How to Stay Out of Jail as an Entrepreneur Karen Brehmer IRS Stakeholder Liaison February 2017

Objectives Recordkeeping – why, how long, what? IRS Resources for small business owners Sharing Economy Payments to Independent Contractors Secure Access Authentication

Recordkeeping – Why? Prepare tax returns Support items reported on tax returns Monitor progress of business activity Identify receipt sources Track deductible expenses Prepare financial statements

Recordkeeping – How long? Keep all documents verifying income, purchases, deductions and credits Timeframes: Minimum three years Employment tax – four years (Pub 15) Business property – life of the asset

Publication 463: Travel, Transportation, Entertainment, and Gift Expenses

On IRS.gov

Small Business and Self-Employed Tax Center on IRS.gov

Small Business Taxes: The Virtual Workshop

SHARING ECONOMY

Sharing Economy Tax Center If you use one of the many online platforms available to rent a spare bedroom, provide car rides, or to connect and provide a number of other goods or services, you’re involved in what is sometimes called the sharing economy. The IRS developed the Sharing Economy Tax Center to help you meet your tax obligations for your activity in the sharing economy

Issues for Individuals Performing Services Participate in the sharing economy Received a payment during the calendar year Self-employed individual, an employee or a small business May be required to file a tax return to report that income to the IRS.

Rules for Home Rentals Rental Income and Expenses Vacation Property Personal use business property Casualties, Disasters and Thefts

Self-Employment Taxes Self-Employed / Independent Contractor Social Security Medicare Taxes No employer matching Estimated taxes

Tax Payments, Including Estimated Tax Payments Form 1040 ES - Estimated Tax for Individuals Direct pay EFTPS (Electronic Federal Tax Payment System) Form W-4 - Employee's Withholding Allowance Certificate

Resources IRS Web site - Sharing Economy Tax Center: IRS Website – Key words Sharing Economy Pub 17 - Your Federal Income Tax For Individuals Pub 15-A – Employer’s Supplemental Tax Guide

Payments to Independent Contractors

Type of Business Relationship Independent contractor Employee (common-law employee) Behavioral Financial Type of Relationship

Form SS-8 Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding

Form 1099 - MISC Payment to someone who is not your employee; Payment for services in the course of your trade or business; Payment to an individual, partnership, estate, or in some cases, a corporation; and Payments to the payee of at least $600 during the year.

Form W-9 Form W-9, Request for Taxpayer Identification Number and Certification Used to provide name and SSN/EIN to payer. Used by payer to complete Form 1099-MISC Type of entity matters Sole proprietor, 1099 required Partnership, 1099 required “C” or “S” Corporation, no 1099 needed some exceptions, see instructions LLC – more info needed

Form W-9 LLC = Limited Liability Company Single member LLC could be: Disregarded entity (files Schedule C), 1099 required If LLC elects corporation status, no 1099 needed Multiple member LLC could be: Partnership, 1099 required Corporation, no 1099 needed (generally)

New Secure Access Process for Get Transcript Online and other IRS New Secure Access Process for Get Transcript Online and other IRS.gov Tools

Secure Access Process Secure Access Process New authentication framework More rigorous validation process 2-Factor authentication: Password credentials Security code sent by text Secure Access Authentication used for: Get Transcript Online, Get an IP PIN, Online Installment Agreement

Process Prior to 2015 Email confirmation code Identity Proofing Name and SSN Date of Birth Filing status and address on last filed return Knowledge-Based Authentication (KBA) Series of financial/personal questions only a taxpayer should know

New Authentication Steps Email confirmation code Same as before; code sent to email address; taxpayer re-enters in order to continue to next step Identity proofing Similar as before Two new steps: Financial Verification Activation code text sent to mobile phone

How to Successfully Authenticate A readily available email address that you can check immediately An SSN Account number information from either: Credit card (last eight digits), or Home mortgage, or home equity mortgage or home equity line of credit, or Auto loan

How to Successfully Authenticate A mobile phone that is Supported by a data plan that includes texts Associated with your name and/or address Not a business-owned phone Not a virtual phone, i.e. Skype, or a pay-as-you-go phone Remove “credit freeze” if through Equifax

How to Successfully Authenticate Returning Users (registered via Secure Access) Need their username and password Need their mobile phone to receive security code Returning Users (registered via KBA process) Password and user name still valid Must provide financial verification Must receive mobile phone text code

Higher Security/Lower Access Trade offs for higher security Fewer people able to authenticate IRS monitoring pass rate; Evaluate and adjust as necessary Get Transcript by Mail option Taxpayers always should retain copies of prior year tax returns

Looking Ahead – Digital Demand Secure Access provides foundation for future self-help tools Taxpayers demanding more digital options Cost of IRS personal service: $40/$60 per transaction Cost of IRS digital service: $1 per transaction IRS remains committed to providing services needed by taxpayers

IRS Tax Calendars

IRS Tax Calendar on IRS.gov

IRS Tax Calendar