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The American Rescue Plan is now on its way to President Joe Biden. As soon as Biden signs it, millions of taxpayers can look forward to the third COVID-19 economic relief payment. And taxpayers who've already filed their 2020 returns and paid tax on unemployment benefits they received last year also can get ready to file amended returns. That's because during its consideration of the bill last week, the Senate included a provision that made the first $10,200 in unemployment benefits tax-free. UPDATE, Thursday, March 11, 2021: Biden signed the bill into law early in the afternoon today. He originally... Read more →

You filed your tax return. Now the Internal Revenue Service has questions about your Form 1040. While hearing from the tax collector about your return is always a little unnerving, it doesn't necessarily have to be a big deal. A notice does not mean you are under audit. Neither does it mean that your return was incorrectly filed. And in many cases, any issues the IRS has with your 1040 can be quickly resolved. Here are 10 tips to help you deal efficiently and effectively with an IRS notice or letter. 1. Don't panic. You are not alone. The IRS... Read more →

This post was reviewed and updated Wednesday, April 5, 2017 A sin of omission basically is a failure to do something you can and should do. They happen all the time in our daily lives, often inadvertently. Even, or many would say especially, at tax time. Tax sins of omission typically are failing to claim tax breaks for which we're eligible. And while the annual April consequences of overlooked tax breaks aren't quite as severe as their Biblical counterparts, tax sins of omission could be very costly. To ensure that your annual interaction with the Internal Revenue Service this year... Read more →

In addition to updating tax forms and instructions and getting its computer systems ready for the Jan. 20 start of the 2015 tax filing season, the Internal Revenue Service has been touching base with tax preparers who've had some recurring problems with some returns. Rather than penalizing the tax pros who have filed questionable claims for clients, the IRS is, for now, opting for pre-season tax filing reminders encouraging more diligence and a little bit of homework. In November 2014, around 2,500 preparers (according to Kiplinger Tax Letter) received letters recommending the recipients, in the IRS' words, "consider taking continuing... Read more →

The year's second tax-filing deadline isn't as much fun as Sharknado 2, but for many taxpayers it can be just as frightening as the campy Syfy channel classic. Folks who've put off filing until the absolute last minute -- and I must admit I was one of the millions of procrastinators, filing our 2013 federal return just last week -- often find themselves still working on their taxes on Oct. 15. That's OK. You have until midnight local time to e-file it. Or until your post office's last mail pick-up for an Oct. 15 postmark if you're sending paper forms.... Read more →

If you just discovered an error on an old tax return, you might be able to correct it. All you need is Form 1040X … as long as the mistake was made on a return you filed within the last three years. Click image for PDF download of full Form 1040X. Details on filing an amended tax return, which is what you'll do with Form 1040X, are found in the Weekly Tax Tip. I'll let you check out the full tip at your leisure, but here are five key things to keep in mind. First, note the three-year time limit... Read more →

Your federal income tax refund finally arrived and it was less than you expected. What's the deal? It could be debts you owe. The U.S. Treasury, which is boss to the Internal Revenue Service, is able to nab part or all of your refund to pay some outstanding federal or state debts you have. This ability comes thanks to the Treasury Offset Program, or TOP, which is run by the Bureau of Fiscal Service, or BFS. Debts that are collected this way typically include past-due child support, unpaid student loan amounts and due state income tax. Since 2010, TOP also... Read more →

It's one day until the tax filing deadline. Are you panicking yet? Don't. You've got time. Technically, we have a day and a half (sorry for not posting sooner; one of those crazy days) to get our returns done -- and by "we," I mean all y'all planning to send in a 1040 because I've already filed an extension. The Internal Revenue Service accepts as timely filed returns that are postmarked or e-filed by midnight April 15 local time, so that gives you today and tomorrow. To help you cope with any still pending tax issues (remember, tomorrow is the... Read more →

Today is Halloween, when kids and adults alike overindulge in candy, enjoy dressing up (more than usual) and generally celebrate being scared. But there's nothing like getting a letter from the Internal Revenue Service, on Oct. 31 or any other day of the year, to really strike terror in even tax-abiding hearts. I speak from personal experience. The IRS conducted a correspondence audit on one of my returns. Another year, I got a refund check that was much larger than I expected. I must admit that the extra money was scarier. The check -- pre-direct deposit days -- showed up... Read more →

The drop-dead due date for procrastinating tax filers is less than a week away. You have noticed the countdown clock over there in the right column, right? Yes, that's right, the Internal Revenue Service is working with a skeleton crew, but it expects folks who got until Oct. 15 to finish filling out their tax returns to do just that by next Tuesday. If you are an uber-procrastinator, you're pooh-poohing this post. You'll get to your 1040 on Monday, you say, or maybe Tuesday morning. Good luck with that. If you push off your tax filing too long, you'll be... Read more →

Everyone makes tax mistakes, even the Internal Revenue Service. That was again made clear earlier this month when the IRS sent some taxpayers and tax professionals notices that included an interest calculation error. The math mistakes were on CP 2000 notices mailed out the first two weeks of July and which dealt with proposed taxes due on unreported income. The IRS says the interest amount calculated on that new unpaid income amount was too low. Sorry recent CP 2000 recipients. I wish I could tell you, to borrow a Monopoly board game phrase, that the IRS error was in your... Read more →

One of the biggest frustrations this tax filing season was the processing delay of around 600,000 returns because of improperly completed education tax credit claims on Form 8863. Although the Internal Revenue Service didn't provide any details on where the returns in question came from, many of the problematic forms were prepared by H&R Block. The Kansas City-based tax preparer didn't get specific either, but it acknowledged the error in its blog. Bill Cobb, the company's CEO and president, soon thereafter issued an online apology to customers. Now the tax preparation giant is saying it's sorry with cash. OK, with... Read more →

Everyone makes mistakes now and then. (Don't tell the hubby that I admitted that!) When it comes to mistakes on tax returns, the Internal Revenue Service gives us a second chance, up to a point. As this week's Weekly Tax Tip notes, sending in a corrected tax return via Form 1040X is not that difficult. The IRS wants to know what you originally reported, what your corrected numbers are and why you are making the changes. You can add or subtract personal exemptions if on your original 1040 there was some confusion as to whether you properly claimed a dependent.... Read more →

One of the main reason people put off doing their taxes is their fear of making mistakes. One error, whispers that voice as soon as you start working on your 1040, and the Internal Revenue Service will jump all over it, send you nasty letters, audit your return, make your life hell. Take a breath. Most of the time when the IRS finds an error on a tax return, especially a math mistake, it corrects it for you. Sure you'll get a notice of the change, but this correspondence tends to be more boring than totally terrifying. Still, you don't... Read more →

The tax world consensus is that if Mitt Romney doesn't win the White House, he'll amend his 2011 return to recoup the tax savings he surrendered in order to make his effective tax rate reach 14.1 percent. Some calculators say that the Republican presidential candidate's tax rate would have been closer to 9 percent if he'd taken all the deductions for which he qualified. When asked if Romney might file an amended return and claim the $1.77 million in charitable donations that he and the missus didn't include on their Schedule A, thereby getting a nice refund check of around... Read more →

Every year there seems to be a new tax refund horror story. The big one in 2011 was mass delays in processing returns of folks paying back the first-time homebuyer tax credit. There have been some occasional hold-ups on such returns this filing season, but it seems that the Internal Revenue Service's streamlined payback process and changes to the 1040 (enter the payback amount directly on the return and no attachment necessary) have solved a lot of problems, for the IRS and taxpayers. The 2012 filing/refund headache involves Uncle Sam's effort to cut down on tax identity theft and fraud.... Read more →

The 2012 April filng deadline has passed, but tax tasks already in place and others that might one day be on the books were topics last week at my other tax blog. Filers who made a filing error get a chance to correct it via an amended return. Just be sure to tell all on a tax do-over. One mistake that is viewed less leniently by the Internal Revenue Service is nonpayment of taxes. In those cases, a proposal by Congress could revoke the passports of some tax debtors. You can check out new posts each Tuesday and Thursday, and... Read more →

UDPATED Sunday, Aug. 16, 2020 You just got the biggest scare of your life and it has nothing to do with Halloween. The Internal Revenue Service sent you a notice. Photo by me of a neighbor's yard skeleton Halloween decoration. These letters can indeed be frightening. But don't panic. There are lots of reasons why the IRS is writing. Yes, some notices do request more tax money, but others are less alarming. The IRS also sends out notices to notify you of changes to your return or to request additional information. In many cases, you can deal with an IRS... Read more →

Taxes are confusing, intimidating and generally infuriating. That's why we all try to be done with them as quickly as possible. Even when we get more time to file our returns, when we get around to finally filling out the forms we just want the process to be over ASAP. But don't be in such a hurry that you make preventable mistakes. Before you send your Form 1040 (or 1040A or 1040EZ) off to the IRS, be it by tomorrow's impending extended filing deadline or next April, use this checklist to help you avoid a dozen common tax filing errors.... Read more →

Overcoming tax fears

Tax time evokes a lot of emotions. Anger. Frustration. Despair. Then there's fear. Being afraid of filing holds back a lot folks when it comes to accomplishing their annual required tax tasks. I'm no psychologist and I've never played one on TV. But I have been dealing with taxes professionally for almost 15 years. I've been doing my own returns for longer than that. So I know something about how scary taxes can be. And I have some suggestions in my story on how you can overcome some common tax fears. The intimidating tax situations read like a horror... Read more →

IRS paid more than $111 million in erroneous stimulus-related tax benefits

If people dressed as Lady Gaga, Kim Kardashian, The Situation and various Twilight characters aren't scary enough for you this Halloween (and those get-ups are why adults should not be allowed to don costumes!), you can read the IRS watchdog report that reveals the agency let almost $111.4 million in stimulus-related tax payments go out to unqualified filers. "The passage of two significant tax laws impacted the 2010 Filing Season and presented additional challenges for the IRS," notes Michael Phillips, Deputy Inspector General for Audit for the Treasury Inspector General for Tax Administration, or TIGTA, in the Sept. 30 report.... Read more →