Topic 651 – Notices – What to Do
If you receive a letter or notice from the IRS, it will explain the reason for the contact and give you instructions on how to handle your problem. If you agree with the changes, there’s no need to contact us. If you owe a balance, follow the instructions for sending your payment. If you don’t agree, please r…[Read more]

Topic 652 – Notice of Underreported Income – CP-2000
The IRS compares the payment information reported to the IRS by employers, banks, businesses, and other payers on income documents (Forms W-2, 1098, 1099, etc.) to the income, credits, and deductions you report on your income tax return. The Automated Underreporter (AUR) function uses an a…[Read more]

Topic 701 – Sale of Your Home
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic 409 covers…[Read more]

Topic 703 – Basis of Assets
The basis is generally the amount of your capital investment in property for tax purposes. Use your basis to figure depreciation, amortization, depletion, casualty losses, and any gain or loss on the sale, exchange, or other disposition of the property.

In most situations, the basis of an asset is its cost to you. The…[Read more]

Topic 704 – Depreciation
You generally can’t deduct in one year the entire cost of property you acquired, produced, or improved and placed in service for use either in your trade or business or to produce income if the property is a capital expenditure. Instead, you generally must depreciate such property. Depreciation is the recovery of the cost…[Read more]

Topic 705 – Installment Sales
An installment sale is a sale of property where you’ll receive at least one payment after the tax year in which the sale occurs. You’re required to report a gain on an installment sale under the installment method unless you “elect out” on or before the due date for filing your tax return (including extensions) for…[Read more]

Topic 751 – Social Security and Medicare Withholding Rates
Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as social security taxes, and the hospital insurance tax, also known as Medicare taxes. Different rates apply for these taxes.

Social Security and…[Read more]

Topic 752 – Filing Forms W-2 and W-3
Form W-2

Employers must complete, file electronically or by mail with the Social Security Administration (SSA), and furnish to their employees Form W-2 (PDF), Wage and Tax Statement, showing the wages paid and taxes withheld for the year for each employee. Because Form W-2 is the only document used to transmit…[Read more]

Topic 753 – Form W-4 – Employee’s Withholding Allowance Certificate
General Information

When you hire an employee, you must have the employee complete a Form W-4 (PDF), Employee’s Withholding Allowance Certificate. Form W-4 tells you, as the employer, the marital status, the number of withholding allowances, and any additional amount to use w…[Read more]

Topic 755 – Employer Identification Number (EIN) – How to Apply
An employer identification number (EIN) is a nine-digit number assigned by the IRS. It’s used to identify the tax accounts of employers and certain others who have no employees. The IRS uses the number to identify taxpayers who are required to file various business tax returns. EINs a…[Read more]

Topic 756 – Employment Taxes for Household Employees
Household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your private residence as your employee. Repairmen, plumbers, contractors, and other business people who provide their services as independent contractors, are not your employees. Household…[Read more]

Topic 757 – Forms 941 and 944 – Deposit Requirements
Generally, employers are required to deposit the employment taxes reported on Forms 941, Employer’s QUARTERLY Federal Tax Return, or Form 944 (PDF), Employer’s ANNUAL Federal Tax Return. Both forms report federal income tax withheld from your employees, along with the employer’s and employee’s s…[Read more]

Topic 758 – Form 941 – Employer’s Quarterly Federal Tax Return and Form 944 – Employer’s Annual Federal Tax Return
Generally, you must file Form 941 (PDF), Employer’s QUARTERLY Federal Tax Return, or Form 944 (PDF), Employer’s ANNUAL Federal Tax Return, to report wages you’ve paid and tips your employees have reported to you, as well as emp…[Read more]

Topic 759 – Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return – Filing and Deposit Requirements
Who Must File Form 940?

Most employers pay both a federal (FUTA) and a state unemployment tax. There are three tests used to determine whether you must pay FUTA tax: a general test, household employees test, and farm workers emp…[Read more]

Topic 760 – Form 943 – Reporting and Deposit Requirements for Agricultural Employers
Employers who paid wages to agricultural employees that are subject to income tax, social security or Medicare withholding must file a Form 943 (PDF), Employer’s Annual Federal Tax Return for Agricultural Employees, to report those wages.

Additionally, you’re sub…[Read more]

Topic 761 – Tips – Withholding and Reporting
Employees who receive cash tips of $20 or more in a calendar month while working for you, are required to report to you the total amount of tips they receive. The employees must give you written reports by the tenth of the following month. Employees who receive tips of less than $20 in a calendar m…[Read more]

Topic 762 – Independent Contractor vs. Employee
For federal employment tax purposes, the usual common law rules are applicable to determine if a worker is an independent contractor or an employee. Under the common law, you must examine the relationship between the worker and the business. You should consider all evidence of the degree of control…[Read more]

Topic 763 – The Affordable Care Act
The Affordable Care Act, enacted in 2010, contains tax provisions that are in effect and more that will be implemented during the next several years. The information under the following headings briefly explains some of the income tax provisions of the legislation.

Small Business Health Care Tax Credit
This…[Read more]

Topic 801 – Who Must File Information Returns Electronically
The requirements to file electronically depend on the type of information returns that are being filed.

Section 6011(e)(2)(A) of the Internal Revenue Code and the regulations thereunder require any person, including a corporation, partnership, employer, estate and trust, who files 250…[Read more]

Topic 802 – Applying to File Information Returns Electronically
FIRE

All filers must obtain approval from the Internal Revenue Service, Technical Services Operation (TSO), and be assigned a Transmitter Control Code (TCC) prior to electronically filing Forms 1042-S, 1097-BTC, 1098, 1099, 3921, 3922, 5498, 8027, 8955-SSA, and W-2G. Once approval to…[Read more]