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Read this article if ... you’re one of the many who find navigating through the murky maze of IRS regulations and forms a taxing affair. To ease this yearly burden, FDU Magazine asked faculty member Ron West to answer common questions concerning the filing and payment of taxes. |
TAX FAQs (Frequently Asked Questions)
By Ron WestAn assistant professor of taxation, West has been teaching in FDU’s master of science in taxation program since the fall of 1997. A certified public accountant (CPA), West has a master of laws degree (LLM) in taxation from New York University School of Law. His e-mail address is west@alpha.fdu.edu. Note: The following information is intended only for general purposes. Readers with specific questions should consult a personal tax adviser. |
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Quick
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I just completed my return and found that I owe the IRS money. What should I do? Can I request to make installment payments on the amount I owe? When I request an installment payment agreement, can my request be rejected? I am unable to pay my delinquent taxes. Can I work out a deal with the IRS to pay a smaller amount? Can I combine my estimated tax payment with the payment for my Form 1040? I have already filed my return and now I have received another Form W-2. What can I do? I forgot to mail my Form W-2, schedules or forms with my tax return. What should I do? How can I check on the status of my refund? Can my refund be used to pay other debts? |
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Q. I just completed my return and found that I owe the IRS money. What should I do? |
A. File the return by the due date even if you can’t pay all of the amount owed. Pay as much of the amount owed as possible and the amount of interest and late payment penalty will be reduced. |
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Q. Can I request to make installment payments on the amount I owe? |
A. Yes. If you cannot pay the full amount due with your return, you may ask to make monthly installments. However, you will be charged interest and a late payment penalty on the tax not paid. Before requesting an installment agreement you should consider less costly alternatives such as a bank loan. |
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Q. When I request an installment payment agreement, can my request be rejected? |
A. The IRS is required to grant installment agreements to requesting taxpayers who meet certain statutory requirements. Taxpayers with individual income tax liabilities of not more than $10,000 (exclusive of penalties, interest and additions to tax) who have not failed to file a return, failed to pay a tax shown on a return or entered into another installment agreement within the preceding five taxable years are entitled to an installment agreement if the IRS determines that the taxpayer is financially unable to fully pay the tax liability when due. The tax liability will have to be paid within three years. |
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Q. During the course of an audit or an investigation, can the IRS contact third parties without telling me who they are contacting? |
A. In general, such audit practice is no longer permissible under the law. IRS employees may contact persons other than the taxpayer under investigation to obtain information relating to either the determination or collection of tax. Under prior law, the taxpayer would not necessarily be informed about who the IRS has contacted. But now the current law requires the IRS to inform the taxpayers of the identity of the persons it was in contact with regarding their tax liabilities. Specifically, the IRS has three obligations. First, it must notify the taxpayers at the beginning of the examination and collection process that it might contact third parties about the taxpayer’s tax liabilities. Second, the IRS must keep track of the third parties who are contacted. Third, it must provide that information periodically to the taxpayer or whenever asked by taxpayer. |
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Q. I am unable to pay my delinquent taxes. Can I work out a deal with the IRS to pay a smaller amount? |
A. Yes. The Internal Revenue Code allows the IRS to compromise any taxes arising under the internal revenue laws. Congress believed that the IRS should be more flexible in working with taxpayers who are sincerely trying to satisfy their tax obligations. Thus, the authority of the IRS to accept offers in compromise has been expanded. Allowable expenses are now determined on the facts and circumstances of each taxpayer’s case, rather than the rigid prior standards. Offers from low-income taxpayers may not be rejected solely on the basis of the amount of the offer. Taxpayers are no longer required to waive the statute of limitations on collection. New regulations have been issued that provide more bases for compromise, in addition to doubt as to liability and doubt as to collectibility. Additional notices and/or instructions must be provided to taxpayers explaining their rights and the obligations of the IRS with respect to offers in compromise. The amount of the offer should at least equal or exceed your equity in all assets. When reviewing an offer, the IRS considers four factors: the amount collectible from your assets; the amount collectible from present and future income; the amount that can be collectible from third parties, for example, Trust Fund Recovery penalty and transferee; and sources of funds that are available to you but not subject to the IRS’s collection action. |
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Q. Can I combine my estimated tax payment with the payment for my Form 1040? |
A. Estimated tax payments should not be sent with or be included in checks or money orders for payment of federal income tax with your return. Estimated tax payments are mailed separately to the address shown in the 1040-ES instructions. |
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Q. If I drop my return in the mailbox before April 15, is the return considered timely filed if the IRS receives it after April 15? |
A. A return delivered to the IRS by U.S. mail after the due date for the return is considered timely filed if the return was postmarked on or before the due date of the return. This rule also applies to certain private delivery services designated by the IRS, such as UPS and Federal Express. To come within this rule, the return must be postmarked on or before the due date. |
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Q. I have already filed my return and now I have received another Form W-2. What can I do? |
A. If you find that you did not report some income, claimed deductions or credits you should not have claimed, failed to claim some deductions or credits you are entitled to or should have used a different filing status, you should file an amended return. Amended returns for individuals are filed on Form 1040X. |
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Q. I forgot to mail my Form W-2, schedules or forms with my tax return. What should I do? |
A. Wait until the IRS requests the Form W-2, schedules or forms. The request will be made in writing within six weeks from the date you mailed the return. |
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Q. How can I check on the status of my refund? |
A. Refund information does not become available until six weeks after you file your tax return (three weeks if you filed electronically or through Telefile). After waiting the appropriate number of weeks, the fastest, easiest way to find out about your refund is to call the Automated Refund Service at 1-800-829-4477. Be sure to have a copy of your return available since you will need to know the first Social Security number shown on your return, the filing status and the exact dollar amount of your refund. The IRS updates refund information every seven days. |
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Q. What can I do to avoid any errors on my tax return in order to receive my refund as quickly as possible? |
A. Before filing your return, review it to make sure it is correct and complete. The following are some of the steps that may help avoid errors and delays: Did you use the peel-off label and enter any corrections? If you do not have a label or there are too many corrections, did you clearly print your name, Social Security number and address, including zip code, directly on your return? Did you enter the names and Social Security numbers for yourself, your spouse, your dependents and qualifying children for earned income credit, exactly as they appear on the Social Security cards? If there have been any name changes be sure to contact the Social Security Administration at 1-800-772-1213. Did you sign and date the return? If it is a joint return, did your spouse also sign and date the return? Do you have a Form W-2 from all of your employers and did you attach Copy B of each to your return? Did you attach any Forms 1099 that show tax withheld? Did you attach all other necessary schedules and forms in sequence number order given in the upper right-hand corner? Make a copy of the signed return and all schedules for your records. It is important that you review your entire return because any errors may delay the processing of your return. |
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Q. Can my refund be used to pay other debts? |
A. State and federal agencies refer to the IRS names of taxpayers who are behind in their support payments, taxes and loans. Your tax refund may not be refunded to you if you are delinquent in child support payments or you have a past-due federal debt (such as a student loan). Instead, your refund may be used to pay other debts you owe. |
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Q. How long do I need to keep my tax records? |
A. Records such as receipts, canceled checks and other documents that prove an item of income or a deduction appearing on your return should be kept until the statute of limitations expires for that return. Usually this is three years from the date the return was due or filed, or two years from the date the tax was paid, whichever is later. When a return filed is false or fraudulent, or when no return is filed at all, there is no period of limitations. Some records should be kept indefinitely, such as property records, since these may be needed to prove the amount of gain or loss if the property is sold. |
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Q. I received an IRS notice. I’ve contacted the IRS at least three times about it, but the problem still hasn’t been fixed. What can I do? |
A. Since October 1998 there has been a national toll-free Taxpayer Advocate Program (formerly the Problem Resolution Office), with assistance available 24 hours a day, seven days a week. You may reach the hotline by calling 1-877-777-4778. You also may call and ask for help if you are suffering, or are about to suffer, a significant hardship due to the IRS laws. |
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