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Although filing season might be over for most taxpayers, the IRS is available year-round for any questions. They also have a Taxpayer Bill of Rights, which promises the level of service and information you will receive when working with the IRS.

Here are the ten fundamental rights you have as a taxpayer when interacting with the IRS:

• The right to be informed: As a taxpayer, you must know what is required to comply with tax laws.
• The right to quality service: You will receive prompt, courteous, professional assistance.
• The right to pay no more than the correct amount of tax: You only pay what is legally due, including interest and penalties.
• The right to challenge the IRS’ position and be heard: You can object to IRS actions and provide further justification with documentation.
• The right to appeal an IRS decision in an independent forum: Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties.
• The right to finality: You have the right to know how much time you have to challenge an IRS position and how soon the IRS must audit your taxes.
• The right to privacy: All IRS inquiries, examinations, and enforcement will not be more intrusive than necessary.
• The right to confidentiality: Taxpayers have the right to expect that their tax information will remain confidential.
• The right to retain representation: Taxpayers have the right to retain an authorized representative of their choice to represent them in their interactions with the IRS.
• The right to a fair and just tax system: Taxpayers have the right to expect fairness from the tax system; this includes considering all facts and circumstances that might affect their liabilities and their ability to pay or provide information in a timely fashion.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁴

Footnotes and Sources

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Classifying workers as independent contractors or employees is essential for several tax reasons. The basis for this classification has two primary considerations: control and relationship.

Control refers to how much of the person’s work you control; this encompasses the completed work, its execution, and whether you control the financial aspects of the person’s job. In this manner, “control” means both behavioral and financial control.

Another critical factor is the relationship between the employer and the worker. How both parties perceive this relationship can guide you in determining the worker’s status. Some factors that influence relationships include the following.

• Written contracts that describe the relationship the parties intended to create.
• Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation, or sick pay.
• The permanency of the relationship.
• The extent to which services performed by the worker are a pivotal aspect of the company’s regular business.
• The extent to which the worker has unreimbursed business expenses.

Classifying your workers is essential because independent contractors and employees face different tax needs and implications.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁵

Footnotes and Sources

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Whether you pick up painting or cook new concoctions in your kitchen, starting a new hobby is always fun and a great avenue to learn something new. However, there are some important tax considerations when starting a new hobby, especially if you are considering turning your newfound passion into a business.

Taxpayers must report any income earned from hobbies, even if it does not involve a licensed business. While businesses should make a profit, hobbies are primarily recreation. The following nine factors can guide you in determining whether a hobby could also be considered a business, according to the IRS:

• Whether you execute the activity in a businesslike manner and maintain complete and accurate books and records.
• Whether you have personal motives in performing the activity.
• Whether the time and effort you expend in the activity indicate that you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you or your financial professional understand how to parlay the activity into a successful business.
• Whether you successfully made a profit through similar activities in the past.
• Whether the activity will make a profit in some years and how much profit it will make.
• Whether you can profit from appreciating the assets used in the activity.

You can also deduct some of the expenses associated with your hobby. Within certain limits, taxpayers can typically deduct ordinary and necessary hobby expenses. An ordinary expense is common and accepted for the activity, while a necessary expense is appropriate.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Footnotes and Sources

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If you receive Social Security benefits, you may have to pay federal income tax on some of these benefits. Your payment will depend on your specific income and filing status.

To find out whether your Social Security benefits are taxable, if you are single, take half of the Social Security money you received throughout the year and add it to your other income, including pensions, wages, interest, dividends, and capital gains. If the total for an individual exceeds $25,000, part of your benefits may be taxable.

If you are married filing jointly, take half of the Social Security money you received throughout the year plus half of your spouse’s Social Security benefits; add both amounts to your combined household income. If the total is over $32,000, part of your benefits may be taxable.

The IRS’s website delineates the taxable percentage of benefits based on the above calculation. These percentages vary between 50% to 85% and depend on your filing status and income levels. For example, if you are filing as a single person with $25,000 to $34,000 income, 50% of your Social Security benefits may be taxable.

The Interactive Tax Assistant on IRS.gov can help you determine whether your Social Security benefits are taxable and, if so, by how much.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

Footnotes and Sources

6. ^{The Wall Street Journal, May 10, 2024}

If you receive a cash payment of over $10,000, you may be required to report it to the IRS. In this case, a cash payment includes U.S. or foreign currency and can also include cashier’s checks, bank drafts, traveler’s checks, or money orders.

In addition, cash payments to individuals can also include payments from companies, corporations, partnerships, or associations. For example, these could consist of payments from the following parties:

• Dealers of jewelry, furniture, boats, aircraft, automobiles, art, rugs, and antiques
• Pawnbrokers
• Attorneys
• Real estate brokers
• Insurance companies
• Travel agencies

This requirement refers to cash payments received as one lump sum, in two or more payments within 24 hours, as a single transaction within 12 months, or as part of two or more transactions within 12 months.

So, how do you report cash payments? Taxpayers should complete Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. You can file this form electronically or mail a copy to the IRS. You must submit Form 8300 within 15 days after receiving the cash payment.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Footnotes and Sources

^{6 IRS.gov, July 26, 2023}