Category: FATCA

Teens and young adults often go into business for themselves over the summer or after school. This work can include babysitting, lawn mowing, dog walking or other part-time or temporary work. When a teen or young adult is an employee of a business, their employer withholds taxes from their paycheck. However, when they are classified as an independent contractor or are self-employed, they’re responsible for paying taxes themselves.

Things to keep in mind:

• Everyone, including minors, must file a tax return if they had net earnings from self-employment of at least $400.
• If they owe taxes, teens and young adults should file their own tax return, even if their parent or guardian claims them as a dependent.
• Teens and young adults can prepare and sign their own tax return. There is no minimum age to sign a tax return.
• Parents can’t claim a dependent’s earned income on their own tax return.
• In addition to income tax, people who are self-employed are generally responsible for self-employment tax as well. It’s like the Social Security and Medicare taxes withheld from the pay of most wage earners.
• Teens and young adults can lower the amount of tax they owe by deducting certain expenses.

Here’s what young entrepreneurs can do to keep on top of their tax responsibilities:

Keep records. It’s good to make and keep financial records and receipts during the year. Recordkeeping can help track income and deductible expenses and provide the information needed for a tax return.

Pay estimated tax, if required. If a teen or young adult being claimed as a dependent expect to owe at least $1,000 in tax for 2022, they must make estimated payments on a quarterly basis. They should be sure to pay enough tax on time to avoid a penalty. They can use one of these forms to calculate their estimated taxes:

• Form 1040-ES, Estimated Taxes for Individuals
• Form 1040-ES NR, U.S. Estimated Tax for Nonresident Alien Individuals

If a taxpayer also has a job where tax is withheld by their employer, they can request that their withholding be increased to cover their estimated taxes from their self-employed income. That way, they don’t have pay estimated tax separately. The Tax Withholding Estimator is a great tool to help wage earners figure out how much they should be withholding.

File a tax return. When tax season rolls around, young taxpayers can review the information and forms, gather their records and e-file their tax return. When preparing to file a tax return, they should make sure to review all their records, including estimated tax they’ve already paid.

If people owe taxes, they can pay electronically through Online Account and IRS Direct Pay. Visit the Payments page of IRS.gov for the full list of payment options.

From IRS Tax Tip 2022-88

Taxpayer who are living and working outside the U.S., they must file their 2021 federal income tax return by June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

From IRS Issue 2022-22

The IRS began its “Dirty Dozen” list for 2022, which includes potentially abusive arrangements that taxpayers should avoid. The potentially abusive arrangements in this series focus on four transactions that are wrongfully promoted and will likely attract additional agency compliance efforts in the future. Those include charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance and monetized installment sales. Visit IRS.gov for more on these first four potentially abusive arrangements.

From IRS Issue2022-22

With the new tax season starting this week, the IRS reminds taxpayers to be aware that criminals continue to make aggressive calls posing as IRS agents in hopes of stealing taxpayer money or personal information.

Here are some telltale signs of a tax scam along with actions taxpayers can take if they receive a scam call.

The IRS will never:

• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
• Threaten to immediately bring in local police or other law enforcement groups to have the taxpayer arrested for not paying.
• Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
• Call unexpectedly about a tax refund.

Taxpayers who receive these phone calls should:

• Record the number and then hang up the phone immediately.
• Report the call to TIGTA using their IRS Impersonation Scam Reporting form or by calling 800-366-4484.
• Report the number to phishing@irs.gov and be sure to put “IRS Phone Scam” in the subject line.

More information:
Tax Scams and Consumer Alerts
Report Phishing and Online Scams

From IRS Tax Tip:2022-15

The Internal Revenue Service announced that the nation’s tax season will start on Monday, January 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.

The January 24 start date for individual tax return filers allows the IRS time to perform programming and testing that is critical to ensuring IRS systems run smoothly. Updated programming helps ensure that eligible people can claim the proper amount of the Child Tax Credit after comparing their 2021 advance credits and claim any remaining stimulus money as a Recovery Rebate Credit when they file their 2021 tax return.

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop these past several months to prepare,” said IRS Commissioner Chuck Rettig. “The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don’t face processing delays. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year. And we urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year. People should make sure they report the correct amount on their tax return to avoid delays.”

The IRS encourages everyone to have all the information they need in hand to make sure they file a complete and accurate return. Having an accurate tax return can avoid processing delays, refund delays and later IRS notices. This is especially important for people who received advance Child Tax Credit payments or Economic Impact Payments (American Rescue Plan stimulus payments) in 2021; they will need the amounts of these payments when preparing their tax return. The IRS is mailing special letters to recipients, and they can also check amounts received on IRS.gov.

Like last year, there will be individuals filing tax returns who, even though they are not required to file, need to file a 2021 return to claim a Recovery Rebate Credit to receive the tax credit from the 2021 stimulus payments or reconcile advance payments of the Child Tax Credit. People who don’t normally file also could receive other credits.

April 18 tax filing deadline for most

The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers. By law, Washington, D.C., holidays impact tax deadlines for everyone in the same way federal holidays do. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia for everyone except taxpayers who live in Maine or Massachusetts. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states. Taxpayers requesting an extension will have until Monday, October 17, 2022, to file.

Excerpt IR-2022-08