Tax Returns Tips

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What order do my attachments need to be in?

Tax Return Form Attachments

An important consideration you need to make prior to submitting your paper income tax return is the order of the applicable form attachments. What does that mean?

Look on your 1040. Each line will have a specific purpose. On some of these lines the figure you put there will be taken from another IRS tax form. For instance, your wages and salary line will contain the figure from your W-2 IRS tax form. Keep reading further down your Form 1040 (plus 1040A and 1040EZ). You will see a variety of lines containing further requested information.

When you are putting your income tax return together (collating it), it is important to put those IRS tax forms in order. You need to attach them to your Form 1040 tax return in the same order that they are listed on your 1040.

Why is this important? First of all, it will save the IRS processing time. If your IRS tax forms are in order, the IRS will simply be able to flip through them to double check your figures. If they are not in order, the IRS person will have to find out which form applies to which line.

You may be assessed a penalty if your 2006 income tax return (or any tax year for that matter) is not properly ‘put together'. If your information appears as if you have not given it any thought, it may be considered a frivolous return. There are hefty penalties for this.

If you have your income tax return prepared by a tax professional, this is one area you will not need to concern yourself with, usually. Tax preparers are specially trained to follow this procedure of having all the attachments in form order. However, they do make mistakes. After all, tax preparers are human beings, you know.

You are ultimately responsible for your income tax return, regardless of if you have someone else prepare it or you do it yourself. Therefore, to be safe, double check everything prior to having your tax return submitted to the IRS. A competent tax preparer will give you this opportunity.

   
Can I split my income tax refund?

Splitting Your Tax Refund

The 2006 tax year is the first time the IRS allows taxpayers to have their tax refund split among up to three different places. The IRS states that you can have your refund split (and directly deposited) into any of the following accounts you have:

  • Bank checking
  • Bank savings
  • IRA (must be set up prior to you requesting a direct deposit into it)
  • Coverdell education savings account
  • Health savings account
In order to have your 2006 tax refund split into up to three financial accounts, you need to file IRS Form 8888. You must use direct deposit as your only method of receiving your income tax refund in order to file this return.

If you want your 2006 income tax refund deposited directly into one financial account, you do not need to file IRS Form 8888. You just need to fill in the proper lines on your Form 1040, 1040A, or 1040EZ. Be sure to include your bank account number and correct routing number.

Be sure to attach IRS Form 8888 to your applicable 1040 when filing your 2006 income tax return with the IRS.

   
What are some reasons for delaying processing on my tax return?

Reasons for Delays in Tax Return Processing

There are a variety of reasons the IRS may delay the processing of your return. Many of them relate to the incompleteness of your income tax return.

Name change. You have changed your name (for reasons such as divorce, marriage, etc.), but failed to notify the IRS. In addition to delaying your refund and processing of your tax return, it could affect your social security benefits. You need to inform your local Social Security Administration (SSA) office to have your name change done. You need to have your name be the same on your tax return as it is found in the social security records. One easy way to do this in the interim is, if you received a mailing address from the IRS in your income tax return package, simply peel this off and attach it to your 2006 income tax return. Then, cross out your old name and write in your changed name.

Incorrect or missing social security numbers. This number must be the one found on your social security card. In addition to delaying the processing of your return, you could be penalized by the IRS. If you are filing jointly, or claiming an dependents, you must include their social security numbers also. If you do not have this number, apply for one using Form SS-5 (Application for a Social Security Card). You do this at your local SSA office. Expect it to take about 2 weeks before you get a SSN number.

Lack of signature. You return needs to be signed by you. If filing jointly, it must be signed by your spouse. This is a simplistic statement. If your spouse is unable to sign, there are many situations where IRS rules must be followed. Refer to IRS Publication 17 – Your Income Taxes for more information. If you paid someone to prepare your tax return, they need to sign on the designated line.

Incorrect filing status. You checked the wrong box for your filing status.

Your form attachments are not in order. This causes the IRS to manually put them in order.

Incorrect exemption amount. You filled in the wrong exemption amount.

You claimed the incorrect standard deduction amount. For instance, you are single and over 65 but did not claim the full amount you are entitled to.

Incorrect direct deposit information. You want to receive your tax refund via direct deposit. However, you did not furnish your bank account number or routing number.

Your tax payment is not the amount on your tax return.

Mailing to the incorrect IRS address. This will cause a delay to begin with. However, if you mail your 2006 tax return later in the tax season (with thousands of other taxpayers), it will cause an even longer delay in processing.

Not attaching postage to your return. Of course, this will result in your income tax return being returned to you. You will then have to resubmit it.

By making certain all this information is correct, the IRS can process your return in a more efficient and timely manner.

   
What is an audit red flag?

Audit "Red Flags"

Recent years have found an increase in the number of audits performed by the IRS on taxpayer income tax returns. They have been focusing on high income individuals (many tax loopholes exist, you know), Schedule C (sole proprietors) filers, partnerships, abusive tax shelters, and corporations in general. If your income tax return stands out from the rest, it is called an ‘audit red flag'. Here are some reasons your 2006 income tax return may be receive an ‘audit red flag':

  1. You own and operate a home business office. There are strict rules, regulations, and guidelines that must be met in order to qualify for this deduction. Many taxpayers claim this deduction, yet do not qualify. If you claim an excessive amount of deductions, you will probably be ‘red flagged'.
  2. Your business deductions are much larger than your business income.
  3. You are claiming business deductions that appear questionable to the IRS.
  4. You have a history of IRS audits.
  5. You are a shareholder of a corporation that has been audited by the IRS.
  6. You claim tax-shelter losses.
  7. You claim an earned income credit. Much abuse of this credit has occurred in the past causing the IRS to notice taxpayers who claim it.
  8. You are married, but filing separately. This increases the chances of inconsistent information between the two taxpayers.
  9. You receive an inordinate amount of cash during your business transactions.
  10. Your itemized deductions are much larger than what the IRS considers acceptable. The areas of particular concern involve medical, taxes, and interest.
  11. You claim charitable contributions that are not in line with your income.
  12. You are reporting information without any clear explanation, such as complex business or investment transactions.
  13. You under-report an excessive amount of income. Every time you receive income from a source, an IRS Form 1099 is filed with the IRS. You must know this. There is a comprehensive program put into place within the IRS to match information you put on your tax return with that of information submitted from outside sources (those providing you with the Form 1099 series, for example). In other words, the information you report on your income tax return does not match information received from third-party documentation.
Only a small amount of income tax returns are audited by the IRS. The above information is useful to you so you can be certain about not receiving an audit “red flag”.

Another “audit red flag” involves if your income tax return was prepared by someone who is on the IRS list of “suspectable tax preparers”. Otherwise known as a problem preparer, they are known to violate the IRS tax laws. That is another reason to check the background on whom you decide to prepare your income tax return.

   
How can I find out when I'll get my income tax refund?

Where's My Refund?

The IRS has a program in place to help taxpayers find out the status of their 2006 income tax refund. The program is known as “Where's My Refund?” It is a program offered both online and via telephone.

If you mailed your income tax return, you need to wait about 6-8 weeks before using this program. The IRS will not, on the average, have processed your income tax return before that long. If you submitted your 2006 income tax return electronically you need to wait about 3-4 weeks. That is the average time it takes for the IRS to process your income tax return.

When you call the IRS regarding the status of your refund (find out when you can expect to receive it), you will need the following information:

  • Social security number
  • Filing status
  • Refund amount
You can call the IRS at 1-800-829-4477 for an automated refund information line. Or, to speak with a live IRS representative, call the IRS at 1-800-829-1040. You can expect long hold times during late tax season, however. When you go online to the IRS website (irs.gov) wanting to use “Where's My Refund?” you will need the same information.

You can learn if the IRS has processed your refund, if they have received your income tax return, and when your refund check was dated. Or, if you requested direct deposit of your income tax refund, you can find out when it was done.

   
What is the difference between a tax form and a tax return?

Tax Return vs. Tax Form

You hear about income tax returns and income tax forms. How do they differ?

To help you understand, generally, a tax form is a single sheet of paper (form) that contains information regarding a specific topic. (Check out the IRS website to get an idea of the amount of income tax forms available). Every topic you can think of that affects income taxes will have an IRS form. For instance, one Form 1099 is used to report income you received from one source. The IRS Form Schedule C will contain information about a business owner's income and expenses. Form 1040 and its variations (A, EZ) are each considered an income tax form. That, in a nutshell, is what a tax form is. It is a sheet of paper used to report tax information to the IRS.

On the other hand, a tax return consists of a variety of tax forms that are applicable to your complete income tax return. You attach your tax forms (W-2, Schedule C, etc.) to your Form 1040 or Form 1040A. Information from your individual tax forms is transferred onto your Form 1040 or Form 1040A. Notice that every applicable tax form has a line near the bottom stating, ‘enter on Line.... of Form 1040 (or A)'. These figures all combine to give you either a refund or a tax payment due amount. This total combined consolidation of all the forms you will be filing with the IRS is your income tax return. Once again, there are exceptions (such as 941 payroll tax return), but in general this is true.

   
What is a tax return status?

Tax Return Status

Tax return status is lingo for “how far along is your tax return from either being finished or being submitted to the IRS?” Finding out your tax return status depends on the method you choose to prepare and submit it. Either way, you want to know if it has been started in the tax return preparation process, been finalized, and/or be submitted to the IRS.

If you have someone else prepare and submit your 2006 income tax return, and it was not completed while you were in your appointment, simply call him or her. Know that even though you may like to believe your income tax return is the most important in the world, your tax preparer will probably have many other returns that need processing. Give them at least one week from the date you took it in before you inquire as to its status.

Also, know that your income tax preparer will call you if they have any questions regarding any of the information needed for your income tax return. And, you will receive a phone call when your return is ready to be submitted, but is waiting for your signature. These are both great times to ask about the time frame regarding the completion of your 2006 income tax return.

If you prepare your income tax return yourself, and submit it electronically, you will receive a submission receipt confirmation when you e-file your tax return. This assures you that the IRS has received your return. You also do not need to know about your income tax return status, obviously.

If you mailed your paper return in, the IRS states it takes an average of 6-8 weeks to process your return. The later in the tax year you mail your return, the longer it will take for it to be processed. It is recommended to not call them and ask. They are simply swamped during tax season. However, if you must call them, you can speak to an IRS representative by calling 1-800-829-1954 during normal business hours. The actual hours will be shown in your Form instruction booklet.

You can, however, call the IRS to find out about your tax refund, if you are due any. This is a way to also find out where along the income tax preparation process your tax return is. For instance, if you receive information about your refund, you can determine the status of your income tax return. If you receive a refund, it means your tax return is complete. Do not attempt to get this information, however, until about 6 weeks after you have mailed in your tax return to your local IRS service center. Or, if you filed electronically, wait at least three weeks. You can visit the IRS website to enter “Where's My Refund?”. Or, you can call the IRS at 1-800-829-4477 24 hours per day, 7 days per week. To speak to a live person call 1-800-829-1954 during operating hours.

Effective for the 2006 tax year, the IRS has expanded their customer service for taxpayers. Taxpayers can now schedule a personal appointment at locations throughout the U.S. This is done through the IRS' Everyday Tax Solutions service.

   
What about state tax returns?

State Tax Returns

If you live in a state that charges a state income tax, you will need to file a state income tax return. You will be reporting the state withholding amount found on your 2006 W-2 form, if you worked as an employee. You will have other state return reporting responsibilities if you had income from other sources (such as if you were self-employed).

Each state has its own website set up. Go on to your state's website and visit its taxing authority. There should be a link to this for your convenience. In many states this is located in the Department of Revenue. Your state will have information about how to obtain its state tax forms, where to file your tax return, and may offer options as to how to file them. Many states offer electronic filing for their state tax returns.

Also remember that even though you may not have had any state income tax withheld from your paycheck, you will still owe taxes to your state on income earned. For instance, you received income from interest on your bank account. Or, if you received rental income, you will need to pay taxes on this.

Filing your state tax returns can easily be done along with your federal income tax return at most tax preparation firms, tax preparer offices, or by yourself electronically.

   
What is a tax refund calculator?

Tax Refund Calculator

You can calculate the amount of your refund throughout the year, not just at tax time, by using a refund calculator. The Withholding Calculator can be used for this purpose. You simply input your withholding allowances, estimated income, and the calculator automatically calculates the refund associated with that particular withholding amount.

You can get an estimate of your refund by adjusting the amount of your withholding. Using this refund calculator can actually be informative. It will show you how your refund can change according to your withholding amounts. If you are self-employed (and have no withholding taxes) it also will show you your refund. You just need to have an estimated income amount and deduct the estimated taxes you have paid throughout the year.

   
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