What Happens after I File?

What Happens after I File?

by | Apr 19, 2011 | Archives

Now that the federal income tax filing deadline is in your rear-view mirror, what happens after you file? A lot of taxpayers have post tax-filing questions such as what records do I keep and more importantly, “Where’s my Refund?” The IRS has answers for you below.

Refund Information

You can go online to check the status of your 2010 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2010 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

  • Go to http://www.irs.gov and click on “Where’s My Refund”
  • Call 800-829-4477~24 hours a day, seven days a week, for automated refund information
  • Call 800-829-1954 during the hours shown in your tax form instructions
  • Use IRS2Go. If you have an Apple iPhone or iTouch or an Android device you can download an application to check the status of your refund.

What Records Should I Keep?

Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

Change of Address

If you move after you filed your return, send Form 8822, Change of Address, to the Internal Revenue Service. If you are expecting a paper refund check, you should also file a change of address with the U.S. Postal Service.

What If I Made a Mistake?

Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

Visit the IRS website at http://www.irs.gov for more information on refunds, recordkeeping, address changes and amended returns.

Seven Things about Getting More Time to File your Tax Return

Seven Things about Getting More Time to File your Tax Return

by | Apr 17, 2011 | Archives

Can’t make the April 18 tax filing deadline and need more time to file your tax return? You can get an automatic six month extension of time to file from the IRS.
Here are seven important things you need to know about filing an extension:

1. File on time even if you can’t pay If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to the IRS website at http://www.irs.gov and click “Apply for an Online Payment Agreement (OPA)” at the left side of the home page under Online Services. If you are unable to make payments, call the IRS at 800-829-1040 to discuss your options.

2. Extra time to file An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the April 18 deadline, plus you may owe penalties.

3. Form to file Request an extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to the IRS by April 18, 2011, or make an extension-related electronic credit card payment. For more information about extension-related credit card payments, see Form 4868.

4. E-file extension You can e-file an extension request using tax preparation software with your own computer or by coming to my office. The IRS will acknowledge receipt of the extension request if you file by computer.

5. Traditional Free File and Free File Fillable Forms You can use both Free File options to file an extension. Access the Free File page at http://www.irs.gov/. You can also access my do-it-yourself tax preparation option here to fiule your complete return or request an extension of time to file:

6. Electronic funds withdrawal If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers. For information about these and other methods of payment, visit the IRS website at http://www.irs.gov or call 800-TAX-1040 (800-829-1040).

7. How to get forms Form 4868 is available for download from the IRS website. If you come to our office on Monday, April 18th, we will file your extension for you for free!

Spring Cleaning: Tax Records You Can Throw Away

Spring Cleaning: Tax Records You Can Throw Away

by | Apr 15, 2011 | Archives

Spring is a great time to clean out that growing mountain of tax and financial papers that clutters your home and office. Here’s what you need to keep and what you can throw out without fearing the wrath of the IRS.

Let’s start with your “safety zone,” the IRS statute of limitations. This limits the number of years during which the IRS can audit your tax returns. Once that period has expired, the IRS is legally prohibited from even asking you questions about those returns.

The concept behind it is that after a period of years, records are lost or misplaced and memory isn’t as accurate as we would hope. There’s a need for finality. Once the statute of limitations has expired, the IRS can’t go after you for additional taxes, but you can’t go after the IRS for additional refunds, either.

The Three-Year Rule

For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. If you’re looking for an additional refund, the limitations period is generally the later of three years from the date you filed the original return or two years from the date you paid the tax. There are some exceptions:

  • If you don’t report all your income and the unreported amount is more than 25% of the gross income actually shown on your return, the limitation period is six years.
  • If you’ve claimed a loss from a worthless security, the limitation period is extended to seven years.
  • If you file a “fraudulent” return, or don’t file at all, the limitations period doesn’t apply. In fact, the IRS can get you at any time.
  • If you’re deciding what records you need or want to keep, you have to ask what your chances are of an audit. A tax audit is an IRS verification of items of income and deductions on your return. So you should keep records to support those items until the statute of limitations runs out.

Assuming that you’ve filed on time and paid what you should, you only have to keep your tax records for three years, but some records have to be kept longer than that.

Remember, the three-year rule relates to the information on your tax return. But, some of that information may relate to transactions more than three years old.

Here’s a checklist of the documents you should hold on to:

  1. Capital gains and losses. Your gain is reduced by your basis – your cost (including all commissions) plus, with mutual funds, any reinvested dividends and capital gains. But you may have bought that stock five years ago and you’ve been reinvesting those dividends and capital gains over the last decade. And don’t forget those stock splits. You don’t ever want to throw these records away until after you sell the securities. And then if you’re audited, you’ll have to prove those numbers. Therefore, you’ll need to keep those records for at least three years after you file the return reporting their sales.
  2. Expenses on your home. Cost records for your house and any improvements should be kept until the home is sold. It’s just good practice, even though most homeowners won’t face any tax problems. That’s because profit of less than $250,000 on your home ($500,000 on a joint return) isn’t subject to taxes under tax legislation enacted in 1997. If the profit is more than $250,000/$500,000, or if you don’t qualify for the full gain exclusion, then you’re going to need those records for another three years after that return is filed. Most homeowners probably won’t face that issue thanks to the 1997 tax law, but of course, it’s better to be safe than sorry.
  3. Business records. Business records can become a nightmare. Non-residential real estate is now depreciated over 39 years. You could be audited on the depreciation up to three years after you file the return for the 39th year. That’s a long time to hold on to receipts, but you may need to validate those numbers.
  4. Employment, bank, and brokerage statements. Keep all your W-2s, 1099s, brokerage, and bank statements to prove income until three years after you file. And don’t even think about dumping checks, receipts, mileage logs, tax diaries, and other documentation that substantiate your expenses.
  5. Tax returns. Keep copies of your tax returns as well. You can’t rely on the IRS to actually have a copy of your old returns. As a general rule, you should keep tax records for 6 years. The bottom line is that you’ve got to keep those records until they can no longer affect your tax return, plus the three-year statute of limitations.
  6. Social Security records. You will need to keep some records for Social Security purposes, so check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If they’re wrong, you’ll need your W-2 or copies of your Schedule C (if self-employed) to prove the right amount. Don’t dispose of those records until after you’ve validated those contributions. You can confirm your payments and estimate your future benefits by filing Form SSA-7004 with the Social Security Administration. You can download the form, or apply online.

Contact me by phone or email if you have any questions about what records you need to keep this spring.

Form 1099 enhanced reporting by businesses is repealed

Form 1099 enhanced reporting by businesses is repealed

by | Apr 15, 2011 | Archives

It’s finally official. Enhanced 1099 reporting is dead.
On April 14 President Obama signed into law H.R. 4, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.
This erases from the tax code the enhanced 1099 reporting rule.
This provision, created as a way to pay for health care, that in 2012 would have required submit to the IRS a Form 1099 for payments made to any single vendor for goods and services totaling more than $600 a year.
Also gone thanks to the president’s signature is a similar reporting requirement, as part of the Small Business Jobs Act of 2010, that applied to those receiving rental income from real estate.
To make up the money lost by nullifying the original 1099 expansion, the new law raises the amount of a health care tax credit, which will be available beginning in 2014, that can be recaptured from taxpayers in cases of overpayment.

The Joint Committee on Taxation has estimated that the new offset will raise $24.9 billion over 10 years and that repealing the 1099 reporting requirements will cost $24.7 billion over 10 years.