Your Federal Income Tax Return Notes

field audit

An IRS agent visits you at your home, your business, or the office of your accountant to have access to your records. A [this word] may be done to verify whether an individual has a home office if this is claimed.

filing status

Based on marital status and family situation. A taxpayer will fall into one of five possible [this word] categories: single individual, married person filing jointly or surviving spouse, married person filing separately, head of household and a qualifying widow(er) with dependent children.

married, filing joint return

Combines the spouses' incomes.

DVD

The IRS also sells a DVD with over 2,000 tax forms, publications, and FAQs.

correspondence audit

The simplest and most frequent type of audit. This mail inquiry requires you to clarify or document minor questions.

married, filing separate returns

Each spouse is responsible for his or her own tax; under certain conditions, a married couple can benefit from this filing status.

2. income

Earnings from your employment (as reported by your W-2 form) and other income, such as savings and investment income, are reported in this section of Form 1040.

9. your signature

Forgetting to sign a tax return is one of the most frequent filing errors.

walk-in service

You can visit a local IRS office (400 are available) to obtain tax assistance.

phone hotline

Information about specific problems is available through an IRS-staffed phone line at 1-800-829-1040.

Form 1040X

This form is used to amend a previously filed tax return. If you discover income that was not reported, or if you find additional deductions, you should file Form 1040X to pay the additional tax or obtain a refund.

IRS2Go App

This tool provides options for checking your refund status, requesting tax records, locating free tax prep help, and other interactive tools.

office audit

Requires you to visit an IRS office to clarify some aspect of your tax return.

recorded messages

The IRS Tele-Tax system gives you 24-hour access to about 150 recorded tax tips at 1-800-829-4477.

3. adjustments to income

As discussed later in the chapter, if you qualify, you may deduct contributions (up to a certain amount) to an individual retirement account (IRA) or other qualified retirement program.

tax audit

A detailed examination of your tax return by the Internal Revenue Service. In most audits, the IRS requests more information to support your tax return. Be sure to keep accurate records. Receipts, canceled checks, and other evidence can verify amounts that you claim. Avoiding common filing mistakes helps to minimize your chances of an audit (see Exhibit 3-7 ).

qualifying widow or widower

An individual whose spouse died within the past two years and who has a dependent; this status is limited to two years after the death of the spouse.

head of household

An unmarried individual or a surviving spouse who maintains a household (paying for more than half of the costs) for a child or a dependent relative.

6. other taxes

Any special taxes, such as self-employment tax, are included at this point.

5. tax credits

Any tax credits for which you qualify are subtracted at this point.

Form 1040

Form 1040 is an expanded version of Form 1040A that includes sections for all types of income. You are required to use this form if your income is over $100,000 or if you can be claimed as a dependent on your parents' return and you had interest or dividends over a set limit. Form 1040 allows you to itemize your deductions. You can list various allowable expenses (medical costs, home mortgage interest, real estate property taxes) that will reduce taxable income and the amount you owe the government. You should learn about all the possible adjustments to income, deductions, and tax credits for which you may qualify.

8. refund or amount you owe

If your payments exceed the amount of income tax you owe, you are entitled to a refund. If the opposite is true, you must make an additional payment. Taxpayers who want their refunds sent directly to a bank can provide the necessary account information directly on Form 1040, 1040A, or 1040EZ. Changing economic and political environments often result in new tax regulations, some of which may be favorable for you while others are not. An important element of tax planning is your refund. Each year, more than 90 million American households receive an average tax refund of over $2,500 for a total of over $225 billion. Invested at 5 percent for a year, these refunds represent about $11.25 billion in lost earnings. By having less withheld and obtaining a smaller refund, you can save and invest these funds for your benefit during the year.

4. tax computation

In this section, your adjusted gross income is reduced by your itemized deductions (see Exhibit 3-4) or by the standard deduction for your tax situation. In addition, an amount is deducted for each exemption to arrive at your taxable income. That income is the basis for determining the amount of your tax (see Exhibit 3-5).

single

Never-married, divorced, or legally separated individuals with no dependents.

H&R Block At Home and TurboTax

Software packages that allow you to complete needed tax forms and schedules and either print for mailing or file online. Electronic filing of federal taxes now exceeds 113 million returns annually. With e-file, taxpayers usually receive their refunds within three weeks. The cost for this service is usually between $15 and $40 and in some cases will be $0.

interactive tax assistant

The IRS has developed a query-based interactive tool that allows taxpayers to get answers for basic and advanced questions.

publications

The IRS offers hundreds of free booklets and pamphlets that can be obtained at a local IRS office, by mail request, by telephone, or downloaded. Especially helpful is Your Federal Income Tax (IRS Publication 17). IRS publications and tax forms are available by phone at 1-800-TAX-FORM or online at www.irs.gov.

Form 1040A

This form would be used by people who have less than $100,000 in taxable income from wages, salaries, tips, unemployment compensation, interest, or dividends and use the standard deduction. With Form 1040A, you can also take deductions for individual retirement account (IRA) contributions and a tax credit for child care and dependent care expenses. If you qualify for either Form 1040EZ or Form 1040A, you may wish to use one of them to simplify filing your tax return. You may not want to use either the Form 1040EZ or Form 1040A if Form 1040 allows you to pay less tax.

Form 1040EZ

You may use Form 1040EZ if: • You are single or married filing a joint return, under age 65, and claim no dependents. • Your income consisted only of wages, salaries, and tips and not more than $1,500 of taxable interest. • Your taxable income is less than $100,000. • You do not itemize deductions or claim any adjustments to income or any tax credits.

1. filing status and exemptions

Your tax rate is determined by your filing status and allowances for yourself, your spouse, and each person you claim as a dependent.

7. payments

Your total withholding and other payments are indicated in this section.