The IRS would like you to know about six self-employment and self- employment tax tips.

Six Key Points

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.
4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.
5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov or by calling the IRS forms and publications order line at 800.TAX.FORM (800.829.3676).

Links:

• Publication 334, Tax Guide for Small Business
• Publication 535, Business Expenses
• Publication 505, Tax Withholding and Estimated Tax
• Schedule C, Profit or Loss from Business and instructions
• Schedule C-EZ, Net Profit from Business
• Schedule SE, Self-Employment Tax and instructions
• Form 1040-ES, Estimated Tax for Individuals
• Understanding Your 1099-K

Nashville, TN – Tennessee Governor Bill Haslam tonight delivered his 2012 State of the State address before a joint session of the General Assembly in which he shared his vision for the state and called upon those watching and listening to “Believe in Better.”

“We can believe in better for how state government serves Tennesseans,” Haslam said. “We can believe in better when it comes to the education of our children, and we can believe in better when we talk about a stronger, healthier economy for our state.”

Tennessee Governor Bill Haslam delivered his State of the State address on January 30th.

During his speech, the governor emphasized the importance of Tennessee job growth, a continued focus on improving education, public safety, a more customer-focused, efficient and effective state government and keeping taxes low.

“Our role in state government is to provide services that Tennesseans aren’t able to get on their own – we build roads, offer higher education options, guard prisoners, help families adopt children, care for the mentally ill, patrol highways, serve veterans and perform hundreds of other services,” Haslam said. “My job as governor is to make sure we are providing those services in a customer-focused and effective way.”

Haslam also outlined his Fiscal Year 2012-2013 budget proposal, which reflects his priorities and includes strategic investments, necessary reductions and savings for the future.

Highlights of the Budget Include

Restoration of more than $100 million of the $160 million “core services” funding that was designated two years ago to be cut such as:

• The Coordinated School Health program;
• Extended teacher contracts;
• Alcohol and abuse treatment programs;
• Juvenile justice grants;
• Diabetes prevention;
• And matching dollars for state employee 401k programs.

Full funding for the Basic Education Program.

Nearly $264 million to fund long-deferred capital outlay projects in higher education including:

• A new science building at Middle Tennessee State University;
• A science lab at the University of Tennessee in Knoxville;
• A new patient diagnostic center at the University of Tennessee Health Science Center in Memphis;
• And planning money for new buildings at Nashville State Community College, Northeast State Community College, the University of Memphis and the University of Tennessee – Chattanooga.

A 2.5 percent pay increase for state employees.

$50 million to the Rainy Day Fund bringing it up to $356 million.

A continued commitment to the West Tennessee Megasite with $25 million.

More than $23 million to fund a new veterans home in Bradley County.

The budget also includes funding for the governor’s legislative proposals announced earlier in the month that include:

Tougher sentences for certain gang-related crimes and for gun possession by those with prior violent felony convictions along with mandatory incarceration for repeat domestic violence offenders;

Raising the exemption level on the estate tax in Tennessee from $1 million to $1.25 million to lower the tax burden on family farmers and family business owners;

And lowering the state portion of the sales tax on food from 5.5 percent to 5.3 percent with the goal of lowering it to 5 percent during the next three years.

“I promise to be relentless when it comes to providing the very best service to our taxpayers for the very lowest price. They deserve it,” Haslam said. “And on issue or policy, our administration will always work to get to the right answer, not just our own answer…Working together, we are going to achieve better for Tennessee.”

The complete text of the governor’s speech and an archived video of his speech are available at www.tn.gov/StateoftheState.

“The IRS offers options that can boost your tax refund and let you avoid paying a tax preparation fee,” said IRS spokesman Dan Boone.

First, those who worked some part of 2011 but made less than $49,078 may qualify for the Earned Income Tax Credit (EITC), which can increase tax refunds by as much as $5,751. Workers with qualifying children get the highest amount of EITC.Second, people whose household income was less than $50,000 or who are age 60 or older can have their taxes prepared and e-filed free at one of 177 community help sites in 53 Tennessee counties.

Many of the help sites are opening this week.

These sites are staffed by IRS-trained and certified volunteers and are usually coordinated by local nonprofits or government agencies. Residents can locate the closest site by calling their community’s 211 number for local services or by calling the IRS at 1.800.906.9887.

Check out how the IRS delivers the latest tax information, initiatives, products and services through social media.

Click here to view the embedded video.

Social Media List

1. IRS2Go The IRS recently launched a smartphone application that allows you interact with the IRS using your mobile device. Our app can help you get your refund status and tax updates. IRS2Go is available for the iPhone or iTouch and the Android.
2. YouTube The IRS offers short, informative videos on an assortment of tax-related topics through our YouTube Video channel. The videos are offered in English, American Sign Language and a variety of foreign languages.
3. Twitter IRS tweets include tax-related announcements, news for tax professionals and updates for job seekers. Follow us @IRSnews.
4. Audio files for podcasts These short audio recordings provide useful information on one tax-related topic per podcast. They are available on iTunes or through the Multimedia Center on IRS.gov (along with their transcripts).
5. Widgets These tools, which can be placed on websites, blogs or social media networks, direct others to IRS.gov for information. The widgets feature the latest tax initiatives and programs and can be found on Marketing Express, the marketing site that allows IRS partners and tax preparers to customize their IRS communications products.
6. RSS Really Simple Syndication, or RSS, is an easy way to gather a wide variety of content in one place on your computer. The IRS now offers RSS feeds. RSS, is an easy way to get the news you want whenever it is updated, even if you are not on our website.

Keep in mind that the IRS uses these tools to share information with you. Do not post any confidential information on new or social media sites, especially your Social Security number. The IRS will not be able to answer personal tax or account questions through any of these services.

To find links to all of IRS’s social media tools, visit www.irs.gov and click on “Social Media.”

Links:

• IRS New Media
• IRS Multimedia Center

Free File offers two options: easy-to-use software or online fillable forms.

Free File software is for taxpayers who earn $57,000 or less

Nearly 100 million Americans – that’s 70 percent of the nation’s taxpayers – can use the free brand-name software and secure e-filing offered by private-sector companies. Software products also are available in Spanish. Each company sets its eligibility requirements, generally based on income, age or state residency. However, if your adjusted gross income was $57,000 or less in 2011, you will find at least one tax software product to use.

Here’s how it works: You must access Free File through the IRS website. At www.irs.gov/freefile, there’s an online tool which allows you to give a little information about yourself then guides you to the software for which you are eligible. Or, you can review a complete list of companies and their offerings and make a selection.

Once you select a software product, you will be directed away from the IRS website and onto that company’s website. There, the software will generally offer you a step-by-step guide through the tax preparation process.

Free File does all the hard work. You don’t need to be a tax expert; the software will help find tax breaks, such as the Earned Income Tax Credit, that you may be due. The software asks the questions; you supply the answers. It will find the right tax forms and do the math. Free File has a high satisfaction rate among its users, 98 percent recommend it to others. The IRS issues refunds to 98% of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

A word about security: All Free File companies use the latest in secure technology. The safety of taxpayer information is everyone’s priority. Thirty-three million taxpayers have safely and securely used Free File since it started in 2003.

Some companies provide state tax return software – sometimes for free and sometimes for a fee. Some states also have a relationship with the Free File Alliance; those states are listed on the companies’ websites.

Free File Fillable Forms Is Another Free Option

For people who make more than $57,000 or who are comfortable preparing their own tax return, the IRS offers Free File Fillable Forms. It also must be accessed through www.irs.gov/freefile. There is no software assistance with Free File Fillable Forms, but it does basic math calculations for you. It does not support state income tax returns, but it is perfect for the true do-it-yourself taxpayer who prefers paper tax returns. Free File Fillable Forms also offers free e-filing.

Links

• IRS Free File

If you’re e-filing, the software will choose the best form for you, but if you’re taking pencil to paper, make it as simple as possible by choosing the simplest tax form for your situation.

The quickest way to get forms and instructions is the IRS website at www.irs.gov. Taxpayers can also get them from a local IRS office, a participating community outlet like many libraries and post offices, or from the IRS’s automated forms line at 1.800.TAX.FORM.

Here are some general rules to consider when deciding which paper tax form to file.

Use the 1040EZ if:

• Your taxable income is below $100,000
• Your filing status is single or married filing jointly
• You are not claiming any dependents
• Your interest income is $1,500 or less

Use the 1040A if:

• Your taxable income is below $100,000
• You have capital gain distributions
• You claim certain tax credits
• You claim adjustments to income for IRA contributions and student loan interest

If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. Among the reasons you must use the 1040 are:

• Your taxable income is $100,000 or more
• You claim itemized deductions
• You are reporting self-employment income
• You are reporting income from sale of property

You can gain quick and easy access to IRS forms and instructions or find out more about e-file by visiting www.irs.gov. Tax products are available 24 hours a day, seven days a week and often appear online well before they are available on paper. To view and download tax products, visit the IRS website and select Forms and Publications.

Links

• Form 1040EZ, Individual Income Tax Return (PDF 105K )
• Form 1040A, Individual Income Tax Return (PDF 138K)
• Form 1040, Individual Income Tax Return (PDF 181K)
• Publication 17, Your Federal Income Tax
• Publication 17, Your Federal Income Tax (PDF 2.3MB)
• 1040 Central

Nashville, TN – Tennessee Commissioner of Labor & Workforce Development Karla Davis announced today Tennessee’s unemployment rate for December fell to 8.7 percent, down from the November revised rate of 9.1.

The national unemployment rate for December 2011 was 8.5 percent, a decrease of 0.2 percentage point from the November rate.

“This is the lowest unemployment rate Tennessee has experienced since December 2008 when the rate was 8.4 percent,” Commissioner Davis said. “The drop in Tennessee’s rate is largely due to a notable increase of 11,200 employed persons from November to December.”

UT Economist Bill Fox states the Tennessee rate parallels the national picture. “The drop in Tennessee’s unemployment rate mirrors what is happening nationally, but Tennessee has had much stronger employment growth.”

Major Changes in Estimated Nonagricultural Employment

November 2011 to December 2011

From November to December, professional and business services increased 5,400 jobs; durable goods manufacturing was up by 1,000 jobs; and clothing and clothing accessories stores increased by 700 jobs. From November to December, leisure and hospitality decreased by 3,500 jobs; state government educational services was down 2,500 jobs; and mining, logging, and construction declined by 1,900 jobs.

Major Changes in Estimated Nonagricultural Employment

December 2010 to December 2011

Year-over-year increases took place in local government education services, up 11,200 jobs; mining, logging, and construction was up 7,100 jobs; and manufacturing increased by 6,900 jobs. Employment decreases took place in trade, transportation, and utilities, which were down by 5,500 jobs; information was down 1,300 jobs; and hospitals declined by 900 jobs.

The legitimate taxpayer may be unaware that anything has happened until they file their return later in the filing season and it is discovered that two returns have been filed using the same Social Security number.

Here are the top 13 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief.

1. The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS does not send emails stating you are being electronically audited or that you are getting a refund.
2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.
3. Identity thieves get your personal information by many different means, including:* Stealing your wallet or purse
   * Posing as someone who needs information about you through a phone call or
   e-mail
   * Looking through your trash for personal information
   * Accessing information you provide to an unsecured Internet site.
4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov,’ forward that link to the IRS at phishing@irs.gov.
5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx.
6. If your Social Security number is stolen, another individual may use it to get a job. That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return. When this occurs, you should contact the IRS to show that the income is not yours. Your record will be updated to reflect only your information. You will also be asked to submit substantiating documentation to authenticate yourself. That information will be used to minimize this occurrence in future years.
7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.
8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 978-684-4542. Please be sure to write clearly. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800.908.4490. You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.
9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number.
10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.
11. IRS impersonation schemes flourish during tax season and can take the form of e-mail, phone websites, even tweets. Scammers may also use a phone or fax to reach their victims. If you receive a paper letter or notice via mail claiming to be the IRS but you suspect it is a scam, contact the IRS at http://www.irs.gov/contact/index.html to determine if it is a legitimate IRS notice or letter. If it is a legitimate IRS notice or letter, reply if needed. If the caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484. You may also fax the notice/letter you received, plus any related or supporting information, to TIGTA. Note that this is not a toll-free FAX number 1-202-927-7018.
12. While preparing your tax return for electronic filing, make sure to use a strong password to protect the data file. Once your return has been e-filed, burn the file to a CD or flash drive and remove the personal information from your hard drive. Store the CD or flash drive in a safe place, such as a lock box or safe. If working with an accountant, you should ask them what measures they take to protect your information.
13. If you have information about the identity thief that impacted your personal information negatively, file an online complaint with the Internet Crime Complaint Center (IC3) at www.ic3.gov. The IC3 gives victims of cyber crime a convenient and easy-to-use reporting mechanism that alerts authorities of suspected criminal or civil violations. IC3 sends every complaint to one or more law enforcement or regulatory agencies that have jurisdiction over the matter.

Links

• FS-2012-07, Protect Yourself from Identity Theft
• FS-2012-08, Taxpayer Guide to Identity Theft

In fact, last year, 112 million people – 78 percent of all individual taxpayers – used IRS e-file to electronically transmit their tax returns to the IRS. The number of people who use a paper tax return or who mail a tax return dwindles each year – and for good reason.

4 Reasons To File Electronically

1. Safety and security. E-file providers must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your return. If the IRS rejects the return, the receipt will explain why so you can quickly correct and resubmit.
2. Faster refunds. An e-filed tax return normally means a fast refund. If you combine e-file and direct deposit the IRS can typically issue your refund in as few as 10 days. About three of four taxpayers receive a refund and last year the average refund was approximately $2,900.
3. More payment options. If you e-file you can file early and set an automatic payment withdrawal date for any date on or before the April due date. You may also pay by paper check or even by credit card.
4. It’s easy. You can e-file through your tax preparer, use commercial tax preparation software or through Free File, the free tax preparation and e-filing service available exclusively at www.irs.gov.

Starting in January 2012, any paid preparer or firm that reasonably anticipates preparing and filing 11 or more Form 1040 series returns, Form 1041 returns or a combination of both generally must use IRS e-file. These tax return preparers must be authorized IRS e-file providers so they can transmit tax returns electronically. More information for paid preparers is available at www.irs.gov.

Links

• E-file
• Electronic Federal Tax Payment System

Nashville, TN – The Internal Revenue Service opened the 2012 electronic tax return filing season today with a reminder that e-file remains the best way to get fast refunds and ensure accurate tax returns, and that e-filing can be free for everyone through the IRS Free File program at www.IRS.gov.

In Tennessee, about 83 percent of all tax returns received by the IRS in 2011 were e-filed. More than 880,000 of returns that were e-filed were self-prepared by taxpayers using their own computers.

Nationwide, more than 112 million income tax returns were e-filed last year, or 77 percent of all individual returns filed. IRS e-file has surpassed the milestone of 1 billion returns processed.

“E-filing is fast, easy, and accurate, plus it’s safe and secure,” said IRS spokesman Dan Boone. “And through IRS Free File, taxpayers don’t have to pay anything to prepare and e-file their returns.”

Taxpayers can e-file their tax returns one of three ways: through a tax return preparer, through self-preparation software or through IRS Free File.

IRS Free File, which has been making taxes a little less taxing for a decade, also begins today, January 17th. Everyone can use Free File, either the brand-name software offered by IRS’ commercial partners or the online fillable forms.

Individuals or families with 2011 adjusted gross incomes of $57,000 or less can use Free File software. Free File Fillable Forms, the electronic version of IRS paper forms, has no income restrictions.