Debt Free

Many people have tax return questions. The day after actor Wesley Snipes got sentenced to 3 years in the slammer for failing to file a federal income tax return seems like a great day to discuss come of these. After all, maybe he didn’t file his tax return for three years because he had some questions and just couldn’t get answers to them. I wouldn’t want that to happen to any Debt Free readers!

Tax Return Question 1–
What should I do if I think I made a mistake when I filled out my return?

Mistakes on returns happen all the time. The IRS has provisions for just such an event. You’ll have to spend 6 months in jail, do 150 hours of community service, and pay a 50% penalty on any taxes owed. Just kidding. Actually the IRS recommends that you fix the mistake by filing a form 1040X. This is an amended return that you’ll use of you forgot to report all your income or claim a credit. You have up to 3 years after you filed your return to file this form, so there’s no rush.

The IRS reports that most math mistakes are caught when processing the return. If the processors have more questions or something is missing, don’t worry, they’ll contact you.

Tax Return Question 2 -
What if I made a mistake on my return, I’m getting more money back than I should be, and I’ve already sent me the check? I don’t want to be visiting Wesley in jail for a few years. What should I do? Fear not, tax payer. The IRS has you covered. If it was a math mistake, see answer number 1, above. If it was a mistake in the amount of reported income, you simply use the same form 1040X and send it back with the un-cashed check.

What? You say it’s too late, you already cashed the check and bought a new Ducati to ride for the summer? Well, in that case, you have to file the 1040X ASAP. Include a check or money order payable to the Internal Revenue Service for the amount you borrowed due to your error, and pray repeatedly that that settles the whole matter.

Tax Return Question 3 -
What do I do if I received a 1099 form, but I’m not self employed and I don’t have a business license? What do I do about this? Unless you can prove you actually were an actual employee of whoever sent you the 1099, you’ll have to fill out a 1040 schedule C and report your income from the 1099. In addition, you will need to fill out a form 1040, schedule SE to report your self employment tax. Self employment tax is basically the matching part of your Social Security that your employer usually pays.

One thing to know about fixing mistakes with the ‘1040 X’ form is that these forms can’t be filed electronically. You have to actually fill them out with a pen, put them in an envelope and use the old fashioned mail, if you remember how.

Tax Return Question 4 -
How do I find out what has changed from last year? IRS forms have a “what’s new” section in their instruction books. They will have a list of all changes from the previous year.

Tax Return Question 5 -
I can’t pay the taxes I owe. What do I do now? You might try calling Wesley’s legal team. After all, they got him off on most of the charges. Seriously, you have alternatives if you just can’t come up with the money the Feds are looking for. They will allow you to pay with a credit card. You can also make payment arrangements with the IRS. I went over this in my post on what to do if you can’t pay your taxes.

Tax Return Question 6 -
If you’re a student, do you have to file a tax return? It depends on how much money you earned, and if you can be claimed as dependent by another tax payer. You’ll be a‘filin’ if you are a dependent and:

1.      Your unearned income was more than $850.

2.      Your earned income was more than $5,350.

3.      Your gross income was more than the larger of —

a.       $850, or

b.      You earned income (up to $5,050) plus $300.

Students, you should note that many fellowship grants and scholarships are considered taxable income by the IRS, so they’re not as free as you first thought.

It’s pretty common to have questions when you’re filing out or filing your tax return. That’s why we in the U.S. have an entire industry dedicated to helping you out in this endeavor. It helps explain why franchises such as Liberty Tax Services (started by Jackson Hewitt alum John Hewitt) have grown to over 1,700 locations in only 7 years, and H&R Block had revenues of $4 billion in FY 2007.

So, if you have tax return questions, don’t feel bad. If you can’t find answers here, check the FAQs at the IRS website