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IRS Sex workers taxes

How a taxpayer’s filing status affects their tax return

A taxpayer’s filing status tells the IRS about them and their tax situation. This is just one reason taxpayers should familiarize themselves with each option and know their correct filing status. The IRS Interactive Tax Assistant can help them determine their filing status.

A taxpayer’s filing status typically depends on whether they are considered unmarried or married on Dec. 31, which determines their filing status for that entire year.

More than one filing status may apply in certain situations. If this is the case, taxpayers can usually choose the filing status that allows them to owe the least amount of tax.

When preparing and filing a tax return, filing status determines:
• If the taxpayer is required to file a federal tax return
• If they should file a return to receive a refund
• Their standard deduction amount
• If they can claim certain tax credits
• The amount of tax they owe
Here are the five filing statuses:
• Single. Normally, this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.
• Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. If one spouse died in 2021, the surviving spouse can use married filing jointly as their filing status for 2021 if they otherwise qualify to use that status.
• Married filing separately. Married couples can choose to file separate tax returns. This may benefit taxpayers who want to be responsible only for their own tax or if it results in less tax than filing a joint return.
• Head of household. Unmarried taxpayers may be able to file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year.
• Qualifying widow or widower with dependent child. This status may apply to a taxpayer filing a 2021 tax return if their spouse died in 2019 or 2020, and they didn’t remarry before the end of 2021 and have a dependent child. Other conditions also apply.

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IRS Sex workers taxes

The first step of good tax planning is good recordkeeping

Year-round tax planning is for everyone. An important part of that is recordkeeping. Gathering tax documents throughout the year and having an organized recordkeeping system can make it easier when it comes to filing a tax return or understanding a letter from the IRS.
Good records help:
• Identify sources of income. Taxpayers may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from nonbusiness income and taxable from nontaxable income.
• Keep track of expenses. Taxpayers can use records to identify expenses for which they can claim a deduction. This will help determine whether to itemize deductions at filing. It may also help them discover potentially overlooked deductions or credits.
• Prepare tax returns. Good records help taxpayers file their tax return quickly and accurately. Throughout the year, they should add tax records to their files as they receive them to make preparing a tax return easier.
• Support items reported on tax returns. Well-organized records make it easier to prepare a tax return and help provide answers if the return is selected for examination or if the taxpayer receives an IRS notice.

Download this spreadsheet to keep track of all of your expenses and income.   Expenses Spreadsheet

In general, the IRS suggests that taxpayers keep records for three years from the date they filed the tax return. Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.
Records to keep include:
• Tax-related records. This includes wage and earning statements from all employers or payers, interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents – electronic or paper – that support income, a deduction, or a credit reported on their tax return.
• IRS letters, notices and prior year tax returns. Taxpayers should keep copies of prior year tax returns and notices or letters they receive from the IRS. These include adjustment notices when an action is taken on the taxpayer’s account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. Taxpayers who receive 2021 advance child tax credit payments will receive a letter early next year that provides the amount of payments they received in 2021. Taxpayers should refer to this letter when filing their 2021 tax return in 2022.
• Property records. Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.
• Business income and expenses. For business taxpayers, there’s no particular method of bookkeeping they must use. However, taxpayers should find a method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
• Health insurance. Taxpayers should keep records of their own and their family members’ health care insurance coverage. If they’re claiming the premium tax credit, they’ll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid.

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IRS Sex workers taxes

The first step of tax preparation is gathering records

As taxpayers get ready to file their 2020 tax return, they should start by gathering their records. Taxpayers should gather all year-end income documents to help ensure they file a complete and accurate 2020 tax return and avoid refund delays.
Taxpayers should have all necessary records handy, such as W-2s, 1099s, receipts, canceled checks and other documents that support any income, deductions or credits on their tax return.
Most taxpayers should have already received income documents including:
• Forms W-2, Wage and Tax Statement
• Form 1099-MISC, Miscellaneous Income
• Form 1099-INT, Interest Income
• Form 1099-NEC, Nonemployee Compensation
• Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund
• Form 1095-A, Health Insurance Marketplace Statements
Here are a couple other things taxpayers can do to prepare to file.
View IRS account online
Taxpayers can view their online account. This allows them to see the latest information about their federal tax account and most recently filed tax return through a secure and convenient tool on IRS.gov. This can help taxpayers if they need information from last year’s return.
People with an account on IRS.gov can also see the amounts of their Economic Impact Payments. This will be helpful to eligible individuals who either did not receive any Economic Impact Payments or received less than the full payments. They may claim the recovery rebate credit on their 2020 federal tax return.
People should visit Secure Access: How to Register for Certain Online Self-Help Tools for more information about how to create an account or how to reset the username or password.
Review unemployment benefits
Unemployment compensation is taxable and must be included as gross income on a taxpayer’s return.
Taxpayers should receive a Form 1099-G showing their unemployment income. They can have federal taxes withheld from their unemployment benefits or make estimated tax payments, but many do neither. In that case, taxes on those benefits need to be paid when their 2020 tax return is filed. Therefore, taxpayers who didn’t have tax withheld from their payments may see a smaller refund than expected or possibly have a tax bill.
Individuals who receive a Form 1099-G for unemployment compensation they were not paid should contact their state tax agency and request a corrected Form 1099-G. States should not issue Forms 1099-Gs to taxpayers they know to be victims of identity theft involving unemployment compensation. Taxpayers should file an accurate return including the income they actually received.
Taxpayers who are victims of identity theft involving unemployment compensation should not file an identity theft affidavit with the IRS.

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IRS Sex workers taxes

New things taxpayers should consider as they get ready to file taxes in 2021

When people get ready to file their federal tax return there are new things to consider when it comes to which credits to claim and what deductions to take. These things can affect the size of any refund the taxpayer may receive.

Here are some new key things people should consider when filing their 2020 tax return.
Recovery rebate credit
Taxpayers may be able to claim the recovery rebate credit if they met the eligibility requirements in 2020 and one of the following applies to them:
• They didn’t receive an Economic Impact Payment in 2020.
• They are single and their payment was less than $1,200.
• They are married, filed jointly for 2018 or 2019 and their payment was less than $2,400.
• They didn’t receive $500 for each qualifying child.

Refund interest payment
People who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest of at least $10.

New charitable deduction allowance
New this year, taxpayers who don’t itemize deductions can take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, people should review Publication 526, Charitable Contributions.

Other refund-related reminders
• Taxpayers shouldn’t rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some tax returns may require additional review and processing may take longer.
• Refunds for taxpayers claiming the earned income tax credit or additional child tax credit can’t be issued before mid-February. This applies to the entire refund, not just the portion associated with this credit.
• The fastest and most secure way to receive a refund is to combine direct deposit with electronic filing, including the IRS Free File program. Taxpayers can track the status of their refund using the Where’s My Refund? tool.

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IRS Sex workers taxes

IRS to resume sending balance-due notices despite pandemic

IRSThe Internal Revenue Service said Friday it would restart issuing its 500 series of balance-due notices to taxpayers later this month after they were paused on May 9 due to the COVID-19 pandemic.

While the IRS continued to issue most of its notices, the 500 series was temporarily suspended because of a backlog of mail that built up at the IRS while many employees were away from agency facilities due to COVID-19. The IRS came under fire earlier this year for issuing balance due notices with the incorrect dates to taxpayers during the pandemic and agreed to stop sending the notices until it caught up with its backlog of unopened mail.

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