IRS Offers Tips on Charity Travel

Do you plan to donate your time to charity this summer? If you incur travel expenses, you may be able to lower your taxes IF you itemize deductions on Schedule A. Here are some tax tips that you should know about deducting charity-related travel expenses:

• Qualified Charities.  To deduct your costs, you must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and do not need to apply to the IRS. Ask the group about its status before you donate. You can also use the Select Check tool on IRS.gov to check a group’s status.
  
• Out-of-Pocket Expenses.  You may be able to deduct some of your costs including travel. They must be necessary while you are away from home. All  costs must be:

o Unreimbursed,

o Directly connected with the services,

o Expenses you had only because of the services you gave, and

o Not personal, living or family expenses.

• Genuine and Substantial Duty.  Your charity work has to be real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip. 
  
• Value of Time or Service.  You can’t deduct the value of your time or services that you give to charity. This includes income lost while you serve as an unpaid volunteer for a qualified charity. 
• Travel You Can Deduct.  The types of expenses that you may be able to deduct include:  air, rail and bus transportation; car expenses; lodging costs; cost of meals; and taxi or other transportation costs between the airport or station and your hotel.
  
• Travel You Can’t Deduct.  Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or  vacation.

For more on these rules, see Publication 526, Charitable Contributions. You can get it on IRS.gov/forms at any time.

From IRS

Check Your Tax Withholding this Summer to Prevent a Tax-Time Surprise

Each year, many people get a larger refund than they expect. Some, however, find they owe more tax than they thought they would. Even if this has never happened to you, it's wise to review your situation to prevent a tax surprise. Did you marry? Have a child? Change in income? Life events can have a major impact on your taxes. Bring the taxes you pay closer to the amount you owe. Here are some tips to help you come up with a plan:

• New Job. When you start a new job, or change jobs, you must fill out a Form W-4, Employee's Withholding Allowance Certificate, and give it to your employer. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Use the IRS Withholding Calculator on IRS.gov to help you fill out the form. This tool is easy to use and it’s available 24/7.
  
• Estimated Tax. If you earn income that is not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe $1,000 or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure the tax.
  
• Life Events. Check to see if you need to change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or the purchase of a new home can change the amount of taxes you owe. In most cases, you can submit a new Form W–4 to your employer anytime.
  
• Changes in Circumstances. If you are receiving advance payments of the premium tax credit, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

The Withholding Calculator at IRS.gov is easy to use. All you need is your last pay stub. See if you can reduce your withholding (keep more in your check) or if you need to increase your withholding, so underpayment penalties do not apply.

For more see Publication 505, Tax Withholding and Estimated Tax. 

Additional IRS Resources:

• Publication 5152: Report changes to the Marketplace as they happen –English | Spanish

IRS YouTube Videos:

• IRS Withholding Calculator – English | Spanish | ASL
• Premium Tax Credit: Changes in Circumstances – English | Spanish |ASL

IRS Podcasts:

• IRS Withholding Calculator – English | Spanish
• Premium Tax Credit Changes in Circumstances – English | Spanish

From IRS

Taxation of Digital Products in Washington State

The taxation of digital products for sales and use tax purposes varies state-to-state: some states tax digital products such as photographs, movies, or music when downloaded from the Internet, but some do not.

In the State of Washington, sales (or use) tax apply to all digital products, regardless of how they are accessed (downloaded, streamed, subscription service, networking, etc.). 

Digital products subject to sales or use tax include:

• Downloaded digital goods (music and movies, etc.)
• Streamed and accessed digital goods
• Digital automated services (DAS)

The laws also cover remote access software (“RAS”) which is also subject to sales and use tax.

It does not matter if the purchaser obtains a permanent or nonpermanent right of use.

The Q&A below is provided by the Washington Department of Revenue. More detailed information is available on their website at http://dor.wa.gov/content/getaformorpublication/publicationbysubject/taxtopics/digitalproducts.aspx 

 What is a digital product?

• It is transferred electronically.
• Digital goods (movies and music, etc.)
• Digital automated services (services that have been automated)

What is a digital good?

• Data
• Facts
• Information
• Sounds (music)
• Images (movies, pictures)
• Any combination of the above.

When these are transferred electronically, they are digital goods.

Digital goods do not include:

• The representation of a personal or professional service primarily involving the application of human effort
• Internet access
• Computer software
• Digital automated services (DAS)
• Remote access software (RAS)

What are digital automated services (DAS)?

DAS are services that use one or more software applications and are transferred electronically. DAS includes software, but it is not merely software. A DAS will frequently include data, information or additional functionality/services (e.g. chat rooms, multiplayer capabilities etc).

Examples include:

• Photo sharing services
• Car history report services
• A service that crawls the internet and gathers, categorizes and stores information

DAS also does not include:

• Internet access
• Payment processing
• Data processing services
• Telecommunications
• Live interactive presentations
• Advertising services
• Web hosting, storage, and back up

What are data processing services?

Data processing services are primarily automated services provided to a business or other organization where the primary object of the service is the systematic performance of operations by the service provider, on data supplied in whole or in part by the customer, to extract the required information in an appropriate form or to convert the data to usable information. Data processing services include check processing, image processing, form processing, survey processing, payroll processing, claim processing, and similar activities. Charges for data processing services are subject to service and other activities B&O tax as a professional service (sales tax does not apply).

How does B&O tax apply to sales of digital products, digital codes, and RAS?

Taxpayers with nexus in Washington who sell digital products, digital codes, or remote access software sourced to Washington are subject to the B&O tax under the Retailing classification on the gross proceeds of retail sales and the B&O tax under the Wholesaling classification on the grossproceeds for wholesaling receipts. If digital products are licensed to someone who is not an end user, then those gross receipts are likely subject to the Royalties B&O tax.

Is the production of digital goods classified as manufacturing?

No. The production of digital goods is not manufacturing.

From Washington State Department of Revenue

About Your IRS Notice or Letter

The IRS normally sends correspondence in the mail, with millions of letters sent to taxpayers every year. Keep these important points in mind if you get a letter or notice:

• Don’t Ignore It.  You can respond to most IRS notices quickly and easily.
  
• Follow Instructions.  Read the notice carefully. It will tell you if you need to take any action. Be sure to follow the instructions. The letter will also have contact information if you have questions.
  
• Focus on the Issue.  IRS notices usually deal with a specific issue about your tax return or tax account. Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue. If you do not understand what you are supposed to do or have questions, you should contact your tax advisor.
  
• Correction Notice. If the IRS corrected your tax return, you should review the information provided and compare it to your tax return.

If you agree, you don’t need to reply unless a payment is due.

If you don’t agree, it’s important that you respond. Follow the instructions on the notice for the best way to respond to us. You may be able to call to resolve the issue. Have a copy of your tax return and the notice with you when you call. If you choose to write, be sure to include information and any documents you want the IRS to consider. Also, write your taxpayer identification number (Social Security number, employer identification number or individual taxpayer identification number) on each page of the letter you send. Mail your reply to the address shown on the notice. Allow at least 30 days for a response.

• Respond to Requests about the Premium Tax Credit.  The IRS may send you a letter asking you to clarify or verify your premium tax credit information. You should follow the instructions on the letter. For more information about these letters, see the Understanding Your Letter 0012C page on IRS.gov/aca.
  
• You Don’t Need to Visit the IRS.  You can handle most notices without visiting the IRS. If you have questions, call the phone number in the upper right corner of the notice. Have a copy of your tax return and the notice when you call.
  
• Keep the Notice.  Keep a copy of the IRS notice with your tax records.
  
• Watch Out for Scams.  Don’t fall for phone and phishing email scamsthat use the IRS as a lure. We will contact you about unpaid taxes by mail first – not by phone.  Be aware that the IRS does not initiate contact with taxpayers by email, text or social media.

Additional IRS Resources available at www.irs.gov :

• Tax Topic 651 – Notices – What to Do
• Tax Topic 653 – IRS Notices and Bills, Penalties and Interest Charges
• Understanding Your CP2000 Notice
• Understanding Your Letter 0012C

IRS YouTube Videos:

• Receive a Letter from the IRS? – English | Spanish | ASL

You Can Do It; I can help. DO NOT IGNORE IRS NOTICES. If you don't feel comfortable calling or writing the IRS yourself, I can help. Please email with any questions about your individual tax account.

From IRS

It's Time for a Premium Tax Credit Checkup

If you or anyone in your family are getting advance payments of the premium tax credit, it’s a good time for a checkup to see if you need to adjust your premium assistance. Since the advance payments are paid directly to your insurance company and lower the out-of-pocket cost for your health insurance premiums, changes in your income or family size may affect your credit.  You should report changes that have occurred since the time that you signed up for your health insurance plan.

Changes in circumstances that you should report to your Marketplace when they happen include:

• Increases or decreases in your household income including, lump sum payments; for example, lump sum payment of Social Security benefits
• Marriage
• Divorce
• Birth or adoption of a child
• Other changes affecting the composition of your tax family
• Gaining or losing eligibility for government sponsored or employer sponsored health care coverage
• Moving to a different address

Reporting the changes when they happen will help you avoid getting too much or too little advance payment of the premium tax credit.  Getting too much means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing out on premium assistance to lower what you pay out-of-pocket for your monthly premiums.

Changes in circumstances also may qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you generally have 60 days to enroll following the change in circumstances. You can find Information about special enrollment at HealthCare.gov.

The Premium Tax Credit Change Estimator can help you estimate how yourpremium tax credit will change if your income or family size changes during the year. This estimator tool does not report changes in circumstances to your Marketplace. 

To report changes and to adjust the amount of your advance payments of the premium tax credit you must contact your Health Insurance Marketplace.

from IRS