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Understanding Tax Refunds and Amounts Owed: Key Calculations and Payment Options

This lesson delves into the intricacies of tax refunds and amounts owed on IRS Form 1040. It covers lines 73 to 77 for refunds and payments due, and discusses various options for receiving refunds, including direct deposit and purchasing Series I Savings Bonds. Additionally, it highlights the importance of submitting payments on time, potential penalties, and options for installment agreements. Practical exercises are provided for correcting withholding and making accurate tax calculations based on personal changes such as marriage or having children.

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Understanding Tax Refunds and Amounts Owed: Key Calculations and Payment Options

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  1. Lesson 31 Refund and Amount Owed

  2. 1040 Lines • Refund 73 – 75 • Owe 76 - 77

  3. Calculation • Line 60 – Total Tax Due • Less Line 72 – Total Payments • = Refund or owe

  4. Refund options • Apply to next year ---- not a good idea • Receive it as a check – takes the longest to get • Direct Deposit – to your existing checking account or creating a USBank debit card – 10-14 days • Purchase Series I Savings Bond – Form 8888 • In Multiples of $50 • Can be put in several options pg 31-3 Always uses the last account for any adjustments • Refund Monitor on Taxwise

  5. If Owe • Submit the return • Amount must be paid by 4/18 • Filing an extension does not extend what you owe • Forms of payment • 1040-V Voucher check or money order • Electronic withdrawal -- Hard to make sure it happens • Credit Card – will have a fee • Electronic Federal Tax Payment System

  6. If Can’t Pay • Have 60 or 120 days with no user fee • Interest and penalties are included if over $1000 • Monthly Payments Form 9465 Installment Agreement Request – IRS person can help you prepare this with the client – includes a user fee • Extension of time due to hardship Form 1127

  7. Exercises and Examples • Exercise pg 31-8 • Example 31-9 • Exercise 31-10

  8. Correcting withholding • Change W-4 Withholding allowances • Caused by change in life: Marriage, children, death, divorce • Exact amount: 1. Amount of total tax line 60 • 2. Divide by number of paychecks • 3. Tax Withholding by payperiod (941) • 4. Look up the number of allowances that match the amount of tax in number 2

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