FAQ - Frequently Asked Questions
Q:
I
received this letter from the IRS in the mail this weekend and
wanted to check it through you. I paid the amount you had told me
online that day - I think I sent you a copy for your files. Does
this letter mean that they didn't receive it or that they don't
know that they received it? So, do I just owe the penalty amounts
and should I write a check and mail that in?!
A:
No
problem. It's just a case of the left hand not catching up to the
right at the IRS. Your tax return was E-Filed in Cincinnati.
Your payment was mailed to Atlanta. The payment gets processed in
Birmingham, but the bill comes from Memphis. If your payment gets
lost, we file a tracer in Baltimore. If you had overpaid, Chicago
would send you the refund check. If you are seriously delinquent,
Austin will get on your case. Ahh! The Age of Computers!! : )
Q. I owe federal
and state taxes. Isn’t there some place on-line where I can use a
credit card to pay the tax I owe?
A. Yes. You can go to
www.1040paytax.com
or
www.officialpayments.com
to pay both the state and the federal. You can also deduct the
fee charged to pay your taxes with a credit card on next year’s
tax return (and maybe earn points on your credit card)!
Q. I have
a quick question about donating a car. I was thinking about
donating my existing car, a 2001 Volvo, what are pros/cons? Does
the value of the donated car impact my tax returns, etc?
A. Go to
www.kellybluebook.com
or
www.edmunds.com
and find out the value of the Volvo. This is the maximum amount
you can write off as a donation on your tax return, but it doesn't
stop there. You need a statement from the charity you are
donating the car to that tells you whether they are using the car
themselves or sending it to auction. If they are using it
themselves, the letter should state a value (at or close to the
bluebook amount) and you can deduct that amount as a charitable
donation on your tax return. If it is going to auction, you can't
take a donation until it is sold and only for the amount of the
sale.
Q. Are
Unemployment Benefits taxable?
A. It kind of feels like kicking you when you’re
down! Yes. Unemployment benefits are taxable on the federal
return. Some states allow a partial exemption, but because
states’ revenues are also down, many of the states that used to
allow unemployment benefits to be tax-free no longer do.
Q. I cut my
hours at work so I can help my sister who is disabled and lives
alone. She isn’t my dependent, so is there any tax relief I can
get for the loss in pay?
A. Since she isn’t your dependent, there isn’t
anything for you on the federal return (except your income is
lower so your tax will be lower). GA, however, has a Caregiver
Credit. To qualify, the person receiving the care must be a
family member but does not have to be living with you. She must
be permanently disabled or age 62 or older. The credit is 10% of
money that you spent for housekeeping, yard work, day care
services, or medical equipment and supplies. The maximum credit
you can use to offset your GA state taxes is $150 (10% of a
maximum allowance of $1500).
Q. I just funded my and my wife’s Roth at $5,000 each. Then I
remembered there was an income limit for Roths and my income is
above the limit. But I've already sent the money. Who is going
to know? What will happen if I let it ride?
A. You are correct. Your income is too high to
contribute to a Roth. You CAN contribute, though, to a
non-deductible Traditional IRA. What you want to do is called a
recharacterization. Contact the company and ask them to: a)
send it back, or b) recharacterize it to a traditional
IRA. Don't mix the new contribution, which is after-tax money,
with any 401k rollovers, which are pre-tax money and fully taxable
when you make a withdrawal. Since this new IRA is after-tax
money, you will be able to get your investment back tax-free when
you withdraw from it, and only the interest will be taxable.
A word of caution: a reporting form goes to
the IRS annually. If you leave it in the Roth, there is a 6%
annual Excise Tax until you take it out.
