Category Archives: Tax Returns

Summertime Tax Tip: Amending a 1040 Return

As the IRS states, the tax code is a complex set of laws affecting virtually every American individual and business. Last year the IRS processed over 244 million tax returns and other documents. The volume is a tribute to the voluntary tax system as well as the IRS workforce.

Undoubtedly, however, the complexity and volume of our tax system means that errors are almost unavoidable. As representation experts we do our best to find and correct those errors made by the IRS. But, that’s just one side of the equation. Every year countless taxpayers ask us what to do if they discover an error on a return that was already filed. The short answer is to not panic and correct the mistake.

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Questions about your unique situation? Learn more about ways we can help or feel free to contact us at any time!

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How do I split my IRS refund?

In April 2014, the Internal Revenue Service issued over 57 million taxpayers a refund via direct deposit at an average of $2,980 per check. Getting money back from the IRS is easier and faster than ever if you provide your bank account information when e-filing or when filing your paper income tax return.

Many taxpayers are unaware of another simple feature available to them regarding their tax refunds; splitting. The IRS will allow you to split your refund into multiple bank accounts. This provides you flexibility to allocate a portion of your refund into your checking account and the remainder into your savings account. Moreover, you can use a portion of your refund to purchase U.S. Series I Savings Bond. These bonds can be for your or other individuals (children, grandchildren) but the total amount of bonds purchased cannot exceed $5,000.

In order to request a split of your refund, complete and attach IRS Form 8888 with your e-filed or paper income tax return. Make sure to include your name, social security number, bank account and routing numbers along with your account type. Next, allocate the exact amounts for each account and designate if you seek to purchase a savings bond. Finally, it is important to review your form for accuracy to avoid any delay.

Funds can be divided in any amount up to and amongst three different bank accounts (within the U.S.). This includes your own account, your spouse’s account or a joint account. Further, taxpayers who file IRS Forms 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-SS, or 1040-PR are all eligible to file Form 8888. It is advised that you contact your bank first to ensure your direct deposit will be accepted.

Also make note of some restrictions. Your refund cannot be divided between a paper check and direct deposit. On Form 8888 you can choose it be issued either via direct deposit or paper check. In addition, refunds from a prior year return cannot be directly deposited nor split.   Finally, if you are simply seeking to have your refund be issued to only one account, Form 8888 is not necessary. This can be requested directly on your income tax return.

With the flexibility to manage your finances more efficiently, filing IRS Form 8888 can help ensure your income tax refund is directed securely to where you need it.

In April 2014, the Internal Revenue Service issued over 57 million taxpayers a refund via direct deposit at an average of $2,980 per check. Getting money back from the IRS is easier and faster than ever if you provide your bank account information when e-filing or when filing your paper income tax return.

Many taxpayers are unaware of another simple feature available to them regarding their tax refunds; splitting. The IRS will allow you to split your refund into multiple bank accounts. This provides you flexibility to allocate a portion of your refund into your checking account and the remainder into your savings account. Moreover, you can use a portion of your refund to purchase U.S. Series I Savings Bond. These bonds can be for your or other individuals (children, grandchildren) but the total amount of bonds purchased cannot exceed $5,000.

In order to request a split of your refund, complete and attach IRS Form 8888 with your e-filed or paper income tax return. Make sure to include your name, social security number, bank account and routing numbers along with your account type. Next, allocate the exact amounts for each account and designate if you seek to purchase a savings bond. Finally, it is important to review your form for accuracy to avoid any delay.

Funds can be divided in any amount up to and amongst three different bank accounts (within the U.S.). This includes your own account, your spouse’s account or a joint account. Further, taxpayers who file IRS Forms 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-SS, or 1040-PR are all eligible to file Form 8888. It is advised that you contact your bank first to ensure your direct deposit will be accepted.

Also make note of some restrictions. Your refund cannot be divided between a paper check and direct deposit. On Form 8888 you can choose it be issued either via direct deposit or paper check. In addition, refunds from a prior year return cannot be directly deposited nor split.   Finally, if you are simply seeking to have your refund be issued to only one account, Form 8888 is not necessary. This can be requested directly on your income tax return.

With the flexibility to manage your finances more efficiently, filing IRS Form 8888 can help ensure your income tax refund is directed securely to where you need it.

Can I Receive a Tax Refund?

You may be wondering whether or not you can receive a tax refund if you are currently making payments under an Installment Agreement or Payment Plan for a prior year’s federal taxes.

The short answer is simply, no.

All taxpayers are entitled to make a claim for a refund of overpaid taxes within the prior three years. However, in instances where there is a past balance, the IRS will confiscate any refund due and apply it towards a taxpayer’s oldest liability period before remitting any excess portion of the overpayment back to the taxpayer.  Even in cases where a taxpayer has entered into a formal payment arrangement, the IRS will offset any refund due and apply it towards the liability. The federal government will pursue all available options to ensure that it is paid for any delinquencies as expeditiously as possible.  The same holds true for many other types of federal debt the most common being delinquent student loan debt.

This is also why the Internal Revenue Service issues tax liens and assesses interest and penalties.  These are all mechanisms the IRS utilizes to ensure repayment of a tax and encourage “voluntary compliance” amongst taxpayers.  When the IRS grants payment arrangements they take into consideration all allowable household expenses and net that amount against the gross household income. Any excess income, beyond the amounts that are considered necessary living expenditures, the IRS expects to be remitted in the form of structured monthly payments.  One of those expenses being considered is income tax withholding.  If income taxes were taken into consideration as a qualified monthly expense, but there is in fact excess withholding, the IRS would assume that that amount should have been reduced when formulating the initial installment agreement terms anyway. Therefore, the IRS will confiscate the excess withholding in the form of a tax refund offset.

The best method for avoiding this pitfall is to seek the counsel of a qualified tax professional shortly after accruing a tax liability with the Internal Revenue Service.  This is especially crucial in instances where a taxpayer may have received or is due a large federal tax refund.  Careful tax planning in the current year can ensure that tax debtors minimize or altogether eliminate a tax refund that would ultimately be confiscated the following year.

For wage earners (those that receive a form W-2 at the end of the year) this can be as simple as adjusting the exemptions reported to their employer on form W-4.  All taxpayers are allowed to claim up to nine exemptions without providing any proof that they qualify.  This will severely reduce the amount of income tax withholding that an employer deducts from each paycheck and ultimately any refund due at the end of the tax year.  For self-employed individuals, taking a little extra time each week to maintain careful bookkeeping records will allow them the ability to consistently track current year tax obligations so that they aren’t in danger of over or under paying when making estimated tax deposits.