WASHINGTON – As tax filing season approaches, the Internal Revenue Service is reminding taxpayers about steps they can take now to ensure smooth processing of their 2016 tax return and avoid a delay in getting their tax refund next year.
The IRS reminds taxpayers to be sure they have all the documents they need, such as W-2s and 1099s, before filing a tax return. You may also need a copy of your 2015 tax return to make it easier to fill out a 2016 tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income amount from a prior tax return to verify their identity. Learn more about how to verify your identity and electronically sign your tax return at Validating Your Electronically Filed Tax Return. The IRS will begin accepting and processing tax returns once the filing season begins.
Under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), any Individual Taxpayer Identification Numbers (ITIN) issued prior to 2013 or that haven’t been used for tax-years 2013, 2014 and 2015 will no longer be valid for use on a tax return as of Jan. 1, 2017. Individuals with expiring ITINs who need to file a return in 2017 will need to renew their ITIN. This process typically takes 7 weeks to receive an ITIN assignment letter, but the process can take longer - 9 to 11 weeks if taxpayers wait to submit Form W-7 during the peak filing season, or send it from overseas. Taxpayers who do not renew an expired ITIN before filing a tax return next year, could face a delayed refund and may be ineligible for certain tax credits. For more information, visit the ITIN information page on IRS.gov.
If you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) on your tax return, the IRS must hold your refund until February 15. This new law requires the IRS to hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure that you receive the refund you are owed by giving the agency more time to help detect and prevent fraud.
The IRS always cautions taxpayers not to rely on getting a refund by a certain date, especially when making major purchases or paying bills. Though the IRS issues more than nine out of 10 refunds in less than 21 days, some returns are held for further review.
The easiest way to avoid common errors that delay processing a tax return is to e-file. E-file is the most accurate way to prepare a return and file. There are a number of e-file options:
With direct deposit, the refund goes directly into the taxpayer’s bank account. There is no risk of having the refund check stolen or lost in the mail. This is the same electronic transfer system used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts. Direct deposit also saves taxpayer dollars. It costs the nation’s taxpayers more than $1 for every paper refund check issued but only a dime for each direct deposit made.
The IRS has a special page on IRS.gov with steps to take now for the 2017 tax filing season.
Many businesses use independent contractors to keep payroll taxes and fringe benefit costs down. But using outside workers may result in other problems. The IRS often questions businesses about whether workers should be classified as employees or independent contractors for federal employment tax purposes.
If the IRS reclassifies a worker as an employee, your company could be hit with back taxes, interest and penalties. In addition, the employer could be liable for employee benefits that should have been provided but weren’t. Audits by state agencies may also occur.
The key is control
So, how can you safeguard your use of independent contractors? Unfortunately, no single factor determines a worker’s legal status. The issue is complicated, but the degree of control you have over how a worker gets the job done is often considered the most important factor. Little or no control indicates independent contractor status.
The IRS looks at a number of other issues, including:
Tools and facilities. Employers usually give tools, equipment and workspace to employees, while contractors invest their own money in these items.
Hours. Employees generally have set schedules, while contractors are allowed greater flexibility. (However, the IRS recognizes that some work must be done at specific times.)
With those guidelines in mind, here are some tips: