Home » PAYING YOUR TAX (Page 13)

Category Archives: PAYING YOUR TAX

When To File An Amended Tax Return

August 5, 2009 2:29 pm / Leave a comment

[Stacie says: If you have already filed your income tax return, and you realize that you have made an error or forgot to include something on your return, thats the time to start thinking aboutn amending.]
The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return.

However, you should file an amended return if any of the following were reported incorrectly:

Your filing status
Your dependents
Your total income
Your deductions or credits

You may also elect to amend your 2008 return if you are eligible to claim the new first-time homebuyer credit of up to $8,000 for a qualified 2009 home purchase. The amended tax return will allow you to claim the homebuyer credit on your 2008 return without waiting until next year to claim it on the 2009 return.
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ submitted electronically or by mail. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.
The Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. There is an area on the back of the form where you explain the specific changes being made to the return and the reason for each change.
If the changes involve other schedules or forms, attach them to the Form 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Schedule EIC to show the qualifying person’s name, year of birth and Social Security number.
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. If you owe additional tax for 2008, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
Generally, to claim a refund, 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.
Form 1040X and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Link:
Form 1040X, Amended U.S. Individual Income Tax Return

Has Your Mortgage Debt Been Forgiven? Here Are Some Things You Should Know

August 1, 2009 3:58 am / 2 Comments on Has Your Mortgage Debt Been Forgiven? Here Are Some Things You Should Know

[Stacie says: Here are some helpful tips that are part of the Internal Revenue Service’s Summer Tax Tips series. Definitely worth the read. For more information see also my blog Canceled Debts, Foreclosures, Repossessions, and Abandonments]

There is tax relief for struggling homeowners. If your mortgage debt is partly or entirely forgiven at any time during 2007 through 2012, you may be able to claim special tax relief on your federal income tax return for that year.

Here are six things the IRS wants you to know about mortgage debt forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from tax up to $2 million of debt forgiven on your principal residence. The limit is $1 million for a married person filing a separate return.

2. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief.

3. The debt must have been used to buy, build or substantially improve your principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

4. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax-relief provision. In some cases, other kinds of tax relief – based on insolvency, for example – may be available.

[Stacie says: The following worksheet can be used to calculate the extent that you were insolvent.]
[Click on the picture to enlarge]

5. If your debt is reduced or eliminated you should receive a Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

6. Taxpayers who qualify claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attaching it to their federal income tax return for the year.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit the IRS Web site at IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. This publication and Form 982 can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:
IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments (PDF)
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (PDF)

Post navigation

← Older posts Newer posts →