Should You Be Making Quarterly Tax Payments?

Should You Be Making Quarterly Tax Payments?

By Emma Kerr, U.S.News, Oct. 14, 2021,

Quarterly taxes are estimated payments made on a quarterly basis to the U.S. Internal Revenue Service for income that is not subject to withholding. As the U.S. workforce is increasingly engaged in freelancing, side gigs, and self-employment, quarterly payments are a reality more taxpayers may soon be facing.

The group of Americans who are self-employed has grown since 2020: More than 10 million people in the U.S. were self-employed in September 2021, according to the U.S. Bureau of Labor Statistics, up from about 9.5 million in September 2020.

These self-employed individuals are usually required to make quarterly payments, but some workers receiving salaried W-2 income may still need to make quarterly payments under certain circumstances. These payments can help taxpayers avoid an unwelcome surprise on April 15.

“The trend has been that most taxpayers who don’t pay enough taxes throughout the year find themselves in a very tight situation at the end of the tax year when they file their tax return. They get into a situation where they cannot pay their back taxes owed,” says Alex Oware, certified public accountant at O&G Tax and Accounting Services and tax expert at JustAnswer. “Instead, they can pay their taxes up front by making quarterly payments.”

When Are Quarterly Taxes Due in 2022

Quarterly tax payments are due on the following dates:

Jan. 1 to March 31April 15
April 1 to May 31June 15
June 1 to Aug. 31Sept. 15
Sept. 1 to Dec. 31Jan. 15 of the following year



Quarterly Taxes Aren’t Just for the Self Employed

Individuals who are self-employed – whether sole proprietors, partners, or S corporation shareholders – typically must make estimated tax payments if they anticipate owing $1,000 or more when their tax return is filed.

But quarterly taxes may also need to be paid in other situations where an individual’s withholdings are not sufficient. Estimated payments may need to be sent to cover income from the following sources:

  • Gambling winnings or other prizes.
  • Dividends and interest.
  • Divorce settlements and alimony.
  • IRA distributions.
  • Social Security (if your income is high enough to make benefits taxable).
  • Self-employed or independent contractor 1099 income.
  • Self-employed people and independent contractors can sometimes avoid making quarterly payments.

“You could be self-employed and still pay yourself a salary. If you pay yourself a salary, you can adjust your withholdings however you like and avoid making quarterly payments,” says Deborah F. Graver, certified financial planner and principal at Signature Financial Planning in Pittsburgh. “But people often just aren’t sure what they’re going to be earning, so paying themselves a paycheck is tough.”

And workers with a W-2 income and a side gig can also avoid making estimated payments quarterly by talking with their employer.

“If you’re making a strong side income, you need to be thinking about quarterly payments,” Oware says. “If I have a W-2 income and a side gig, I have to decide to ask my employer to increase my W-2 withholding or just pay the estimated taxes on the other side.”

How to Estimate Your Quarterly Taxes
Quarterly taxes are used to pay income tax as well as self-employment taxes and alternative minimum taxes, if applicable. To get a rough estimate of your quarterly taxes, Oware says taxpayers can take last year’s owed taxes and simply divide by four to estimate this year’s quarterly tax payments.

If a small business owner, for example, owed $2,000 after filing last year, he or she could plan to pay roughly $500 each quarter in estimated tax payments this year.

However, last year’s income may not be predictive of this year’s if your financial situation has changed. To estimate your quarterly taxes most accurately, taxpayers should complete the worksheet included in Form 1040-ES.

Year after year, self-employed taxpayers may be able to better estimate their tax liability by comparing their estimated quarterly payments to the outcome of their annual tax return.

“If you still paid taxes, you might be underestimating,” Oware says. “Whenever you get a refund, it means you’re giving money to the government interest-free, you may be overestimating.”

How to Make Quarterly Tax Payments and Avoid Penalties
To make estimated tax payments, complete Form 1040-ES and submit your payment online, by phone or by mail.

The penalty for failing to pay enough tax throughout the year includes the tax owed plus interest. Taxpayers can avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or by paying either at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, according to the IRS website. (

Crypto Investors Need To Know This Unique Tax Planning Opportunity

Crypto Investors Need To Know This Unique Tax Planning Opportunity

By Megan Gorman, Forbes, December 11, 2021

Ah, December. It always feels like this month sneaks up on us. For many, it is the last chance to impact their tax planning. But in the year-end rush, there is a lot to consider.

The past 18 months have been a wild ride in the capital markets. From the lows of March 2020 to the highs of the recent months, investors have done incredibly well. Further investors who fearlessly entered the crypto market a few years back might find themselves with significant gains.

And that is where taxes can become tricky.

“Think of cryptocurrency like a stock. Sell it in less than a year at a gain, and it is ordinary income. More than a year, and it’s taxed at long-term capital gains rates,” explains Adam Markowitz, EA and Vice President, Howard L Markowitz PA, CPA

While recognizing a gain might seem like the only option available to crypto investors, a unique tax planning opportunity is available:  the ability to use your cypto holdings to donate to charity. As crypto becomes commonplace in investment portfolios, more donor advised funds (DAFs) and charities are accepting these holdings in their donations.

For many, this will be a significant planning opportunity, but just because it is permissible, doesn’t mean it’s straightforward. There are a few rules of the road that crypto investors must consider when donating to charity.

Tax Mechanics

Before we get into how crypto can be donated, it is important to understand the mechanics of donating non-cash assets to charities.

“In addition to cash donations, individuals, partnerships, and corporations are allowed a charitable deduction on their tax returns for donated property,” explains Lorilyn Wilson, CPA & CEO of Lookahead LLC and DueNorth PDX.

Publicly traded securities are commonly-donated non-cash items. In this situation, investors can get a special two-part tax benefit. First, they do not have to recognize the capital gain; second, they get a charitable deduction when the holdings go to the charity or donor-advised fund.

“But there are rules. For property donated with a combined worth of more than $500 (think Goodwill donations, cars, etc.), an additional form called Form 8283 must be filed as well,” says Wilson.

For publicly traded holdings, only Part I of the form is required.

“The IRS requires you take the charitable deduction at the fair market value of the property being donated – and this is the form used to do just that,” says Wilson. “Questions such as the name of the organization donated to, property description, date property was acquired and contributed, how much it cost, and what the resale value is – is all information gathered on this form.”

Donating stocks can be a powerful tax management tool, but charities and DAFs have historically been nervous about crypto. Things are changing and the door for donating crypto is now open.

Be Aware of Appraisal Rules

Donating crypto is not as straightforward as donating publicly traded stocks. The world of crypto has not been transparent and the rules around donations reflect that.

“Now let’s say someone has decided to donate their crypto or other non-publicly traded securities. Could they artificially inflate the value of their donated property to get a higher deduction and pay less in taxes? As usual, the IRS is one step ahead of them,” says Wilson.

That’s why it is important to be aware of another set of rules surrounding Form 8283. Unlike publicly traded securities, a donation of crypto currency that exceeds $5,000 will require a qualified appraisal. Neither the IRS nor the SEC has taken any official position to treat cryptocurrencies as securities. The IRS has designated cryptocurrency as property and not currency.

A qualified appraisal must meet IRS requirements, including the need to use a qualified appraiser who has met education and experience requirements. Qualified appraisers are usually licensed or certified in the state in which the property is located.

Further, the appraisal must be done no more than 60 days prior to the donation and no later than the due date of the tax return including extensions. The appraisal is reported on Form 8283 and the appraiser is required to sign the form. No appraiser? No deduction.

It can be challenging to find a crypto appraiser, but as the technique is in greater demand, there are more resources available. Investors who use a donor advised fund like Schwab Charitable or Fidelity Charitable, may also be able to draw on their expertise.

Investors should anticipate that they will spend approximately $500 to $1,000 on appraisal fees, but the tax benefit may be worth it.

Check With Your Tax Professional

Ultimately, crypto investors should seek help from their tax professional to make sure that they take the appropriate steps in donating crypto to a DAF. It could mean the difference between a great tax planning experience and the disappointment of a disallowed deduction. (

How the IRS is working to positively impact filing, payment and reporting compliance for cannabis/marijuana businesses

How the IRS is working to positively impact filing, payment and reporting compliance for cannabis/marijuana businesses

By De Lon Harris
CL-21-28, September 27, 2021

Tackling complex tax compliance issues is something I take great pride in doing as part of my job as the Commissioner for the Small Business/Self Employed (SB/SE) Examination division. I also see it as my responsibility to make sure my organization helps taxpayers navigate those complex issues and provides the tools that we have available for them to be successful and compliant business owners.

One such evolving and complex issue my organization has been focused on is the tax implications for the rapidly growing cannabis/marijuana industry. The specific rules and regulations regarding how it is taxed at the federal level provides the IRS an opportunity to promote voluntary compliance, not only through audits, but also through outreach and education. At last count, 36 states plus the District of Columbia have legalized marijuana for recreational or medicinal use, or both. These states, such as California, Washington and Colorado provide tax guidance for businesses and we strongly encourage industry members to remain compliant with state taxes as well. And while there are 14 states that still ban cannabis use, we expect both unlicensed and licensed marijuana businesses to grow.

It’s tricky from a business perspective, because even though states are legalizing marijuana and treating its sale as a legal business enterprise, it’s still considered a Schedule 1 controlled substance under federal law. That means a cannabis/marijuana business has additional considerations under the law, creating unique challenges for members of the industry. Specifically, these businesses are often cash intensive since many can’t use traditional banks to deposit their earnings. It also creates unique challenges for the IRS on how to support these new business owners and still promote tax compliance.

While IRS Code Section 280E is clear that all the deductions and credits aren’t allowed for an illegal business, there’s a caveat: Marijuana business owners can deduct their cost of goods sold, which is basically the cost of their inventory. What isn’t deductible are the normal overhead expenses, such as advertising expenses, wages and salaries, and travel expenses, to name a few.

I understand this nuance can be a challenge for some business owners, and I also realize small businesses don’t always have a lot of resources available to them. That’s why I’m making sure the IRS is doing what it can to help businesses with our new Cannabis/Marijuana Initiative.

The goal of this initiative is to implement a strategy to increase voluntary compliance with the tax law while also identifying and addressing non-compliance. I believe this will positively impact filing, payment and reporting compliance on the part of all businesses involved in the growing, distribution and sales of cannabis/marijuana.

How will we do it? Here are some of the strategic activities:

We’ll ensure training and job aids are available to IRS examiners working cases so they can conduct quality examinations (audits) consistently throughout the country.
We’ll make sure there is coordination and a consistent approach by the IRS to the cannabis/marijuana industry.
We’re going to find ways to identify non-compliant taxpayers.
We’ll collaborate with external stakeholders to increase an awareness of tax responsibilities to improve compliance.
And we’ll give taxpayers access to information on how to properly comply with the filing requirements.
I’m very focused on the success of this strategy because it’s very important for business owners to understand that under our nation’s tax laws, and specifically Internal Revenue Code 61, all income is taxable, even if someone is running a business that’s considered illegal under federal law.

I also want to point out that there is no difference in paying income taxes or employment taxes. You still must file your income taxes and you still have to file your employment taxes, and if it’s a cash-intensive business, you still have to make arrangements to pay your tax obligations.

This is a truly groundbreaking effort for our agency. I’m proud of the work my organization has done to provide much-needed educational tips, guidance and more information on our Marijuana Industry page,, which includes links to information on:

IRC Section 280E
Income reporting
Cash payment options
Reporting large cash receipts
Estimated payments
Keeping good records
We’ve also posted frequently asked questions on to answer questions commonly asked by those in the cannabis/marijuana industry.

Our strategy is not limited to pushing information out via our website in the hope that business owners will find it. I’ve made it a priority for my SB/SE organization to engage with the cannabis/marijuana industry through speaking events and other outreach. I have done three of these types of events over the last year, and what I have heard is a genuine desire to comply with the tax laws regarding the industry. Through this extended outreach, we hope to help small business owners and others fully understand the unique tax rules before there are any compliance issues.

Cannabis/marijuana business owners also need to understand that all cash-intensive businesses can be, and are, audited. I recommend business owners familiarize themselves with the cash business audit techniques guide and all the resources available on

Here are some other helpful tips to help cannabis/marijuana business owners:

Know your investors
There are thousands of people trying to get into the industry legitimately; however, there are some pitfalls with investors that business owners need to be aware of to make sure their investors don’t cause more harm than good. The social stigma and federal designation as an illegal substance have led to unregistered and “silent” financing and ownership arrangements within the industry. Individuals associated with these funding and ownership arrangements are often referred to as “beneficial owners.” A beneficial owner enjoys the benefits of ownership, but the property’s title or activity is in another name. This creates complex compliance challenges for the IRS and may contribute to a business’s failure to file a tax return or accurately report gross receipts. IRS examiners explore the potential for these arrangements during examination engagements.

Additionally, cannabis/marijuana business owners should be aware of nefarious investors who will try to put funds into these new businesses that could cause them to lose their entire business. For example, if one of these silent investors gives initial money, say $5,000 or $10,000, and it grows to where they can then claim ownership, these businesses can become complicit in laundering money for drug traffickers.

Ensure you’re licensed
Make sure you’re licensed for whatever your location requires. Cannabis/marijuana businesses are highly regulated by state and municipal regulatory agencies from a licensing, product development and movement perspective.

File and pay your taxes on time
As I mentioned earlier, even if your business operates with cash, you are still responsible for filing and paying your taxes on time.

The Internal Revenue Code doesn’t differentiate between income derived from legal sources and income derived from illegal sources. It’s all income and is taxable and must be reported on your tax return. However, because it’s a Schedule I controlled substance, Section 280E of the tax code applies, even if the business operates in a state that has legalized the sale of marijuana.

But Section 280E doesn’t prohibit a participant in the marijuana industry from reducing their gross receipts by properly calculating the cost of goods sold to determine its gross income. For example, a marijuana dispensary may not deduct advertising or selling expenses, but it may reduce its gross receipts by its cost of goods sold.

Cannabis businesses have no exemption from their employment tax obligations, and as with other small businesses, they often need to make quarterly tax payments. These business owners should always pay their taxes on time to avoid interest and penalties.

Our enforcement efforts in the industry indicate there are taxpayers operating in segments of the industry (growers, transporters, wholesalers and retailers/dispensaries) who fail to file U.S. tax returns. These business owners should be aware that non-filers are an IRS enforcement priority.

Another of our top enforcement priorities in the cannabis industry is the use of cryptocurrency. Those who use it need to understand that the IRS considers it property, and there are gains that are taxable. I highly recommend anyone using cryptocurrency in their business to work with a reputable exchanger.

Report your cash transactions
As I mentioned earlier, because marijuana is listed as a U.S. Schedule 1 drug, many businesses do not participate in the U.S. banking system and conduct transactions in cash.

If a business in the cannabis/marijuana industry receives more than $10,000 in cash in a single transaction or in related transactions, they must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business PDF, within 15 days after receiving payment. Business owners really must be diligent about this.

It’s also important to note that some of our IRS Taxpayer Assistance Centers accept cash, but an appointment must be scheduled to make cash payments. The number to call to request an appointment is 844-545-5640.

Keep good records
I don’t think I can stress the importance of good record-keeping enough. All records, such as receipts, canceled checks and other documents that support an item of income, a deduction or a credit appearing on a return should be kept regardless of whether they’re tracked by hard copy or electronically. It’s important for a cannabis business to maintain records for all expenses, even those that are not legally deductible at the federal level, because good, well-organized records make it easier to prepare a tax return, track expenses, substantiate items reported on tax returns, and help provide answers if a return is selected for examination.

Since the unique circumstances of the cannabis industry can make tax preparation challenging, I hope that new and experienced business owners take my advice in this post and use our resources to ensure they understand their tax obligations and avoid penalties associated with non-compliance. We’re always here to help with tools, information and guidance.

Tax benefits of making a business accessible to workers and customers with disabilities

Tax benefits of making a business accessible to workers and customers with disabilities

IRS Tax Tip – Issue Number: 2021-183

Businesses that make structural adaptations or other accommodations for employees or customers with disabilities may be eligible for tax credits and deductions.

Here’s an overview of the tax incentives designed to encourage employers to hire qualified people with disabilities and to off-set some of the costs of providing accommodations.

Disabled access credit
The disabled access credit is a non-refundable credit for small businesses that have expenses for providing access to persons with disabilities. An eligible small business is one that earned $1 million or less or had no more than 30 full-time employees in the previous year. The business can claim the credit each year they incur access expenditures.

Barrier removal tax deduction
The architectural barrier removal tax deduction encourages businesses of any size to remove architectural and transportation barriers to the mobility of people with disabilities and the elderly. Businesses may claim a deduction of up to $15,000 a year for qualified expenses on items that normally must be capitalized.

Businesses claim this deduction by listing it as a separate expense on their income tax return. Also, businesses may use the disabled tax credit and the architectural/transportation tax deduction together in the same tax year if the expenses meet the requirements of both sections. To use both, the deduction is equal to the difference between the total expenses and the amount of the credit claimed.

Work opportunity tax credit
The work opportunity tax credit is available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. This includes people with disabilities and veterans. The maximum amount of tax credit for employees who worked 400 or more hours of service is:
• $2,400 or 40% of up to $6,000 of first year wages, for qualifying individuals.
• $9,600 or 40% of up to $24,000 of first year wages for certain qualified veterans.
A 25% rate applies to wages for individuals who work at least 120 hours but less than 400 hours for the employer.

More information:
Form 8826, Disabled Access Credit
Form 5884, Work Opportunity Credit
Form 3800, General Business Credit
Instructions for Form 3800, General Business Credit

Tax Benefits Available to Disabled Taxpayers

Tax Benefits Available to Disabled Taxpayers

Tax Benefits Available to Disabled Taxpayers

Article Highlights:

• Increased Standard Deduction
• Tax-Exempt Income
• Impairment-Related Work Expenses
• Financially Disabled
• Earned Income Tax Credit
• Child or Dependent Care Credit
• Special Medical Deductions
• Qualified Medicaid Waiver Payments
• ABLE Accounts

Disabled individuals, as well as parents of disabled children, may qualify for a number of tax credits and other tax benefits. Listed below are several tax credits and other benefits that are available if you or someone listed on your federal tax return is disabled.
Increased Standard Deduction – Since a change in the law more than 35 years ago, taxpayers (or spouses when filing a joint return) who are legally blind have been eligible for a standard deduction add-on. Thus, for 2021, if a taxpayer is filing jointly with a blind spouse, they are able to add an additional $1,350 to their standard deduction of $25,100; if both spouses are blind, the add-on doubles to $2,700. For other filing statuses, the additional amount is $1,700. While being age 65 or older isn’t a disability, it should be noted that there is an “elderly” add-on to the standard deduction of $1,350 or $1,700, depending on filing status. These add-ons apply only to the taxpayer and spouse, not to dependents.
Exclusions from Gross Income – Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income (i.e., they are not taxable). Amounts received for Social Security disability are treated the same as regular Social Security benefits, which means that up to 85% of the benefits could be taxable, depending on the amount of the recipient’s (and spouse’s, if filing jointly) other income.
Impairment-Related Work Expenses – Individuals with a physical or mental disability may deduct impairment-related expenses paid to allow them to work.
• Employees – Although the 2017 tax reform eliminated most miscellaneous itemized deductions, it retained the deduction for employees who have a physical or mental disability limiting their employment. As a result, they can still deduct the expenses necessary for them to work as an itemized deduction.
• Self-employed – For those who are self-employed, impairment-related expenses are deductible on Schedule C or F.
Impairment-related work expenses are ordinary, necessary business expenses for attendant care services at the individual’s place of work as well as other expenses in the workplace that are necessary for the individual to be able to work. An example is when a blind taxpayer pays someone to read work-related documents to the taxpayer.
Financially Disabled – Under normal circumstances, one must file a claim for a tax refund within 3 years of the unextended due date of the tax return. For example, for a 2018 tax return, the due date was April 15, 2019, which is when the 3-year clock started running. Thus, the IRS will not issue refunds for an amended 2018 or a late-filed original 2018 return submitted to the IRS after April 15, 2022. However, if a taxpayer is “financially disabled,” the time period for claiming a refund is suspended for the period during which the individual is financially disabled.
What does being financially disabled mean? An individual is financially disabled if they are unable to manage their financial affairs because of a medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months.
For a joint income tax return, only one spouse has to be financially disabled for the time period to be suspended. However, financial disability does not apply during any period when the individual’s spouse or any other person is authorized to act on the individual’s behalf in financial matters.
Earned Income Tax Credit (EITC) – The EITC is available to disabled taxpayers and the parents of a child with a disability, even when the child’s age would normally prevent the child from being a qualifying child. To be eligible for the credit, the taxpayer must receive earned income, which generally means wages or self-employment income. However, if an individual has retired on disability, taxable benefits received under their employer’s disability retirement plan are considered earned income until the individual reaches a minimum retirement age. If the disability benefits received are nontaxable, as would be the case if the disabled individual paid the premiums for the disability insurance policy from which the benefits come, then the benefits are not considered earned income. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children may qualify for the EITC.
If a taxpayer’s child is disabled, the qualifying child’s age limitation for the EITC is waived.
The EITC has no effect on certain public benefits. Any refund received because of the EITC will not be considered income when determining whether a taxpayer is eligible for benefit programs such as Supplemental Security Income and Medicaid.
Child or Dependent Care Credit – Taxpayers who pay someone to come to their home and care for their dependent or disabled spouse may be entitled to claim this credit. For children, this credit is usually limited to the care expenses paid only until age 13, but there is no age limit if the child is unable to care for themselves.
Special Medical Deductions When Claiming Itemized Deductions – In addition to conventional medical deductions, the tax code provides special medical deductions related to disabled taxpayers and dependents. They include:
• Impairment-Related Expenses – Amounts paid for special equipment or improvements installed in the home may be included as medical expenses deductible as part of itemized deductions, if their main purpose is medical care for the taxpayer, the spouse, or a dependent. The cost of permanent improvements that increase the value of the property may only be partly included as a medical expense.
 Learning Disability – Tuition paid to a special school for a child with severe learning disabilities caused by mental or physical impairments, including nervous system disorders, can be included as medical expenses eligible for the medical deduction when itemizing deductions. A doctor must recommend that the child attend the school. Fees for the child’s tutoring recommended by a doctor and given by a teacher who is specially trained and qualified to work with children who have severe learning disabilities might also be included.
• Drug Addiction – Amounts paid by a taxpayer to maintain a dependent in a therapeutic center for drug addicts, including the cost of the dependent’s meals and lodging, are included as medical expenses for itemized deduction purposes.
• Other Medical Expenses – Here are some other medical expenses that apply to individuals with disabilities:
o Cost of Braille books and magazines that exceeds the price of regular printed editions.
o Cost of a wheelchair used mainly for the relief of sickness or disability, not just to provide transportation to and from work, including the cost of operating and maintaining the wheelchair.
o Cost and care of a guide dog or other animal aiding a person with a physical disability.
o Cost of artificial limbs and hearing aids.
Exclusion of Qualified Medicaid Waiver Payments – Payments made to care providers caring for related individuals in the provider’s home are excluded from the care provider’s income if they meet certain requirements to be considered foster care payments. Even so, the nontaxable income may qualify as earned income for purposes of the care provider claiming the earned income tax credit. Qualified foster care payments are amounts paid under a state’s foster care program (or political subdivision of a state or a qualified foster care placement agency). For more information, please call.
ABLE Accounts – Qualified ABLE programs provide a way for individuals and families to contribute and save for the purpose of supporting individuals with disabilities in maintaining their health, independence, and quality of life.
Federal law authorizes states to establish and operate ABLE programs. Under these programs, an ABLE account may be set up for any eligible state resident – someone who became severely disabled before turning 26 – who would generally be the only person who could take distributions from the account. ABLE accounts are very similar in function to Sec. 529 plans. The main purpose of ABLE accounts is to shelter assets from the means testing required by government benefit programs.
Individuals can contribute to ABLE accounts, subject to per-account gift tax limitations (maximum $16,000 for 2022, up from $15,000, which it has been for several years). For years 2018 through 2025, working individuals who are beneficiaries of ABLE accounts are allowed to contribute limited additional amounts to their ABLE accounts, and these contributions can be eligible for the nonrefundable saver’s credit.
Distributions to the disabled individual are tax-free if the funds are used for qualified expenses of the disabled individual.
For more information on these benefits available to disabled taxpayers or dependents, please give this office a call.

IRS Tax Tips 2021-153: The tax responsibilities that come with shutting down a business

IRS Tax Tips 2021-153: The tax responsibilities that come with shutting down a business

IRS Tax Tip 2021-153, October 18, 2021

There are many reasons a business owner may choose to close their doors, and there are many things that must be done to go out of business. Two important steps all business owners must take are fulfilling their federal tax responsibilities and informing the IRS of their plans. The closing a business page of is designed to help owners navigate the process of shutting down.

Small businesses and self-employed taxpayers will find a variety of information on the page including:

  • What forms to file
  • How to report revenue received in the final year of business
  • How to report expenses incurred before closure

The page also details steps all business owners should take when closing a business.

  • File a final tax return and related forms. The type of return to file and related forms depends on the type of business.
  • Take care of employees. Business owners with one or more employees must pay any final wages or compensation, make final federal tax deposits and report employment taxes.
  • Pay taxes owed. Even if the business closes now, tax payments may be due next filing season.
  • Report payments to contract workers. Businesses that pay contractors at least $600 for services including parts and materials during the calendar year in which they go out of business, must report those payments.
  • Cancel EIN and close IRS business account. Business owners should notify the IRS so they can close the IRS business account.
  • Keep business records. How long a business needs to keep records depends on what’s recorded in each document.

The page also provides helpful information for business owners declaring bankruptcy, selling their business and terminating retirement plans.

Share this tip on social media — #IRSTaxTip: The tax responsibilities that come with shutting down a business.

IRS Tax Tips 2021-153: The tax responsibilities that come with shutting down a business

IRS Tax Tip 2021-149: Understanding taxpayer rights: The right to finality

IRS Tax Tip 2021-149, October 7, 2021

Taxpayers interacting with the IRS have the right to finality. This right comes into play for taxpayers who are going through an audit. These taxpayers have the right to know when the IRS has finished the audit. This is one of ten basic rights — known collectively as the Taxpayer Bill of Rights.

Here’s what taxpayers in the process of an audit, should know about their right to finality:

  • Taxpayers have the right to know:
    • The maximum amount of time they have to challenge the IRS’s position.
    • The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. 
    • When the IRS has finished an audit.  
  • The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.   
  • There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has an unlimited amount of time to assess tax for that tax year.  
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements or the IRS obtains court judgments.   
  • There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer’s bankruptcy or there’s an ongoing collection due process proceeding involving the taxpayer.  
  • A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.  
  • Generally, a taxpayer will only be subject to one audit per tax year. However, the IRS may reopen an audit for a previous tax year, if the IRS finds it necessary. This could happen, for example, if a taxpayer files a fraudulent return.

More Information:
Publication 1, Your Rights as a Taxpayer
Taxpayer Advocate Service

IRS Tax Tips 2021-153: The tax responsibilities that come with shutting down a business

IRS Tax Tip 2021-147: Here’s how a taxpayer’s custody situation may affect their advance child tax credit payments

Parents who share custody of their children should be aware of how the advance child tax credit payments are distributed. It is important to remember that these are advance payments of a tax credit that taxpayers expect to claim on their 2021 tax return. Understanding how the payments work will help parents to unenroll, if they choose, and possibly avoid a possible tax bill when they file next year.

Here are some of the most common questions about shared custody and the advance child tax credit payments.

If two parents share custody, how will the IRS decide which one receives the advance child tax credit payments?

Who receives 2021 advance child tax credit payments is based on the information on the taxpayer’s 2020 tax return, or their 2019 return if their 2020 tax return has not been processed. The parent who claimed the child tax credit on their 2020 return will receive the 2021 advance child tax credit payments.

If a parent is receiving 2021 advance child tax credit payments and they shouldn’t be, what should they do?

Parents who will not be eligible to claim the child tax credit when they file their 2021 tax return should go to and unenroll to stop receiving monthly payments. They can do this by using the Child Tax Credit Update Portal. Receiving monthly payments now could mean they have to return those payments when they file their tax return next year. If their custody situation changes and they are entitled to the child tax credit for 2021, they can claim the full amount when they file their tax return next year.

If parents alternate years claiming their child on their tax return, will the IRS send the 2021 advance child tax credit payments to the parent who claimed the child on their 2020 tax return even though they will not claim them on their 2021 tax return?

Yes. Because the taxpayer claimed their child on their 2020 tax return, the IRS will automatically issue the advance payments to them. When they file their 2021 tax return, they may have to pay back the payments over the amount of the credit they’re entitled to claim. Some taxpayers may be excused from repaying some or all of the excess amount if they qualify for repayment protection. If a taxpayer won’t be claiming the child tax credit on their 2021 return, they should unenroll from receiving monthly payments using the Child Tax Credit Update Portal.

If one parent is receiving the advance child tax credit payments even though the other parent will be claiming the child tax credit on their 2021 tax return, will the parent claiming the qualifying child still be able to claim the full credit amount?

Yes. Taxpayers will be able to claim the full amount of the child tax credit on their 2021 tax return even if the other parent is receiving the advance child tax credit payments. The parent receiving the payments should unenroll, but their decision will not affect the other parent’s ability to claim the child tax credit. has additional information and answers to frequently asked questions about custody situations and how they may affect advance payments of the child tax credit.

CTC Payment Technical Issue Resolved

CTC Payment Technical Issue Resolved

On Sept. 15, the IRS delivered a third monthly round of approximately 35 million child tax credits (CTC), totaling $15 billion. However, the IRS system had a technical issue. As a result, approximately 2% of eligible taxpayers did not receive the September payment.

According to an IRS statement, the impacted group primarily included taxpayers who recently made an update on their bank account or address on the IRS CTC Update Portal and affected payments to married filing jointly taxpayers where only one spouse made a bank or address change.

The IRS has since resolved the technical issue, and these individuals should have received their payments by direct deposit on Sept. 24, or this week for those receiving checks by mail.

Generally, there are multiple reasons why people may be seeing a different amount than expected. If only one spouse changed an address or bank account, the other spouse’s half could be going to the old address or bank account. In these instances, the full payment will still be distributed. Monthly payment amounts can also change depending on recently processed tax returns. The IRS encourages people to check the IRS CTC Update Portal for the latest payment information. (Source: NATP TAXPRO Weekly,  9/30/21).

IRS Tax Tips 2021-153: The tax responsibilities that come with shutting down a business

IRS Tax Tip 2021-142: How to avoid fraud and scams after a disaster

IRS Tax Tip 2021-142, September 27, 2021

Criminals and fraudsters often see disasters as an opportunity to take advantage of victims when they are the most vulnerable, as well as the generous taxpayers who want to help with relief efforts.

These disaster scams normally start with unsolicited contact. The scammer contacts their possible victim by telephone, social media, email or in-person. Also, taxpayers may search for a charity online and be directed to a website or social media page that is not affiliated with the actual charity.

Here are some tips to help taxpayers recognize a scam and avoid becoming a victim:

  • Some thieves pretend they are from a charity. They do this to get money or private information from well-intentioned taxpayers.
  • Bogus websites use names like legitimate charities. They do this scam to trick people to send money or provide personal financial information.
  • Scammers even claim to be working for ― or on behalf of ― the IRS. The thieves say they can help victims file casualty loss claims and get tax refunds.
  • Disaster victims can call the IRS toll-free disaster assistance line at 866-562-5227. Phone assistors will answer questions about tax relief or disaster-related tax issues.
  • Taxpayers who want to make donations can get information to help them on The Tax Exempt Organization Search helps users find or verify qualified charities. Donations to these charities may be tax-deductible.
  • Taxpayers should always contribute by check or credit card to have a record of the tax-deductible donation if they choose to give money. individual taxpayers can deduct up to $300 and married couples can deduct up to $600 in qualifying charitable contributions for tax year 2021 even if they don’t itemize.
  • Donors should not give out personal financial information to anyone who solicits a contribution. This includes things like Social Security numbers or credit card and bank account numbers and passwords.

More Information:
National Center for Disaster Fraud