Table of Contents
- Do You Have a Household Employee?
- Can Your Employee Legally Work in the United States?
- Do You Need To Pay Employment Taxes?
- Do You Need To Withhold Federal Income Tax?
- What Do You Need To Know About the Earned Income Credit?
- How Do You Make Tax Payments?
- What Forms Must You File?
- What Records Must You Keep?
- Can You Claim a Credit for Child and Dependent Care Expenses?
- How Can You Correct Schedule H?
- How To Get Tax Help
You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
Example.
You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.
When you hire a household employee to work for you on a regular basis, you and the employee must complete the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. No later than the first day of work, the employee must complete the employee section of the form by providing certain required information and attesting to his or her current work eligibility status in the United States. You must complete the employer section by examining documents presented by the employee as evidence of his or her identity and employment eligibility. Acceptable documents to establish identity and employment eligibility are listed on Form I-9. You should keep the completed Form I-9 in your own records. Do not submit it to the IRS, the USCIS, or any other government or other entity. The form must be kept available for review upon notice by an authorized U.S. Government official.
Two copies of Form I-9 are contained in the Handbook for Employers (Form M-274) published by the USCIS.
Call the USCIS at 1-800-870-3676 to order the Handbook for Employers. If you have questions about the employment eligibility verification process or other immigration-related employment matters, contact the USCIS Office of Business Liaison at 1-800-357-2099. You also can visit the USCIS website at www.uscis.gov to get Form I-9.For more information, see Employee's Social Security Number (SSN) in Publication 15 (Circular E), Employer's Tax Guide.
If you have a household employee, you may need to withhold and pay social security and Medicare taxes, pay federal unemployment
tax, or both. To find out,
read Table 1.
You do not need to withhold federal income tax from your household employee's wages. But if your employee asks you to withhold it, you can. See Do You Need To Withhold Federal Income Tax? on page 6.
If you need to pay social security, Medicare, or federal unemployment tax or choose to withhold federal income tax, read Table 2 on page 4 for an overview of what you may need to do.
If you do not need to pay social security, Medicare, or federal unemployment tax and do not choose to withhold federal income tax, read State employment taxes, next. The rest of this publication does not apply to you.Table 1. Do You Need To Pay Employment Taxes?
IF you ... | THEN you need to ... | |
A– | Pay cash wages of $1,700 or more in 2009 to any one household employee. | Withhold and pay social security and Medicare taxes.
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Do not count wages you pay to—
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B– | Pay total cash wages of $1,000 or more in any calendar quarter of 2008 or 2009 to household employees. | Pay federal unemployment tax.
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Do not count wages you pay to—
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Note. If neither A nor B above applies, you do not need to pay any federal employment taxes. But you may still need to pay state employment taxes. |
The social security tax pays for old-age, survivors, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance.
Both you and your household employee may owe social security and Medicare taxes. Your share is 7.65% (6.2% for social security tax and 1.45% for Medicare tax) of the employee's social security and Medicare wages. Your employee's share is the same.
You can use Table 3 on page 18 to figure the amount of social security and Medicare taxes to withhold from each wage payment.You are responsible for payment of your employee's share of the taxes as well as your own. You can either withhold your employee's share from the employee's wages or pay it from your own funds. If you decide to pay the employee's share from your own funds, see Not withholding the employee's share on page 5. Pay the taxes as discussed under How Do You Make Tax Payments? on page 7. Also, see What Forms Must You File? on page 8.
Table 2. Household Employer's Checklist
You may need to do the following things when you have a household employee.
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When you hire a household employee: | □ Find out if the person can legally work in the United States. □ Find out if you need to pay state taxes. |
When you pay your household employee: | □ Withhold social security and Medicare taxes. □ Withhold federal income tax. □ Make advance payments of the earned income credit. □ Decide how you will make tax payments. □ Keep records. |
By February 1, 2010: | □ Get an employer identification number (EIN). □ Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement. |
By March 1, 2010 (March 31, 2010 if you file Form W-2 electronically): | □ Send Copy A of Form W-2 to the Social Security Administration (SSA). |
By April 15, 2010: | □ File Schedule H (Form 1040), Household Employment Taxes, with your 2009 federal income tax return (Form 1040). If you do not have to file a return, use one of the other filing options, such as the option to file Schedule H by itself. |
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Your spouse.
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Your child who is under the age of 21.
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Your parent. Exception: Count these wages if both the following conditions apply.
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Your parent cares for your child who is either of the following.
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Under the age of 18, or
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Has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter.
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Your marital status is one of the following.
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You are divorced and have not remarried,
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You are a widow or widower, or
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You are living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in a calendar quarter.
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An employee who is under the age of 18 at any time during the year. Exception: Count these wages if providing household services is the employee's principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.
If you provide your employee transit passes to commute to your home, do not count the value of the transit passes (up to $120 per month for January and February 2009 and $230 per month for March through December 2009) as wages. A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train.
If you provide your employee parking at or near your home or at or near a location from which your employee commutes to your home, do not count the value of parking (up to $230 per month for 2009) as wages.
If you reimburse your employee for transit passes or parking, you may be able to exclude the reimbursement amounts. See Publication 15-B, Employer's Tax Guide to Fringe Benefits, for special requirements for this exclusion.
Example.
On February 7, 2008, Mary Brown hired Jane R. Oak (who is an unrelated individual over age 18) to care for your child and agree to pay cash wages of $50 every Friday. Jane worked for the remainder of the year (a total of 46 weeks). Mary did not give Jane a Form W-4 to request federal or state tax withholding. Mary also did not pay advance earned income credit payments. The following is the information Mary will need to complete Schedule H, Form W-2, and Form W-3. See pages 19 and 20 for completed example of Schedule H, Form W-2, and Form W-3.
Total cash wages paid to Jane | $2,300.00 ($50 x 46 weeks) |
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Jane's share of: | |||
Social security tax | $142.60 ($2,300 x 6.2% (.062)) |
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Medicare tax | $33.35 | ||
($2,300 x 1.45% (.0145)) | |||
Mary's share of: | |||
Social security tax | $142.60 ($2,300 x 62% (.062)) |
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Medicare tax | $33.35 ($2,300 x 1.45% (.0145)) |
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Amount reported on Form W-2 and Form W-3: | |||
Box 1:Wages, tips | $2,300.00 | ||
Box 4: Social security tax withheld | 142.60 | ||
Box 6: Medicare tax withheld | 33.35 |
For information on withholding and reporting federal income taxes, see Publication 15, (Circular E), Employer's Tax Guide.
Example.
You hire a household employee (who is an unrelated individual over age 18) to care for your child and agree to pay cash wages of $100 every Friday. You expect to pay your employee $1,700 or more for the year. You decide to pay your employee's share of social security and Medicare taxes from your own funds. You pay your employee $100 every Friday without withholding any social security or Medicare taxes.
For social security and Medicare tax purposes, your employee's wages each payday are $100. For each wage payment, you will pay $15.30 when you pay the taxes. This is $7.65 ($6.20 for social security tax + $1.45 for Medicare tax) to cover your employee's share plus a matching $7.65 for your share. For income tax purposes, your employee's wages each payday are $107.65 ($100 + the $7.65 you will pay to cover your employee's share of social security and Medicare taxes).
The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Like most employers, you may owe both the federal unemployment tax (the FUTA tax) and a state unemployment tax. Or, you may owe only the FUTA tax or only the state unemployment tax. To find out whether you will owe state unemployment tax, contact your state's unemployment tax agency. See the list of state unemployment agencies in the Appendix for the address.
The FUTA tax is 6.2% of your employee's FUTA wages. However, you may be able to take a credit of up to 5.4% against the FUTA tax, resulting in a net tax of 0.8%. Your credit for 2009 is limited unless you pay all the required contributions for 2009 to your state unemployment fund by April 15, 2010. The credit you can take for any contributions for 2009 that you pay after April 15, 2010, is limited to 90% of the credit that would have been allowable if the contributions were paid by April 15, 2010. (If you did not pay all the required contributions for 2008 by April 15, 2009, see Credit for 2008, later.)
Pay the tax as discussed under How Do You Make Tax Payments? on page 7. Also, see What Forms Must You File, later.
Do not withhold the FUTA tax from your employee's wages. You must pay it from your own funds.-
Your spouse.
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Your child who is under the age of 21.
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Your parent.
Example.
You hire a household employee (who is not related to you) on January 1, 2009, and agree to pay cash wages of $200 every Friday. During January, February, and March you pay the employee cash wages of $2,600. You pay cash wages of $1,000 or more in a calendar quarter of 2009, so the first $7,000 of cash wages you pay the employee (or any other employee) in 2009 or 2010 is FUTA wages. The FUTA wages you pay may also be subject to your state's unemployment tax.
During 2009, you pay your household employee cash wages of $10,400. You pay all the required contributions for 2009 to your state unemployment fund by April 15, 2010. Your FUTA tax for 2009 is $56 ($7,000 × 0.8%).
Form 1040.
You are not required to withhold federal income tax from wages you pay a household employee. You should withhold federal income tax only if your household employee asks you to withhold it and you agree. The employee must give you a completed Form W-4, Employee's Withholding Allowance Certificate.
If you and your employee have agreed to withholding, either of you may end the agreement by letting the other know in writing.
If you agree to withhold federal income tax, you are responsible for paying it to the IRS. Pay the tax as discussed under How Do You Make Tax Payments? on page 7. Also, see What Forms Must You File? on page 8.
Use the income tax withholding tables in Publication 15-T, New Wage Withholding and Advance Earned Income Credit Payment Tables (For Wages Paid through December 2009 to find out how much to withhold. Publication 15-T is available at www.irs.gov/pub/irs-pdf/p15t.pdf. Figure federal income tax withholding on wages before you deduct any amounts for other withheld taxes. Withhold federal income tax from each payment of wages based on the filing status and exemptions shown on your employee's Form W-4. Publication 15 (Circular E) contains detailed instructions.
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Meals provided to your employee at your home for your convenience.
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Lodging provided to your employee at your home for your convenience and as a condition of employment.
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Up to $120 per month for January and February 2009 and $230 per month for March through December 2009 for transit passes you give your employee (or for any cash reimbursement you make for the amount your employee pays for transit passes used to commute to your home if you qualify for this exclusion). A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train. See Publication 15-B for special requirements for this exclusion.
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Up to $230 a month for 2009 for the value of parking you provide your employee or for any cash reimbursement you make for the amount your employee pays and substantiates for parking at or near your home or at or near a location from which your employee commutes to your home.
Worksheet A. Worksheet for Credit for Late Contributions
1. | Enter the amount from Schedule H, line 23 | |
2. | Enter the amount from Schedule H, line 20 | |
3. | Subtract line 2 from line 1. If zero or less, enter -0- | |
4. | Enter total contributions paid to the state(s) after the Form 1040 due date | |
5. | Enter the smaller of line 3 or 4 | |
6. | Multiply line 5 by .90 (90%) | |
7. | Add lines 2 and 6 | |
8. | Enter the smaller of the amount on line 1 or 7 here and on Schedule H, line 24 |
Certain workers can take the earned income credit (EIC) on their federal income tax return. This credit reduces their tax or allows them to receive a payment from the IRS. You may have to make advance payment of part of your household employee's EIC along with the employee's wages. You also may have to give your employee a notice about the EIC.
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A substitute Form W-2 with the same EIC information on the back of the employee's copy that is on Copy B of the Form W-2.
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Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC).
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Your own written statement with the same wording as in Notice 797.
February 8, 2010. You must give your household employee a notice about the EIC if you agree to withhold federal income tax from the employee's wages (as discussed earlier under Do You Need To Withhold Federal Income Tax?) and the income tax withholding tables show that no tax should be withheld. Even if not required, you are encouraged to give the employee a notice about the EIC if his or her 2009 wages are less than the EIC eligible maximum amount (see the Form W-5 instructions for the 2009 maximum amount).
When you file your 2009 federal income tax return in 2010, attach Schedule H (Form 1040), Household Employment Taxes, to your Form 1040. Use Schedule H to figure your total household employment taxes (social security, Medicare, FUTA, and withheld federal income taxes). Add these household employment taxes to your income tax. Pay the amount due by April 15, 2010. (For more information about using Schedule H, see Schedule H under What Forms Must You File? on page 9.)
You can avoid owing tax with your return if you pay enough tax during the year to cover your household employment taxes, as well as your income tax. You can pay the additional tax in any of the following ways.
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Ask your employer to withhold more federal income tax from your wages in 2009.
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Ask the payer of your pension or annuity to withhold more federal income tax from your benefits.
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Make estimated tax payments for 2009 to the IRS.
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Increase your payments if you already make estimated tax payments.
You may be subject to the estimated tax underpayment penalty if you did not pay enough income and household employment taxes during the year. (See Publication 505, Tax Withholding and Estimated Tax, for information about the underpayment penalty.) However, you will not be subject to the penalty if both of the following situations apply to you.
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You will not have federal income tax withheld from wages, pensions, or any other payments you receive.
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Your income taxes, excluding your household employment taxes, would not be enough to require payment of estimated taxes.
You must file certain forms to report your household employee's wages and the federal employment taxes for the employee if you pay any of the following wages to the employee.
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Social security and Medicare wages.
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FUTA wages.
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Wages from which you withhold federal income tax.
The employment tax forms and instructions you need for 2009 will be sent to you automatically in January 2010 if you reported employment taxes for 2008 on Schedule H. Otherwise, for information on ordering these forms, see How To Get Tax Help on page 11.
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Social security and Medicare wages of $1,700 or more.
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Wages from which you withhold federal income tax.
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Cash wages of $1,700 or more.
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FUTA wages.
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Wages from which you withhold federal income tax.
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You can file Schedule H by itself. See the Schedule H instructions for details.
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If, besides your household employee, you have other employees for whom you report employment taxes on Form 941, Form 944, or Form 943 and on Form 940, you can include your taxes for your household employee on those forms. See Business employment tax returns, next.
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Your employee's cash and noncash wages.
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Any employee social security tax you withhold or agree to pay for your employee.
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Any employee Medicare tax you withhold or agree to pay for your employee.
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Any federal income tax you withhold.
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Any advance EIC payments you make.
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Any state employment taxes you withhold.
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Social security and Medicare wages of $1,700 or more.
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Wages from which you withhold federal income tax.
www.socialsecurity.gov/online/ss-5.pdf.
If your household employee cares for your dependent who is under age 13 or for your spouse or dependent who is not capable of self-care, you may be able to take an income tax credit of up to 35% of your expenses. To qualify, you must pay these expenses so you can work or look for work. If you can take the credit, you can include in your qualifying expenses your share of the federal and state employment taxes you pay, as well as the employee's wages. For information about the credit, see Publication 503, Child and Dependent Care Expenses.
If you discover that you made an error on a Schedule H (or Anexo H-PR), the forms used to correct the error depend on whether the Schedule H was attached to another form or whether it was filed by itself.
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
www.aarp.org/money/taxaide . For more information on these programs, go to
www.irs.gov and enter keyword “VITA” in the upper right-hand corner.
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E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.
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Check the status of your 2008 refund. Go to www.irs.gov and click on Where's My Refund. Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2008 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund.
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Download forms, instructions, and publications.
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Order IRS products online.
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Research your tax questions online.
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Search publications online by topic or keyword.
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View Internal Revenue Bulletins (IRBs) published in the last few years.
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Figure your withholding allowances using the withholding calculator online at www.irs.gov/individuals.
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Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant.
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Sign up to receive local and national tax news by email.
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Get information on starting and operating a small business.
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Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days.
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Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
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Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
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TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
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TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.
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Refund information. To check the status of your 2008 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2008 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Refunds are sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back.
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Other refund information. To check the status of a prior year refund or amended return refund, call 1-800-829-1954.
Evaluating the quality of our telephone services. To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to listen in on or record random telephone calls. Another is to ask some callers to complete a short survey at the end of the call. Walk-in. Many products and services are available on a walk-in basis.
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Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
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Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary—just walk in. If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. All other issues will be handled without an appointment. To find the number of your local office, go to
www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
Department of the Treasury
National Distribution Center
1201 N. Mitsubishi Motorway
Bloomington, IL 61705–6613
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Current-year forms, instructions, and publications.
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Prior-year forms, instructions, and publications.
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Tax Map: an electronic research tool and finding aid.
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Tax law frequently asked questions.
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Tax Topics from the IRS telephone response system.
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Internal Revenue Code—Title 26 of the U.S. Code.
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Fill-in, print, and save features for most tax forms.
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Internal Revenue Bulletins.
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Toll-free and email technical support.
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The DVD is released twice during the year.
– The first release will ship the beginning of January 2009.
– The final release will ship the beginning of March 2009.
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Helpful information, such as how to prepare a business plan, find financing for your business, and much more.
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All the business tax forms, instructions, and publications needed to successfully manage a business.
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Tax law changes for 2009.
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Tax Map: an electronic research tool and finding aid.
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Web links to various government agencies, business associations, and IRS organizations.
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“Rate the Product” survey—your opportunity to suggest changes for future editions.
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A site map of the guide to help you navigate the pages with ease.
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An interactive “Teens in Biz” module that gives practical tips for teens about starting their own business, creating a business plan, and filing taxes.
www.irs.gov and enter keyword “SBRG” in the upper right-hand corner for more information.
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