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IRS Sex workers taxes

Tax tips for gig economy entrepreneurs and workers

In recent years, the gig economy has changed how people do business and provide services. Taxpayers must report their gig economy earnings on a tax return – whether they earned that money through a part-time, temporary or side gig. The IRS’ Gig Economy Tax Center provides information and resources to help this group of entrepreneurs and workers understand and meet their federal tax obligations.
Here are key things for individuals involved in the gig economy to remember as they get ready to file in 2023.
Gig economy income is taxable
• Taxpayers must report all income on their tax return unless excluded by law, whether they receive an information return such as a 1099 or not.
• Individuals involved in the gig economy may also be required to make quarterly estimated tax payments to pay income tax and self-employment tax, which includes Social Security and Medicare taxes. The last estimated tax payment for 2022 is due Jan. 17, 2023.
Workers report income according to their worker classification
Gig economy workers who perform services, such as driving a car for booked rides, running errands and other on demand work, must be correctly classified. Classification helps the taxpayer determine how to properly report their income.
• If they are employees, they report their wages from the Form W-2, Wage and Tax Statement.
• If they are an independent contractor, they report their income on a Schedule C, Form 1040, Profit or Loss from Business – Sole Proprietorship.
The business or the platform determines whether the individual providing the services is an employee or independent contractor. The business owners can use the worker classification page on IRS.gov for guidance on properly classifying employees and independent contractors.
Expenses related to gig economy income may be deductible
Individuals involved in the gig economy may be able to deduct expenses related to their gig income, depending on tax limits and rules.
• Taxpayers may be able to lower the amount of tax they owe by deducting certain expenses.
• It is important for taxpayers to keep records of their business expenses.
Pay the right amount of taxes throughout the year
An employer typically withholds income taxes from their employees’ pay to help cover taxes their employees owe.
Individuals involved in the gig economy have two ways to cover their taxes due:
• If they have another job where they are considered an employee, they can submit a new Form W-4, Employee’s Withholding Certificate to their employer to have more taxes withheld from their paycheck to cover the tax owed from their gig economy activity.
• They can make quarterly estimated tax payments throughout the year.
More information:
Publication 525 Taxable and Nontaxable Income
Publication 1779, Independent Contractor or Employee

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IRS Sex workers taxes

IRS issues standard mileage rates for 2023; business use increases 3 cents per mile

This is good for touring SW’s. email or txt us if you have questions on claiming mileage over actual expenses.  You can only choose one method for the life of the vehicle. 

WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
Notice 2023-03 contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

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IRS Sex workers taxes

IRS announces delay for implementation of $600 reporting threshold for third-party payment platforms’ Forms 1099-K

WASHINGTON — The Internal Revenue Service today announced a delay in reporting thresholds for third-party settlement organizations set to take effect for the upcoming tax filing season.
As a result of this delay, third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021.
As part of this, the IRS released guidance today outlining that calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for third-party settlement organizations (TPSOs) including Venmo, PayPal and CashApp that would have generated Form 1099-Ks for taxpayers.
“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said Acting IRS Commissioner Doug O’Donnell. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”
The American Rescue Plan of 2021 changed the reporting threshold for TPSOs. The new threshold for business transactions is $600 per year; changed from the previous threshold of more than 200 transactions per year, exceeding an aggregate amount of $20,000. The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill.
Under the law, beginning Jan. 1, 2023, a TPSO is required to report third-party network transactions paid in 2022 with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of transactions. TPSOs report these transactions by providing individual payee’s an IRS Form 1099K, Payment Card and Third-Party Network Transactions.
The transition period described in Notice 2022-10, delays the reporting of transactions in excess of $600 to transactions that occur after calendar year 2022. The transition period is intended to facilitate an orderly transition for TPSO tax compliance, as well as individual payee compliance with income tax reporting. A participating payee, in the case of a third-party network transaction, is any person who accepts payment from a third-party settlement organization for a business transaction.
The change under the law is hugely important because tax compliance is higher when amounts are subject to information reporting, like the Form 1099-K. However, the IRS noted it must be managed carefully to help ensure that 1099-Ks are only issued to taxpayers who should receive them. In addition, it’s important that taxpayers understand what to do as a result of this reporting, and tax preparers and software providers have the information they need to assist taxpayers.
Additional details on the delay will be available in the near future along with additional information to help taxpayers and the industry. For taxpayers who may have already received a 1099-K as a result of the statutory changes, the IRS is working rapidly to provide instructions and clarity so that taxpayers understand what to do.
The IRS also noted that the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect.

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IRS Sex workers taxes

Tax Court Approves Vehicle Deductions for Side Gig

Do you client have a “side hustle” going on in addition to their full-time job? If you qualify, you may deduct certain expenses incurred by the self-employed business, including costs attributable to your vehicle.

The recent Tax Court case Gonzalez, TC Summary Opinion 2022-13, 7/18/22 found that it is indeed OK to deduct vehicle expenses related to a side-gig, as long as the filer follows strict rules.

Generally, expenses relating to use of a car, van, pickup or panel truck used for business are deductible. For example, if they drive their own passenger car to visit clients or customers, they may write off the portion of their vehicle’s costs that is attributable to business use, subject to some special limits. If they use their car 80 percent for business, they can deduct 80 percent of the costs.

The vehicle expenses are deductible under one of two methods:

1. Standard mileage rate: This is a flat rate adjusted by the IRS at least annually. For 2022, the deduction is 58.5 cents per business mile for the first half of the year and 62.5 cents for the second half. Also, they can add in business-related parking fees and tolls.

2. Actual expenses: Alternatively, they can deduct actual expenses based on the percentage of business use. This includes gas, oil, insurance, repairs, licenses, tires, etc., plus a generous depreciation allowance.

The actual expense method often provides a bigger deduction than the standard mileage rate. However, they must keep receipts, invoices and other documentation to show costs and establish the identity of the vehicle for which the expenses were incurred. For depreciation purposes, they must show the original cost of the vehicle and any improvements, as well as the date it was placed in service.

The IRS has issued detailed regulations covering the substantiation of vehicle expenses under the actual expense method. The best way to secure a deduction is to keep a contemporaneous log or comparable record of expenses and business use.

Facts of the new case: The taxpayer, a resident of California, had a full-time job at Stanford University. After moving to Palo Alto, she started a small clothing design business in Los Angeles.

During the year at issue, the taxpayer traveled to a patternmaker workshop in Los Angeles and Inglewood in southern California approximately every other weekend. She made the 800-mile round-trip by car. Although the taxpayer stayed with family and friends in the area during these trips, the primary purpose of the travel was business-related.

At trial, the taxpayer submitted a mileage log detailing the dates traveled, distances traveled and the purpose of each trip. She also submitted vehicle service receipts corroborating the miles driven. The taxpayer testified credibly as to the business nature of her trips.

End of the road: The Tax Court determined that the taxpayer has satisfied her burden of proof for substantiating vehicle expenses. Accordingly, it approved a deduction of more than $12,000 for vehicle expenses for the year at issue.

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IRS Sex workers taxes

Extension filers: IRS.gov & SWTaxes is the source for summertime tax help; agency encourages people to file soon

WASHINGTON — With millions of people still waiting to file their tax returns, the IRS reminds them to file as soon as possible and take advantage of special tools available on IRS.gov that can help them file.
Summer may be a busy time for many, but it’s a great time to start tax planning – whether you still need to file a 2021 tax return or start planning for next year’s tax season. IRS.gov is the fastest and most convenient way to get tax-related information and help. The online tools are available any time, so taxpayers can use them at their convenience.
Here are some important reasons for taxpayers to visit IRS.gov this summer.
Get tax information 24/7
Taxpayers can use IRS.gov to:
• View the filing page to get information on most federal income tax topics.
• Access the Interactive Tax Assistant tool for answers to many tax law questions.
• Sign into their individual IRS online account to view their balance an tax records, manage communication preferences, make payments and more.
• Find the most up-to-date information about their tax refunds using the Where’s My Refund? tool. Taxpayers can check the status of their refund 24 hours after the IRS acknowledges receipt of an e-filed return.
Taxpayers can also download the official IRS mobile app, IRS2Go, to check their refund status, make payments, find free tax preparation assistance, sign up for helpful tax tips and more.
Adjust withholding now to avoid tax surprises next year
Summer is a great time for taxpayers to check their withholding to avoid a tax surprise next filing season. Life events like marriage, divorce, having a child or a change in income can affect taxes.
The IRS Tax Withholding Estimator on IRS.gov helps employees assess their income tax, credits, adjustments and deductions, and determine whether they need to change their withholding. If a change is recommended, the estimator will provide instructions to update their withholding with their employer either online or by submitting a new Form W-4, Employee’s Withholding Allowance Certificate.
File electronically
Taxpayers who requested an extension to Oct. 17 or missed the April 18 deadline can still prepare and e-file returns. The IRS accepts electronically filed returns 24/7. There’s no reason to wait until Oct. 17 if filers have all the information and documentation they need to file an accurate return today. They can get their refund faster by choosing direct deposit. Contact us today to file your return.

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Sex workers

IRS reminds taxpayers who haven’t filed yet to choose their tax preparer wisely

Taxpayers who have not yet filed their 2021 tax return may file electronically when they are ready rather than wait until the October 17, 2022, extension deadline. If they are considering hiring a tax preparer, it’s important to choose wisely. Taxpayers are responsible for all the information on their tax return, no matter who prepares it for them or when it’s filed.

There are different kinds of tax return preparers, and a taxpayer’s needs will determine which kind of preparer is best for them.

Here are some things taxpayers should do when choosing a tax return preparer
• Check the IRS Directory of Federal Tax Return Preparers. This searchable and sortable public directory helps taxpayers find a tax return preparer with specific qualifications.
• Check the preparer’s history with the Better Business Bureau. Taxpayers should check for any disciplinary actions for credentialed tax return preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For enrolled agents, verify the agent’s status on IRS.gov.
• Ask about fees. Taxpayers should avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of the refund into their own financial accounts. They should be wary of tax return preparers who claim they can get larger refunds than their competitors.
• Ask if the preparer plans to use IRS e-file. Taxpayers should make sure their preparer offers IRS e-file. The IRS issues most refunds in fewer than 21 days for taxpayers who file electronically and choose direct deposit.
• Make sure the preparer is available. Taxpayers should consider whether the tax return preparer will be around after the filing deadline has passed. Taxpayers should do this because they might need the preparer to answer questions about the preparation of the tax return. Avoid fly-by-night preparers.
• Ensure the preparer signs and includes their preparer tax identification number. All aid tax return preparers must have a PTIN to prepare tax returns. Preparers must sign returns and include their PTIN.
• Understand the preparer’s credentials. Enrolled agents, CPAs, and attorneys have unlimited practice rights and can represent taxpayers on any tax matter before the IRS. Tax return preparers who participate in the IRS Annual Filing Season Program have limited practice rights and may only represent taxpayers whose returns they prepared and signed, and only for exams and for customer service and Taxpayer Advocate Service inquiries.

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Sex workers

Top 4 things to remember when filing income tax returns in 2022

WASHINGTON — With filing season beginning January 24, the Internal Revenue Service reminded taxpayers about several key items to keep in mind when filing their federal income tax returns this year.
Given the unprecedented circumstances around the pandemic and unique challenges for this tax season, the IRS offers a 4-point checklist that can help many people speed tax return processing and refund delivery while avoiding delays.
1. File an accurate return and use e-file and direct deposit to avoid delays. Taxpayers should electronically file and choose direct deposit as soon as they have everything they need to file an accurate return. Taxpayers have many choices, including using a trusted tax professional. For those using e-file, the software helps individuals avoid mistakes by doing the math. It guides people through each section of their tax return using a question-and-answer format.
2. For an accurate return, collect all documents before preparing a tax return; make sure stimulus payment and advance Child Tax Credit information is accurate. In addition to collecting W-2s, Form 1099s and other income-related statements, it is important people have their advance Child Tax Credit and Economic Impact Payment information on hand when filing.
Advance CTC letter 6419: In late December 2021, and continuing into January, the IRS started sending letters to people who received advance CTC payments. The letter says, “2021 Total Advance Child Tax Credit (AdvCTC) Payments” near the top and, “Letter 6419” on the bottom righthand side of the page. Here’s what people need to know:
• The letter contains important information that can help ensure the tax return is accurate.
• People who received advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.
• Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.
Third Economic Impact Payment letter 6475: In late January 2022, the IRS will begin issuing letters to people who received a third payment in late January 2021. The letter says, “Your Third Economic Impact Payment” near the top and, “Letter 6475” on the bottom righthand side of the page. Here’s what people need to know:
• Most eligible people already received their stimulus payments. This letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit (RRC) for missing stimulus payments.
• People who are eligible for RRC must file a 2021 tax return to claim their remaining stimulus amount.
• People can also use IRS online account to view their Economic Impact Payment amounts.
Both letters – 6419 and 6475 – include important information that can help people file an accurate 2021 tax return. If a return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.
3. Avoid lengthy phone delays; use online resources before calling the IRS. Phone demand on IRS assistance lines remains at record highs. To avoid lengthy delays, the IRS urges people to use IRS.gov to get answers to tax questions, check a refund status or pay taxes. There’s no wait time or appointment needed — online tools and resources are available 24 hours a day.
Additionally, the IRS has several ways for taxpayers to stay up to date on important tax information:
• Follow the IRS’ official social media accounts and email subscription lists to stay current on the latest tax topics and alerts.
• Download the IRS2Go mobile app, watch IRS YouTube videos, or follow the IRS on Twitter, Facebook, LinkedIn and Instagram for the latest updates on tax changes, scam alerts, initiatives, products and services.
• Taxpayers can also get information in their preferred language. The IRS translates tax resources into several languages and currently has basic tax information in 20 languages. People can also file Schedule LEP, Request for Change in Language Preference, to receive written communications from the IRS in their preferred language.
4. Waiting on a 2020 tax return to be processed? Special tip to help with e-filing a 2021 tax return: In order to validate and successfully submit an electronically filed tax return to the IRS, taxpayers need their Adjusted Gross Income, or AGI, from their most recent tax return. For those waiting on their 2020 tax return to be processed, here’s a special tip to ensure the tax return is accepted by the IRS for processing. Make sure to enter $0 (zero dollars) for last year’s AGI on the 2021 tax return. For those who used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment in 2021, they should enter $1 as their prior year AGI. Everyone else should enter their prior year’s AGI from last year’s return. Remember, if using the same tax preparation software as last year, this field will auto-populate.

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IRS Sex workers taxes

Taxpayers must report gig economy earnings when filing taxes

Whether it’s a full-time job or just a side hustle, taxpayers must report gig economy earnings on their tax return. Understanding how gig work can affect taxes may sound complicated but, it doesn’t have to be. The IRS offers several resources to help gig economy taxpayers properly fulfill their tax responsibilities.
Here are some things gig workers should keep in mind.
Gig work is taxable:
• Earnings from gig economy work is taxable, regardless of whether an individual receives information returns. The reporting requirement for issuance of Form 1099-K changed for payments received in 2022 to totals exceeding $600, regardless of the total number of transactions. This means some gig workers will now receive an information return. This is true even if the work is full-time, part-time or if an individual is paid in cash.
• Gig workers may also be required to make quarterly estimated income tax payments and pay their share of Social Security and Medicare taxes.
Check worker classification:
• While providing gig economy services, it is important that the taxpayer is correctly classified.
• This means the business, or the platform, 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.
Pay the right amount of taxes throughout the year:
• 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:
o 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.
o 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.

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IRS Sex workers taxes

Get ready for taxes: Here’s what’s new and what to consider when filing in 2022

The IRS encourages taxpayers to get informed about topics related to filing their federal tax returns in 2022. These topics include special steps related to charitable contributions, economic impact payments and advance child tax credit payments. Taxpayers can visit IRS.gov/getready for online tools, publications and other helpful resources for the filing season.
Here are some key items for taxpayers to know before they file next year.
Changes to the charitable contribution deduction
Taxpayers who don’t itemize deductions may qualify to take a deduction of up to $600 for married taxpayers filing joint returns and up to $300 for all other filers for cash contributions made in 2021 to qualifying organizations.
Check on advance child tax credit payments
Families who received advance payments will need to compare the advance child tax credit payments that they received in 2021 with the amount of the child tax credit that they can properly claim on their 2021 tax return.
• Taxpayers who received less than the amount for which they’re eligible will claim a credit for the remaining amount of child tax credit on their 2021 tax return.
• Eligible families who did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the child tax credit when they file a 2021 federal income tax return next year. This includes families who don’t normally need to file a return.
In January 2022, the IRS will send Letter 6419 with the total amount of advance child tax credit payments taxpayers received in 2021. People should keep this and any other IRS letters about advance child tax credit payments with their tax records. Individuals can also create or log in to IRS.gov online account to securely access their child tax credit payment amounts.
Economic impact payments and claiming the recovery rebate credit
Individuals who didn’t qualify for the third economic impact payment or did not receive the full amount may be eligible for the recovery rebate credit based on their 2021 tax information. They’ll need to file a 2021 tax return, even if they don’t usually file, to claim the credit.
Individuals will need the amount of their third economic impact payment and any plus-up payments received to calculate their correct 2021 recovery rebate credit amount when they file their tax return.
In early 2022, the IRS will send Letter 6475 that contains the total amount of the third economic impact payment and any plus-up payments received. People should keep this and any other IRS letters about their stimulus payments with other tax records. Individuals can also create or log in to IRS.gov online account to securely access their economic impact payment amounts.
More information:
Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return

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Sex workers

What taxpayers can do now to get ready to file taxes in 2022

There are steps people, including those who received stimulus payments or advance child tax credit payments, can take now to make sure their tax filing experience goes smoothly in 2022. They can start by visiting the Get Ready page on IRS.gov. Here are some other things they should do to prepare to file their tax return.
Gather and organize tax records
Organized tax records make preparing a complete and accurate tax return easier. They help avoid errors that lead to processing delays that slow refunds. Having all needed documents on hand before taxpayers prepare their return helps them file it completely and accurately. This includes:
• Forms W-2 from employers
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan
• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy
• Form 1099-INT for interest received
• Other income documents and records of virtual currency transactions
Taxpayers should also gather any documents from these types of earnings. People should keep copies of tax returns and all supporting documents for at least three years.
Income documents can help taxpayers determine if they’re eligible for deductions or credits. People who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information. Those who did not receive their full third Economic Impact Payments will need their third payment amounts to figure and claim the 2021 recovery rebate credit.
Taxpayers should also keep end of year documents including:
• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments
• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit
• Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for Marketplace coverage
Confirm mailing and email addresses and report name changes
To make sure forms make it to the them on time, taxpayers should confirm now that each employer, bank and other payer has their current mailing address or email address. People can report address changes by completing Form 8822, Change of Address and sending it to the IRS. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office. They should also notify the Social Security Administration of a legal name change.
View account information online
Individuals who have not set up an Online Account yet should do so soon. People who have already set up an Online Account should make sure they can still log in successfully. Taxpayers can use Online Account to securely access the latest available information about their federal tax account.
Review proper tax withholding and make adjustments if needed
Taxpayers may want to consider adjusting their withholding if they owed taxes or received a large refund in 2021. Changing withholding can help avoid a tax bill or let individuals keep more money each payday. Life changes – getting married or divorced, welcoming a child or taking on a second job – may also be reasons to change withholding. Taxpayers might think about completing a new Form W-4, Employee’s Withholding Certificate, each year and when personal or financial situations change.
People also need to consider estimated tax payments. Individuals who receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income should make quarterly estimated tax payments. The last payment for 2021 is due on Jan. 18, 2022.

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