David Stewart is the guest host for this forum.
He is the media relations specialist for the Internal Revenue Service for the state of Pennsylvania. Stewart, who received a master's degree from Temple University's Fox School of Business, works out of the Philadelphia offices at 600 Arch St. He has more than 20 years of experience as a spokesman and communicator for the federal government.
Ask about the IRS and federal income taxes. He and other IRS staff will answer as many questions as they can, but cannot answer them all. Responses do not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.
Liens give us a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after:
- We assess the liability;
- We send you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and
- You neglect or refuse to fully pay the debt within 10 days after we notify you about it.
Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.
The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).
Caution!
Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.
Should You File a Tax Return? |
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Filing Requirements
2005 2006 2007
Single $ 8,200 $8,450 $8,750
65 or > $ 9,450 $9,700 $10,050
Head of household $10,500 $10,850 $11,250
65 or > $11,750 $12,100 $12,550
Married joint $16,400 $16,900 $17,500
(1) 65 or over $17,400 $17,900 $18,550
(2) 65 or over $18,400 $18,900 $20,650
Married separate $ 3,200 $3,300 $3,400
Qualifying widow(er) $13,200 $13,600 $14,100
65 or > $14,200 $14,600 $15,150
Child Tax Credit*
2005 - $1,000 2006 - $1,000 2007 - $1,000
*The credit per dependent may be refundable for any taxpayer if it exceeds tax liability, with the refund generally limited to 15% of the amount by which the taxpayer’s earned income exceeds $11,000 for 2005, $11,300 for 2006, & $11,750 for 2007). Taxpayers with 3 or more children may qualify for a larger refundable amount.
I am sorry but you have not provided enough information regarding your employment status Self-eimployed, independent contractor, etc.) so that I can provide some guidance in general, Social Security tax is a flat tax rate of 6.2% for wages up to a maximum of $90,000. Wages above $90,000 are not subject to the Social Security tax. The Medicare tax is a flat tax rate of 1.45% of your total Medicare wages. For additional information please visit us at IRS.gov.
The Collection Process |
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I am sorry to hear about your loss.
If you have not yet, please touch base with the company to get the account placed into your name. Regarding the 1099DIV, we suggest you place the information on your return. If there is an issue that comes up in the future regarding your mother's estate (in effect the 1099 DIV you recieved) you can provide the IRS with a detailed explanation of your circumstances. You may wish to also consult with a tax professional regarding this issue.
You don't provide enough infomration. If you are an individual worker you can adjust your withholding and/or make additional payments. I an inculding additional infomration regarding quarterly tax payments...
Generally, the corporation must make estimated tax payments for the following taxes if the total of these taxes is more than an amount specified by law:
- the tax on certain capital gains,
- the tax on built-in gains,
- the excess net passive income tax, and
- the investment credit recapture tax.
For more information regarding estimated tax, refer to Form 1120S Instructions, U.S. Income Tax Return for an S Corporation, under topic Estimated Tax Payments, and Publication 542, Corporations, under topic Paying and Filing Income Taxes.
References:
- Publication 542, Corporations
- Form 1120S Instructions
Partnerships file Form 1065 (PDF), U.S. Partnership Return of Income, to report income and expenses. The partnership passes the information to the individual partners on Schedule K-1, Form 1065. The partners report the information and pay any taxes due on Form 1040. Because partners are not employees of the partnership, no withholding is taken out of their distributions to pay the income and self-employment taxes on their Forms 1040. The partners may need to pay Estimated Tax Payments using Form 1040-ES.
Refer to Form 1065 Instructions, U.S. Partnership Return of Income and Chapter 2 of Publication 505, Tax Withholding and Estimated Tax, for additional information.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Form 1065 (PDF), U.S. Partnership Return of Income
- Form 1065 Instructions, U.S. Partnership Return of Income
9.3 Estimated Tax: Individuals
Estimated tax payments can be used to pay Federal income tax, self-employment tax, and household employment tax. To estimate if you need to pay tax on income not subject to withholding or on other income from which not enough tax is withheld, you need to calculate if the total tax you'll owe on your annual income tax return will be covered by the amount of tax you have already had either:
- withheld from wages and other payments, or
- paid in earlier estimated payments for the year, or
- credited to your account from adjustments or overpayments to previously filed returns.
Generally, you should make estimated tax payments if you will owe tax more, than an amount specific by law, after withholding and credits, and the total amount of tax withheld and your credits will be less than the smaller of:
- 90% of the tax to be shown on your current tax return, or
- 100% of the tax shown on your prior year's tax return, if your prior year's tax return covered all 12 months of the year. However, if your prior year's adjusted gross income exceeded a certain amount based on your filing status, then you must pay 110% instead of 100% of last year's tax. (Note: the percentages change depending on the tax year. Refer to Chapter 2 of Publication 505, Tax Withholding and Estimated Tax.)
Estimated tax requirements are different for farmers and fishermen. Publication 505, Chapter 2, 3, & 4, Tax Withholding and Estimated Tax, provides more information about these special estimated tax rules and about estimated tax in general. Get Form 1040-ES (PDF), Estimated Tax for Individuals, to help you figure your estimated tax liability.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Form 1040-ES (PDF), Estimated Tax for Individuals
Self-employment tax is paid by making quarterly estimated tax payments which include both income tax and social security tax.
References:
- Publication 334, Tax Guide for Small Business
- Publication 505, Tax Withholding and Estimated Tax
Your first estimated tax payment is usually due the 15th of April. You may pay the entire year's estimated tax at that time, or you may pay your estimated tax in four payments. The four payments are due April 15th, June 15th, September 15, and January 15th of the following year.
If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday, or legal holiday.
References:
- Publication 505, Tax Withholding and Estimated Tax, Chapter 2.
First you should contact your local IRS office a soon as possible to find out how best to address this matter. It is possible that you had no filing requirment however, if you did then you may be subject to penalties and interest. Below are the regulations for those living overseas.
A citizen or resident alien is generally subject to
If you would like more information on who qualifies for the exclusion, refer to Tax Topic 854, Foreign Earned Income Exclusion - Who Qualifies. For more information on what type of income qualifies for the exclusion, refer to Tax Topic 855, Foreign Earned Income Exclusion - What Qualifies. You may also wish to refer to chapter 4 Publication 54, Tax Guide for Citizens and Resident Aliens Abroad, for a detailed discussion.
If the information you need relating to this topic is not addressed in Publication 54, you may call the IRS International ax Law hotline. The number is (215) 516-2000. This is not a toll-free number.
References:
Publication 54, Tax Guide for Citizens and Resident Aliens Abroad
Tax Topic 853, Foreign Earned Income Exclusion - General
Tax Topic 854, Foreign Earned Income Exclusion - Who Qualifies
Tax Topic 855, Foreign Earned Income Exclusion - What Qualifies
I am a citizen working for a firm in a foreign country. Is any part of my wages or expenses tax deductible?
Citizens are taxed on their worldwide income, no matter where they work. Some taxpayers may qualify for the foreign earned income exclusion, foreign housing exclusion, or foreign housing deduction, if their tax home is in a foreign country and they are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. If the taxpayer is temporarily away from his or her tax home in the on business (less than a year), the taxpayer may qualify to deduct away from home expenses (for travel, meals, and lodging ) but would not qualify for the foreign earned income exclusion.
References:
Publication 54, Tax Guide for Citizens and Resident Aliens Abroad
Publication 514, Foreign Tax Credit for Individuals
Publication 463, Travel, Entertainment, Gift and Car Expenses
Form 2555 (PDF), Foreign Earned Income
Form 2555EZ (PDF), Foreign Earned Income Exclusion
Form 1116 (PDF), Foreign Tax Credit
Tax Topic 514, Employee Business Expenses
I am a citizen living and working overseas. Can I have a tax credit on my taxes for the taxes I pay to the foreign country?
The foreign tax credit is intended to relieve taxpayers of the double tax burden when their foreign source income is taxed by both the and the foreign country from which the income is derived.
Generally, only income taxes paid or accrued to a foreign country or a possession qualify for the foreign tax credit. You can choose to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction.
To choose the foreign tax credit you must generally complete Form 1116 (PDF), Foreign Tax Credit, and attach it to your Form 1040 (PDF). You may claim credit without attaching Form 1116 if all of your foreign source income is passive income (such as interest and dividends) reported to you on a payee statement and the total amount of qualifying foreign taxes you paid or accrued is not more than $300 ($600 in the case of a joint return) and is also reported to you on a payee statement. To choose the deduction, you must itemize deductions on Form 1040, Schedule A (PDF).
You may not take either a credit or a deduction for taxes paid or accrued on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. There is no double taxation in this situation because the income is not subject to tax.
References:
Publication 54, Tax Guide for Citizens and Resident Aliens Abroad
Publication 514, Foreign Tax Credit for Individuals
Form 1116 (PDF), Foreign Tax Credit
Tax Topic 856, Foreign Tax Credit
******** This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional. **********
TAX TIP: TELEPHONE EXCISE TAX REFUND -
The Telephone Excise Tax Refund (TETR) is a one-time payment available on your 2006 federal income tax return. It is designed to refund previously collected long distance telephone taxes. You can request a standard amount or request the actual amount paid. Individuals, businesses and tax-exempt organizations are eligible to request it. ********
Topic 701 -
If you have a gain from the sale or exchange of your main home, you may be able to exclude from income all or part of the gain, please refer to Publication 523 for more information on the gain exclusion. The exclusion may be allowed each time you sell or exchange your main home, but generally no more frequently than once every two years. You cannot deduct a loss from the sale of your main home.
If you sold your home under a contract that provides for part or all of the selling price to be paid in a later year, you made an "installment sale." See Topic below 705 for more information.
To be eligible for an exclusion, your home must have been owned by you and used as your main home for a period of at least two years out of the five years prior to its sale or exchange. The required two years of ownership and use during the five–year period ending on the date of sale do not have to be continuous. You can meet the ownership and the use tests during different two year periods. However, both tests must be met during the five–year period ending on the date of the sale or exchange.
If you did not meet the ownership and use tests, or if during the two–year period ending on the date of the sale or exchange you sold or exchanged another home at a gain and excluded all or part of that gain, you may be allowed to exclude the gain realized on the sale or exchange of your home if:
You sold or exchanged your home due to a change in place of employment or health or unforeseen circumstances.
Report the sale or exchange only if you have a gain that is not excluded from your income. If you have a gain that is not excluded you must report it on Form 1040, Schedule D (PDF).
For additional information, refer to Publication 523, Selling Your Home.
If you were on qualified extended duty in the U.S. Armed Services or the Foreign Service you may suspend the five-year test period for up to 10 years. You are on qualified extended duty when, for more than 90 days or for an infinite period, you are:
At a duty station that is at least 50 miles from the residence sold, or
Residing under orders in government housing.
Topic 705 - Installment Sales
An installment sale is a sale of property at a gain where at least one payment is to be received after the tax year in which the sale occurs. You are required to report the sale on the installment method unless you "elect out" in the year of the sale. If you elect out, you report all the gain as income in the year of the sale. Installment sale rules do not apply to losses. You cannot use the installment method to report gain from the sale of inventory or stocks and securities traded on an established securities market.
Under the installment method, you include in income each year only part of the gain you receive, or are considered to have received. Use Form 6252 (PDF), Installment Sale Income, to report installment income each year. You will need to file Form 1040 (PDF), and may need to attach Form 4797 (PDF) and Form 1040, Schedule D (PDF).
In general, interest should be charged on an installment sale. If interest is not charged or the interest rate is too low, there is a minimum amount of interest you, as a seller, are considered to have received. This "imputed" or "unstated" interest is taxable. You must use the applicable federal rate (AFR) to figure the unstated interest on the sale. The rates are published monthly in the Internal Revenue Bulletin. You can get this information by contacting the IRS at 1–800–829–1040 or on the IRS website at www.irs.gov.
For additional information, refer to Publication 537, Installment Sales.
******** This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional. **********
TAX TIP: SCAMS -
This year the “Dirty Dozen” highlights five new scams that IRS auditors and criminal investigators have uncovered. Topping off the list are fraudulent refunds being claimed in connection with the special Telephone Excise Tax Refund. ********
For more information visit us at IRS.gov.
Please refer to Publication 17 (Chapter 3) on the IRS.gov Web site… http://www.irs.gov/publications/p17/ch03.html#d0e10393
This chapter discusses exemptions for dependents - You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. If you are entitled to claim an exemption for a dependent, that dependent cannot claim a personal exemption on his or her tax return.
Exemptions for Dependents
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.
The term “dependent” means:
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A qualifying child, or
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A qualifying relative.
The terms “qualifying child” and “qualifying relative” are defined later in the chapter..
Caution. This table is only an overview of the rules. For details, see the rest of this chapter.
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| Tests To Be a Qualifying Child | Tests To Be a Qualifying Relative |
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| 1There is an exception for certain adopted children. | |
| 2There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents, and | |
| kidnapped children. | |
| 3There is an exception if the person is disabled and has income from a sheltered workshop. | |
| 4There are exceptions for multiple support agreements, children of divorced or separated parents, and kidnapped children. | |
You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met.
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Dependent taxpayer test.
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Joint return test.
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Citizen or resident test.
These three tests are explained in detail later in this chapter.
******** This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional. **********
TAX TIP: TELEPHONE EXCISE TAX REFUND -
The Telephone Excise Tax Refund (TETR) is a one-time payment available on your 2006 federal income tax return. It is designed to refund previously collected long distance telephone taxes. You can request a standard amount or request the actual amount paid. Individuals, businesses and tax-exempt organizations are eligible to request it. ********
For more information visit us at IRS.gov.
Please review Publication 544 (2006), Sales and Other Dispositions of Assets … http://www.irs.gov/publications/p544/ar01.html#d0e62
This publication explains the tax rules that apply when you dispose of property and covers the following topics:
How to figure a gain or loss.
Whether your gain or loss is ordinary or capital.
How to treat your gain or loss when you dispose of business property.
How to report a gain or loss.
This publication also explains whether your gain is taxable or your loss is deductible.
******** This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional. **********
TAX TIP: TELEPHONE EXCISE TAX REFUND -
The Telephone Excise Tax Refund (TETR) is a one-time payment available on your 2006 federal income tax return. It is designed to refund previously collected long distance telephone taxes. You can request a standard amount or request the actual amount paid. Individuals, businesses and tax-exempt organizations are eligible to request it. ********
For more information visit us at IRS.gov.
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