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Tax return (United States) Archives - R. Darren Sanford, CPA, CGMA
May 242015
 
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Facts about Filing an Amended U. S. Individual Income Tax Return

You’ve filed your tax return and received your refund and later discover that you left out a tax document.  Perhaps it was an oversight or you received a tax document after filing your return.  You may also need to make a correction to the information previously reported or for some other reason.  How do you handle this situation?  Generally, filing an amended U. S. individual income tax return is the solution.

There are nine points you should know about when filing an amended U. S. individual income tax return:

  1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended income tax return.
  1. Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ.  An amended return cannot be filed electronically, thus you must file it by mail.  It’s always best to use a method of mailing which allows for tracking so that you can confirm the IRS received your return.  This is also true for original returns filed by mail.
  1. Generally, you do not need to file an amended return due to math errors.  The IRS will automatically make that correction.  Also, do not file an amended return because you forgot to attach tax forms such as W-2s or schedules.  The IRS normally will send a request asking for those.
  1. Be sure to enter the year of the return you are amending at the top of Form 1040X.  Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
  1. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS address.  The 1040X instructions list the addresses.
  1. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
  1. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X.  You may cash that check while waiting for any additional refund.
  1. If you owe additional tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account.  Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
  1. Your state tax liability may be affected by a change made on your federal return.  For information on how to correct your state tax return, contact your state tax agency.

Filing an Amended U. S. individual income tax return can be a complex and confusing task.  For assistance with preparing and filing Form 1040X, you may wish to seek the services of a professional tax preparer.  For more information contact me via the form below.

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Mar 132015
 
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Standard Deduction

For tax year 2015, all taxpayers will see a slight bump in the standard deduction over the 2014 amounts. The standard deduction rises to $6,300 for single and married filing separately filing statuses, up from $6,200 for tax year 2014.  Married filing jointly filers will see an increase in the standard deduction to $12,600, up from $12,400 for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.

The decision to itemize deductions will depend on whether or not the deduction exceeds the standard deduction amounts.  However, for married filing jointly taxpayers, if one spouse itemizes, the other spouse must also itemize.

For more information and assistance with determining the amount of your standard deduction, go to How much is my standard deduction.

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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May 242014
 
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If your mortgage debt has been partly or entirely forgiven, you may be able to exclude the forgiven debt from your income.  Normally, the amount of debt forgiven by a lender must be reported on your tax return as income.  But because of a special tax relief program, in general, you will not have to report as income mortgage debt on your home that was forgiven or reduced by the lender.  This includes mortgage debt that was forgiven or reduced through a mortgage work-out, short sale or foreclosure.

English: Mortgage debt

English: Mortgage debt (Photo credit: Wikipedia)

 

This tax relief is only available on mortgages taken out to buy, build or improve your home and it is only available for debt that was forgiven in the years 2007 through 2013.

There is also a limit on how much forgiven debt can be excluded from your income.  If you qualify, just fill out Form 982 and attach it to your tax return.  See the instructions for Form 982 for more information, including information on restrictions that apply.

A word of caution though.  Most other kinds of debt are not eligible for this relief, and special rules and limitations apply.  So before you claim this tax relief, check out the details on irs.gov.

For assistance with Form 982 related to reduction of tax attributes and mortgage debt forgiveness, contact me via the form below:

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Apr 192014
 
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8 Facts about Penalties for Filing and Paying Late

April 15 is the tax day deadline for most people. If you’re due a refund there’s no penalty if you file a late tax return. But if you owe taxes and you fail to file and pay on time, you’ll usually owe interest and penalties on the taxes you pay late. Here are eight facts that you should know about these penalties.

1. If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

2. The failure-to-file penalty is usually much more than the failure-to-pay penalty. In most cases, it’s 10 times more, so if you can’t pay what you owe by the due date, you should still file your tax return on time and pay as much as you can. You should try other options to pay, such as getting a loan or paying by credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan with the IRS using the Online Payment Agreement tool on IRS.gov.

3. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.

5. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

6. If the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5 percent.

7. If you requested an extension of time to file your income tax return (Form 4868) by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time.

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Apr 122014
 
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Four Tips If You Can’t Pay Your Taxes on Time

If you find you owe more than you can pay with your tax return, don’t panic. Make sure to file on time. That way you won’t have a penalty for filing late.

Here is what to do if you can’t pay all your taxes by the due date.

1. File on time and pay as much as you can.  File on time to avoid a late filing penalty. Pay as much as you can to reduce interest charges and a late payment penalty. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options.

2. Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.

3. Use the Online Payment Agreement tool.  You don’t need to wait for IRS to send you a bill before you ask for a payment plan. The best way is to use the Online Payment Agreement tool on IRS.gov. You can also file Form 9465, Installment Agreement Request, with your tax return. You can even set up a direct debit agreement. With this type of payment plan, you won’t have to write a check and mail it on time each month. It also means you won’t miss payments that could lead to more penalties.

4. Don’t ignore a tax bill.  If you get a bill, don’t ignore it.  The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you are suffering a financial hardship, the IRS will work with you.

In short, remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can.

If you’ve filed an extension, chances are good that you need the services of a tax professional. Feel free to contact me via the form below:

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Feb 262014
 
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IRS Reminds Individuals of Health Care Choices for 2014

Everyone has important decisions to make concerning health care coverage in 2014.  Starting in 2014, you must choose to either have basic health insurance coverage (known as minimum essential coverage) for yourself and everyone in your family for each month or go without health care coverage for some or all of the year.

If you don’t maintain health insurance coverage, you will need to either seek an exemption or make an individual shared responsibility payment for the period that you are not covered with the 2014 income tax return you file in 2015.

If you choose to have health care coverage, qualifying coverage includes:

  • health insurance coverage provided by your employer (including COBRA and retiree coverage),
  • health insurance coverage you purchase through a Marketplace,
  • Medicare, Medicaid or other government-sponsored health coverage including programs for veterans, or
  • coverage you buy directly from an insurance company.

If you purchase health insurance coverage through the Marketplace, you may be eligible for financial assistance including the premium tax credit, which will help lower the out-of-pocket cost of your monthly insurance premiums.

Qualifying coverage does not include certain coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or coverage only for a specific disease or condition.

If you choose to go without coverage or experience a gap in coverage, you may qualify for an exemption if you do not have access to affordable coverage, you have a gap of less than three consecutive months without coverage, or you qualify for one of several other exemptions.  A special hardship exemption applies to individuals who purchase their insurance through the Marketplace during the initial enrollment period but due to the enrollment process have a coverage gap at the beginning of 2014.

If you (or any of your dependents) do not maintain coverage and do not qualify for an exemption, you will need to make an individual shared responsibility payment with your return. In general, the payment amount is either a percentage of your household income or a flat dollar amount, whichever is greater. You will owe 1/12th of the annual payment for each month you (or your dependents) do not have coverage and are not exempt. The annual payment amount for 2014 is the greater of:

  • 1 percent of your household income that is above the tax return filing threshold for your filing status, such as Married Filing Jointly or single, or
  • Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.

The individual shared responsibility payment is capped at the cost of the national average premium for the bronze level health plan available through the Marketplace in 2014. You will make the payment when you file your 2014 federal income tax return in 2015.

For more information about the individual shared responsibility provision and the premium tax credit, visit IRS.gov/aca. Visit the Department of Health and Human Services at HealthCare.gov for more information about health insurance coverage options and the Health Insurance Marketplace, financial assistance and exemptions

 

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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