or the courts.

Where the last day for responding to an IRS request falls on June 14, the taxpayer will have until Monday, June 17--the next business day.

Some web-based online tools and phone-based automated services will continue to function this Friday, while others will be shut down. Available services include Withholding Calculator, Order A Transcript, EITC Assistant, Interactive Tax Assistant, Tele-Tax and the Online Look-up Tool for those needing to repay the first-time homebuyer credit. Services not available this Friday include Where’s My Refund? and the Online Payment Agreement. Visit online tools on IRS.gov to learn more about these tools.

The remaining scheduled furlough days are July 5, July 22 and Aug. 30, 2013. If necessary, the IRS may announce one or two additional furlough days.

IRS Reminds Those with Foreign Assets of U.S. Tax Obligations

WASHINGTON – The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2012, that they may have a U.S. tax liability and a filing requirement in 2013.

The filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Eligible taxpayers get two additional days because the normal June 15 extended due date falls on Saturday this year. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for additional information additional information on extensions of time to file.

Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 17 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds.Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. For details, see Publication 4261: Do You Have a Foreign Financial Account? Though this form can be filed on paper, Treasury encourages taxpayers to file it electronically.

Taxpayers abroad can now use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $57,000 or less can use brand-name software to prepare their returns and then e-file them for free.

Taxpayers with an AGI greater than $57,000 who don’t qualify for Free File can still choose the accuracy, speed and convenience of electronic filing. Check out the e-file link on IRS.gov for details on using the Free File Fillable Forms or e-file by purchasing commercial software.

A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best, get help choosing a software provider. Both e-file and Free File are available until Oct. 15, 2013, for anyone filing a 2012 return.

Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map to get answers. An International Tax Topic Index page was added recently. The IRS Tax Map assembles or groups IRS forms, publications and web pages by subject and provides users with a single entry point to find tax information.