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Liberty Tax Service Online Basic Income Tax Course. Lesson 19. Chapter 18 Homework 1.
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Liberty Tax Service Online Basic Income Tax Course.Lesson 19
Chapter 18 Homework 1 HOMEWORK 1: Sean D. (SSN 022-45-0947, born 12/12/1941) and Sue P. Summers (SSN 034-66-4362, born 2/9/1944) live at 22 Abbott Road, Sacramento, CA 94211. In 2007, they filed MFJ. They have no dependents. They will have a balance due for 2008 and want to figure the penalty themselves. They are eligible to use the short method on Form 2210. They will pay their balance due on the due date, April 15, 2009. Information from their 2007 and 2008 returns is as follows.
Chapter 18 Homework 1 2008 tax after credits (line 56 of Form 1040) - $6,784 2008 withholding - $2,100 2008 estimated tax payments - $2,000 2007 tax - $6,194 2007 AGI - $64,200 Sean and Sue do not want to pay a penalty for 2009. Their filing status, etc. will remain the same as in 2008. Their estimates for 2009 follow. AGI expected for 2009 - $69,500 Estimated federal withholding for 2009 - $3,950 1. Prepare Form 2210 for Sean and Sue. 2. Prepare an Estimated Tax Worksheet and the payment-vouchers for Sean and Sue. Use the 2009 Tax Rate Schedule and Standard Deduction Chart following.
Chapter 18 Homework 1 Standard Deduction for 2009
Chapter 18 Homework 2 HOMEWORK 2: Use the information from your answer to Homework 2 in Chapter 7 for Gerald T. and Belle M. Harrison. Assume that the Harrison's were notified that their entire refund was used to pay Belle’s past due student loan payments. Gerald determines that if he filed a separate return he would claim all the dependent exemptions. Fill out an Injured Spouse claim for Gerald.
Chapter 18 Homework 3 HOMEWORK 3: John A. Terry (SSN 500-18-1128, born 1/18/1966) is single and lives at 205 Stamford Bridge Road, Ahoskie, NC 27910. His only income is from working as a mechanic for Chelsea Manufacturing. He has his HUD- 1 settlement statement showing he purchased a home on August 1, 2008 for $165,000. John meets the qualifications for the first-time home buyer credit. Prepare his tax return.
Chapter 19: Extensions, Amended Returns, Electronic Filing, State Returns Chapter Content • Extension Requests • Amended Returns • Electronic Filing • Form 8888 • State Returns • Key Ideas Objectives • Learn How to File an Extension Request • Learn How to File an Amended Return • Learn About Electronic Filing and How to File Electronically • Learn About Filing State Returns
EXTENSIONS A. An extension is an extension of time to file and not an extension of time to pay. 1. If cannot file by due date, may get an automatic 6-month extension of time to file 2. File Form 4868 for the 6-month extension of time to file 3. With 6-month extension must file by October 15, 2009 4. Accurate estimated payment must be made by regular due date, can send with Form 4868 5. If cannot pay full amount, can still get extension but may owe interest on unpaid amount and possibly a penalty for paying late 6. When you do file, enter payment made with Form 4868 on line 67 of Form 1040.
EXTENSIONS On Form 1040, page 2
EXTENSIONS OUTSIDE THE UNITED STATES B. You are allowed an automatic 2-month extension to file and pay federal income tax due if: 1. You are U.S. citizen or resident, and 2. On regular due date of return: a. You are living outside U.S. and Puerto Rico, and your main place of business or post of duty is outside U.S. and Puerto Rico, or b. You are in military or naval service on active duty outside U.S. and Puerto Rico.
WHEN TO FILE YOUR 2007 RETURN Table 19-1 shows the timelines for regular returns and extensions.
PENALTIES FOR LATE PAYMENT AND LATE FILING Penalties For Late Payment And Late Filing D. There are penalties for paying late and filing late. 1. Failure-to-pay penalty is usually 1/2 of 1% of any tax (other than estimated tax) not paid by regular due date a. Charged for each month or part of month tax is unpaid b. Maximum penalty is 25% c. May not be charged if you show “reasonable cause”.
FAILURE TO FILE PENALTY 2. Failure-to-file penalty is usually charged if return is filed after due date (including extensions) and is usually 5% of tax not paid by paid by regular due date a. Charged for each month or part of month return is late b. Maximum penalty is 25% c. If over 60 days late, minimum penalty is $100 or balance of tax due on return, whichever smaller d. May not owe penalty if good reason for filing late.
AMENDED RETURNS AMENDED RETURNS A. If you discover errors on your return, you can file an amended return or claim for refund. 1. Correct return if, after filing it, you find that you: a. Did not report some income b. Claimed deductions or credits you should not have claimed c. Did not claim deductions or credits you should have claimed d. Should have claimed a different filing status
AMENDED RETURNS B. To file an amended return, use Form 1040X. 1. Cannot be filed electronically 2. File separate Form 1040X for each year being amended 3. May need to amend state return as well C. Form 1040X compares amounts from original return with corrected amounts. 1. May result in additional tax due or refund owed to you 2. Complete and attach appropriate forms and schedules or it will be returned.
AMENDED RETURNS D. Mail your Form 1040X to IRS Service Center where you now live. 1. Use Table 19-2 to find out where to file Form 1040X. E. File Form 1040X within 3 years after date you filed original return or within 2 years after date you paid tax, whichever is later. 1. Time for filing a claim for refund is same as time for filing Form 1040X 2. If did not file original return when due, generally can claim a refund by filing return within 3 years from time tax was paid 3. May be limit on amount of refund.
AMENDED RETURNS F. If amended return results in additional refund, interest will be paid on it.
AMENDED RETURNS WHEN TO FILE Form 1040X. Generally, you must file your Form 1040X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. The time for filing a claim for refund. The time for filing a claim for refund is the same as the time for filing a Form 1040X. Returns filed before the due date (without regard to extensions) are considered filed on the due date (even if the due date was a Saturday, Sunday, or holiday). The time periods can be suspended while you are financially disabled. See Publication, 556, Examination of Returns, Appeal Rights, and Claims for Refund, for more details. If you do not file a claim within the time period, you may not be entitled to a credit or a refund.
AMENDED RETURNS Late-filed returns. If the original return was not filed when it was due, a refund can generally be claimed by filing the return within 3 years from the date the return was due to get a refund. The return must be received by the IRS within the 3 year period. If the return is filed late, the postmark date does not determine the date of filing. There may be a limit on the amount of your refund. If you file your claim within 3 years after the date you filed your return, the credit or refund cannot be more than the part of the tax paid within the 3-year period (plus any extension of time granted for filing your return) immediately before you filed the claim. This time period is suspended while you are financially disabled. Payments made before the due date (without regard to extensions) of the original return are considered paid on the due date.
AMENDED RETURNS Dolly made estimated tax payments of $500 and got an automatic extension of time to October 15, 2006, to file her 2005 income tax return. She filed on 10/15/06 and paid $200 additional tax. Dolly later realized she had additional deductions or credits and wanted to amend her 2005 return to claim a refund of $700. Will she be able to receive this refund? YES OR NO?
AMENDED RETURNS Dolly made estimated tax payments of $500 and got an automatic extension of time to October 15, 2006, to file her 2005 income tax return. She filed on 10/15/05 and paid $200 additional tax. Dolly later realized she had additional deductions or credits and wanted to amend her 2005 return to claim a refund of $700. Will she be able to receive this refund? YES Because she filed her claim within 3 years after she filed her return, she can get a refund of up to $700, the tax paid within the 3 years plus the 6-month extension period immediately before she filed the claim.
AMENDED RETURNS If you file a claim more than 3 years after you file your return, but within 2 years from the time you paid the tax, the credit or refund cannot be more than the tax you paid within the 2 years immediately before you file the claim. Example: Abbey filed her 2005 tax return on 4/15/06. She paid taxes of $500. On 11/1/07 after an examination of her 2005 return, she had to pay an additional tax of $200. On 5/11/09, she files a claim for a refund of $300. However, because she filed her claim more than 3 years after she filed her return, her refund will be limited to the $200 she paid during the 2 years immediately before she filed her claim.
AMENDED RETURNS EXCEPTIONS FOR SPECIAL TYPES OF REFUNDS There are exceptions for special types of refunds and deadline dates and limits may be different for: • Qualified reservist distributions • First-time home buyer credit • Bonus depreciation for the Kansas City disaster area • Recovery rebate (2008 only) • Federal telephone excise tax (2006 only) • Nontaxable combat pay • Tax shelters • A bad debt • A worthless security • Net operating loss carryback • Carryback of certain business tax credits • A claim based on an agreement with the IRS extending the period for assessment of tax • Foreign tax paid or accrued • An injured spouse claim. Instead, file only Form 8379.
AMENDED RETURNS A Form 1040X based on a bad debt or worthless security generally must be filed within 7 years after the due date of the return for the tax year in which the debt or security became worthless. A Form 1040X based on a net operating loss carry-back or a general business credit carry-back generally must be filed within 3 years after the due date of the return.
AMENDED RETURNS PROCESSING CLAIMS FOR REFUNDS Claims are usually processed shortly after they are filed. Your claim may be accepted as filed, disallowed, or subject to examination. If your claim is disallowed, you will receive an explanation of why it was disallowed.
AMENDED RETURNS INTEREST ON REFUND If you receive a refund because of your amended return, interest will be paid on it from the due date of your original return or the date you filed your original return, whichever is later, to the date you filed the amended return. However, if the refund is not made within 45 days after you file the amended return, interest will be paid up to the date the refund is paid. Your refund may be reduced by an additional tax liability that has been assessed against you. Also, your refund may be reduced by any amounts you owe for past-due child support, debts to another federal agency, or for state tax. Remember if your return is changed for any reason, it may affect your state income tax liability and require the filing of an amended state return.
AMENDED RETURNS FORM 1040X After you have completed the background information on Form 1040X, note that the lines 1-15 have 3 columns labeled A, B, and C. Column A: In this column enter amounts from your original return or if you previously amended that return or if the return was changed by the IRS, enter the adjusted amounts. Column B: In this column enter the net increase or decrease for each line you are changing. Show the decreases in parentheses. Explain each change in Part II. Reference the reason to the line on the form where the change was made. If you need more space, attach a statement. Also attach any schedule or form relating to the change.
AMENDED RETURNS Column C: In this column either add the increase in column B to column A or subtract the decrease in column B from column A. For any item you do not change, enter the amount from column A in column C. Alan Arbor originally reported $11,000 as his adjusted gross income on his 2007 Form 1040. He received another W-2 for $500 after he filed his return. He completes line 1 of Form 1040X as follows: Column A Column B Column C $11,000 $500 $11,500 He would also report any additional Federal income tax withheld on line 11 in column B.
