The IRS Audit Blog

Posts Tagged ‘finance’

Question: When to file Tax Form 8606?

I made a nondeductible contribution to my Traditional IRA on April 15th, 2008 for tax year 2007. My tax guy did not file a Form 8606. He says that for 2008, the IRS will send me some form showing my Traditional IRA contributions and then he’ll submit the Form 8606 for tax year 2008. ( I think he thinks this makes sense since I somehow technically made the contribution in calendar year 2008?) However, this does not make sense to me since the contribution was for tax year 2007. Can anyone tell me whether I need to file a Form 8606 with my 2007 taxes (obviously late) or with my 2008 taxes?

Thanks.

Answer: If your accountant really said what you said he said, RUN as fast as you can to another accountant.

You cannot report 2007 information on your 2008 return. Every year stands on its own with very few exception, none of which come into play here.

You will get a form from the holder of your Trad IRA reporting to you your contributions for 2007 and you should have it very soon. But he didn’t need that document to file the 8606 – he could use your record of how much you contributed.

Instead of just adding this to a different year – which would be stupid, inappropiate and illegal – you need to amend your 2007 return to add the 8606 to it.

A little off the subject — why would you make non-deductible contribs to your IRA now that there are Roth IRAs? The Roth contributions are always nondeductible, but because of that you get some other pretty good advantages that Trad IRAs don’t give. The only reason to do what you did instead of getting a Roth is if you make to much to be allowed to contribute to a Roth – AGI over $114,000 if you are single or over $166,000 if you are married. If so, disregard this paragraph. Otherwise, talk to your financial advisor about Roth IRA and maybe even doing a conversion from Traditional to Roth.

IRS Has $1.3 billion for people who have not filed a 2006 tax return

Nearly $10 million is waiting for 12,200 Iowans who did not file a federal tax return for 2006, the Internal Revenue Service announced.

Question: Audit or Tax??? Anyone out there who works for a Big 4 firm ….why did you choose Audit or Tax???

I’m currently a tax associate for a Big 4 firm, i love the job so far, but its not busy season for me so no long hours just yet. My question is, why did you choose your career path…in audit…or in tax??? If you switched between the two, why did you choose??? It interests me to know successful people’s stories about how they manage to choose or land towards their career and why you do or don’t like it…any stories are appreciated…i actually read them

Answer: I work in tax – and love it! I work for the big tax prep company, doing mainly individual returns. I also teach classes on tax, and work in HR. But I love the tax prep part of my job because I get to help people. There are so many people who come to my office just wanting to get a quick refund check. But I treat each person like an individual, and talk to them about short and long-term savings, about starting to fund their 401K, or an IRA, or both. We talk about how to avoid getting in a situation where your tax refund is ‘already spent’ every year by starting some short-term savings. We talk about what’s going on in their lives and how it’s going to afect their tax return. I have clients who I’ve seen every year for 7-8 years now. I watch kids grow up and go to college. I help fill out FAFSA forms. I answer tax questions at home when clients look up my number and call me in July. I absolutely LOVED doing the 1040 EZT’s for elderly clients who didn’t otherwise need to file last year – the $30 was important to them, but they didn’t know about it ’till I told them, in some cases.
I do this work because when we were newly married and in college, my former husband and I went to a (different) tax prep firm to have our taxes done. The woman imput some figures, then asked “how fast do you want your refund?” No explanation of what had happened, snippy answers to our questions, and no information on why we were getting back what we were. I had asked that my husband be head of household, which I now know is laughable to a tax pro, and she simply told me ‘nope – you don’t make enough anyway’. I was extremely frustrated. Before we left, I decided I could probably do a better job of that than she did, and asked how to get into the business. She told me, and a few years later, after college and kids, I took some classes and started dong taxes. And to this day I’m thankful she sucked at her job, ’cause I’m really good at mine, and very, very blessed to love what I do!

Hillsborough auditor reports two county offices reading his e-mail

Auditor follows a trail back to offices of Pat Bean and County Attorney Renee Lee.

Tax Strike 2010 – Reform American Government – Career Term Limits -

Question: i filed my 2007 w2 in 2008…..?

I am a single mother who switched jobs in june of 2007. I filed my new employer’s w2 form with my 2008 taxes. Now i have received a letter from the irs stating i owe over $6000 due to not filing the income for 2007. Will it matter if i provide documentation showing the w2 was filed in 2008?
i only filed one w2 in 2007, the one from my first job. i filed 3 w2s in 2008, the one from 2007 and 2008 from my new job and a w2 from my part time job.

Answer: You can’t just file it the next year – if the first one from your new job was for work in 2007, it has to be filed with your 2007 return. From the large amount of what they say you owe, it sounds like maybe with only the one rather than both of them filed, you qualified for EIC and wouldn’t have if you had filed properly with both of them. If that’s the case, you probably do owe quite a bit.

You need to amend both returns, 2007 and 2008, with the right W-2′s in each.

Allston-Brighton community notes

Here are the latest Allston-Brighton community notes.

Eligiendo un preparador de impuestos

Question: Questions about child tax credit/EIC and filing?

What is the difference between a child tax credit and an EIC? I read the qualifications for the EIC, and I do qualify, but what’s the child tax credit? Can I get that too?

I am a single mother, and I had a child last August of 2008. I’m filing through my state’s website (California) with CalFile for free. I worked for 6 months and earned about $9,000, and I received about $1,100 for Unemployment Compensation-Paid Family Leave.

I printed out the Earned Income Credit for Qualifying Child Information form. It says I have to figure out my earned income credit. How do I do that? And then it says to use Schedule EIC to give the IRS Information about my qualifying child . . . How do I do this? How do I submit my forms for an EIC?

Sorry, I’m just really confused . . .
What about EIC? Is that the same thing as the child tax credit?

Answer: The EIC and child tax credit are two different credits (meaning refundable credits- not just a deduction from your income) the child tax credit (up to $1000 for each child under 17 as of December 31st) can be used to pay the tax that you owe…or can be taken as additional child tax credit…meaning you get the money back if you don’t owe or can be split between the two…say you owe $500, you can use $500 to pay the tax you owe and then get the other $500 back in the refund…..on the amount of income you have you won’t get much of the child tax credit, but EIC is where the majority of your refund will be coming from. That being said your EIC could be up to $2500…..you really need to go have someone prepare your taxes for you….someone who knows how to get these credits for you….it’s worth spending $150 if you can gain up to $2500…right? I would just hate to see you miss out on these important credits because you weren’t using good software or were just simply not willing to invest a little money to get a LOT of money back.

United Way works to improve workers’ financial literacy

Escambia County United Way encourages employers to help improve workers’ financial literacy, and thereby create more engaged employees.

How to Manage an Independent Contractor

In today’s freelance culture, independent contractors are an integral part of small businesses’ success. And contractors can fill a diverse slate of positions, from legal consultants to Web designers to copywriters.Due to the independent nature of contract work – it’s often done away from the office, without direct supervision – it can be a tricky thing to manage, even for experienced CEOs. Dig …

Tax Tips: Job Search Expenses February 2010 (ASL, Captions & Voice Over)