It's tax return time again and the forms are more complicated than ever before because of revisions in the tax law ordered last year by Congress.
This year, as in the past, the Internal Revenue Service is ready to help ease the April 15 blues. Workers will help you prepare your federal return at the IRS office for northern Virginia. There is no charge for the service.
You can also call a local tollfree number - 557-9230 - for tax advice. There is a special toll-free number - 800-428-4732 - for deaf taxpayers who have access to a TV-phone/teletypewriter (TTY).
Faced with more complicated forms, people are pouring into IRS offices for help this tax season, the agency reports. In one local office, the number has already jumped 51 per cent over the same period last year. While there are peak-hour, standing-room-only crowds at some offices, taxpayers who plan ahead can still get help with little delay. Service is faster on Wednesday through Fridays, before 9:30 a.m. and after 3:30 p.m. The same applies to telephone help.
While the IRS tries to make sure its tax advice is correct, its employees can and do make mistakes. Nevertheless, taxpayers are responsible for their own returns regardless of who prepares them, and may be have to pay additional taxes if they are audited. There is on exception to this rule. The Tax Reform Act of 1976 provides that if the IRS makes a mathematical error in preparing a return, it may not charge the taxpayer interest on any additional tax that results from the error. WHERE TO GO FOR HELP.
Here are IRS recommendations on where to go for help, documents to bring with you, free tax publications to ask for, steps to take if your have trouble with your refund, or if the agency audits your return and send you a bill.
The spacious office on the sixth floor of the Skyline Center Building at 5205 Leesburg Pike in Baileys Crossroads has free parking and offers high quality tax assistance. Half of its staff are skilled auditors or revenue agents who ordinarily spend their time examining returns. They shift to taxpayer service during the filing season.
There are also three taxpayer service specialists who research knotty problems, and a backup team of auditors who can help out if the office gets crowded.
Tax forms are available in the hall outside the sixth floor taxpayer service office. The receptionist will provide IRS publications that are not on the rack. There are three counters where you can ask questions, and one where an employee will help prepare your short form 1040A. If you want indepth help on the long form, an employee will assist you at a table that has dividers to enhance your privacy. After your return is prepares, someone else will check it for errors.Plan to spend an hour, not counting waiting time, if your return is complex.
If you do not understand the advice you receive, or sense uncertainty on the part of your adviser, ask that the matter be checked with a specialist. Also ask the employee to cite the law or regulation that applies. The law is complex and IRS employees can make mistakes. It's your money, so speak up if you have doubts. TAX FORMS AND PUBLICATIONS
The IRS puts out 354 different tax forms and 79 free publications to clarify the law. They are available at the area office. You can also order IRS publications by calling the toll-free number - 557-9230. If you are in a hurry go to an IRS office. The agency has to mail telephone orders to a distribution center in Richmond, Va.
IRS publications are helpful because they explain the agency's view of the law. The most popular and comprehensive is a 192-page tax guide, "Your Federal Income Tax," (Publication 17).
You can compare your situation to the examples in the guide. You can also study filled-in tax forms, and gas and sales tax tables. This guide compares favorably with commercial ones available at newsstands, and it is free. However, it does not describe situations where courts * have taken positions more advantageous to taxpayers than th IRS has. You also may not rely on IRS publicatons as authority for the tax treatment you get. Although you follow the official guide, you can still be challenged by the IRS, go to court, and lose. The same is true of commercial guides.
One warning: This year the guide contains some errors. Be sure you get a one-page correction.
Other publications put out by the IRS cover a wide range of tax matters, and should be consulted if something unusual occurs during the year.
"Your Federal Income Tax" has a complete list of the publications on page 192. There is a shorter list on page 39 of the Form 1040 instructions. FILLING OUT YOUR TAX FORMS
The IRS will help you prepare your return without charge but you must make some careful preparations. Fisrt, read the instructions for the form (1040 or 1040A) and study the form itself. Make a list of all of the information needed to complete your return, including your social security number, number of dependents, types and amount of income, and expenses incurred during the year.
Take the list and your W-2 form (wage and tax statement provided by employer) to the IRS office. Do not take a shopping bag full of bank statements, canceled checks, stock certificates for receipts. THe IRS helper will explain the law and use the list to help you fill out each line of your return. If you are clearly unable to do it yourself, the employee will complete the return for you. In either case, your helper mist sign the return as the preparer. This does not mean that he or she is responsible for errors. If the IRS audits your return an assesses more tax, you can't escalpe payment because the agency made a mistake. However, you do not have to pay interest if the IRS makes a mathematical error on your return.
Errors are common because the law is complex. An IRS study of returns filed in 1972 shows that the agency's employees made mistakes on 15 per cent of the standard deduction return and 74 per cent of the itemized returns prepared for people with adjusted gross incomes of less than $10,000. However, error rates for commercial preparers were even higher - 30 per cent for standard deduction return and 78 per cent on itemized returns in the under $100,000 category. The mistakes involved incorrect applications of the tax law, not mathematical errors. IF YOU ARE AUDITED
If your receive a refund, do not assume that the IRS had accepted your return as correct. It has three years to examine it after you file - forever if it believes fraud had occured.
While chances of audit are slim for low and middle income taxpayers (2 to 3 per cent), you should be prepared to substantiate your return. Keep a file of the receipts, canceled checks, bank statements, work papers and other documents you used to prepare the return. Also, write yourself a file memo explaing how you solved difficult tax problems. You may need to reconstruct the situation years later. Keep your records for at least three years, the IRS advises.
If you are audited, there is at least a 70 per cent chance that the agent will ask you to pay more taxes, according to IRS figures. Accordingly, you may wish to appeal. The law is complex and IRS employees make mistakes. Also, they act on the official IRS view of the law, not on more liberal positions taken by some courts. Nor do they treat taxpayers consistently, a recent government study shows. As a result, you may have to pay after an audit while your neighbor, with exactly the same tax situation, pays nothing.
The study, by Congress's watchdog agency, the General Accounting Office, also concluded that taxpayers are not taking advantage of their appeal rights, perhaps because they are unaware of, or do not understand these rights.
Be prepared to appeal the audit if you do not agree with the results. When you receive an audit notice, ask your IRS office for a copy of Pub. 556, "Audit of Returns, Appeal Rights and Claims for Refund." It explains how to appeal through the agency's internal appellate system, or though the courts.
You will need a skilled representative if you take your case to the IRS, because agency officials have a one-sided view of the law.
Certified public accountants and attorneys are legally qualified to represent you before the IRS. Persons known as "enrolled agents," who have passed a rigorous IRS examination, are also legally qualified to present your case.
You can argue your case yourself if necessary.
If you are not satisified with the IRS settlement, you may appeal in court. To do this, you must notify IRS officials and ask that you be sent a "notice of deficiency."
If the amount in question is $1,500 or less, you can pay a $10 fee and argue the case yyourself in the small case division of the U.S. Tax Court. The court's decision is final. To get a court hearing, you must write within 90 days after the date on the notice of deficiency. Address: Office of the Clerk, Small Case Division, U.S. Tax Court, 400 2d St. NW Washington, D.C. 20217.