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Chapter 1. Filing Information

Important Changes for 1992

Filing requirements. Generally, the amount of income you can receive before
you are required to file a return has been increased.

Important Reminders

Change of address. If you change your address for any reason, you should use
Form 8822, Change of Address, to notify the IRS. See Change of Address, later.

Form 1040A changes. Form 1040A was expanded in 1990 to include IRA payments,
pensions and annuities, taxable social security and railroad retirement
benefits, and the credit for the elderly or the disabled. New lines were
added that allow you to include advance earned income credit payments received
and estimated tax payments made, and allow you to elect to apply all or part of
your refund for this year to your estimated tax for next year. See Form
1040A, later.

Penalties. Congress has changed various penalties related to accuracy, such as
the penalties for negligence and substantial understatement of income tax. In
addition, the penalties for failure to supply a social security number and for
failure to file a return when fraud is involved have increased. These changes
took effect in 1990. See Penalties, later.

Introduction

This chapter discusses:

∙  Whether you have to file a return,

∙  Which form to use,

∙  When, how, and where to file your return,

∙  What happens if you pay too little or too much tax,

∙  What records you should keep and how long you should keep them, and

∙  How you can change a return that has already been filed.

This chapter covers the requirements for filing a tax return. It refers you to
other chapters for specific information on the income, deductions, and credits
that you include on your return.

Do I Have to File a Return?

If you are a citizen or resident of the United States or a resident of
Puerto Rico, you must file a federal income tax return if the filing
requirements for any of the following categories apply to you:

∙  Individuals - In General

      Surviving Spouses, Executors, Administrators,
      or Legal Representatives

      U.S. Citizens Living Outside the U.S.

      Residents of Puerto Rico

      Individuals With Income From U.S. Possessions

∙  Dependents

∙  Children Under Age 14

∙  Self-Employed Persons

∙  Aliens

The filing requirements apply even if you do not owe tax.

One return. File only one federal income tax return regardless of how
many jobs you had, how many Form(s) W─2 you received, or how many states
you lived in during the year.

Note. Even if you are not required to file a return, it may be to your
advantage to file a tax return. See Who Should File, later.

Individuals - In General

If you are a U.S. citizen or resident, your filing requirement depends
on three factors:

1)  Your gross income,

2)  Your filing status, and

3)  Your age.

However, you must file a return if your situation is one of those discussed
later under Other Situations When You Must File.

Gross income. This includes all income you receive in the form of money,
goods, property, and services that is not exempt from tax. Common types
of income are discussed in the chapters in Part II of this publication.

Community property. If you are married and live with your spouse in a
community property state, half of any income described by state law as
community income may be considered to be yours. See Publication 555,
Federal Tax Information on Community Property, for more information.

Self-employed individuals. If you are self-employed, your gross income
includes the amount on line 7 of Schedule C (Form 1040), Profit or Loss From
Business, or gross receipts on schedule C-EZ. See Self-Employed Persons,
later, for more information about your filing requirements.

Filing status. This is your status on the last day of your tax year, which is
December 31 for most taxpayers. See Chapter 2 for an explanation of each
filing status.

Age. If you are 65 or older at the end of the year, the requirement to file
a return may be different for you. You can generally have a higher amount of
gross income than other taxpayers before you are required to file. You are
considered 65 on the day before your 65th birthday. For example, if your
65th birthday was on January 1, 1993, you are considered 65 for 1992. See
the Filing Requirements Chart For Most Taxpayers, earlier.

Filing requirements chart for most taxpayers. Generally, if you are a U.S.
citizen or resident, you must file a tax return if your gross income for the
year is at least as much as the amount shown for your filing status and age
in the Filing Requirements Chart For Most Taxpayers. If your parent (or
someone else) can claim you as a dependent, do not use this chart. See
Dependents, later.

                       1992 FILING REQUIREMENTS CHART
                            FOR MOST TAXPAYERS

   To use this chart, first find your marital status at the end of 1992. Then
   read across to find your filing status and age at the end of 1992. (Being
   blind does not change your filing requirement.) You must file a return if
   your gross income was at least the amount shown in the last column.
   ---------------------------------------------------------------------
   MARITAL STATUS           FILING STATUS      AGE*         GROSS INCOME
   ---------------------------------------------------------------------
                                               under 65        $5,900
   Single (including
   divorced and             Single             65 or older     $6,800
   legally separated)       --------------------------------------------
                            Head of            under 65        $7,550
                            household          65 or older     $8,450
   ---------------------------------------------------------------------
   Married with a child
   and living apart from
   your spouse during the
   the last 6 months        Head of            under 65        $7,550
   of 1992                  household          65 or older     $8,450
   ---------------------------------------------------------------------
                                               under 65
                                              (both spouses)  $10,600
   Married and living
   with your spouse         Married, joint     65 or older
   at end of 1992           return            (one spouse)    $11,300
   (or on the date
   date your                                   65 or older
   spouse died)                               (both spouses)  $12,000
                            -------------------------------------------
                            Married, separate
                            return             any age         $2,300
   --------------------------------------------------------------------
   Married, not living
   with your spouse at
   the end of 1992          Married, joint or
   (or on the date          separate return    any age         $2,300
   you spouse died)
   --------------------------------------------------------------------
                                               under 65        $5,900
                            Single             65 or older     $6,800
                            -------------------------------------------
                            Head of            under 65        $7,550
   Widowed before 1992      household          65 or older     $8,450
   and not remarried        -------------------------------------------
   in 1992                  Qualifying
                            widow(er) with     under 65        $8,300
                            dependent child    65 or older     $9,000
   --------------------------------------------------------------------
   *If you were age 65 on January 1, 1993 you are considered to be age
    65 at the end of 1992.

Surviving Spouses, Executors, Administrators, or Legal Representatives

You must file a final return for a decedent (a person who died) if:

∙  You are the surviving spouse, executor, administrator, or legal
   representative, and

∙  The decedent met the filing requirements at the date of death.

For more information on rules for decedents, see Chapter 4.

U.S. Citizens Living Outside the U.S.

If you are a U.S. citizen living outside the United States, you must file
a return if you meet the filing requirements. For more information on special
tax rules that may apply to you, get Publication 54, Tax Guide for U.S.
Citizens and Resident Aliens Abroad. It is available at most U.S. embassies
and consulates, or you can order it using the order blank at the end of
this publication.

Residents of Puerto Rico

Generally, if you are a U.S. citizen and a resident of Puerto Rico for the
entire year, you must file a U.S. income tax return if you meet the filing
requirements. This is in addition to any legal requirement you may have to
file an income tax return for Puerto Rico.

Gross income, for purposes of the federal filing requirements, does not
include income from sources within Puerto Rico, except for amounts received
as an employee of the United States or a United States agency. If you receive
income from Puerto Rican sources that is not subject to U.S. tax, you must
make a special adjustment for your standard deduction amount to arrive at the
income level for your requirement to file a U.S. income tax return. See
Publication 570, Tax Guide for Individuals With Income From U.S. Possessions,
for further information.

Individuals With Income From U.S. Possessions

If you had income from Guam, the Northern Mariana Islands, American Samoa, the
Virgin Islands, or Puerto Rico, special rules may apply in determining whether
you must file a U.S. federal income tax return. In addition, you may have to
file a return with the individual island government. See Publication 570, Tax
Guide for Individuals With Income From U.S. Possessions, for more information.

Dependents

If you are a dependent (one who meets the Dependency tests in Chapter 3), the
requirement to file a return generally depends on:

∙  The amount of your earned and unearned income,

∙  The amount of your gross (total) income,

∙  Whether you are single or married,

∙  Whether you are 65 or older, and

∙  Whether you are blind,

unless your situation is one of those discussed later under Other Situations
When You Must File. See the Filing Requirements Chart For Dependents in this
chapter to determine whether a dependent must file a return.

                        1992 FILING REQUIREMENTS CHART
                                FOR DEPENDENTS

  See Chapter 3 to find out if someone can claim you as a dependent.

  If your parent (or someone else) can claim you as a dependent, and any
  of the four situations listed below applies to you, you must file a return.

  In this chart, unearned income includes taxable interest and dividends.
  Earned income includes wages, tips, and taxable scholarship and
  fellowship grants.

  Caution: If your gross income was $2,300 or more, you generally cannot
  be claimed as a dependent unless you were under 19 or under 24 and a
  full-time student. For details, see Gross Income Test in Chapter 3.
  ------------------------------------------------------------------------
  1. Single dependents under 65 and not blind.- You must file a return if-

     Your unearned                           the total of that income
     income was:            and              plus your earned
                                             income was:
     $1 or more                              more than $600
     $0                                      more than $3,600
  ------------------------------------------------------------------------
  2. Single dependents 65 or older or blind. - You must file a return if-

  ∙  Your earned income was more than $4,500 ($5,400 if 65 or older and
     blind), or
  ∙  Your unearned income was more than $1,500 ($2,400 if 65 or older and
     blind), or
  ∙  Your gross income was more than the total of your earned income (up to
     $3,600) or $600, whichever is larger, plus $900 ($1,800 if 65 or older
     and blind).
  -----------------------------------------------------------------------
  3. Married dependents under 65 and not blind. - You must file a return if-

  ∙  Your earned income was more than $3,000, or
  ∙  You had any unearned income and your gross income was more than $600, or
  ∙  Your gross income was at least $5 and your spouse files a separate
     return on Form 1040 and itemizes deductions.
  -----------------------------------------------------------------------
  4. Married dependents 65 or older or blind. - You must file a return if-

  ∙  Your earned income was more than $3,700 ($4,400 if 65 or older and
     blind), or
  ∙  Your unearned income was more than $1,275 ($1,950 if 65 or older and
     blind), or
  ∙  Your gross income  was more than the total of your earned income (up
     to $3,000) or $600, whichever is larger, plus $700 ($1,400 if 65 or
     older and blind), or
  ∙  Your gross income was at least $5 and your spouse files a separate
     return on Form 1040 and itemizes deductions.
  -----------------------------------------------------------------------

Earned income is salaries, wages, tips, professional fees, and other amounts
received as pay for work actually done.

Unearned income. This is income that does not meet the definition of earned
income. It includes investment - type income such as interest, dividends, and
capital gains. It also includes social security benefits, pensions, and
annuities. Distributions of interest, dividends, capital gains, and other
unearned income from a trust are also unearned income to a beneficiary of
the trust.

Responsibility of parent. If a dependent child with taxable income cannot file
an income tax return, a parent, guardian, or other legally responsible person
must file it for the child. If the child cannot sign the return, the filer
must sign the child's name followed by the words "By (your signature), parent
(or guardian) for minor child."

If a child's tax is not paid, the parent or guardian is liable for the income
tax on salaries and wages of the child.

Child's income. Amounts a child earns by performing services are his or her
gross income. This is true even if under local law the child's parents have
the right to the earnings and may actually have received them.

Children Under Age 14

If a child's only income is interest and dividends (including Alaska Permanent
Fund dividends) and certain other conditions are met, a parent can elect to
include the child's income on the parent's return. If this election is made,
the child is not required to file a return. See Parent's Election to Include
Child's Income, in Chapter 32. Also see Publication 929, Tax Rules for
Children and Dependents.

Self-Employed Persons

You are self-employed if you:

∙  Carry on a trade or business as a sole proprietor.

∙  Are an independent contractor.

∙  Are a member of a partnership.

∙  Are in business for yourself in any other way.

Self-employment can include work in addition to your regular full-time
business activities. It also includes certain part-time work that you do
at home or in addition to your regular job.

Filing Requirements For Self-Employed Persons

You must file Form 1040 if your gross income is at least as much as the filing
requirement amount for your filing status or if your net earnings from
self-employment are $400 or more. See the Filing Requirements Chart For Most
Taxpayers, shown earlier.

Gross income. For purposes of the filing requirements, your gross income
includes all income you receive in the form of money, goods, property, and
services that is not exempt from tax. This includes the gross income amount on
line 7 of Schedule C (Form 1040), Profit or Loss From Business, or gross
receipts on schedule C-EZ (Form 1040).

If you are self-employed in a business that provides services (where products
are not a factor), then the gross income on line 7 of Schedule C is gross
receipts from that business. If you are self-employed in a business involving
manufacturing, merchandising, or mining, the gross income on line 7 of
Schedule C is the total sales from that business less cost of goods sold, plus
any income from investment and incidental or outside operations or sources.

Net earnings of $400 or more. You must file a tax return if you had net
earnings of $400 or more from self-employment. Net earnings from self-
employment generally is the net income (gross income minus deductible
business expenses) from your business or profession. The $400 net earnings
figure applies regardless of your age. For more information about net
earnings, see Publication 533, Self-Employment Tax.

Net earnings of less than $400. If you have net earnings from self-employment
of less than $400 (or even a loss), you may have to file a tax return. You
must file a tax return if your gross income is at least as much as the filing
requirement amount shown for your filing status on the Filing Requirements
Chart For Most Taxpayers, shown earlier. If you must file, you are required
to show your net self-employment income (or loss) on Form 1040.

Self-Employment Tax

You must pay self-employment tax on your net earnings from self-employment.
This tax is comparable to the social security and Medicare tax withheld from
an employee's wages. An individual who earned less than $130,200 in 1992 as
an employee and earned $400 or more from self-employment normally has to pay
self-employment tax. The combined self-employment tax rate for 1992 is 15.3%.
The 15.3% tax rate is a total of 12.4% for social security and 2.9% for
Medicare. For 1992, the maximum net earnings subject to the social security
portion is $55,500, while the maximum net earnings subject to the Medicare
portion is $130,200. Use Schedule SE (Form 1040), Self-Employment Tax, to
figure your tax. Attach it to Form 1040.

Foreign organizations or governments. If you are a U.S. citizen who works in
the United States for an international organization, a foreign government, or
a wholly owned instrumentality of a foreign government, and if your work is
exempt from social security and Medicare taxes, you must pay self-employment
tax on earnings from services performed in the United States.

Employees of churches. If you work for a church or a qualified church-
controlled organization that elected exemption from social security and
Medicare taxes, you will have to pay self-employment tax if you are paid
$108.28 or more in a year by the church organization. See Publication 533 for
more information.

Aliens

Your status as an alien - resident, nonresident, or dual-status - determines
how you file your income tax return.

The rules used to determine if you are a resident or nonresident alien are
discussed in Publication 519, U.S. Tax Guide for Aliens.

Resident aliens. If you are a resident alien for the entire year, you must
file a tax return following the same rules that apply to U.S. citizens. Use
the forms discussed in this publication.

Nonresident aliens. If you are a nonresident alien, the rules and tax forms
that apply to you may be different from those that apply to U.S. citizens.
See Publication 519 to find out if U.S. income tax laws apply to you and
which forms you should file.

Dual-status taxpayers. If you were a resident alien for part of the tax year
and a nonresident alien for the rest of the year, you are a dual-status
taxpayer. Different rules apply for the part of the year you were a resident
of the United States and the part of the year you were a nonresident. For
information on dual-status taxpayers, see Publication 519.

Joint return. If you are an alien and you were married to a person who was a
U.S. citizen or resident on the last day of the tax year, you may be able to
file a joint return with your spouse. See Publication 519.

Other Situations When You Must File

You may need to file a tax return even if your gross income is less than the
amount shown earlier in the Filing Requirements Chart For Most Taxpayers or
the Filing Requirements Chart For Dependents. You must file a return if any of
the following applied to you:

1)  You owe any special taxes, such as:

    a)  Social security and Medicare tax on tips you did not report to your
        employer (see Chapter 7),

    b)  Uncollected social security, Medicare, or railroad retirement tax on
        tips you reported to your employer (see Chapter 7),

    c)  Uncollected social security, Medicare, or railroad retirement tax on
        your group-term life insurance,

    d)  Alternative minimum tax (see Chapter 31),

    e)  Tax on an IRA or a qualified retirement plan (see Chapter 18),

    f)  Repayment of an investment credit or a low-income housing credit
        you claimed in a previous year (see the instructions for Form 4255,
        Recapture of Investment Credit or Form 8611, Recapture of Low-Income
        Housing Credit), or

    g)  Recapture tax on the disposition of a home purchased with a
        federally-subsidized mortgage (see Chapter 16).

2)  You had net earnings from self-employment of at least $400. See
    Self-Employed Persons, earlier.

3)  You received any advance earned income credit payments from your
    employer. This amount should be shown on your Form W─2 in Box 8. See
    Chapter 35.

4)  You had wages of $108.28 or more from a church or qualified
    church-controlled organization that is exempt from employer social
    security and Medicare taxes. See Publication 533, Self-Employment Tax.

Income from U.S. Possessions. If you had income from Guam, the Northern
Mariana Islands, American Samoa, the Virgin Islands, or Puerto Rico, special
rules may apply in determining whether you must file a U.S. federal income tax
return. In addition, you may have to file a return with the individual island
government. See Publication 570, Tax Guide for Individuals With Income From
U.S. Possessions, for more information.

Who Should File

Even if you are not required to file, you should file a federal income tax
return if:

∙  You had income tax withheld from your pay. You can file a return to get a
   refund even if you can be claimed as a dependent by another taxpayer.

∙  You qualify for the earned income credit. See Chapter 35 for more
   information.

Which Form Should I Use?

You must use one of three forms to file your return - Form 1040EZ, Form
1040A, or Form 1040.

Form 1040EZ

If you are single, you may be able to use the simpler Form 1040EZ.

You can use Form 1040EZ if all of the following apply.

∙  Your filing status is single.

∙  You are not 65 or older or blind.

∙  You do not claim any dependents.

∙  Your taxable income is less than $50,000.

∙  Your income is only from wages, salaries, tips, taxable scholarship and
   fellowship grants, and interest of $400 or less.

∙  You do not itemize deductions, claim any adjustments to income or tax
   credits, receive advance earned income credit payments, or owe any taxes
   other than the amount from the Tax Table.

You must meet all of these requirements to use Form 1040EZ. If you do not meet
all of them, you must use Form 1040A or Form 1040.

Form 1040A

If you do not qualify to use Form 1040EZ, you may be able to use Form 1040A.

You can use Form 1040A if:

∙  Your income is only from wages, salaries, tips, IRA distributions,
   pensions and annuities, taxable social security and railroad retirement
   benefits, taxable scholarship and fellowship grants, interest, dividends
   (except for Alaska Permanent Fund dividends), and unemployment
   compensation.

∙  Your taxable income is less than $50,000.

∙  Your only deduction is for certain contributions to an IRA.

∙  You do not itemize your deductions.

∙  Your only taxes are the amount from the Tax Table and (if you received
   any) advance earned income credit payments.

∙  Your only credits are:

   a)  The credit for child and dependent care expenses (see Chapter 33).

   b)  The credit for the elderly or the disabled (see Chapter 34).

   c)  The earned income credit (see Chapter 35).

If you file Form 1040A, you can claim estimated tax payments for 1992 and the
exclusion of interest from Series EE U.S. savings bonds issued after 1989.

If you do not meet all of the above requirements, you cannot use Form 1040A.
For example, you may want to claim itemized deductions, which you cannot claim
on Form 1040A. Check the list under You must use Form 1040 if to see if you
are required to use Form 1040.

Form 1040

Form 1040 is used to report more types of income, deductions, and credits than
you can include on either Form 1040EZ or Form 1040A.

You may have received Form 1040A or Form 1040EZ in the mail because of the
return you filed last year. If your situation has changed this year, it may be
to your advantage to file Form 1040 instead. You may pay less tax by filing
Form 1040 because you can take itemized deductions, adjustments to income, and
some credits that you cannot take on Form 1040A or Form 1040EZ.

You must use Form 1040 if:

∙  Your taxable income is $50,000 or more.

∙  You itemize your deductions.

∙  You received or paid accrued interest on securities transferred between
   interest payment dates.

∙  You received nontaxable dividends, capital gain distributions, or Alaska
   Permanent Fund dividends.

∙  You are required to complete Part III of Schedule B (Form 1040) because:

       You were a grantor of, or transferor to, a foreign trust that
       existed during 1992, or

       At any time during the year you had an interest in, or signature or
       other authority over, a bank, securities, or other financial account
       in a foreign country. Note. If the combined value of the foreign
       account(s) is $10,000 or less during all of 1992, or if the
       account(s) were with a U.S. military banking facility operated by a
       U.S. financial institution, you may file Form 1040A.

∙  You had income other than wages, salaries, tips, IRA distributions,
   pensions and annuities, taxable social security and railroad retirement
   benefits, taxable scholarship and fellowship grants, unemployment
   compensation, interest, or dividends. This includes gain from the sale
   of your home or other property, barter income, alimony income, taxable
   refunds of state and local income taxes, or self-employment income
   (including farm income).

∙  You claim adjustments to gross income for payments for self-employed
   health insurance, the deduction for self-employment tax, payments to
   a Keogh or SEP plan, the penalty on early withdrawal of savings, alimony
   paid, certain required repayments of supplemental unemployment benefits,
   jury pay turned over to your employer, qualified performing artists'
   expenses, or amortization of costs of forestation/reforestation.

∙  Your Form W─2 shows uncollected employee tax (social security and
   Medicare tax) on tips in Box 17. See Chapter 7.

∙  You received $20 or more in tips in any one month, and you did not report
   all of these tips to your employer. See Chapter 7.

∙  You owe uncollected social security or Medicare tax on your group-term
   life insurance.

∙  You must pay tax on self-employment income. See Schedule SE (Form 1040),
   Self-Employment Tax.

∙  You have to repay an investment credit or a low-income housing credit you
   claimed in a previous year.

∙  You have to recapture tax on the disposition of a home purchased with a
   federally-subsidized mortgage. See Chapter 16.

∙  You have to pay any section 72 penalty taxes, any alternative minimum
   tax, or any tax on an excess golden parachute payment.

∙  You claim credits against your tax for any of the following:

      Mortgage interest credit

      Foreign tax credit

      Investment credit

      Jobs credit

      Credit for prior year minimum tax

      Credit for alcohol used as fuel

      Credit for fuel from a nonconventional source

      Credit for federal tax on fuels

      Low-income housing credit

      Regulated investment company credit

      Credit for overpaid windfall profit tax

      Credit for increasing research activities

      Disabled access credit

      Enhanced oil recovery credit

  You have more than one employer and you claim a credit for excess
  Medicare tax you paid in 1992. See Chapter 36.

∙  You file any of the following:

      Form 2555, Foreign Earned Income

      Form 4563, Exclusion of Income for Bona Fide Residents of American
      Samoa

      Form 4970, Tax on Accumulation Distribution of Trusts

      Form 4972, Tax on Lump-Sum Distributions (see Chapter 11)

      Form 5329, Return for Additional Taxes Attributable to Qualified
      Retirement Plans (Including IRAs), Annuities, and Modified Endowment
      Contracts (to pay tax on an IRA) (see Chapter 18)

      Form 8271, Investor Reporting of Tax Shelter Registration Number

      Form 8814, Parent's Election To Report Child's Interest and
      Dividends


When Do I Have to File?

April 15, 1993, is the due date for filing your 1992 income tax return if you
use a calendar year. If you use a fiscal year (a year ending on the last day
of any month except December, or a 52/53 week year), your income tax return
is due by the 15th day of the 4th month after the close of your fiscal year.

When the due date for doing any act for tax purposes - filing a return, paying
taxes, etc. - falls on a Saturday, Sunday, or legal holiday, you can do that
act on the next business day.

Filing on time. Your return is filed on time if it is properly addressed
and postmarked no later than the due date. The return must have sufficient
postage. If you send a return by registered mail, the date of the registration
is the postmark date. The registration is evidence that the return was
delivered. If you send a return by certified mail and have your receipt
postmarked by a postal employee, the date on the receipt is the postmark date.
The postmarked certified mail receipt is evidence that the return was
delivered.

Filing late. If you do not file your return by the due date, you may have to
pay a failure-to-file penalty and interest. See Penalties, later.

Nonresident alien. If you are a nonresident alien and earn wages that are
subject to U.S. income tax withholding, your 1992 U.S. income tax return (Form
1040NR) is due by:

∙  April 15, 1993, if you file on a calendar year basis, or

∙  The 15th day of the 4th month after the end of your fiscal year if you
   file on a fiscal year basis.

If you do not earn wages that are subject to U.S. income tax withholding, your
return is due by:

∙  June 15, 1993, if you file on a calendar year basis, or

∙  By the 15th day of the 6th month after the end of your fiscal year, if
   you file on a fiscal year basis.

Get Publication 519, U.S. Tax Guide for Aliens, for more filing information.

Filing for a decedent. If you must file a final return as an executor,
administrator, legal representative, or surviving spouse of a taxpayer who
died during the year (a decedent), the income tax return is due by the 15th
day of the 4th month after the end of the deceased taxpayer's normal tax year.
See Final Return for the Decedent in Chapter 4. In most cases, for a 1992
return, this will be April 15, 1993.

Extensions

There are three types of extensions that may apply to your return. These are:

∙  Time to file,

∙  Time to file and pay, and

They will be discussed separately.

Extensions of Time to File

If you ask for an extension of time to file your return, you cannot use Form
1040EZ or have the IRS figure your tax.

If you are not able to file your return by the due date, you may be able to
get an automatic 4─month extension of time to file your 1992 tax return.
To get the automatic extension, you must file Form 4868, Application for
Automatic Extension of Time To File U.S. Individual Income Tax Return.

Example. If your return is due on April 15, 1993, you will have until August
16, 1993, to file.

Caution: You may not be eligible. If you want the IRS to figure your tax, you
cannot use the automatic extension of time to file. If you are under a court
order to file by the regular due date, you also cannot use the automatic
extension of time to file.

When to file Form 4868. You must file Form 4868 by April 15, 1993, with the
Internal Revenue Service Center for your area. If you are filing a fiscal year
return, file Form 4868 by the regular due date for your return. You can file
Form 1040A or Form 1040 any time before the 4─month extension period ends.

Note. Any extension of time granted for filing your 1992 calendar year income
tax return also extends the time for filing a 1992 gift tax return.

An extension of time to file is not an extension of time to pay. You must make
an accurate estimate of your tax for 1992 and pay any amount due with Form
4868. If you do not pay the amount due by the regular due date, you will owe
interest on the unpaid amount.

You also may be charged a penalty for paying the tax late unless you have
reasonable cause for not paying your tax when due. Note. This late-payment
penalty will not apply if you have paid at least 90% of your 1992 tax by the
regular due date. See Penalties, later.

If you must pay any interest or penalty, it will be assessed (charged) from
the original due date of the return, which, for most taxpayers, is April 15.

When you file your return. Enter any payment you made with Form 4868 on line
57, Form 1040. If you file Form 1040A, include in the total on line 28d the
amount paid with Form 4868. Also write "Form 4868" and the amount in the space
to the left of line 28d.

Extensions beyond the automatic 4─month extension. If you qualify for the
4─month extension and you later find that you are not able to file within the
4─month extension period, you may be able to get 2 more months to file, for a
total of 6 months.

You can apply for an extension beyond the 4─month extension either in a letter
or by filing Form 2688, Application for Additional Extension of Time To File
U.S. Individual Income Tax Return. You should request the extension early so
that, if refused, you will still be able to file on time. Except in cases of
undue hardship, Form 2688 or a request by letter will not be accepted until
you have first used Form 4868 to get an automatic 4─month extension. Form 2688
or your letter will not be considered if you file it after the extended due
date.

To get an extension beyond the automatic 4─month extension, you must give all
the following information:

∙  The reason for requesting the extension.

∙  The tax year to which the extension applies.

∙  The length of time needed for the extension.

∙  Whether another extension of time to file has already been granted for
   this tax year.

You may sign the request for this extension, or it may be signed by your
attorney, CPA, enrolled agent, or a person with a power of attorney. If you
are unable to sign the request because of illness or for another good reason,
a person in close personal or business relationship to you can sign for you,
stating why you could not sign the request.

If your application for this extension is approved, you will be notified
by the IRS. Attach the notice to your return when you file it.

If an extension is granted and the IRS later determines that the statements
made on your request for this extension are false and misleading and an
extension would not have been granted at the time based on the true facts, the
extension is null and void. You will have to pay the failure-to-file penalty
(discussed later).

If your application for this extension is not approved, you must file your
return by the extended due date of the automatic extension. You may be allowed
to file within 10 days of the date of the notice you get from the IRS if the
end of the 10─day period is later than the due date. The notice will tell you
if the 10─day grace period is granted.

No further extensions. An extension of more than 6 months will not be granted
if you are in the United States. However, if you are outside the United States
and meet certain tests, you may be granted a longer extension. See Filing
Requirements in Publication 54 for more information.

Extensions of Time to File and Pay

You are allowed an automatic 2─month extension (until June 15, 1993, if you
use a calendar year) to file your 1992 return and pay any federal income tax
that is due if:

∙  You are a U.S. citizen or resident living outside of the United States
   and Puerto Rico, and your main place of business or post of duty is
   outside the United States and Puerto Rico on April 15, 1993, or

∙  You are a U.S. citizen or resident in military or naval service who is on
   duty outside the United States and Puerto Rico on April 15, 1993.

However, if you pay the tax due after the original due date, interest will be
charged from the original due date until the date the tax is paid.

Fiscal year. If you file your return on a fiscal year basis and you meet one
of the requirements listed above, you are allowed a 2─month extension beyond
the regular due date of your return to file your return and pay any tax due
for 1992. However, if you pay the tax due after the original due date,
interest will be charged from the original due date until the tax is paid.
See When To File in Publication 54 for more information.

Married taxpayers. If you file a joint return, only one spouse has to qualify
for this automatic extension to apply. If you and your spouse file separate
returns, this automatic extension applies only to the spouse who qualifies.

How to receive the extension. To use this special automatic extension, you
must attach a statement to your return explaining what situation qualified
you for the extension.

Extensions beyond the automatic 2─month extension. If you are unable to file
your return within the automatic 2─month extension, you may be able to get an
additional 2─month extension of time to file your return, for a total of 4
months. You must file Form 4868 by June 15, 1993, to get this additional
2─month extension.

This additional 2─month extension of time to file is not an extension of time
to pay. You must make an estimate of your tax for 1992 and pay the required
amount with Form 4868.

If you are still unable to file your return within the 4─month extension,
you may be able to get an extension for 2 more months, for a total of 6 months.
You can apply for this extension either in a letter or by filing Form 2688,
Application for Additional Extension of Time To File U.S. Individual Income
Tax Return. You should request the extension early so that, if refused, you
will still be able to file on time. Except in cases of undue hardship, Form
2688 or a request by letter will not be accepted until you have first used
Form 4868 to get an automatic 4─month extension. Form 2688 or your letter will
not be considered if you file it after the extended due date.

To get an extension beyond the automatic 4─month extension, you must give all
the following information:

∙  The reason for requesting the extension.

∙  The tax year to which the extension applies.

∙  The length of time needed for the extension.

∙  Whether another extension of time to file has already been granted for
   this tax year.

You may sign the request for this extension, or it may be signed by your
attorney, CPA, enrolled agent, or a person with a power of attorney. If you
are unable to sign the request because of illness or for another good reason,
a person in close personal or business relationship to you can sign for
you, stating why you could not sign the request.

If your application for this extension is approved, you will be notified by
the IRS. Attach the notice to your return when you file it.

If an extension is granted and the IRS later determines that the statements
made on your request for this extension are false and misleading and an
extension would not have been granted at the time based on the true facts,
the extension is null and void. You will have to pay the failure-to-file
penalty (discussed later).

If your application for this extension is not approved, you must file your
return by the extended due date of the automatic extension. You may be allowed
to file within 10 days of the date of the notice you get from the IRS if the
end of the 10─day period is later than the due date. The notice will tell you
if the 10─day grace period is granted.

No further extensions. An extension of more than 6 months will generally not
be granted. However, if you are outside the United States and meet certain
tests, you may be granted a longer extension. See Filing Requirements in
Publication 54 for more information.

How Do I Prepare the Forms?

This section explains how to get ready to fill in your tax return, including
when to report your income and expenses. It also explains how to complete
certain sections of the form. You may find the 6 Steps For Preparing Your
Return chart, shown later, helpful when you prepare your return.

In most cases, the IRS will mail you either Form 1040, Form 1040A, or Form
1040EZ with related instructions, based on what you filed last year. Before
you fill in your return, look over the forms to see if you need additional
forms or schedules.

If you have not received a tax return package in the mail, or if you need
other forms, you can order them. You can get most forms and publications
you need from the IRS Forms Distribution Center by calling the toll-free
number 1─800─TAX─FORM (1─800─829─3676).

Substitute tax forms. You cannot use your own version of a tax form unless it
meets the requirements explained in Publication 1167, Substitute Printed,
Computer-Prepared, and Computer-Generated Tax Forms and Schedules.

Tax help on videotape. A videotape of tax return instructions is available in
either English or Spanish at participating libraries.

               6 STEPS FOR PREPARING YOUR RETURN
      1 - Get all of your records together for income and expenses.
      2 - Get all forms, schedules, and publications that you need.
      3 - Fill in your return.
      4 - Check your return to make sure it is correct.
      5 - Sign and date your return.
      6 - Attach all required forms and schedules.

When Do I Report My Income and Expenses?

You must figure your taxable income on the basis of a tax year. A "tax year"
is an annual accounting period used for keeping your records and reporting
your income and expenses. You must account for your income and deductions in
a way that clearly shows your taxable income. The way you account is called
an accounting method. This section explains which accounting periods and
methods you can use.

Accounting Periods

Most individual tax returns cover a calendar year - the 12 months from
January 1 through December 31. This is one accounting period. Another
accounting period is the fiscal year - a 12 - month period that ends on
the last day of any month except December.

You must choose your accounting period when you file your first income tax
return. It cannot be longer than 12 months. To change your accounting period,
you must get permission from the IRS. If you want to change your accounting
period, get Form 1128, Application to Adopt, Change, or Retain a Tax Year.

Example. During 1991, you were an employee and earned $15,000. You filed your
1991 income tax return on a calendar year basis. On July 1, 1992, you quit
your job and opened your own repair shop. For business reasons, you want to
file your income tax return on a fiscal year basis from July 1, 1992, to June
30, 1993. To change your accounting period, complete and submit Form 1128. The
new period cannot be used until you receive approval from IRS.

For more information on accounting periods, see Publication 538, Accounting
Periods and Methods.

Accounting Methods

Your accounting method is the way you account for your income and deductions.
Most taxpayers use either the cash method or an accrual method.

Cash method. If you use this method, report all items of income in the year
in which you actually or constructively receive them. Deduct all expenses in
the year you pay them. This is the method most individual taxpayers use.

Constructive receipt. Income is constructively received when it is credited to
your account, or is set apart in any way that makes it available to you. You
do not need to have physical possession of it. For example, dividends or
interest credited to your bank account on December 31, 1992, are taxable
income to you in 1992 if you could have withdrawn them in 1992 (even if the
amount is not entered in your passbook or withdrawn until 1993).

Garnisheed wages. If your employer uses your wages to pay your debts, or
if your wages are attached or garnisheed, the full amount is constructively
received by you. You must include these wages in income for the year you
would have received them.

Brokerage and other accounts. Profits from a brokerage account, or similar
account, are fully taxable in the year you earn them. This is true even if:

1)  You do not withdraw the earnings,

2)  The credit balance in the account may be reduced or eliminated by losses
    in later years, or

3)  Current profits are used to reduce or eliminate a debit balance from
    previous years.

Debts paid for you. If another person cancels or pays your debts (but not as a
gift or loan), you have constructively received the amount and must include it
in your gross income for the year.

Payment to third party. If a third party is paid income from property you own,
you have constructively received the income. It is the same as if you had
actually received the income and paid it to the third party.

Payment to an agent. Income received by an agent for you is income
constructively received by you in the year the agent receives it. If you
indicate in a contract that your income is to be paid to another person,
you must include the amount in your gross income when the other person
receives it.

Check received or available. A valid check you received or that was made
available to you before the end of the tax year is constructively received
by you in that year, even if you do not cash the check or deposit it in your
account until the next year.

No constructive receipt. There may be facts to show that you did not
constructively receive income.

Example. Alice Johnson, a teacher, agreed to her school board's condition
that, in her absence, she would receive only the difference between her
regular salary and the salary of a substitute teacher hired by the school
board. Therefore, Alice did not constructively receive the amount by which
her salary was reduced to pay the substitute teacher.

Accrual method. If you use this method, you report income when you earn it,
whether or not you receive it. You deduct your expenses when you incur them,
rather than when you pay them.

Income paid in advance. Prepaid income is generally included in gross income
in the year you receive it. Your method of accounting does not matter as long
as the income is available to you. Prepaid income includes rents or interest
received in advance and compensation for services to be performed later.

If, under an agreement, you receive advance payment for services to be
performed by the end of the next tax year, you can defer these payments from
income until you earn them by performing the service. You must be an accrual
method taxpayer to defer advance payments. You cannot defer them beyond the
year after the year you receive them. For more information, get Publication
538.

Changing your accounting method. Once you have chosen your accounting method,
you ordinarily cannot change it without the permission of the IRS. However,
you can use a different method for each business you have.

Example. You work for a salary and use the cash method to report that income
on your tax return. You open a gift shop and continue to work for a salary.
Even though you use the cash method for your salary, you can use an accrual
method for reporting income from your gift shop.

How to change. If you want to change your accounting method, get Form
3115, Application for Change in Accounting Method. For more information
on accounting methods, get Publication 538.

Address Label

After you have completed your return, peel your address label off the cover
of your tax return package and place it in the address area of the Form 1040,
Form 1040A, or Form 1040EZ you send to the IRS. If you have someone prepare
your return, give that person your label to use.

The coding on the label is used by the IRS in processing your return. The
label helps to correctly identify accounts. It also saves processing costs
and speeds up processing so that refunds can be issued sooner.

Correcting the label. Make necessary name and address changes on the label. If
you have an apartment number that is not shown on the label, please write it
in. If you and your spouse file a joint return and maintain separate homes,
choose one address to enter on your return. If the label is for a joint return
and the social security numbers are not listed in the same order as the first
names, change the numbers to show the correct order. If your social security
number is not correct, or if you changed your name, see the discussion under
Social Security Number, later.

No label. If you did not receive a tax return package with a label, print
or type your name, address, and social security number in the spaces provided
at the top of Form 1040 or Form 1040A. If you are married filing a separate
return, do not enter your spouse's name in the space at the top. Instead,
enter his or her name in the space provided on line 3.

If you file Form 1040EZ and you do not have a label, print (do not type) this
information in the spaces provided.

P.O. box. If your post office does not deliver mail to your street address and
you have a P.O. box, write your P.O. box number on the line for your present
home address instead of your street address.

Foreign address. If your address is outside the United States or its
possessions or territories, enter the information on the line for "City,
state, and ZIP code" in the following order:

1)  City,

2)  Province or state,

3)  Foreign postal code, and

4)  Name of foreign country.

Do not abbreviate the name of the country.

Social Security Number

You must show your social security number (SSN) on your return. If the number
shown on the address label on the tax return package you received in the mail
is wrong, mark through it. Correct it on the label. If you did not receive a
return with a label, print your number in the space provided on the return.

If you are married and you did not receive a tax return package with a label,
enter the social security numbers for both you and your spouse, whether you
file jointly or separately.

Name change. If you changed your name because of marriage, divorce, etc., make
sure you immediately notify your Social Security Administration (SSA) office
so the name on your tax return is the same as the one the SSA has on its
records. This may prevent delays in issuing your refund and safeguard future
social security benefits.

Dependent's social security number. If you claim an exemption for a dependent
who is at least 1 year old by December 31, 1992, you must list the dependent's
SSN on Form 1040 or Form 1040A. The social security number requirement applies
to all dependents (not just your children) claimed on the tax return who are
at least 1 year old.

No social security number. If you or your dependent who is at least 1 year old
does not have an SSN, file a Form SS─5 with your local SSA office. If you are
a U.S. citizen, you must show proof of age, identity, and citizenship with
your Form SS─5. If you are 18 or older, you must appear in person.

Form SS-5 is available at any SSA office. If you have any questions about
which documents you can use as proof of age, identity, or citizenship,
contact your SSA office.

It usually takes about 2 weeks to get an SSN. If you or your dependent will
not have a number by the time you are ready to file your tax return, ask the
SSA to give you a Form SSA─5028, Receipt for Application for a Social Security
Number.

If you or your dependent does not receive a number by the time you are ready
to file, you should file your return and enter "Applied for" in the space
provided for the number. If you have a Form SSA─5028, attach a copy to your
return.

Nonresident alien dependents. If you claim dependents who are residents of
Mexico or Canada, they must have SSN's. You can apply for an SSN with either
the Social Security Administration or a U.S. consulate or embassy. See Social
Security Number for Dependents in Chapter 3 for more information.

Nonresident alien spouse. If your spouse is a nonresident alien and you file a
joint return, your spouse must get an SSN. If your spouse does not receive an
SSN by the time you are ready to file, follow the instructions explained
earlier under No social security number.

If you file a separate return and your spouse does not have an SSN or any
income, enter "NRA" in the space provided for your spouse's number.

Penalty for not providing SSN. If you do not give your SSN to another person
when you are required to, you may have to pay a penalty. See the discussion
on Penalties, later, for more information.

SSN on correspondence. If you write to the IRS about your tax account, be
sure to include your SSN in your correspondence. Because your SSN is used to
identify your account, this helps the IRS respond to your correspondence
promptly.

Presidential Election Campaign Fund

This fund was set up to help pay for presidential election campaigns.

You may have $1 of your tax liability go to this fund by checking the Yes box
on Form 1040, Form 1040A, or Form 1040EZ. If you are filing a joint return,
your spouse may also have $1 go to the fund.

If you check Yes, it will not change the tax you pay or the refund you will
receive.

Rounding Off Dollars

You may round off cents to whole dollars on your return and schedules. If you
do round to whole dollars, you must round all amounts. To round, drop amounts
under 50 cents and increase amounts from 50 to 99 cents to the next dollar.
For example, $1.39 becomes $1 and $2.50 becomes $3.

If you have to add two or more amounts to figure the amount to enter on a
line, include cents when adding the amounts and round off only the total.

Example. You receive two W─2 forms: one showing wages of $5,000.55 and one
showing wages of $18,500.73. On Form 1040, line 7, you would enter $23,501
($5,000.55 + $18,500.73 = $23,501.28) instead of $23,502 ($5,001 + $18,501).

Additional Schedules

Depending on the form you file and the items reported on your return, you
may have to complete additional schedules and attach them to your return.

Form 1040EZ. There are no additional schedules to file for Form 1040EZ.

Form 1040A. If you file Form 1040A, you must complete and attach the following
four schedules, if they apply to you.

∙  Schedule 1 to report your interest income or dividend income if either
   amount is more than $400, or if you claim the exclusion of interest from
   Series EE U.S. savings bonds.

∙  Schedule 2 to take the credit for child and dependent care expenses.

∙  Schedule 3 to take the credit for the elderly or the disabled.

∙  Schedule EIC to take the earned income credit.

Form 1040. If you file Form 1040, attach the necessary schedules or forms,
such as:

∙  Schedule A to itemize your deductions.

∙  Schedule B to report over $400 in interest or dividends (including
   capital gain and nontaxable distributions), or to answer the foreign
   accounts and foreign trusts questions.

∙  Schedule C to report profit or loss from your business or profession.

∙  Schedule D to report capital gains and losses, and to reconcile Form(s)
   1099─B to your return.

∙  Schedule E to report income or loss from rents, royalties, partnerships,
   estates, trusts, S corporations, and REMICs (residual interests).

∙  Schedule EIC to claim the earned income credit.

∙  Schedule F to report farm income and expenses.

∙  Schedule R to claim the credit for the elderly or the disabled.

∙  Schedule SE to figure self-employment tax.

Foreign financial accounts and foreign trusts. You must complete Part III of
Schedule B (Form 1040) if:

1)  You received more than $400 in either interest or dividends, or

2)  You had a foreign account or were the grantor of, or transferor to, a
    foreign trust.

If you checked Yes to the question on line 11a, Part III of Schedule B, you
must file Form TD F 90─22.1, Report of Foreign Bank and Financial Accounts,
by June 30, 1993, with the Department of the Treasury at the address shown on
the form. Form TD F 90─22.1 is not a tax return, so do not attach it to your
Form 1040. Be sure to file your Form 1040 with the IRS. You can get Form TD
F 90─22.1 by using the order blank at the end of this publication.

For more information, see the instructions for Part III of Schedule B
(Form 1040).

Assembling your return. Attach all forms and schedules in order of the
"Attachment Sequence Number" shown in the upper right corner of the form
or schedule. Attach all other statements or attachments at the end of your
return, even if they relate to another form or schedule.

Form W─2. Form W─2, Wage and Tax Statement, is a statement from your employer
of the wages and other compensation paid to you and the taxes withheld from
your pay. If you worked for more than one employer during the year, you should
have a Form W─2 from each employer. Be sure to attach the first copy or copy B
of Form W─2 in the place indicated on the front of your return. For more
information, see Form W─2 in Chapter 5.

Signatures

You must sign and date your return. If you file a joint return, both you and
your spouse must sign the return, even if only one of you had income.

If you prepare your own return, leave the space under your signature blank.
If another person prepares your return and does not charge you, that person
should not sign your return.

Paid preparer. Generally, anyone who is paid to prepare, assist in preparing,
or review your tax return must sign it and fill in the other blanks in the
paid preparer's area of your return. Paid preparers of Form 1040EZ must sign
the return and provide all other required information at the bottom of the
form below the area for the taxpayer's signature.

If the preparer is self-employed (that is, not employed by any person or
business to prepare the return), he or she should check the self-employed
box in the Paid Preparer's Use Only space on Form 1040 or Form 1040A.

The person required to sign your return must fill in the required preparer
information and sign in the space provided for the preparer's signature.
Signature stamps and labels are not acceptable. The preparer must also give
you a copy of your return in addition to the copy filed with the IRS.

If you have questions about whether a preparer must sign your return, please
contact any IRS office.

Occupation. Enter your occupation in the space provided in the signature
section. If you file a joint return, enter both your occupation and your
spouse's occupation.

Someone else can sign for you. You can appoint an agent to sign your return if
you are:

1)  Unable to sign the return because of a disability,

2)  Absent from the United States for a continuous period of at least 60 days
    before the due date for filing your return, or

3)  Given permission to do so by the IRS district director in your district.

A return signed by an agent in any of these cases must have a power of
attorney (POA) attached that authorizes the agent to sign for you.

Signing for an individual with disabilities. If you sign a tax return for
an individual with disabilities (a parent with disabilities, for example),
you must attach a power of attorney (POA) to the return. You can use a POA
specifically designed for the individual with disabilities that states you
are granted authority to sign the return, or you can use Form 2848, Power of
Attorney and Declaration of Representative. Part I of Form 2848 must state
that you are granted authority to sign the return. If you are filing a joint
return and your spouse has a disability, see Signing a joint return in Chapter
2.

Unable to sign. If the taxpayer is mentally incompetent and cannot sign the
return, it must be signed by a court-appointed representative who can act
for the taxpayer.

If the taxpayer is mentally competent but physically unable to sign the return
or POA, a valid "signature" is defined under state law. It can be anything
that clearly indicates the taxpayer's intent to sign. For example, the
taxpayer's "X" with the signatures of two witnesses might be considered
a valid signature under a state's law.

Child's return. If a child is required to file a tax return but cannot sign
the return, the child's parent, guardian, or another legally responsible
person must sign the child's name, followed by the words "By (signature),
parent (or guardian) for minor child."

Refunds

When you complete your return, you will determine if you paid more income tax
than you owed. If so, you can get a refund of the amount you overpaid or, if
you file Form 1040 or Form 1040A, you can choose to apply all or part of the
overpayment to your next year's (1993) estimated tax.

Follow the instructions in your tax forms package to complete the entries to
claim your refund and/or to apply your overpayment to your 1993 estimated tax.

Note. You cannot have your overpayment applied to your 1993 estimated tax if
you file Form 1040EZ.

Overpayment less than one dollar. If your overpayment is less than one dollar,
you will not receive a refund unless you request it on a separate statement
attached to your return.

Cashing your refund check. U.S. Government checks must be cashed within 12
months of the date they are issued. Checks not cashed within 12 months will
be canceled and the proceeds returned to the IRS. Cash your tax refund check
soon after you receive it.

If your check has been canceled, you can apply to the IRS to have it reissued.

Amount You Owe

When you complete your return, you will determine if you have paid the full
amount of tax that you owe. If you owe additional tax, you should pay it
with your return. If you owe less than one dollar, you need not pay it.

If the IRS figures your tax for you, you will receive a bill for any tax
that is due. You should pay this bill within 30 days.

If you do not pay your tax by the due date, you may have to pay a failure-
to-pay penalty. See Penalties, later.

Balance due. For more information about your balance due, see Publication
586A, The Collection Process (Income Tax Accounts).

Interest

You will have to pay interest on any tax you owe that is not paid by the due
date of your return. Interest is charged even if you get an extension of time
for filing.

Interest on penalties. Interest will also be charged on some penalties,
including the failure-to-file penalty and the accuracy-related penalty.
Interest is imposed on these penalties as of the due date of the return
(including extensions) to the date of payment. Interest on other penalties
starts on the date of notice and demand.

Interest on deficiency suspended. If you are (or were) charged compounded
interest on a deficiency for any period during which regular interest on the
deficiency is suspended, you can claim a refund of the compounded interest
paid for that period. You can file a claim on Form 843, Claim for Refund and
Request for Abatement, for such interest.

Interest due to IRS error or delay. All or part of any interest you were
charged for a deficiency or payment can be forgiven if the interest is due
to an error or delay by an officer or employee of the IRS in performing a
ministerial act. This is a procedural or mechanical act that occurs during
the processing of a taxpayer's case.

The interest can be forgiven only if you are not responsible in any important
way for the error or delay and the IRS has notified you in writing of the
deficiency or payment. For more information, get Publication 556, Examination
of Returns, Appeal Rights, and Claims for Refund.

How to Pay

If you pay by check or money order, make it out to Internal Revenue Service.
Please write your correct name, address, social security number, form number,
daytime telephone number, and tax year on the front of your check or money
order.

For example, during 1993 you file your Form 1040 for 1992 and you owe
additional tax. Write your social security number, daytime telephone number,
and 1992 Form 1040 on your check or money order. If you file an amended return
(Form 1040X) for 1991 and you owe tax, write your social security number,
daytime telephone number, and 1991 Form 1040X on the front of your check or
money order. Be sure to attach your payment to the front of your return.

Your tax is not paid until your check or money order is paid (IRS receives
the funds from your bank, etc.).

Do not mail cash with your return. If you pay cash at an IRS office, keep the
receipt as part of your records.

Do not include any estimated tax payment in your check or money order that is
for payment of your 1992 taxes. Mail the estimated tax payment separately to
the address shown in the Form 1040─ES instructions. The address for mailing
estimated tax payments is different from the address for sending your tax
return.

Gift to Reduce The Public Debt

You can make a contribution (gift) to reduce the public debt. If you wish to
do so, enclose a separate check in the envelope with your income tax return,
and make it payable to Bureau of the Public Debt. You can deduct this gift on
next year's tax return if you itemize your deductions. Please do not add it
to any tax you owe. If you owe tax, include a separate check for the tax
payable to Internal Revenue Service.

Where Do I File?

After you complete your return, you must send it to the IRS. You can mail it
or you may be able to file it electronically.

Mailing Your Return

If an addressed envelope came with your tax forms package, you should mail
your return using that envelope.

If you do not have an addressed envelope or if you moved during the year, mail
your return to the Internal Revenue Service Center for the area where you
now live. The street address of the Service Center is not needed. A list of
Service Center addresses is shown at the end of this publication.

Electronic Filing

If you are due a refund on your 1992 tax return, you may be able to have your
return filed electronically instead of on a paper form. The electronic filing
method can be used by many tax return preparers and other professional filers
(who do not prepare returns but use this method to file returns already
completed by taxpayers). These preparers and filers are equipped to send tax
return information over telephone lines to an Internal Revenue Service Center.
They will charge you for this service, but you will normally receive your
refund sooner, and you may be able to have it deposited directly into your
savings or checking account. Electronic filing is available to taxpayers in
all 50 states.

Advantages. Electronic filing can shorten the time for processing returns
to within 3 weeks. Electronic filing uses automation to replace most of the
manual steps needed to process paper returns. As a result, processing for
electronic returns is faster and more accurate. However, errors on the
return or problems with its transmission or processing can delay your refund.

As with a paper return, you are responsible for making sure your return
contains accurate information and is filed on time. Electronic filing does
not affect your chances of an IRS audit of your return.

Form 8453. Your preparer will ask you to sign Form 8453, U.S. Individual
Income Tax Declaration for Electronic Filing. Your preparer will file the
form with the IRS. Your signature on the declaration form:

∙  Certifies that the information on Form 8453 is correct and corresponds to
   the information on your return,

∙  Authorizes your preparer to file your return electronically, and

∙  Authorizes the IRS to:

   a)   Deposit your refund directly to your savings or checking account,
        and

   b)   Notify your preparer whether the direct deposit request will be
        honored.

Form 8453 is not a power of attorney. It does not authorize your tax preparer
to receive information from IRS about your tax account.

Your preparer will give you the required preparer-signed copy of your return,
including a copy of the completed Form 8453. This material is for your
records. Do not mail this copy to the IRS; if you do, your refund may be
delayed.

Tele-Tax information. For more information on electronic filing, a recorded
message is available on the Tele-Tax system. It is Topic Number 112 on the
Recorded Tax Information. You can also call toll-free 1─800─TAX─1040
(1─800─829─1040) for more information. Ask for electronic filing information.

Refund inquiries. The IRS will notify your preparer of the date your
electronic return was accepted for processing. If you do not receive your
refund within 4 weeks after the return was accepted by IRS, you can call
Tele-Tax Automated Refund Information. Before you call Tele-Tax, please have
the following information from your return available:

∙  The first social security number shown on the return,

∙  Your filing status, and

∙  The exact amount of your refund.

If the Tele-Tax recording tells you the date your refund was issued, you
should receive the refund within a week of that date. If you do not receive
the refund by the end of that week, contact your IRS office. See the telephone
numbers listed under Call the IRS With Your Tax Question, at the back of this
publication.

If Tele-Tax has no information on your return, contact your preparer for the
date IRS accepted your return. If your return was accepted more than 4 weeks
ago, contact your local IRS office. Explain that you filed your return
electronically and that Tele-Tax has no information on it. Also, provide
the first social security number shown on your return and the date the IRS
accepted your return.

Direct deposit. To choose direct deposit of your refund, complete Part II of
Form 8453. Your signature in Part III gives IRS your authorization to deposit
the refund. Your signature also gives IRS permission to notify your preparer
whether the direct deposit request will be honored.

Errors in direct deposit information will cause delays in processing your
refund. Review the information carefully. Make sure the "routing transit
number" (RTN) of your financial institution contains 9 digits. Your return
will be rejected if there are less than 9 digits. If this occurs, your
electronic filer will be notified.

Your request for direct deposit may not be honored if one of the following
occurs:

∙  You owe federal tax, a student loan, child support, or debts to other
   federal agencies. (IRS will notify your electronic filer.)

∙  The IRS has certain special processing needs. (IRS will notify you and a
   paper check will be sent to you.)

Once an electronic return has been accepted by IRS, you cannot cancel the
direct deposit election nor can you change your RTN or bank account number.

What Happens After I File?

After you send your return to IRS, you may have some questions. This section
discusses some concerns that you may have about recordkeeping, your refund,
and errors on your return.

What Records Should I Keep?

You must keep records so that you can prepare a complete and accurate income
tax return. The law does not require any special form of records. However, you
should keep all receipts, canceled checks, and other evidence to prove amounts
you claim as deductions or credits.

How long to keep records. You must keep your records for as long as they are
important for any Internal Revenue law.

Keep records that support an item of income or a deduction appearing on a
return until the period of limitations for the return runs out. (A period
of limitations is the limited period of time after which no legal action can
be brought.) Usually this is 3 years from the date the return was filed, or
2 years from the date the tax was paid, whichever date is later. Returns filed
before the due date are treated as filed on the due date.

If income that should have been reported on your return was not reported,
and it is more than 25% of the income shown on the return, the period of
limitations does not run out until 6 years after the return was filed. If
a return is false or fraudulent with intent to evade tax, or if no return
is filed, an action can generally be brought at any time.

If you file a claim for refund, you must be able to prove by your records that
you have overpaid your tax. Records to support your claim must be maintained
for a period of at least 4 years after you file the claim.

In property transactions, the basis of new or replacement property may depend
on the basis of the old property. Keep the records of transactions relating to
the basis of property for as long as they are important in figuring the basis
of the original or replacement property. See Chapter 14 for information on
determining basis.

Copies of returns. You should keep copies of tax returns you have filed
and the tax return package as part of your records. They may be helpful
in amending filed returns or preparing future ones.

If you need a copy of a prior year tax return, you can obtain it from the IRS.
Use Form 4506, Request for Copy of Tax Form. A $4.25 charge for a copy of a
return must be paid with Form 4506.

Contact your local IRS office if you need a transcript of your tax account.
You should have available your name, social security number or employer
identification number (if applicable), tax period, and form number. You will
receive the following information free of charge:

∙  Type of return filed

∙  Filing status

∙  Tax shown on return

∙  Adjusted gross income

∙  Taxable income

∙  Self-employment tax

∙  Number of exemptions

For more information on recordkeeping, get Publication 552, Recordkeeping for
Individuals.

Interest on Refunds

If you are due a refund, you may also be entitled to receive interest on your
overpayment. The interest rates are adjusted quarterly.

If the refund is made within 45 days of the due date of your return, no
interest will be paid. If you file your return after the due date (including
extensions), no interest will be paid if the refund is made within 45 days
of the date you filed. If the refund is not made within this 45─day period,
interest will be paid from the due date of the return or from the date you
filed, whichever is later.

For determining whether you are entitled to any interest on a refund, your
return will be treated as filed when all of the following steps are completed:

1)  It is filed on a permitted form,

2)  It contains information that identifies you,

3)  It is signed by you, and

4)  It contains sufficient information for mathematical verification of the
    tax liability shown on the return.

Accepting a refund check does not change your right to claim an additional
refund and interest. File your claim within the applicable period of time.
See Amended Returns and Claims for Refund, later. If you do not accept a
refund check, no more interest will be paid on the amount of the overpayment
included in the check.

Interest on erroneous refund. All or part of any interest you were charged on
an erroneous refund will generally be forgiven. Any interest charged for the
period before demand for repayment was made will be forgiven unless:

1)  You, or a person related to you, caused the erroneous refund in any way,
    or

2)  The refund is more than $50,000.

For example, if you claimed a refund of $100 on your return, but the IRS made
an error and sent you $1,000, you would not be charged interest for the time
you held the $900 difference. You must, however, repay the $900 when requested
by the IRS.

Offset Against Debts

If you are due a refund but have not paid certain obligations, all or part of
your overpayment of tax may be used to pay all or part of the past-due amount.
This includes past-due income tax, other federal debts (such as student
loans), and child and spousal support payments. See Reduced refund, under
Amended Returns and Claims for Refund, later.

Joint return and injured spouse. When a joint return is filed and only one
spouse is obligated to pay past-due child and spousal support or a federal
debt, the spouse who is not obligated for the debt can be considered an
injured spouse. An injured spouse can obtain a refund for his or her share
of the overpayment that would otherwise be used to pay the past-due amount.

To be considered an injured spouse, you must:

1)  File a joint return,

2)  Have received income (such as wages, interest, etc.),

3)  Have made tax payments (such as federal income tax withheld from wages or
    estimated tax payments),

4)  Report the income and tax payments on the joint return, and

5)  Have an overpayment, all or part of which may be applied against the
    past-due amount.

If you are an injured spouse, you can obtain your portion of the joint refund
by completing Form 8379, Injured Spouse Claim and Allocation. Follow the
instructions on the back of the form.

Note. Refunds that involve community property states must be divided according
to local law. If you live in a community property state in which all community
property is subject to the debts of either spouse, your entire refund is
subject to offset. You do not qualify for injured spouse status.

Change of Address

If you move or otherwise change your mailing address, be sure to notify the
IRS by using Form 8822, Change of Address. Mail it to the Internal Revenue
Service Center for your old address. Addresses for the Service Centers are
on the back of the form.

If you move after filing your return and you are expecting a refund, you
should notify both the post office serving your old address and the Service
Center where you filed your return. This will help in forwarding your check to
your new address.

Be sure to include your social security number (and the name and social
security number of your spouse, if you filed a joint return) in any
correspondence with the IRS.

Past-Due Refund

If you do not get your refund within 8 weeks after filing your return, call
your IRS office or write to the Service Center where you filed your return.
Be sure to include your name, address, daytime telephone number, and social
security number (and the name and social security number of your spouse, if
you filed a joint return) in any letter you send to the IRS. Also have the
social security number(s) available if you call the IRS.

Telephone service for tax refund information. You may be able to call a
telephone number for your area to find out the status of your income tax
refund. Please wait 8 weeks after filing your 1992 tax return before using
this service. However, if you filed your return electronically, see Where
Do I File? earlier, for information about refund inquiries when you file
an electronic return.

What If I Made a Mistake?

If there is an error on your tax return, you may have to pay one or more
penalties. If you discover an error, you can file an amended return or claim
for refund.

Penalties

To ensure that all taxpayers pay their fair share of taxes, the law provides
penalties for failure to file returns or pay taxes as required.

Civil Penalties

If you do not file your return and pay your tax by the due date, you may have
to pay a penalty. You may also have to pay a penalty if you substantially
understate your tax, file a frivolous return, or fail to supply your social
security number. If you provide fraudulent information on your return, you
may have to pay a civil fraud penalty.

Filing late. If you do not file your return by the due date (including
extensions), you may have to pay a failure-to-file penalty. The penalty is
based on the tax not paid by the due date (without regard to extensions). The
penalty is usually 5% for each month or part of a month that a return is late.
The failure-to-file penalty generally cannot be more than 25% of your tax.

Return over 60 days late. If you file your return more than 60 days after the
due date or extended due date, the penalty will be at least $100 or 100% of
the balance of tax due, whichever is smaller.

Fraud. If your failure to file is due to fraud, the penalty is 15% for each
month or part of a month that your return is late, up to a maximum of 75% of
your tax.

Exception. You will not have to pay the penalty if you show that you failed
to file on time because of reasonable cause and not because of willful neglect.

Paying tax late. You will have to pay a failure-to-pay penalty of 1/2 of 1%
of your unpaid taxes for each month, or part of a month, after the due date
that the tax is not paid. If a notice of intent to levy is issued, the rate
will increase to 1% at the start of the first month beginning at least 10 days
after the day that the notice is issued. If a notice and demand for immediate
payment is issued, the rate will increase to 1% at the start of the first
month beginning after the day that the notice and demand is issued.

This penalty cannot be more than 25% of your unpaid tax. You will not have to
pay the penalty if you can show that you had a good reason for not paying your
tax on time. This failure-to-pay penalty is added to interest charges on late
payments.

Combined penalties. If both the failure-to-file and the failure-to-pay penalty
(discussed earlier) apply in any month, the 5% (or 15%) failure-to-file
penalty is reduced by the failure-to-pay penalty. However, if you file your
return more than 60 days after the due date or extended due date, the penalty
will not be reduced below $100 or 100% of the tax due, whichever is smaller.

Accuracy-related penalty. You may have to pay an accuracy-related penalty if:

1)  There is any underpayment of tax on your return due either to negligence
    or disregard of rules or regulations, or

2)  You substantially understate your income tax.

The penalty is equal to 20% of the underpayment. Each term is discussed later.

The penalty will not be figured on any part of an underpayment on which a
fraud penalty (discussed later) is charged.

Negligence. The term "negligence" includes a failure to make a reasonable
attempt to obey rules. The term "disregard" includes any careless, reckless,
or intentional disregard.

The penalty is based on the part of the underpayment due to negligence or
disregard of rules or regulations, not on the entire underpayment on the
return.

Adequate disclosure. The penalty for negligence or disregard of rules or
regulations may be avoided if you adequately disclose a nonfrivolous
position on the return or can show reasonable cause and good faith for
the tax treatment of a particular item.

To make this adequate disclosure, use Form 8275, Disclosure Statement.

Substantial understatement of income tax. You understate the tax if the
tax shown on your return is less than the correct tax. You substantially
understate your tax if the understatement is more than 10% of the correct
tax or $5,000, whichever is larger.

Substantial authority. The understatement may be reduced if there is or was
substantial authority which supports the tax treatment of the item as you
reported it on your return. For tax shelter items, this exception applies only
if you reasonably believed that the tax treatment was more likely than not the
correct treatment.

Whether there is or was substantial authority depends on the facts and
circumstances. Consideration will be given to court opinions, Treasury
regulations, revenue rulings, revenue procedures, and notices and
announcements issued by the IRS and published in the Internal Revenue
Bulletin that involve the same or similar circumstances as yours.

Disclosure statement. Except in the case of a tax shelter item, the
understatement may also be reduced if you have adequately disclosed the
relevant facts about the tax treatment of the item. To make this disclosure,
you can use Form 8275.

Items that meet the requirements of Revenue Procedure 91-19, 1991-10 IRB 24
(or later update), are considered adequately disclosed on your return without
filing Form 8275. This revenue procedure is updated annually.

Reasonable cause. You will not have to pay a penalty if you show a good reason
(reasonable cause) for giving special tax treatment to a particular item.

Penalty for frivolous return. You may have to pay a penalty of $500 if you
file a frivolous return. A frivolous return is one that does not include
enough information to figure the correct tax or that contains information
clearly showing that the tax you reported is substantially incorrect.

You will have to pay the penalty if you filed this kind of return because of
a frivolous position on your part or a desire to delay or interfere with the
administration of federal income tax laws. This includes altering or striking
out the preprinted language above the space provided for your signature.

This penalty is added to any other penalty provided by law.

The penalty must be paid in full upon notice and demand from IRS even if you
protest the penalty.

Fraud penalty. If there is any underpayment of tax on your return due to
fraud, a penalty of 75% of the underpayment due to fraud will be added to
your tax.

Joint return. The fraud penalty on a joint return does not apply to a spouse
unless some part of the underpayment is due to the fraud of that spouse.

Penalty for failure to supply social security number. If you do not include
your social security number or the social security number of another person,
including your dependent, where required on a return, statement, or other
document, (other than returns or statements related to interest, dividends,
or patronage dividends), you will be subject to a penalty of $50 for each
failure. You will also be subject to the penalty of $50 if you do not give
your social security number to another person when it is required on a return,
statement, or other document.

For example, if you have a bank account that earns interest, you must give
your social security number to the bank. The number must be shown on the Form
1099─INT or other statement the bank sends you. If you do not give the bank
your social security number, you will be subject to the $50 penalty. (You also
may be subject to "backup" withholding of income tax. See Chapter 5.)

The maximum penalty is $100,000 for any calendar year. However, you will not
have to pay the penalty if you are able to show that the failure was due to
reasonable cause and not willful neglect.

Penalty for failure to furnish tax shelter registration number. A person who
sells (or otherwise transfers) to you an interest in a tax shelter must give
you the tax shelter registration number or be subject to a $100 penalty.
If you claim any deduction, credit, or other tax benefit because of the
tax shelter, you must attach Form 8271, Investor Reporting of Tax Shelter
Registration Number, to your return to report this number. You will have to
pay a penalty of $250 for each failure to report a tax shelter registration
number on your return. The penalty can be excused if you have a reasonable
cause for not reporting the number.

Criminal Penalties

You may be subject to criminal prosecution (brought to trial) for actions such
as:

1)  Tax evasion.

2)  Willful failure to file a return, supply information, or pay any tax due.

3)  Fraud and false statements.

4)  Preparing and filing a fraudulent return.

Amended Returns and Claims for Refund

You should correct your return if, after you have filed it, you find that:

1)  You did not report some income,

2)  You claimed deductions or credits you should not have claimed, or

3)  You did not claim deductions or credits you could have claimed.

If you need a copy of your return, see Copies of returns under What Records
Should I Keep, earlier in this chapter.

Form 1040X. Use Form 1040X, Amended U.S. Individual Income Tax Return, to
correct the Form 1040, Form 1040A, or Form 1040EZ you have already filed.

Completing Form 1040X. On Form 1040X, write your income, deductions, and
credits as you originally reported them on your return, the changes you are
making, and the corrected amounts. Then figure the tax on the corrected amount
and the amount you owe or your refund. If you owe tax, you must pay the full
amount with Form 1040X using Form 1040X Payment-Voucher. The tax owed will
not be subtracted from any refund you have not yet received or from any amount
you had credited to your 1993 estimated tax. If you overpaid tax, a refund
will be sent separately from any refund shown on your original return.

Filing Form 1040X. After you finish your Form 1040X, check it to be sure that
it is complete. Do not forget to show the year of your original return and
explain all changes you made. Be sure to attach any forms or schedules needed
to explain your changes. Mail your Form 1040X to the Internal Revenue Service
Center serving the area where you now live (as shown in the instructions to
the form).

A separate form must be filed for each tax year or period involved.

Time for filing a claim for refund. Generally, you must file your claim for a
credit or refund within 3 years from the date your original return was filed
or within 2 years from the date the tax was paid, whichever is later. Returns
filed before the due date are considered to have been filed on the due date.

If the due date for filing a return or claiming a credit or refund is a
Saturday, Sunday, or legal holiday, the return or claim is considered
timely filed if it is filed on the next business day.

If you do not file a claim within this period, you may not be entitled to a
credit or a refund.

Limit on amount of 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 years (plus any extension of time for filing your
return) before you filed the claim.

Example 1. You made estimated tax payments of $500 and got an automatic
extension of time to August 15, 1989, to file your 1988 income tax return.
When you filed your return on that date, you paid an additional $200 tax.
Three years later, on August 15, 1992, you file an amended return and claim
a refund of $700. Because you filed within the 3 years plus the 4─month
extension period, you could get a refund of $700.

Example 2. The situation is the same as in Example 1, except you filed your
return on October 31, 1989, 2-1/2 months after the extension period ended. You
paid an additional $200 on that date. Three years later, on October 25, 1992,
you file an amended return and claim a refund of $700. Although you filed your
claim within 3 years from the date you filed your original return, the refund
is limited to $200. The estimated tax of $500 was paid before the 3 years plus
the 4─month extension period.

If you file a claim after the 3─year period, 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. You filed your 1988 tax return on April 15, 1989. You paid taxes of
$500. On November 3, 1990, after an examination of your 1988 return, you had
to pay an additional tax of $200. On May 2, 1992, you file a claim for a
refund of $300. However, your refund will be limited to the $200 you paid
during the 2 years immediately before you filed your claim.

Exceptions for special types of refunds. If you file a claim for one of the
items listed below, the dates and limits discussed earlier (under Time for
filing a claim for refund and Limit on amount of refund) may not apply.
These special types of refunds are:

∙  A bad debt.

∙  A worthless security.

∙  Foreign tax paid or accrued.

∙  Net operating loss carryback.

∙  Carryback of certain tax credits.

∙  A claim based on an agreement with the Service extending the period for
   assessment of tax.

∙  An injured spouse claim.

Processing claims for refund. It often takes 2 to 3 months to process a claim.
Your claim may be accepted as filed or may be subject to examination. If a
claim is examined, the procedures are the same as in the examination of a
tax return.

However, you should request in writing that your claim be immediately rejected
if:

    You are filing a claim for a credit or refund based solely on contested
    income tax or on estate tax or gift tax issues considered in your
    previously examined returns, and

    You want to take your case to court instead of appealing it within the
    Service.

A notice of claim disallowance will then be promptly sent to you. You have 2
years from the date of mailing of the notice of disallowance to file a refund
suit in the United States District Court having jurisdiction or in the United
States Claims Court.

Reduced refund. Your refund may be reduced by an additional tax liability that
has been assessed against you.

Also, your refund may be reduced by amounts you owe for past-due child support
or debts to another federal agency. The IRS will notify you if this happens.
The refund procedures discussed in this chapter will not be available to you
to get back the reduction. However, if you are the spouse of a person who
owes past-due amounts for these obligations and the reduced refund relates to
an overpayment on a joint return, you may be able to get a refund of your share
of the overpayment before it is used to pay the past-due amount. See Offset
Against Debts, earlier.

Affect on state tax liability. If your return is changed for any reason, it
may affect your state income tax liability. This includes changes made as a
result of an examination of your return by the IRS. Contact your state tax
agency for more information.