Liberty Tax Service Online Basic Income Tax Course. Lesson 19 1 Chapter 18 Homework 1 HOMEWORK 1: Sean D. (SSN 022-45-0947, born 12/12/1941) and Sue P. Summers (SSN 034-664362, born 2/9/1944) live at 22 Abbott Road, Sacramento, CA 94211. In 2007, they filed MFJ. They have no dependents. They will have a balance due for 2008 and want to figure the penalty themselves. They are eligible to use the short method on Form 2210. They will pay their balance due on the due date, April 15, 2009. Information from their 2007 and 2008 returns is as follows. 2 Chapter 18 Homework 1 2008 2008 2008 2007 2007 tax after credits (line 56 of Form 1040) - $6,784 withholding - $2,100 estimated tax payments - $2,000 tax - $6,194 AGI - $64,200 Sean and Sue do not want to pay a penalty for 2009. Their filing status, etc. will remain the same as in 2008. Their estimates for 2009 follow. AGI expected for 2009 - $69,500 Estimated federal withholding for 2009 - $3,950 1. Prepare Form 2210 for Sean and Sue. 2. Prepare an Estimated Tax Worksheet and the paymentvouchers for Sean and Sue. Use the 2009 Tax Rate Schedule and Standard Deduction Chart following. 3 Chapter 18 Homework 1 4 Chapter 18 Homework 1 Standard Deduction for 2009 5 Chapter 18 Homework 1 6 Chapter 18 Homework 1 7 Chapter 18 Homework 1 8 Chapter 18 Homework 1 9 Chapter 18 Homework 1 10 Chapter 18 Homework 1 11 12 13 Chapter 18 Homework 2 HOMEWORK 2: Use the information from your answer to Homework 2 in Chapter 7 for Gerald T. and Belle M. Harrison. Assume that the Harrison's were notified that their entire refund was used to pay Belle’s past due student loan payments. Gerald determines that if he filed a separate return he would claim all the dependent exemptions. Fill out an Injured Spouse claim for Gerald. 14 15 Chapter 18 Homework 2 16 Chapter 18 Homework 3 HOMEWORK 3: John A. Terry (SSN 500-18-1128, born 1/18/1966) is single and lives at 205 Stamford Bridge Road, Ahoskie, NC 27910. His only income is from working as a mechanic for Chelsea Manufacturing. He has his HUD- 1 settlement statement showing he purchased a home on August 1, 2008 for $165,000. John meets the qualifications for the first-time home buyer credit. Prepare his tax return. 17 Chapter 18 Homework 3 18 Chapter 18 Homework 3 19 Chapter 18 Homework 3 20 Chapter 18 Homework 3 21 Chapter 18 Homework 3 22 Chapter 18 Homework 3 23 Chapter 19: Extensions, Amended Returns, Electronic Filing, State Returns Chapter Content Extension Requests Amended Returns Electronic Filing Form 8888 State Returns Key Ideas Objectives Learn How to File an Extension Request Learn How to File an Amended Return Learn About Electronic Filing and How to File Electronically Learn About Filing State Returns 24 EXTENSIONS A. An extension is an extension of time to file and not an extension of time to pay. 1. If cannot file by due date, may get an automatic 6-month extension of time to file 2. File Form 4868 for the 6-month extension of time to file 3. With 6-month extension must file by October 15, 2009 4. Accurate estimated payment must be made by regular due date, can send with Form 4868 5. If cannot pay full amount, can still get extension but may owe interest on unpaid amount and possibly a penalty for paying late 6. When you do file, enter payment made with Form 4868 on line 67 of Form 1040. 25 EXTENSIONS On Form 1040, page 2 26 EXTENSIONS OUTSIDE THE UNITED STATES B. You are allowed an automatic 2-month extension to file and pay federal income tax due if: 1. You are U.S. citizen or resident, and 2. On regular due date of return: a. You are living outside U.S. and Puerto Rico, and your main place of business or post of duty is outside U.S. and Puerto Rico, or b. You are in military or naval service on active duty outside U.S. and Puerto Rico. 27 WHEN TO FILE YOUR 2007 RETURN Table 19-1 shows the timelines for regular returns and extensions. 28 PENALTIES FOR LATE PAYMENT AND LATE FILING Penalties For Late Payment And Late Filing D. There are penalties for paying late and filing late. 1. Failure-to-pay penalty is usually 1/2 of 1% of any tax (other than estimated tax) not paid by regular due date a. Charged for each month or part of month tax is unpaid b. Maximum penalty is 25% c. May not be charged if you show “reasonable cause”. 29 FAILURE TO FILE PENALTY 2. Failure-to-file penalty is usually charged if return is filed after due date (including extensions) and is usually 5% of tax not paid by paid by regular due date a. Charged for each month or part of month return is late b. Maximum penalty is 25% c. If over 60 days late, minimum penalty is $100 or balance of tax due on return, whichever smaller d. May not owe penalty if good reason for filing late. 30 AMENDED RETURNS AMENDED RETURNS A. If you discover errors on your return, you can file an amended return or claim for refund. 1. Correct return if, after filing it, you find that you: a. Did not report some income b. Claimed deductions or credits you should not have claimed c. Did not claim deductions or credits you should have claimed d. Should have claimed a different filing status 31 AMENDED RETURNS B. To file an amended return, use Form 1040X. 1. Cannot be filed electronically 2. File separate Form 1040X for each year being amended 3. May need to amend state return as well C. Form 1040X compares amounts from original return with corrected amounts. 1. May result in additional tax due or refund owed to you 2. Complete and attach appropriate forms and schedules or it will be returned. 32 AMENDED RETURNS D. Mail your Form 1040X to IRS Service Center where you now live. 1. Use Table 19-2 to find out where to file Form 1040X. E. File Form 1040X within 3 years after date you filed original return or within 2 years after date you paid tax, whichever is later. 1. Time for filing a claim for refund is same as time for filing Form 1040X 2. If did not file original return when due, generally can claim a refund by filing return within 3 years from time tax was paid 3. May be limit on amount of refund. 33 AMENDED RETURNS F. If amended return results in additional refund, interest will be paid on it. 34 AMENDED RETURNS 35 AMENDED RETURNS 36 AMENDED RETURNS 37 AMENDED RETURNS 38 39 AMENDED RETURNS WHEN TO FILE Form 1040X. Generally, you must file your Form 1040X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. The time for filing a claim for refund. The time for filing a claim for refund is the same as the time for filing a Form 1040X. Returns filed before the due date (without regard to extensions) are considered filed on the due date (even if the due date was a Saturday, Sunday, or holiday). The time periods can be suspended while you are financially disabled. See Publication, 556, Examination of Returns, Appeal Rights, and Claims for Refund, for more details. If you do not file a claim within the time period, you may not be entitled to a credit or a refund. 40 AMENDED RETURNS Late-filed returns. If the original return was not filed when it was due, a refund can generally be claimed by filing the return within 3 years from the date the return was due to get a refund. The return must be received by the IRS within the 3 year period. If the return is filed late, the postmark date does not determine the date of filing. There may be a limit on the amount of your refund. If you file your claim within 3 years after the date you filed your return, the credit or refund cannot be more than the part of the tax paid within the 3-year period (plus any extension of time granted for filing your return) immediately before you filed the claim. This time period is suspended while you are financially disabled. Payments made before the due date (without regard to extensions) of the original return are considered paid on the due date. 41 AMENDED RETURNS Dolly made estimated tax payments of $500 and got an automatic extension of time to October 15, 2006, to file her 2005 income tax return. She filed on 10/15/06 and paid $200 additional tax. Dolly later realized she had additional deductions or credits and wanted to amend her 2005 return to claim a refund of $700. Will she be able to receive this refund? YES OR NO? 42 AMENDED RETURNS Dolly made estimated tax payments of $500 and got an automatic extension of time to October 15, 2006, to file her 2005 income tax return. She filed on 10/15/05 and paid $200 additional tax. Dolly later realized she had additional deductions or credits and wanted to amend her 2005 return to claim a refund of $700. Will she be able to receive this refund? YES Because she filed her claim within 3 years after she filed her return, she can get a refund of up to $700, the tax paid within the 3 years plus the 6-month extension period immediately before she filed the claim. 43 AMENDED RETURNS If you file a claim more than 3 years after you file your return, but within 2 years from the time you paid the tax, the credit or refund cannot be more than the tax you paid within the 2 years immediately before you file the claim. Example: Abbey filed her 2005 tax return on 4/15/06. She paid taxes of $500. On 11/1/07 after an examination of her 2005 return, she had to pay an additional tax of $200. On 5/11/09, she files a claim for a refund of $300. However, because she filed her claim more than 3 years after she filed her return, her refund will be limited to the $200 she paid during the 2 years immediately before she filed her claim. 44 AMENDED RETURNS EXCEPTIONS FOR SPECIAL TYPES OF REFUNDS There are exceptions for special types of refunds and deadline dates and limits may be different for: 1. Qualified reservist distributions 2. First-time home buyer credit 3. Bonus depreciation for the Kansas City disaster area 4. Recovery rebate (2008 only) 5. Federal telephone excise tax (2006 only) 6. Nontaxable combat pay 7. Tax shelters 8. A bad debt 9. A worthless security 10. Net operating loss carryback 11. Carryback of certain business tax credits 12. A claim based on an agreement with the IRS extending the period for assessment of tax 13. Foreign tax paid or accrued 14. An injured spouse claim. Instead, file only Form 8379. 45 AMENDED RETURNS A Form 1040X based on a bad debt or worthless security generally must be filed within 7 years after the due date of the return for the tax year in which the debt or security became worthless. A Form 1040X based on a net operating loss carry-back or a general business credit carry-back generally must be filed within 3 years after the due date of the return. 46 AMENDED RETURNS PROCESSING CLAIMS FOR REFUNDS Claims are usually processed shortly after they are filed. Your claim may be accepted as filed, disallowed, or subject to examination. If your claim is disallowed, you will receive an explanation of why it was disallowed. 47 AMENDED RETURNS INTEREST ON REFUND If you receive a refund because of your amended return, interest will be paid on it from the due date of your original return or the date you filed your original return, whichever is later, to the date you filed the amended return. However, if the refund is not made within 45 days after you file the amended return, interest will be paid up to the date the refund is paid. Your refund may be reduced by an additional tax liability that has been assessed against you. Also, your refund may be reduced by any amounts you owe for past-due child support, debts to another federal agency, or for state tax. Remember if your return is changed for any reason, it may affect your state income tax liability and require the filing of an amended state return. 48 AMENDED RETURNS FORM 1040X After you have completed the background information on Form 1040X, note that the lines 1-15 have 3 columns labeled A, B, and C. Column A: In this column enter amounts from your original return or if you previously amended that return or if the return was changed by the IRS, enter the adjusted amounts. Column B: In this column enter the net increase or decrease for each line you are changing. Show the decreases in parentheses. Explain each change in Part II. Reference the reason to the line on the form where the change was made. If you need more space, attach a statement. Also attach any schedule or form relating to the change. 49 AMENDED RETURNS Column C: In this column either add the increase in column B to column A or subtract the decrease in column B from column A. For any item you do not change, enter the amount from column A in column C. Alan Arbor originally reported $11,000 as his adjusted gross income on his 2007 Form 1040. He received another W-2 for $500 after he filed his return. He completes line 1 of Form 1040X as follows: Column A Column B Column C $11,000 $500 $11,500 He would also report any additional Federal income tax withheld on line 11 in column B. 50 AMENDED RETURNS If you are providing additional information and not changing amounts you originally reported, skip lines 1-33 and complete Part II and, if applicable, Part III. To help you complete Form 1040X use the following: 1. If you are changing income or deductions - start with line 1 2. If you are changing only credits or other taxes - start with line 6 3. If you are changing only payments - start with line 10 Lines 1-5 of Form 1040X pertain to income and deduction changes. Lines 6-10 deal with tax liability. Lines 11-18 are for payments. Lines 19- 24 are for the figuring of your refund or amount you owe. Page 2 of Form 1040X consists of Part I (exemptions, lines 25-33), Part II (explanation of changes to income, deductions, and credits), and Part III (presidential election campaign fund). Refer to the instructions for Form 1040X for specific line instructions. 51 ELECTRONIC FILING A. IRS e-filing is faster and more accurate than processing paper returns. 1. Refer to Table 19-3 for benefits of electronic filing. B. Electronic return consists of following: 1. Data transmitted 2. Taxpayer’s electronic signature using a PIN 3. Does not include forms or schedules not accepted by electronic filing system; sent with Form 8453 C. In most states, you can also electronically send state return simultaneously with federal return. 52 ELECTRONIC FILING 53 ELECTRONIC FILING REFUNDS D. Refunds issued faster with e-filing. 1. Most within 3 weeks 2. Many in about 14 days if direct deposit 3. RAL’s available from lending institutions provide loan on your refund in 1-2 days 4. If you owe past-due amounts, may not get all of refund. 54 ELECTRONIC FILING OFFSET AGAINST DEBTS As with a paper return, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. BALANCE DUE If you have a balance due with your return, you must pay it by the due date of your return to avoid latepayment penalties and interest. You can make your payment electronically, by credit card, or a direct debit to your checking or savings account. 55 ELECTRONIC FILING TAX PROFESSIONAL You can electronically file your return by using a tax professional or using your personal computer. Many tax professionals file returns electronically for their clients. You can prepare your own return and have a tax professional electronically file it for you, or you can have the tax professional prepare and electronically file your return. The tax professional who electronically transmits returns to the IRS is authorized by the IRS to do so as an electronic return originator (ERO). 56 ELECTRONIC FILING FORM 8879 When your tax return is completed, you electronically “sign” the return by entering your self-selected PIN using the computer keyboard. If you are filing a joint return, both taxpayers must sign using a PIN. You can authorize your tax professional to input your PIN as your signature by using Form 8879, IRS e-file Signature Authorization. 57 ELECTRONIC FILING 58 ELECTRONIC FILING Joel S. Pryce (SSN 091-72-2448) is filing an electronic return. Joel lives at 1322 Nineteenth St., St. Louis, MO 63103. Chuck Harris (PTIN, P00543444) from Liberty Tax Service (EIN 55-1234567) prepares his return as a paid preparer at the office at 12 Bonnie Rd., St. Louis, MO 63103. The following information for Joel is taken from the electronically prepared Form 1040: Line 38: $29,000 Line 61: $ 2,650 Line 62: $ 3,359 Line 73a: $ 709 Line 75: 0 The DCN for this return is 00-567890-55639-9. 59 ELECTRONIC FILING 60 ELECTRONIC FILING 61 ELECTRONIC FILING MAKING CHANGES TO FORM 8879 Once you have signed Form 8879, the ERO cannot make changes to this document that exceeds specific tolerances established by the IRS without preparing a new form. These tolerances are: 1. The amount of total income or AGI does not differ from the amount on the electronic portion of the tax return by more than $50; or 2. The amount of total tax, Federal income tax withheld, refund, or amount you owe does not differ from the amount on the electronic portion of the tax return by more than $14. If one of these amounts does exceed the tolerance limit, you will need to sign a new Form 8879 showing the changes before the return can be filed. 62 ELECTRONIC FILING Once the IRS has accepted your e-filed return, you are not able to make any changes to it such as canceling a direct deposit request. Sending in a paper return at this point would result in the IRS having a duplicate return for you and this could result in a delay of your refund. If you need to change your return after it has been accepted by the IRS, you should send a paper amended return. After the IRS has accepted the original return, the refund should be issued within 3 weeks. However, some refunds may be delayed because of compliance reviews to ensure that returns are accurate. 63 ELECTRONIC FILING Self-Select PIN 1. Allows taxpayers to sign e-filed return using a five-digit PIN 2. PIN can be any five numbers you choose except all zeroes 3. PIN can be used if file taxes yourself or use tax professional 4. You can authorize the preparer to enter your PIN for you 5. If filing a joint return, a PIN is needed for each taxpayer 64 ELECTRONIC FILING PRACTIONER PIN The Practitioner PIN is the electronic signature program used by tax professionals (EROs). Taxpayers that are eligible to file Form 1040, 1040A, or 1040EZ and have their return prepared professionally can use this method. 65 ELECTRONIC FILING FORM 8453 Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, is a transmittal cover sheet used to send any required paper forms or supporting documentation to the IRS. The ERO mails Form 8453 to the IRS within three business days after acceptance of the electronically filed return. Use the same Declaration Control Number assigned to the efiled return for the DCN on Form 8453. Only the items listed on Form 8453 maybe sent to the IRS.. 66 ELECTRONIC FILING FORM 8888 1. You can direct deposit refund to 3 separate accounts 2. E-file or paper return 3. Need correct routing #s and account #s If you file Form 8888, you cannot: 1.Choose to receive any part of your refund as a paper check. 2. Request a deposit of your refund to an account that is not in your name 3. Cross out or whiten out any numbers. If you do, the IRS will reject your direct deposit and send you a paper check. 4. Direct the refund into the account of others. 67 ELECTRONIC FILING You should check with your financial institution to get the correct routing and account numbers and make sure your deposit to the type of account will be accepted. The IRS is not responsible for a lost refund if you enter the wrong account information and the refund is deposited into a wrong account. In that situation, the taxpayer must work directly with the respective financial institution to recover their funds. Some financial institutions will not allow a joint refund to be deposited into an individual account (even though the IRS will allow a joint refund to be direct deposited into the separate account of either one of them). If the direct deposit is rejected, a check will be sent instead. The IRS is not responsible if a financial institution rejects a direct deposit. 68 ELECTRONIC FILING A deposit into an IRA using Form 8888 does not give you an opportunity to specify for which year the contribution would apply in order to avoid exceeding annual contribution limitations. If the refund amount is adjusted by the IRS for any reason, they will make adjustments to Form 8888 deposit requests accordingly with a “bottoms up” approach and adjust the last account listed first and work it’s way up to the second and then to the first. The IRS recommends electronic filing when using Form 8888 in order to receive the added benefit of the “extra checking” for accuracy on parts of the return that occur when e-filing, including the checking of the math and to minimize some common problems. If the IRS adjusts the refund expected by the taxpayer, a letter will be sent to the taxpayer 69 notifying them of the amounts and reason(s). ELECTRONIC FILING 70 ELECTRONIC FILING The IRS may reject an electronically-filed return. If rejected, return not considered filed by IRS. Specific reject codes with explanations allow ERO to know exactly where error occurred. IRS sends acknowledgement or rejection notice to ERO within 2 work days of original transmission. 71 ELECTRONIC FILING The most common reject codes are: Code 501. On Schedule EIC, the qualifying SSN, and the corresponding name control (first four letters of the last name) must match information received from the Social Security Administration. Code 502. The employer identification number (EIN) from Form W-2, W-2GU, W-2G, 1099-R, or 2439, must match the IRS Master File. Code 503. Spouse’s SSN and name control must match the corresponding data on the IRS Master File. Code 504. Dependent’s SSN and corresponding dependent name control must match the data on the IRS Master File. Code 507. Dependent’s SSN was previously used for the same purpose. 72 ELECTRONIC FILING FRAUD AWARENESS There are some indicators of fraudulent activities that are documented by the IRS. It is a good idea to be aware of them so that you can avoid sending nonstandard forms to the IRS with your return or conduct yourself in a suspicious manner. Some indicators include: A typed, handwritten, duplicated, or corrected Form W2 A Form W-2 for a firm in the area that differs from other W-2 forms from the same firm Suspicious person accompanying a taxpayer, and observed on prior occasions Multiple refunds directed to the same address or post office box Employment or earnings which are not welldocumented Similar returns from different individuals. 73 STATE RETURNS STATE RETURNS Forty-two states (including the District of Columbia) have individual income tax and require income tax returns from individuals required to file. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have individual income tax. New Hampshire and Tennessee have taxes on interest and dividend income in excess of limits that are based on filing status. States with individual income tax also have specific forms and instructions on how to properly prepare the state return. Each state has its own state tax website which can be found at http://www.taxadmin.org/fta/link/forms.html. 74 STATE RETURNS RESIDENCY To file a state income tax return, it is necessary to determine the following: Your residency status in each state. You may be a full-year resident, part-year resident, or nonresident. You may, in certain cases, be both a part-year resident and a nonresident in the same year. Your residency status is important in deciding which state form to use. Some states have separate forms for residents, part-year residents, and nonresidents. The income you have for each state that is taxable and the state that it is taxable to. Generally, if you receive income from a state in which you live, you are taxed by that state. If you live in one state but have wages in another state, you probably are subject to income tax in both states. When a taxpayer is taxed on the same income in two states, they may qualify to take an “outof-state” tax credit on one state’s return, usually the resident state return. Usually if you earn income in a state, you are subject to tax by that state. 75 STATE RETURNS MILITARY PERSONNEL An active duty military person may get special treatment under state tax laws. His or her state of residency is not determined in the same way. It generally depends on what the service person established as a home state of record. This is originally based on where the person lived when they entered the service. Once this is established, the home of record does not change unless the service member changes it officially through the military personnel office. Treatment of military pay is taxable to the home state of record only if it is taxed at all. If the service member has income, such as a rental property or another job, from a state other than his home state, it is taxable in that state and may be taxable in the home-of-record state. 76 STATE RETURNS FORMAT OF STATE RETURN The format of a state return is generally one of four types: 1. One that uses the federal Form 1040 to carry over information such as wages, interest, dividends, etc. that are taxable. 2. One that starts with carrying over the federal AGI (FAGI) from the federal return. The state then makes adjustments to the FAGI to arrive at a state AGI. 3. One that starts with the federal taxable income. This is basically the FAGI minus exemptions and deductions. 4. One that starts with federal tax liability. 77 STATE RETURNS Some areas in which state returns tend to differ from the federal return are: Child care credit Pensions Capital gains Moving expenses Active duty military income and military retirement income Social security Itemized deductions Depreciation 78 EXTENSIONS, AMENDED RETURNS, ELECTRONIC FILING, STATE RETURNS KEY IDEAS o You can get an automatic 6-month extension of time to file by filing Form 4868 by the regular due date for your return. An extension of time to file is not an extension of time to pay. o You can file an amended return by using Form 1040X. You must file your Form 1040X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. 79 EXTENSIONS, AMENDED RETURNS, ELECTRONIC FILING, STATE RETURNS o The processing of an electronic return is faster and more accurate than the processing of paper returns. Form 8879 is the signature document for electronic filed returns. o Form 8453 is used as a transmittal cover sheet for documents required to be mailed. o If the IRS rejects your electronically filed return, it means that the return is not filed with the IRS. o Most of the common IRS reject codes for electronic filing involve SSN and name data that does not match the IRS Master File and the SSA records. 80 EXTENSIONS, AMENDED RETURNS, ELECTRONIC FILING, STATE RETURNS o Form 8888 can be used to direct deposit a federal refund into 3 or more accounts at banks or financial institutions. The preparer must be very careful when using this form as with all direct deposits so that the taxpayer’s refund is not “lost”. o Forty-two states (including the District of Columbia) have individual income tax and require income tax returns from individuals required to file. o Some states also have separate local income tax returns to be filed. o Active duty military personnel may get special treatment under state tax laws. 81 CLASSWORK 1 CLASSWORK 1 TRUE OR FALSE: 1. Generally, to get an automatic extension of time to file, you must file Form 4868 by the regular due date of your return. 2. Some items that may differ in a state return from a federal return are capital gains and pensions. 3. An extension of time to file is not an extension of time to pay. 4. If you live in one state but have wages in another state, you will pay taxes only in the state in which you reside. 5. A U.S. citizen living in Europe on the due date of their return receives an automatic 2-month extension. 82 CLASSWORK 1 6. For state filing purposes, your “home state” is usually the state in which you reside. 7. You must file an amended return if you claimed deductions or credits you should not have claimed. 8. A handwritten Form W-2 might be an indication of fraud. 9. Generally, you must file your Form 1040X within 2 years after the date you filed your original return or within 3 years after the date you paid the tax, whichever is later. 10. A legal marriage will automatically change the woman’s maiden name to her married name for tax purposes. 11. A Form 1040X based on a worthless security must be filed within 3 years after the due date of the return for the tax year in which the security became worthless. 83 CLASSWORK 1 12. If the IRS rejects an electronically filed return, the IRS considers the return filed but needing correction. 13. You may have a refund from an e-filed return directly deposited into your savings account. 14. Once signed, Form 8879 cannot be changed if the amount of total income differs from the amount on the electronic portion of the return by more than $50. 15. An ERO can prepare your tax return, including Form 8879. 84 CLASSWORK 1 16. When used, a signed Form 8879 must always be sent to the IRS to follow up on the e-filed return. 17. You can enter your own PIN or authorize the tax preparer employed by an ERO to enter it on your behalf. 18. Form 8888 is used to request a paper refund check from IRS. 85 CLASSWORK 1 CLASSWORK 1 TRUE OR FALSE: 1. Generally, to get an automatic extension of time to file, you must file Form 4868 by the regular due date of your return. T 2. Some items that may differ in a state return from a federal return are capital gains and pensions. T 3. An extension of time to file is not an extension of time to pay. T 4. If you live in one state but have wages in another state, you will pay taxes only in the state in which you reside. F 5. A U.S. citizen living in Europe on the due date of their return receives an automatic 2-month extension. T 86 CLASSWORK 1 6. For state filing purposes, your “home state” is usually the state in which you reside. T 7. You must file an amended return if you claimed deductions or credits you should not have claimed. T 8. A handwritten Form W-2 might be an indication of fraud. T 9. Generally, you must file your Form 1040X within 2 years after the date you filed your original return or within 3 years after the date you paid the tax, whichever is later. F 10. A legal marriage will automatically change the woman’s maiden name to her married name for tax purposes. F 11. A Form 1040X based on a worthless security must be filed within 3 years after the due date of the return for the tax year in which the security became worthless. F 87 CLASSWORK 1 12. If the IRS rejects an electronically filed return, the IRS considers the return filed but needing correction. F 13. You may have a refund from an e-filed return directly deposited into your savings account. T 14. Once signed, Form 8879 cannot be changed if the amount of total income differs from the amount on the electronic portion of the return by more than $50. T 15. An ERO can prepare your tax return, including Form 8879. T 88 CLASSWORK 1 16. When used, a signed Form 8879 must always be sent to the IRS to follow up on the e-filed return. F 17. You can enter your own PIN or authorize the tax preparer employed by an ERO to enter it on your behalf. T 18. Form 8888 is used to request a paper refund check from IRS. F 89 CLASSWORK 2 CLASSWORK 2 PROBLEM 1: 1. Howard J. Pratt (SSN 403-82-1111, born 7/7/1960) is single and lives at 396 Bay Street, Norfolk, VA 23501. He has a Form W-2 with wages of $25,000 and no other income. His withholding is $2,300. His estimated total tax liability for 2008 is $2,050. Complete Form 4868 for him. 90 CLASSWORK 2 91 CLASSWORK 2 92 CLASSWORK 2 CLASSWORK 2 PROBLEM 2: 2. Using the tax return for the D’Andrios found in Homework 2 from Chapter 8, complete Form 8879. Dominic will enter his own PIN (25644) and Lucille authorizes the Liberty Tax Service preparer to enter her PIN (24599) for her. The DCN for the electronic return is 00-567890-55667-9 and the ERO’s EFIN/PIN is 56789012126. 93 CLASSWORK 2 94 CLASSWORK 2 95 CLASSWORK 2 CLASSWORK 2 PROBLEM 3: 3. Using the tax return for the D’Andrios found in Homework 2 from Chapter 8, prepare an amended federal return using the additional information provided in the following W-2 form that Lucille forgot to enter on the original return. 96 CLASSWORK 2 CLASSWORK 2 PROBLEM 3 97 CLASSWORK 2 98 CLASSWORK 2 99 CLASSWORK 2 100 CLASSWORK 2 101 CLASSWORK 2 102 CLASSWORK 2 103 QUESTION & ANSWERS 104