More on the AT&T tax refund. In my June 9 column, I wrote about the court-ordered change, from taxable to nontaxable status, of a small portion of the Pacific Telesis stock that was distributed as a part of the AT&T divestiture.
The IRS has mailed instructions on submitting a claim for a tax refund to those who reported that portion (39 cents for each share of original AT&T stock) as income on their 1984 tax returns.
The instructions include IRS Notice 773 (explaining the background of this convoluted problem), a special Form 1040X (amended return) with "AT&T claim" overprinted on the face, the general instructions for Form 1040X, and a return envelope.
If your AT&T stock was being held for you by a "nominee" -- generally meaning in street name for your brokerage account -- at the time of the divestiture, the return envelope is addressed to the Internal Revenue Service Center in Fresno, Calif., which is handling these special claims for this particular group of taxpayers. If you were holding the stock certificate yourself, the return envelope is addressed to the service center to which you normally send your tax returns.
If you have other corrections to make on your 1984 tax return, do not include them on this special 1040X; this AT&T form should be limited to your claim for refund on the overpayment resulting from the PacTel dividend originally reported.
Attach to the special Form 1040X the bottom part of Notice 773 containing your name, some identifying information and the amount of the dividend you reported on your 1984 tax return -- which should match the amount you are claiming as a reduction of total income.
The IRS also asks that you enter a brief note in Part II on page 2 of the 1040X showing the amount of originally reported income on which the claim is based.
Do not use the 1985 tax tables or tax-rate schedules when completing the form 1040X; 1984 rates were slightly higher than in 1985.
If you didn't keep the 1984 booklet (with the rates) with your copy of the tax return, you have several options:
Check with your library -- it may have a copy of the booklet.
Call the toll-free IRS number listed for forms and instructions, and ask for a copy of the booklet for 1984 tax returns. (Expect a delay of as much as four weeks.)
Complete the 1040X down through line 7, column C. Then call the IRS number for assistance and tell the technician who answers what you're working on and what the amount on line 7, column C. You also will have to identify your filing status (single, married filing jointly, etc.). The technician then will tell you the new, corrected tax, which goes on line 8 of column C of Form 1040X. You should be able to complete the rest of the form without difficulty.
When the amended return is accepted by the IRS -- as indicated by your receipt of the refund check -- you may file an amended state-tax return to claim a refund of the amount originally overpaid to the state for 1984. An extra copy of the Form 1040X attached to your state amendment will simplify this request.
Although the IRS notice doesn't mention it, your federal refund also will include interest from April 15, 1985, (the due date of the original return) to the date of payment. Unfortunately, this is small compensation for the amount of extra work called for -- and besides, the interest will be reportable as income on your 1986 tax return.
If you have not received the refund package, either call your local IRS office and ask for one, or file your claim on a regular Form 1040X on which you print at the top "AT&T claim." Mail the claim to the IRS service center to which you had mailed your 1984 tax return, printing the same "AT&T claim" legend on the lower left-hand corner of the envelope.
Abramson is a family financial counselor and tax adviser. Questions of general interest on tax matters, insurance, investments, estate planning and other aspects of family finances will be answered in this column. Advice cannot be given on an individual basis. Address all questions to E. M. Abramson, The Washington Post, Business News, 1150 15th St. NW, Washington, D.C. 20071.