Color of Money Live With Michelle Singletary |
Tax Time 2000 with Dom LaPonzina of the IRS
Tuesday, April 11, 2000 at 2 p.m.
The countdown is almost over. If you have not filed your tax forms already, you have just a few more days to do so without penalty. Whether you do it yourself or you hand over your W-2s to a professional, you will need help on how to beat the deadline and get on with the rest of your life. So put down that Census form and let's get down to it.
My guest this week is Dom LaPonzina, Chief of Communications for Delaware, Maryland and D.C. district of the IRS. He brings with him a wealth of knowledge about filing options, exemption dos and donts, and the government's efforts to make life a little easier on taxpayers. He joins us Tuesday at 2 p.m. to answer your tax questions and help beat the deadline for once in your life.
Welcome to another discussion about money. As you know today we are talking taxes. Dom is a great guy and I'm sure will be very helpful in answering you tax questions. So send them away.
I work full time as a computer programmer.
I was moolighting at night as a computer
programmer, of which most of my work were
done at home. Twice a month, I went to meet
my client to install or test my codes. I got
paid by hour and received w-2 form. Can I
claim home office, travel to and from the meeting places, parking fee downtown, and other supplies like buying new computer, ink
for this job as business deduction on schedule C? Thank you.
Dom LaPonzina: As posed, your question raises several questions from me.
You say you were moonlighting but received a W-2 form. Usually, self-employed people who file Sch C. don't recieve W-2 as employees normally do..instead they recieve Form 1099 misc. This question is important since if you, in fact, DID recieve a W-2 from your moonlighting income you probably CANNOT claim office in the home unless your employer expressly requires such an office and it is used EXCLUSIVELY for that business and NO other activity.
If you are in fact, an independent contractor that your travel expenses and other costs associated with your self-employment would be deductible on your Sch. C.
I cashed in a whole life insurance policy. I received two W-2's for the same payout, two weeks apart. I called the insurance company who told me not to worry about it. Two weeks later I received a letter stating that the second W-2 was in error and a corrected one would be sent with zeroes in it. I had already mailed in my tax return with one W-2. How do I correct this. There is no additional tax liability, just a mess because the insurance company mailed out more W-2s than necessary. Do I need to file an amended return, send a letter, what?
Dom LaPonzina: You're fine as is. No need for you to do anything else. The IRS will get a copy of the Corrected statement and not charge you twice.
My girlfriend is 25 years old, and began attending grad school full time this past August. No one can claim her as a dependent. She has some income from school teaching last year. Her college tuition is being paid by her with the help of student loans. Can she take some sort of education tax credit?
Dom LaPonzina: Yes. She cannot take the Hope Scholarship credit since you state that she is in grad school. Hope Scholarship is only for first two years undergrad years of college. However, she may qualilfy for the Lifetime Learning Credit which can be taken for any college or post grad courses up to $1,000 for qualified tuition related expenses. She can claim up to this amount each year. Check IRS Pub. 970 for more details.
Also don't forget that if she is now paying back some of her student loans, up to $1500 of loan interest is deductible in 1999. Next year's return '2000, she can claim up to $2,000 in interest paid toward her student loans.
Fortunately for me I have a husband who takes care of making sure we get our taxes done on time but what about all those people out there who don't have a honey to push them. If they aren't going to file their taxes in time what should they do? Does it make a difference if they owe money or due a refund?
Dom LaPonzina: Michelle, I think a lot of folks are asking this question right now. Here's what I suggest. With just under a week to go, taxpayers should try to file their actual return. IRS offices are open all week to assist you and they will also be open on Saturday from 8:30 am - 12:30 pm ALSO on Sunday from 1pm - 5pm. ALL IRS offices will be open on Monday, April 17th, the filing deadline day from 7:30 am to 6 pm.
If you feel you won't be able to prepare your actual return by 4/17 then request an Automatic Extention of Time To File.
You do this on Form 4868. No reason need be given with the request...it's an automatic 4 month extention of time to file, BUT YOU MUST FILE THE EXTENTION FORM (4868) BY MIDNIGHT APRIL 17 INSTEAD OF YOUR TAX RETURN.
ALSO REMEMBER, It's only an extention of time to file NOT AN EXTENTION OF TIME TO PAY. Any amount of tax you owe will be subject to 9% interest on the unpaid amount and .5% penalty for failure to pay timely.
If you don't file either your return or the extention request, THEN, you will also face a failure to file penalty of 5% per month up to 25% max on the unpaid balance.
What are the most common errors people make when filing their returns?
Dom LaPonzina: Biggest mistake is math. Not adding or subtracting your figures properly. (That's why I always encourage taxpayers to switch to E-File - IRS electronically filed returns contain virtually no errors since the computer does the math for you.
Next, be sure this year to write in your social security number on your return since it is no longer contained on your mailing label as it had been in past years.
Be sure to find the amount of tax in the proper tax table colume. If you're single, be sure that you don't use the column for someone who is married filing jointly.
Be sure to sign your return and if it's a joint return, BOTH spouses must sign it.
Be sure to fill in your day time phone number at the bottom of the return so that if you make any of these errors, we may contact you quickly to resolve them correctly.
Welcome back Michelle! To your guest: I am repaying student loans from my 1990 College graduation. Can I claim the interest on these payments or is it too late for me to get a credit -more than six years after the fact-?
Thanks in advance.
Dom LaPonzina: You qualify for the deduction as long as your payments are made during the first 60 months that such payments were required by the lender.
If I fill for an extension, and don't owe money, will I still have to pay a penatly?
Dom LaPonzina: No. Penalty is computed based on the amount you owe.
However, should your return be subsequently audited and what you thought would be a refund instead turns into a tax liability due to any audit adjustments, then you would be subject to the penalties on the amount you now owe.
When will the time come that consumers can file electronically without having to go through a purchased software program or pay an outside firm to do so? Personally, I resent having to pay anything to file even if it cost as low as $10. For me that's lunch for two days.
Dom LaPonzina: Michelle, This year, nearly half, yes I said HALF of the returns filed from the Maryland/D.C./Va area have been filed electronically either from a home computer or from a tax preparer offering E-File. E-file is easy, it's accurate and, best of all, it's fast. (Refunds in 2 weeks vs. 7-8 weeks for a paper return.
You already can file FREE on-line by using some of the software available on our website www.irs.gov if your income meets the threshold set by the providers.
As time goes by E-file costs have gone lower and lower. Competition in the market place adds to the cost reduction.
Bottom line, depending on your income, you may already be able to file electronically at NO COST.
Chevy Chase, Maryland:
I thought I would attempt to do my own taxes this year, but there are a few things that I'm not clear on:
- if I roll an end-of-1999 401-k- contribution from a previous employer into an IRA account, is there anything I need to worry about?
- are there any special considerations for private school tuition which we pay for our daughter?
- is it worth trying to calculate -and document- expenses related to job-hunting?
Dom LaPonzina: No problem with the IRA rollover.
Secondary (high school) tuition is not deductible.
Job Hunting expenses,(whether you get the job or not) are deductible as long as you are looking for employment in the same trade or business that you are currently employed in.
First time job search or search in a different occupational field are NOT deductible.
So what is the income level theshold to file for free (and I'm betting most middle-income people don't qualify). What about this $10 credit for filing electronically the President proposed? Is it in effect yet?
Dom LaPonzina: Please check our website www.irs.gov. Look under "Electronic Services". Michelle, If my memory serves me, I believe the Threshold for Free E-file is $25,000 or less.
The $10 credit is merely a proposal at this point and is NOT law yet.
My client did options trading online with broker. The broker sent about 22 pages of activity on this. The proceeds, etc. were not reported to the IRS on a 1099-B. My client does not want to report these as they were not reported to IRS. I need your comments on this. I believe they need to be reported anyway.
Dom LaPonzina: The key issue is DID YOUR CLIENT HAVE ANY GAINS/LOSSES FROM ANY OF THESE BROKER TRANSACTIONS. If he did then he would need to reflect them on his Schedule D Form 1040.
Dupont Circle (Again):
I'm sorry Dom -may I call you Dom?-, I don't understand.
"You qualify for the deduction as long as your payments are made during the first 60 months that such payments were required by the lender."
After the first 60 months I no longer qualify for the deduction?
Or I qualify if I started making my payments in the first 60 months and have continued to do so?
I love tax law, don't you??!!
Again, thanks in advance.
Dom LaPonzina: Correct, After the first 60 months that INTEREST payments were required, you NO LONGER qualify for the deduction.
Specifically the citing reads as follows: " Regardless of when you took out the loan, you can deduct ONLY interest paid during the first 60 months that interest payments are required."
Hope this answers your question. And, Yes, I do love tax law...doesn't everybody?
One more note on the student loan deduction: you can only take it if you earn less than a certain amount, I think $55,000 single, $70,000 married. I'm not sure I understand why it isn't $110,000 married! And, I think these limits are low considering some people repaying loans are professionals earning more than this, especially those who do file jointly.
Dom LaPonzina: You're right and thanks for the addition clarification. It's tough to cover all of the stipulations in this online format since I'm really trying to get as many questions answered as possible and as briefly as possible.
The limits are set by Congress NOT the IRS. Write to your representatives if you wish for changes in the laws.
Oxon Hill, Maryland:
I was in the process of divorce by the end of 1999 -he was a bum-. But the divorce was not complete until this month. Can I be considered legally separated since the process had been initiated?
Dom LaPonzina: NO. Must be legally divorced in the State of Maryland for you to be able to file as a Single Taxpayer.
If your divorce wasn't FINAL last year, then you were not legally divorced...Bum or not.
I would like to make sure there haven't been any changes regarding home equity loans... if I purchase a new car with a home equity loan am I still able to deduct the interest on my taxes?
Dom LaPonzina: Yes. If the loan is secured by your residence and not more than $100,000.
I always hear about congress and Clinton battling over wether or not to raise or lower taxes. Out of curiosity how much say does the IRS itself have in all this or does Congress just make the decision and the IRS must follow it.
Dom LaPonzina: Congress makes the Laws. The IRS enforces the laws we are given by the Congress.
The IRS hasn't written or sponsored One single tax law.
From time to time, the Congress will ask IRS officials to comment or testify as the the "administrability" of a particular proposal.
After completing my taxes I found that I owe money. I understand that the IRS offers an installment payment plan if you sumbit form 9465. In searching the IRS website, I found that you will be assessed $43 to pay in installments and will be charged interest, but there was no mention of the interest rate, what is the current rate? Also, in your opinion, which is better taking a credit card advance or using the IRS payment plan? Thanks!
Dom LaPonzina: Current interest rate is 9% plus a "failure to pay penalty" of .5 % per month (6% per year). So, 9% and 6% equal 15%. If your credit card charges less than 15%, you are better off charging. If it charges more than 15%, you can figure out the rest of this sentence.
I cannot believe that the IRS has not publicized the free on-line filing for those with incomes under $xx -- you guess 25,000 -- seems like you should know that. How deceptive of them-you. I'm sure lots and lots of low income folks paid extra to file on line. This is the first I've heard of it and I've read every article about IRS taxes this year! Your response?
Dom LaPonzina: As Michelle will tell you, I don't write the News Articles, reporters and columnists do.
All I can tell you is that as with this session today and all of the hundreds of media interviews I've conducted over this filing season on Radio, TV and Print, I have repeatedly mentioned this option and obviously many have gotten the message since thousands have already filed for FREE!
Hi, My boyfriend lives with me in a home that I own. He wants to be able to write off a portion of the interest and property tax. I was told by the IRS that he cannot write off anything unless he responsible for the loan. I don't want to re-fi to get him on the loan because the loan I have is great. Is there anyway he can write it off every other year, or write off a portion yearly?
Dom LaPonzina: No. no way, no how.
Good afternoon! I am confused by the commercials I've seen asking people to donate their cars to charity in return for a tax write-off. I did so last year, but when I went to file my taxes, H&R Block told me that the only way to take advantage of it was to itemize. Lucky for me, the market value of the car was pretty high and I had expenses totalling more than the standard deduction, so I did get the benefit of my contribution. What are the laws regarding this type of donation? Can you deduct ANY charitable contributions? I donate on a pretty regular basis, so your help is appreciated. thanks!
Dom LaPonzina: Itemize your deductions if your total deductions exceed the "standard deduction" for your filing status.
For example a single person's standard deduction for the returns we're filing now is $4300. If you have more than $4300 then you'll want to itemize. If fewer than this amount the take the standard.
One caution, when donating cars, be sure to get a valid certified appraisal of its value. Not just what is listed in some Blue Book. You need to be able to show the condition of your specific car rather than a general value of similar cars.
Hey Miss Arlington why don't you tell you boyfriend that if he wants a tax deduction he should get it the legal way --- GET MARRIED!! Opps. That was the columnist coming out in me.
Former D.C. Resident:
I have been out of school for two years. I have an extremely large amount of student loans and am interested in the ways I can deduct the loan interest. What is the maximum amount of student loan interest I can deduct each year and can I deduct it on the Miscellaneous Itemized Deductions Statement? I appreciate your help on this.
Dom LaPonzina: The deduction limit is $1500 for 1999. Will go up to $2,000 this year. You don't need to itemized to claim this deduction. You take it right on the front of Form 1040 or 1040A. For the criteria and timeframes see the answer I gave earlier to a similar question.
We've gone a little long but Dom has agreed to take a few more questions. Isn't he a sweety?
Mr. LaPonzina: I'm a reasonably intelligent - my wife might disagree - "middle class" taxpayer. Even with our few deductions, the tax forms are confusing enough to force me pay an on-line preparer to complete my taxes. I realize Congress, not the IRS has forced us into this mess, so I make the plea, let's just have a flat percentage tax, none of these 1,000s of excemptions, and SIMPLIFY!!
Dom LaPonzina: You are certainly entitled to your opinion. The magic question in this long standing debate is still this...What IS A FAIR FLAT RATE THAT WILL COLLECT ENOUGH TAX TO MEET THE BUDGET AND BE FAIR TO ALL TAXPAYERS. THEY HAVEN'T REACH AGREEMENT IN THE PAST 5 YEARS SO YOUR GUESS IS AS GOOD AS MINE AS TO WHEN THEY WILL.
OK. Don't kill me, But what are my options for filing late. I know I owe a bunch of money and I really can't come up with it by Monday.
Dom LaPonzina: See my earlier answer.
When does a stock become qualified to be declared worthless?
Dom LaPonzina: When your broker or the corporation that originally offered the stock advises you in a formal way that the stock no long has any worth.
On the 1040, it said if you owe money to send in a check along with the 1040-V. What is the 1040-V? I never submitted a 1040-V before in my life.
Dom LaPonzina: It's a payment voucher that is included in your tax booklet that you are asked to fill out and send along with your payment. It helps us process your check and ensure that it is credited to your account. Don't panic if you didn't include it. We'll still process your check.
Silver Spring, Maryland:
My 14 year old daughter earned money in 1999 baby sitting, washing cars, and doing lawn work for neighbors and relatives. We also paid her to do some chores around our house. The total amount she earned in 1999 was about $2,500. Does she have to file a tax return? Can she establish a Roth IRA without filing a return? Thanks.
Dom LaPonzina: From what you've provided in your question, it would appear that your daughter would NOT have to file a return for 1999. Also, YES, she can establish a Roth even though she doesn't file a return.
under what circumstances must you file jointly?
does being joint owners of stocks -with dividend payments- and property -with tax deductions- necessitate joint filing.
Dom LaPonzina: JOINT FILING STATUS REFERS ONLY TO YOUR MARITAL STATUS.
SEVERAL PEOPLE COULD BE JOINT OWNERS OF PROPERTY BUT THAT DOESN'T MEAN THEY COULD ALL FILE AS "MARRIED FILING JOINTLY".
MARITAL STATUS IS WHAT DETERMINES FILING STATUS.
I am a Federal employee. I have a civil service retirement pension plan and have an optional thrift savings plan through the VA. Am I eligible to have a Roth IRA?
Dom LaPonzina: PENSION INCOME AND 401(K) INCOME AND OTHER RETIREMENT PLAN INCOME DO NOT QUALIFY AS "EARNED INCOME" OR COMPENSATION. ROTH IRA CONTRIBUTION MAY ONLY BE MADE IF YOU HAVE EARNINGS FROM INCOME OR COMPENSATION.
Can you deduct the interest on a motorhome-or other RV- used as a second home?
Dom LaPonzina: YES. SO LONG AS YOU CAN EAT ON IT,,,SLEEP ON IT.,,, AND USE THE PLUMBING FACILITIES ON IT (IF YOU KNOW WHAT I MEAN,).
INTEREST ON THE LOAN, SECURED BY THE MOTOR HOME ITSELF, WOULD BE DEDUCTIBLE JUST LIKE REGULAR HOME INTEREST.
I filed my taxes and received a refund; however, I was going through my files and found a statement of real estate proceeds that looks like it should have been taken to my tax preparer and included in my income tax reporting. What are the implications, if any, of my waiting a couple of months to amend this year's tax forms to include this statement? By the way, I did make some money from the real estate transaction.
Dom LaPonzina: NOT A PROBLEM. YOU HAVE UP TO 3 YEARS TO AMEND A PREVIOUSLY FILED TAX RETURN. YOU DO IT ON FORM 1040X.
Okay, okay we have got to let Dom go. I want to thank him again for being my guest today and answering your questions. Obviously most of us need a lot of help figuring out how to file. At any rate good luck in filing your taxes (sure am glad I have my honey on my side otherwise I would be sweating right now too). Hope to hear from you guys in two weeks for another discusion about the Color of Money.
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