Tag: Tax Return

Posted on by Jan Roberg

How To File a Tax Return When You Have No Income (And Why You Might Want To)

If your income is below the filing requirement, there is no need to file a federal tax return. But for some people, it still makes sense to file.

If your income is below the filing requirement, there is no need to file a federal tax return. But for some people, it still makes sense.

 

There are two main reasons for filing a US income tax return even if you don’t have any income to report.

 

1.  Identity theft, and
2.  Identity theft.

 

I realize it looks like I was repeating myself but I wasn‘t.  I’m talking about two different kinds of identity theft.  The first is related to an unauthorized person claiming your kids as dependents on their tax return.  The second involves someone claiming you, or impersonating you, on a tax return.

 

Let’s talk about your kids first.  Here’s a story I’ve heard several times:

 

“I’m on SSI and I support my daughter 100%.  We get nothing from her father but he claims her every year on his tax return and gets thousands of dollars in refund money.  I reported him to the IRS but I haven’t heard anything.  I tried to file a tax return but other tax company said I don’t have income so I can’t file.   Is there anything I can do to stop him from profiting on my child that he never sees?”

 

 

One way to deal with this issue is to report the tax fraud.  Here’s more information about how to do that:  http://robergtaxsolutions.com/2010/11/how-to-report-tax-fraud/.  But here’s the thing–the IRS will never tell you what happens.  You’ll never know if the fraud stops.  You might not have enough information to give to the IRS to stop the fraud.  But if you file a tax return and claim your child as a dependent–that messes up their computers and something is going to happen.   The IRS will have to deal with the issue.  You’ll need to be prepared to prove that your child lives with you to stop your ex from claiming your child, but hey–with no income, you’re not getting a refund.  You’ve got nothing to lose!

 

Here’s another story that I don’t hear as often, but I have had to deal with before:

 

I got a letter from the IRS saying that my tax return is wrong and that I shouldn’t have claimed those kids.  I don’t understand, I don’t have any kids and I never filed a tax return.  What’s going on?


 

 

Fraud isn’t limited to claiming kids that aren’t yours; the fraudsters will also use a non-filer’s identity to claim kids that aren’t theirs for huge refunds and then when the IRS investigates, some innocent person who never filed a return gets caught and gets fined.  It’s a nightmare to sort this all out.

 

So how do you protect yourself?  File a tax return.

 

Just because you don’t have any taxable income doesn’t mean you can’t file a tax return.  You won’t get any money back, but you can still file an information return just to let the IRS know that you’re out there.  Many software programs won’t process the return if you show no income, so you’ll want to plug $1 into the other income section on line 21 for the long form.

 

You can even file for free with no income from my website.  Just go to the “Do Your Own Taxes” tab at the top.  Of course, you can always go to the IRS.gov website and use their Free File Online instead.  The important thing is that you file a return and protect yourself.

Posted on by Jan Roberg

Does This Make My Files Look Fat (Part 2)?

Photo by xeeliz at Flickr.com

What Documentation Do I Need To Support My Tax Return?

 

I recently got an e—mail from my friend Steve who was concerned that he was keeping his records for too long.  He was looking to purge some of his files and he also wanted to know if he was overdoing it on his documentation.  Steve owns a small business.   This is part 2 of a series—http://robergtaxsolutions.com/2013/11/does-this-make-my-files-look-fat/.

 

In my last post I talked about the IRS rules for record keeping.  The problem I find with the IRS post is they tell you to keep records for your tax returns, but they don’t tell you what records to keep.  I’m going to go over those here.  Part of my job as an Enrolled Agent is to assist people who are getting audited.  So, based upon my audit experience I think you should keep the records that the IRS will ask for in the event of an audit.

 

Bank Statements—if you own a small business, you should have a separate bank account for the business.  In an audit, the IRS will always ask for copies of the bank statements.

 

Deposit tickets—Granted, your deposits should all be reflected on your bank statement, but they always ask to see those so hang onto them as well.

 

Receipts for expenses— always good to have.

 

Mileage logs—if you claim mileage you should have a log.  Hold onto these—they are like gold.

 

Your QuickBooks or other accounting software records.

 

Now for space purposes—you can have all of these things scanned and saved on disc or on the cloud.  I like to keep the paper around for at least three years, but after that, as long as you can access the scanned documents you should be good.

 

Here’s the funny thing—the better you are at keeping records, the more stuff you can throw away.  Counterintuitive, right?  Let me explain, let’s say you use QuickBooks, and you purchase a few cases of paper and other stuff from your local office supply company.  They deliver the paper and goods and send you a bill.  You write them a check and log into QuickBooks something like Check #1241 to Office Supply Solutions for $162.47 paid on October 31, 2013 from Bank of America checking account and expensed as office supplies.  It’s all right there in your QuickBooks transaction.

 

Now, for the three years, I would still hang on to the Office Supply Solutions receipt, I’d keep my bank statement, and my checking account register.  But after five years, I’d let those receipts find their way to the shredder.  (Yes, the IRS says three, but I’m paranoid.)

 

If your records are good, you don’t need to hang on to stuff for as long because you documented everything and it will tie to your bank statement.  Three years from now when you’re getting audited, you’ll have no clue what check number 1241 was for—you don’t have to, it’s in your QuickBooks.

 

But if your records are bad—that’s when you really need them.  Let me explain—

 

Let’s say I don’t use accounting software, I don’t maintain a separate bank account for my business, and I don’t keep a ledger of my expenses.  One day the IRS decides that I’ve over claimed my expenses (meaning that my income is actually higher.)  Remember my last post?  If the IRS believes that you underreported your income by 25% or more, the statute of limitations on an audit is 6 years instead of three.  (If they think it’s fraud, it’s open season on your forever.)

 

Well, the person with good records still has his QuickBooks account and matching bank statements.  Everything ties.  Easy audit—in, out and outta there.

 

The person with the bad records is going to have to dig and find that office supply receipt, find cancelled checks (who still get cancelled checks anyway?) or somehow prove the expense.  Can you pick up a random bank statement from three years ago and look at a check number without copies of the cancelled checks and tell what that check was written for?  Even if you can, the IRS auditor isn’t going to believe you without a receipt to back it up.

 

So keep good records now, so you can thin out your files later.

Posted on by Jan Roberg

Putting Your Name on Your Tax Return

1953 IRS Tax Form

Photo by Edwin Goei at Flickr.com

 

Wait right there.  I can hear you through the computer.  “How stupid does she think we are?”  “Who doesn’t know how to put their name on a tax return?”  “I’m not a moron you know.”

 

Yes, I know you’re not a moron.  (And no, I can’t really hear you through the computer, I’ve just dealt with this issue enough that I know what people generally say.)  For 99.9% of you, you put your name on the tax return and that’s it—no problem.   But there’s always that small number of people every year whose tax return gets rejected because, according to the IRS, their name is wrong.  This is about fixing those returns.

 

Number 1:   Often when you get an IRS “name error” message, it’s not your name that’s the problem at all.  It’s your social security number.  Check that first to make sure you didn’t transpose a number.  If that’s the problem, you may need to re-input your whole tax return.  My current software lets me correct a bad SSN, but I used to use one that made you do the whole return over.  That’s not fun.

 

Number 2:  You didn’t change your new married name with the Social Security office.  Many women get married and change their names.  They tell their friends, they tell their work, but they forget to do it officially with Social Security.  When they file their tax return with their new married name—reject!  They don’t exist.  You’ll need to file the return with your old name on it.  You can still do file as married, you’ll just use your maiden name.  Then go to Social Security and give them the new name.  Here’s information on how to do that:  http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/315/session/L3RpbWUvMTM4Mjc5MzQ0Ny9zaWQvKkRTVzFNRGw%3D

 

Although it will only take about 10 days to get your new social security card, it will take about 8 weeks to get your name into the federal computer system.     If you’re looking for a refund, or have a filing deadline, just use your old name for now and the new name next year.

 

Number 3:  You really spelled your name wrong.  You’d be surprised how easy this is.  We double check our numbers –of course, it’s taxes.  But we don’t double check spelling our names.  Why would we, it’s our name?  We know that.   But you know how it goes, “tiye dubfwea di  ib rgw qeibf jwta”.  I mean, your fingers go on the wrong keys.

 

Number 4:  If you’ve double checked your SSN, and your name is spelled correctly and you’re not recently married and you’re still getting a reject notice—you’ve got to pull out your actual social security card as see what it says.  On newer social security cards, the last name is printed under the first and middle names.  For example, Hillary Clinton’s return might be getting rejected because it should really say Hillary Rodham Clinton on it.

 

Number 5:  It’s wrong at the IRS.  It’s possible.  If you’ve checked everything on this list, including pulling out the actual SS card and checking everything and you still have the “wrong” name, you can still paper file the tax return, just to get it submitted.  You’ll still want to follow up with the IRS and Social Security and get your name fixed.  If you’ve filed returns before, you can get a transcript of your old return from the IRS.  Your transcript will have the name that the IRS has for you on it.  Here’s a link for that:  http://www.irs.gov/Individuals/Order-a-Transcript I know that sounds a little crazy, and even impossible, but I had to do that to once.    Well, I knew the person’s name, but the IRS had something completely different!

 

One final name issue for people who paper file their tax returns:  don’t forget to put your name on the tax return.   Really!  It’s one of the most common mistakes.  People who e-file—you can’t forget to do that.  People who paper file, they often do all of the math and plan on adding their name last.  Then they finish their return and forget to put the name on.  Back in the Stone Age when I was taking the income tax prep class, it was an automatic failing grade to not put a name on the return.  I thought it was silly (they were fake names on fake returns!)

 

If you file a tax return with no name on it, then that means it’s not filed.  If you don’t file your tax return on time, there’s a penalty of 5% per month of the tax you owe, up to 25%.   If you’re expecting a refund, it won’t come.  These returns just go into the trash.  And yes, this still really does happen.      I’ve had people come to my office with IRS letters telling the people they never filed.  The taxpayer shows me the photo copies of his mailed tax return to prove he filed and right there in black and white is a blank space for the name.   It’s a really easy mistake to make.   It happens quite often (or I wouldn’t bother to write about it.)