New Form for Employees Misclassified as Independent Contractors

In 2007 were you an employee whose employer paid you as an independent contractor? Employees usually receive a Form W-2 while independent contractors usually receive a Form 1099-MISC.

Generally, a worker who received a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit using Schedule SE. However, if the worker was actually an employee, rather than an independent contractor, the worker is not required to pay the full self-employment tax, and expenses can only be deducted as an itemized deduction.

Beginning in 2007, Form 8919, Uncollected Social Security and Medicare Tax on Wages, may be used if you were an employee and your employer did not withhold your share these taxes and you meet certain criteria. These taxes will then be credited to you social security records.

To be eligible to use Form 8919 you must meet one of several criteria indicating that you were an employee while performing these services. The criteria include:

• You filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating that you are an employee of the firm.
• You have been designated as a “section 530 employee” by your employer or by the IRS prior to January 1, 1997.
• You have received other correspondence from the IRS that states you are an employee.
• You were previously treated as an employee by the firm and you are performing services in a similar capacity and under similar direction and control.
• Your co-workers are performing similar services under similar direction and control and are treated as employees.
• Your co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
• You have filed Form SS-8 with the IRS and have not yet received a reply.

For more information see Form 8919, Uncollected Social Security and Medicare Tax on Wages available on the IRS Web site at IRS.gov or by calling 800-TAX FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• Form 1099-MISC, Miscellaneous Income

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Are You Eligible for a Tax Credit?

Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes.

Taxpayers should consider their eligibility for the credits listed below:

• The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit. For more information, see IRS Publication 596, Earned Income Credit.
• The Child and Dependent Care Credit is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
• The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
• Adoption Credit Adoptive parents may qualify for a tax credit of up to $11,390 for qualifying expenses paid to adopt each eligible child. The credit may be allowed for the adoption of a child with special needs even if you do not have any qualifying expenses. For more information, see the instructions for Form 8839, Qualified Adoption Expenses.
• Credit for the Elderly or the Disabled This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations. For more information, see IRS Publication 524, Credit for the Elderly or the Disabled.
• Savers Credit (formally called the Retirement Savings Contribution Credit) You may be able to take the credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans. For more information, see IRS Publication 590, Individual Retirement Accounts.

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check the instructions for Form 1040, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www .irs.gov.

Links:

• 1040 Central
• Publication 596, Earned Income Credit (EIC) (PDF 281K)
• Publication 972, Child Tax Credit (PDF 128K)
• Publication 503, Child and Dependent Care Expenses (PDF 167K)
• Publication 524, Credit for the Elderly and Disabled (PDF 140K)
• Publication 970, Tax Benefits for Education (PDF 368K)
• Publication 590, Individual Retirement Arrangements (IRAs) (PDF 449K)
• Form 1040 Instructions (PDF 1,101K)

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MOVING SOON? LET THE IRS KNOW

If you changed your home or business address, notify the IRS to ensure that you receive any refunds or correspondence. While the IRS uses the Postal Service’s change of address files to update taxpayer addresses, notifying the IRS directly is still a good idea.

There are several ways to do this.

• On your tax return. You may correct the address legibly on the mailing label that comes with your tax package or write the new address in the appropriate boxes on your tax return when you file.
• Form 8822. You may use Form 8822, Change of Address, to submit an address or name change at any time during the year.
• Written Notification. To give written notification, write to the IRS center where you file your return and provide your new address. The addresses for the IRS centers are listed in the tax instructions. In order to process an address change, the IRS will need your full name, old and new addresses, and your social security number or employer identification number, and signatures. If you filed a joint return, you should provide the same information for both spouses. If you filed a joint return and have since established separate residences, you each should notify the IRS of your new addresses.
• Verbal Notification. If an IRS employee contacts you about your account, you may be able to verbally provide a change of address.

It's a good idea to notify your employer of your new address so that you can get your W-2 forms on time.

If you change your address after filing your return, don't forget to notify the post office at your old address so your mail can be forwarded.

You should also notify the IRS if you make estimated tax payments and you change your address during the year. You should mail a completed Form 8822, Change of Address, or write the IRS center where you file your return. You can continue to use your old pre-printed payment vouchers until the IRS sends you new ones. However, do not correct the address on the old voucher.

You can download Form 8822, Change of Address at the IRS Web site, IRS.gov, or order by calling 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• Form 8822, Change of Address (PDF 60K)
• Tax Topic 157, Change of Address — How to Notify IRS

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IRS Successfully Processing Tax Forms Affected by AMT Legislation

The Internal Revenue Service is now processing five tax forms affected by legislation involving the Alternative Minimum Tax (AMT).

On Monday, IRS systems began to accept and process returns that include the five affected forms. After several days of processing, the IRS has confirmed all systems are working properly.

In late December, the IRS announced it would delay processing of several tax forms. For the vast majority of taxpayers, the filing season this year began on time. But for any taxpayer whose return included any of the five affected forms, filing opened on Feb. 11.

Taxpayers who use the five forms can now file their tax returns as normal.

The affected forms are:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers;
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

Approximately 13.5 million taxpayers will use these forms this year. Altogether, the IRS expects to receive nearly 140 million individual tax return submissions this year.

The IRS has worked closely with the software industry and tax practitioners during the reprogramming process to minimize disruptions for taxpayers and the tax community.
For more information, see Alternative Minimum Tax –– How It Affects Filing Season 2008.

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e-file – A Smart Way To Do Your Taxes

The IRS is again offering eligible taxpayers the opportunity to electronically prepare and file their tax returns for free through Free File, a program offered in partnership between the IRS and private-sector software companies. For information on taxpayer eligibility, access the Free File Web page at IRS.gov.

For more information on e-file, check the IRS Web site at www.irs.gov/efile. You will also find a withholding calculator and worksheet, along with Form W-4, Employee’s Withholding Allowance Certificate, on the Web site. You may also get Form W-4 from your employer or by calling the IRS at 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• E-file
• Free File
• Form W-4, Employee's Withholding Allowance Certificate (PDF 31K)
• Withholding calculator
• Electronic Federal Tax Payment System

IRS Tax Forms

Here are some links to 4 of the most popular IRS tax forms. The IRS website is not the easiest to find what you need, so I decided to post the links here. These are all in PDF format, and you can save them to your computer and print them off if you need to.

Form 1040

Form 1040-EZ

Form W-4

2007 1040 Tax Table

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