home
***
CD-ROM
|
disk
|
FTP
|
other
***
search
/
500 MB Nyheder Direkte fra Internet 2
/
500 MB nyheder direkte fra internet CD 2.iso
/
start
/
data
/
text
/
faq-1407.txt
< prev
next >
Wrap
Text File
|
1995-05-06
|
25KB
|
574 lines
Archive-name: taxes-faq/part1
Posting-Frequency: monthly
Last-modified: 1995/04/29
Misc.taxes Frequently Asked Questions (FAQ)
General (part 1 of 1)
Maintainer: wayner@metronet.net (Wayne Ross)
Contents:
*Recent changes
*1.0 Misc.taxes charter, mailing list and archive sites
1.9 Annoying postings (posters)
2.0 Professional designations of posters
3.0 Framing questions/replies for posting
4.0 US Internal Revenue Service (Sources of Information)
4.1 IRS TeleTax voice recordings service
4.2 IRS Internet information
4.3 IRS publications
5.0 Sources of tax information (other than above)
5.1 Internet sources
6.0 Some basic federal tax notations and concepts
6.1 Notations
6.4 About basis
6.5 Taxable items for individuals
6.6 About inheritances
6.7 About gifts
7.1 Forms 1099
7.3 Forms K-1
8.1 Responding to service center notices
*9.0 IRS penalties
*9.1 IRS interest on underpayments
*9.2 IRS interest on overpayments
-----------------------------------------------------------------
Copies of this FAQ as well as those for other newsgroups may
be obtained by anonymous ftp from rtfm.mit.edu. For the misc.taxes
faq look under /pub/usenet/news.answers/taxes-faq (this is part1).
Or, send email to mail-server@rtfm.mit.edu with send
usenet/news.answers/taxes-faq/part1 in the body of the message,
leaving the subject line empty.
-----------------------------------------------------------------
1.1 Q) What topics are discussed?
The news group's broad charter is: Tax laws and advice
1.2 Q) Are digest(s) available?
Articles are in digest form on shsu.edu (see below).
1.3 Q) Is the news group available via a mailing list?
Yes, see below from shsu.edu.
"FedTax-L is a mail-oriented discussion list supported by Sam
Houston State University of Huntsville, Texas, to provide a
generally unmoderated environment for the discussion of federal
taxation issues from both a practical and academic viewpoint. The
discussions are intended to include latest trends, regulatory
actions, and, of course, a lively exchange of ideas and concerns."
"The list is mirrored to and from the USENET newsgroup
misc.taxes so that any discussion appearing on that media is
forwarded to subscribers of FedTax-L and all posts appearing on
FedTax-L are forwarded to all network news sites carrying
misc.taxes."
"To subscribe to FedTax-L, include the text: SUBSCRIBE
FedTax-L "Your Real Name in Quotes" in the body of a mail message
to LISTSERV@SHSU.BITNET (LISTSERV@SHSU.edu)."
*1.4 Q) Is the news group archived?
Yes, indirectly. Sam Houston State archives it's FedTax-L
mailing list which contains most postings to the newsgroup.
gopher://niord.shsu.edu:70/1
(try the 4th item on main menu, then the 8th)
An archive of the last month's postings is also maintained
by kentlaw.edu: http://www.kentlaw.edu/lawnet/lawlinks.html, select
tax matters on the forms menu.
1.9 Q) What can be done about annoying articles?
Ignore them! The misc.taxes news group is unmoderated,
which means anyone with access to Usenet may post whatever they
wish to this news group, and any other unmoderated news group.
If your news reader supports "kill files", type K or k,
and the article and all others with the same subject will be
skipped in your current and subsequent news reading sessions.
Be part of the solution, NOT part of the problem. If you
feel you must respond to the poster, please do so using email.
Don't add to the noise by castigating or attempting to refute the
individual with a posted article. Your colleagues will appreciate
your consideration, and the archive sites grateful.
2.1 Q) I see some people sign their articles with titles,
e.g. CA, CFP, CPA, EA what do these mean?
2.1.1 CA Chartered Accountants, used principally in the UK
and present/former Commonwealth countries to indicate accountants
licensed and regulated by the country or province to provide advice
on accounting and tax matters to the public.
2.1.2 CFP Chartered Financial Planners, a US designation for
those who have been licensed by their state to provide financial
advice to the public. Areas of advice include investments,
insurance, taxation, etc.
2.1.3 CPA Certified Public Accountant, US equivalent of CA.
These individuals like those preceding are licensed and regulated
by the states, are required to pass a written proficiency
examination, satisfy a one or two year experience requirement and
hold a college level degree.
2.1.4 EA Enrolled Agent, a US designation for persons
enrolled by the Internal Revenue Service (a US Federal government
agency) to provide federal tax advice and services to the public.
These individuals are required to pass a written proficiency
examination and conform to the IRS rules of practice.
-o-
DISCLAIMER:
The following is for general information only. It is not intended
to be tax advice and should not be relied upon. Please contact your
tax advisor for specific questions.
-o-
3.1 Q) I have a question about (some tax topic) what should
I do?
You may wish to research the question yourself before
posting a question to the net at large. A good place to start your
off line research is your public library, the IRS (see TeleTax and
IRS Publications below) or your state tax department.
You can start your online research by going to the
shsu.edu server (see above) and doing a boolean word search of the
misc.taxes archives. The server will display a list of all articles
in the archive which contain your search word(s). By reading some
of these, particularly those with RE: your search word(s) in the
header you may find that your question has been answered
previously.
Even if your exact question is not answered by searching
the archive first, you can better frame your question to provide
the type of specific information needed for a proper reply.
3.1.1 Q) I prefer to ask my question in the news group, so
how do I proceed?
Give some thought to your question and be as specific
as possible without violating your need for privacy. Often, the
question can only be answered, if those replying have some
necessary background information for example:
'We sold our house, what taxes will we have to pay?' This
is too broad. Instead try:
'My spouse and I sold our former residence for $100,000,
and bought a new one for $120,000 two months later. We lived in our
old house for five years, and bought it for about $85,000. We are
both in our 40's.'
3.1.2 Q) Everyone says you are supposed to brief on Usenet to
conserve band width, why do I need four lines instead of one?
The tax effect often depends on WHO (you and your spouse are
different from you and your father); WHEN (the answer is different
if you lived in your house for only 5 months); HOW MUCH (did you
make a profit on the sale and was the profit re-invested). In
residential sales, the answer may also vary by age of the taxpayer.
3.2 Q) Do you have any suggestions about how to reply to a
questions posted to misc.taxes?
Whenever possible answer the question by email rather than
posting the reply to the news group. Keep in mind many questioners
are drop-ins, not regular readers of the group. Once they get an
answer they are gone. Why punish regular readers with the 100th
answer to 'is whatever deductible'!
If you absolutely must post an answer to the news group
because you feel it needs input from others to answer properly,
then resist the temptation to include in your reply the entire
original question. Instead edit out the extraneous information,
preserving only the key points of the question.
If more than half of the total number of lines in your answer
are quoted from the original question, you probably need to do more
editing. Please avoid including lengthy article headers and
signature lines from the original article.
4.1 Q) How can I get information about a tax topic from the
IRS?
The IRS Tele-Tax service provides recorded messages for about
140 common tax topics. You can call a local or 800 number and
listen to these recorded messages. The numbers and topics are too
lengthy to list here. Instead go to the IRS homepage
http://www.ustreas.gov/treasury/bureaus/irs/irs.html. Or refer to
your current year tax return instructions.
4.2 The IRS home page above also includes a FAQ, toll free
and local numbers to contact the IRS for information and
downloadable tax forms in Adobe Acrobat format. These form files
are large and may require lengthy connect time. The Adobe Acrobat
executables (very large) is also available for download.
Last year Compuserve also made available the forms and Acrobat
reader for download. Other online services may also provide this
material.
Copies of most tax forms and instructions, in pdf (Adobe
Acrobat) format, may be obtained by anonymous ftp from
ftp.fedworld.gov. They are in the irs sub directory.
4.3 Q) People often refer to IRS publications about a subject,
what are these and how do I get them?
You may be able to find some or all of these publications
in your public library, post office, or your workplace human
resource office. If not you can write to one of the IRS central
forms distribution locations listed below. Here is a listing of
some of the more common publications.
17 Your Federal Income Tax
334 Tax Guide for Small Business
463 Travel, Entertainment, and Gift Expenses
501 Exemptions, Standard Deduction, and Filing Information
504 Divorced or Separated individuals
505 Tax Withholding and Estimated Tax
521 Moving Expenses
524 Credit for the Elderly or the Disabled
525 Taxable and Nontaxable Income
529 Miscellaneous Deductions
530 Tax Information for First-Time Homeowners
533 Self-Employment Tax
534 Depreciation
538 Accounting Periods and Methods
544 Sales and Other Dispositions of Assets
550 Investment Income and Expenses
551 Basis of Assets
553 Highlights of 1994 Tax Changes
554 Tax Information for Older Americans
559 Survivors, Executors, and Administrators
561 Determining the Value of Donated Property
564 Mutual Fund Distributions
575 Pension and Annuity Income
584 Nonbusiness Disaster, Casualty, and Theft Loss Workbook
587 Business Use of Your Home
590 Individual Retirement Arrangements (IRAs)
596 Earned Income Credit
907 Information for Persons with Disabilities
908 Bankruptcy and Other Debt Collection
909 Alternative Minimum Tax for Individuals
915 Social Security Benefits...
917 Business Use of a Car
925 Passive Activity and At-Risk Rules
936 Home Mortgage Interest Deductions
947 Practice Before the IRS and Power of Attorney
--------
To order send to "Forms Distribution Center" for your state:
WADC AK, AZ, CA, CO, HI, ID, KS, MT,
Rancho Cordova, CA NV, NM, OK, OR, UT, WA, WY
95743-0001 Guam, Marianas, American Samoa
CADC AL, AR, IL, IN, IA, KY, LA, MI,
PO Box 8903 MN, MS, MO, NE, ND, OH, SD, TN,
Bloomington, IL TX, WI
61702-8903
EADC CT, DE, DC, FL, GA, ME, MD, MA,
PO Box 85074 NH, NJ, NY, NC, PA, RI, SC, VT,
Richmond, VA VA, WV
23261-5074
-------
Many of the publications may also be obtained by anonymous
ftp from ftp.fedworld.gov. These are available in ps (postscript),
pcl (HP Laser) and sgml formats in the irs sub directory.
4.3.1 Q) What is the best do-it-your self book about US
Federal Income Taxes?
At tax time the bookshelves in your local stores are
filled with them. While not necessarily the best, the cheapest
(it's free) is 'Your Federal Income Tax' (IRS Publication 17).
This 300+ page book has the bias of its publisher, and there are
other points of view. However, its a good place to start (see
above).
5.1 Q) What other information about taxes is available on the
Internet?
5.1.1 No one knows, the net changes daily. One of the most
comprehensive listings of tax information (mostly US) is maintained
by Frank McNeil. Frank's listings are available using one of the
following methods.
World Wide Web hypertext version.
The main site is
http://www.best.com/~ftmexpat/html/taxsites.html.
Note: The tilde ~ is required. Many http servers use
the tilde to specify certain site specific file paths.
It is mirrored at
http://io.com/user/ftmexpat/html/taxsites.html
5.1.2 ANet maintained at Southern Cross University in New
South Wales, Australia also has a tax mailing list ATax-L. Their
URL is: http://Anet.scu.edu.au/ANetHomePage.html
5.1.3 The can.taxes news group within the Canadian hierarchy
discusses Canadian tax issues. If it is not available on your site,
you may be able to read the group by telneting to one of the
Canadian freenet sites which offer guest privileges.
6.1 Q) I see people refer to section 61 or 1.61-1(a) what
does that mean?
The tax laws (statutes) the US Congress passes usually
become part of the Internal Revenue Code (the code or IRC). The
code has sections dealing with certain topics. IRC 61, for example
defines gross income. To administer the code, the US Treasury
department publishes regulations (regs) which are the Treasury
Department's (IRS's) interpretation of how the code should be
applied.
Regulation section 1.61 is the regulation for
gross income. Typically, but not always, the regulations for a
given code section are the code section proceeded by a number and
a dot.
6.2 Q) What are some other notations?
From time to time you may see someone refer to Rev Proc,
this is shorthand for Revenue Procedure. Rev Procs are usually
numbered with the year of issue and a sequential number and may
address specific administrative decisions of the IRS.
6.4 Q) I see people refer to 'basis'. What is basis?
Basis is the dollar amount attributed by the tax rules to
some item of property. Although similar to cost or carrying value
in its usage, it is mainly a tax creation. Most often one sees
basis used in connection with some other words, i.e. adjusted
basis, depreciable basis, gain or loss basis, substituted basis,
etc.
Usually a gain on the sale of property is the difference
between the proceeds of the sale, and the seller's basis in the
property sold.
The determination of basis can vary depending upon the
character of the property, from whom and under what circumstances
it was obtained, etc. You should refer to the tax publications
above or consult your tax advisor for specific questions.
6.5 Q) Is what I receive for (pick a topic) taxable?
Generally everything you receive is income, except those
things which are specifically excluded. The determination then of
taxability depends upon finding a specific exclusion or inclusion.
Absent a specific exclusion (pick a topic) is gross income and may
then become taxable.
In arriving at taxable income for individuals one starts
with gross income, moves to adjusted gross, deducts personal
exemptions and deductions (they are different) and arrives at
taxable income.
6.6 Q) I've received (pick an item) as an inheritance. Is it
taxable?
Property in an estate may be taxable, if the estate is
large enough to be subject to estate taxes. Estate taxes, however,
are levied against the estate not the beneficiaries of the estate.
Of course, if you are the only beneficiary then you will in effect
pay the estate tax. Remember an estate tax is based upon the value
of estate assets, not the income which may later flow from the
assets.
Income from an estate asset which was distributed to you
will or will not be taxed, based upon the character of that income.
For example, if an estate included municipal bonds (exempt as to
income), the estate would pay an estate tax on the value of the
bonds, but the interest you receive after the bonds are distributed
to you will not be taxable.
In the above example, since the value of the interest
accrued, and not yet paid on the bonds is an estate asset, that
accrued interest is part of the value of the bond and is taxed to
the estate.
6.7 Q) I received a gift of 'some item' from 'some person'
how much gift tax will I have to pay, and when must I pay it?
A gift for tax purposes means the transfer of property
without adequate and full consideration. If you received 'some
item' in exchange for your car or your services to 'some person',
it wasn't a gift.
For simplicity let's assume you received shares of stock
from your mother on your birthday. First, your mother must
determine the value of the stock on the date of gift. If the value
is $10,000 or less there is no gift tax, because there is an annual
exclusion of $10,000 per donee (recipient). Keep in mind, that if
your mother also gave you $5,000 in cash then the total gifts
within the year exceeds the $10,000 exclusion.
If the value of the gift(s) exceed $10,000 there still
may be no gift tax, if your father and mother elect so-called
"gift-splitting". In gift-splitting one-half of the gift(s) is
deemed to be given by each spouse.
If the value of the gift(s) is more than $10,000 a gift
tax return must be filed by the donor (giver) by April 15th of the
year following the year of the gift, and a gift tax may be payable
by the donor, NOT the donee. Note: A short Form 709 is required for
split gifts over $10,000 even if no tax is due.
Estate and gift taxes are unified excise taxes on the
transfer of property, and there is a $600,000 lifetime credit per
transferor for the total of both, which could reduce any gift tax
due. We are getting into deeper water now, and you should consult
a professional for further information.
7.1 Q) I received $100 of income in 1994, but the payor did
not send me a 1099. Do I need to report the $100 as income?
A) Yes. You are required to report income whether or not
you receive a 1099. Although information returns may make preparing
your return easier that is NOT their primary purpose. The purpose
of information returns (Forms 1099, etc.) is to help the IRS
collect taxes due.
7.2 Q) The 1099 I received showed a incorrect amount. What
should I do?
A) You are responsible for reporting the correct income
amount on your return. Because the IRS matches the income you
report with that shown on the 1099's it receives, you should first
contact the payor and request them to send you, and the IRS a
corrected information return.
If the payor does not comply with your request and the
amount is significant, you might send the payor a certified letter
setting out the error and attaching copies of any supporting
information. The purpose of the letter is to get the payor to issue
a corrected information return, and to have written proof for the
IRS that you tried to set the matter right.
Retain a copy of your letter, so that if, and when challenged
by the IRS, you can demonstrate your good faith attempt to correct
the situation. You may wish to file a copy of the letter with your
return as well, although the computer matching system seems to
ignore some return attachments.
7.3 Q) I received a Form K-1 from my aunt's estate. What do
I do with it?
A) Forms K-1 are specialized information type returns
filed by so-called pass through tax entities, i.e. (partnerships,
trusts, some estates, and small business corporations). Like a 1099
their purpose is to show the amount of income, deductions, etc.
attributable to, and reportable by individuals with an interest in
the issuing entity.
K-1's are lengthy forms which show information by type,
and indicate where on your 1040 each item is to be reported. Some
K-1 deductions and credits may not apply to you, if for example you
do not itemize your deductions. You should read the applicable
instructions, contact the issuer or your tax advisor for specific
questions.
8.1 Q) I received what looks to be a computer generated form
or letter from the IRS together with some other forms. How should
I respond?
A) The IRS service centers issue a multitude of these each
year some are informational, but most require some action on your
part. There are only a few general guidelines since your response
must vary depending upon what you receive.
1) Don't panic or procrastinate. Sit down and read the
material carefully several times. Usually the top right corner of
the form will indicate the tax year involved and a local number to
call if you have questions.
2) Typically, the form will be dated and indicate the
time period you have to reply and to whom you should address your
reply.
3) If large dollar amounts or complex issues are involved
seek professional advice.
4) If you choose to reply in writing to the IRS, which is
usually best. Do these things:
Send a timely response by certified mail
Attach to your letter a copy of the IRS query, so the
person receiving your response will know how to look
up your record, and understand what your letter is
about
Be courteous, clear and concise
Keep in mind that your objective is to provide the
person handling your reply with enough information to
act easily, quickly and favorably
~~~~~~~~~
Attach copies of information upon which you relied
including copies or excerpts from IRS Publications,
letters from payors, copies of canceled checks, etc.
DO NOT over do this or send unnecessary data
If you believe the IRS erred explain why and how, in a
factual, reasoned and non-abusive way
Keep copies of the original IRS material and your
response
*9.0 Q) What are some of the penalties for income tax related
matters?
A) There are several types of penalties which may be
imposed on either or both the taxpayer(s) and tax return preparer.
Let's look at a few of the civil penalties or fines. We'll leave
the criminal penalties to the lawyers. Keep in mind that the IRS
may also assess interest on amounts due including penalties
assessed.
Taxpayer's failure to pay tax when due
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
One-half of 1% per month for each month or part of the
month, up to a maximum of 25% This CAN be in addition to
the failure to file penalty below.
Taxpayer's failure to file a return
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
5% per month or part of the month, up to a maximum of 25%
In the case of a fraudulent failure to file the penalty
is 15% per month, up to 75%.
Taxpayer's frivolous return penalty
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In addition to any other penalties there is a $500
penalty for filing a frivolous return. Frivolity is
defined in IRC 6702.
*9.1 Q)What is the interest rate charged for underpayment of
tax?
A)The rate varies since it depends on the federal short-
term rate. For individuals the rate is the federal rate plus three
percentage points. For corporations with underpayments in excess of
$100,000, five percentage points are added to the federal short-
term rate.
*9.2 Q)What rate of interest is paid on overpayments?
A)The federal short term rate plus two percentage points.