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Tax Preparation Tips
Author: Robert D. Flach
Here are some helpful hints, tips, reminders and advice for preparing and filing your 2005 Form 1040 (or 1040A).
* You should receive all your W-2 and 1099 forms by the first week of February. Check the figures on these forms against your records to make sure the amounts reported are correct. Carefully compare the gross federal, state and local wages, the federal, state and local tax withheld, and the Social Security and Medicare withheld amounts on your W-2s to the cumulative year-to-date numbers on your final pay stubs for the year. Also verify that the Social Security numbers on the forms are correct. If you find an error or a discrepancy you cannot reconcile, contact the appropriate employer or financial institution for an explanation or a corrected copy.
If you do not receive a W-2 from an employer by the first week of February you should contact the employer immediately to obtain a duplicate copy. If you cannot contact the employer because it has gone out of husiness or disappeared all is not lost. You can use your pay stubs or other records to reconstruct the various items of income and withholding and file a Form 4852 Substitute for Form W-2 Wage and Tax Statement with your federal and state returns. In such a situation I recommend you consult a tax professional.
* "Uncle Sam" is very picky about matching names to Social Security numbers. If a name and Social Security number reported on your tax return does not match exactly the name in the files of the Social Security Administration the IRS will remove the name and dependency exemption of that person, plus any applicable credits, and automatically recalculate the tax liability as Head of Household, Married Filing Separately or Single if appropriate. Be sure to check the accuracy of all Social Security numbers on all pages of your return before mailing it.
If you have changed your last name during the year as a result of marriage or divorce make sure to notify the Social Security Administration of the change by requesting a new Social Security card ASAP. To do so file a Form SS-5 Application for a Social Security Card at your local SSA office. This form is available to download at the Social Security Administration website (http://www.ssa.gov). If you don't want to wait until you get your new card to file your tax return be sure to use your maiden name (or married name is divorced) on your tax return.
* The name and Social Security number of each spouse is entered on separate lines on the top of the tax return. However, there is no set rule as to which spouse's name goes on the first line. Generally the name and Social Security number of the husband is entered first, but these is nothing to say that the wife's name and number can't be entered on the first line.
If the husband has had a problem with the IRS in the past, or owes federal or state from a prior year's return filed as Single, Head of Household or jointly with a different spouse, or past due child support, his name should be entered on the second line. In such a situation the name and number of the wife should be entered first under "Your" name and "Your" Social Security number.
* In preparing your federal tax return you are often given choices on how to treat a certain situation or item (i.e. joint vs separate, credit or deduction, depreciate or Section 179). You should review each option and do separate calculations to see which one results in the lowest tax liability.
When doing your calculations you should also see how the various federal options affect your resident and non-resident state and local tax liabilities. In most situations your federal choice must also be used in preparing your state and local tax returns, such as in the case of joint or separate. One option may cause you to pay $50.00 more in federal taxes, but will save $200.00 in state taxes. Select the option that results in the least overall federal, state and local tax liability.
* When attaching the W-2 forms to your tax return be sure that you attach "COPY B". Here, too, the IRS is very picky, and will send back the return unprocessed if any copy other than "COPY B" of a W-2 is attached.
* Don't forget to sign your return before mailing it out! If filing a joint return both spouses must sign the return. In the case of a return for a minor child who cannot sign his/her name, either parent may sign the child's name in the space provided followed by "By (signature), parent of minor child."
*Once again you are given the option of having your federal income tax refund directly deposited into your checking or savings account. Some states also offer this option. This is a good idea. By choosing direct deposit you should receive your refund about 10 days earlier than if it is delivered by mail, plus you avoid any problems or delays caused by the US Post Office. You will not receive a special acknowledgement from your bank that the money has been received - you must check your bank statement to verify receipt. To select direct deposit you must fill in your bank routing and account numbers in the appropriate lines toward the bottom of Page 2 of the 1040 or 1040A.
* If you are including a payment with your tax return make the check or money order payable to "UNITED STATES TREASURY" and not Internal Revenue Service or IRS. Put "2005 Form 1040 (or 1040A)" and your Social Security number on the check or money order.
* If you pay a tax professional to prepare your return you can elect to authorize the IRS to discuss any problems that arise in the processing of the return directly with your paid preparer. This election also authorizes the preparer to provide the IRS with any missing information, check on the status of the processing of your return, refund or payments, and respond directly to many IRS notices regarding the return. All IRS notices will be sent to you and not to the preparer. The election does not give the preparer a "power of attorney" to represent you in an audit situation. To make this election, check the "Yes" box and write "Preparer" in the space for the name of the "Third Party Designee" on the bottom of Page 2 of your return.
* Make sure to file your tax return, or a Form 4868 automatic extension application, by April 17, 2006 (April 15th is a Saturday this year), even if you cannot pay all, or any, of the tax due. I cannot stress enough how important it is that either the return or an extension application is filed on time, whether or not a payment is included. The penalty for paying late is .5% (.005) of the tax due per month, or part thereof, but the penalty for filing late is 5% (.05) per month - 10 times as much!
Any questions? You can Ask The Tax Pro at http://rdftaxpro.tripod.com/taxhelp.
copyright (c) 2006 by Robert D Flach LLC
Robert D Flach is a tax professional with 34 tax seasons of experience preparing 1040s for individuals in all walks of life. He writes and publishes the free monthly online newsletter STUFF AND SUCH ( http://rdftaxpro.tripod.com/stuffandsuch ) and several other websites, as well as several print newsletters and reports on tax planning and preparation. For more information on his websites go to http://rdftaxpro.tripod.com/websites
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