Tax Time: Frequently asked questions
Published 9:23 pm Saturday, February 5, 2011
By Randy Forbes
The first couple months of a new year mean that state and federal taxes once again take center stage. W-2s start to flood mailboxes. As the first paychecks of the new year are cut, changes may appear on income taxes on payroll statements. Upcoming life changes cause us to begin considering updating tax withholdings.
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And every year there seems to be a new set of rules or special circumstances, new forms to fill out, or a new technological feature added to the tax filing process for which we must prepare.
To help ease the process as you begin to gather tax documents and make tax changes in preparation for the year ahead, I have put together the following Frequently Asked Questions and answers with resources from the Internal Revenue Service.
What are the tax changes for this year?
Each year, new changes go into effect within our tax laws. These changes affect anything from first-time homebuyer tax credits, to standard mileage rates, and even the date tax returns are due to be filed.
For example, this year tax returns are due April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia, even if you do not live in the District of Columbia.
It is important that you are aware of these changes. The IRS highlights any tax changes for the current tax year in the “What’s New” section of Forms’ instructions pages.
Why has my income tax gone up this year?
Some taxpayers might have noticed that the amounts being withheld for federal taxes so far in 2011 have been higher than they were last year. Here is why this may have happened: A tax credit that was included in the stimulus bill was available for 2009 and 2010.
The credit was refundable, equal to 6.2 percent of earned income, and capped at $400 for single filers and $800 for joint filers. However, it expired at the end of 2010 and has not been extended.
In its place, Congress included a payroll tax holiday for wage earners and the self-employed in the tax compromise bill passed in December. The provision grants employees and the self-employed a reduction of two percentage points (from 6.2 percent to 4.2 percent in the case of employees) in their share of the federal payroll tax for Social Security in 2011 only.
Though the payroll tax reduction went into effect on Jan. 1, not all employers reportedly have implemented it through modifications to their payroll software, especially smaller employers, which could be why your income tax has gone up. For many individuals, this increase is temporary. Once the payroll tax holiday is fully implemented, employees and the self-employed with incomes in excess of $20,000 will realize an increase in their take-home pay compared to 2010. However, if you have specific questions about your individual income taxes, you should contact the IRS directly.
How do I adjust my tax withholdings?
The IRS urges workers to review their withholding at the beginning of every year and, if necessary, fill out a new W-4 and give it to their employer.
For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms.
How do I find the right tax forms?
You can download tax forms by publication number or topic, and also look up instructions for each specific form on the IRS website. The tax filing forms are available at http://www.irs.gov/formspubs/index.html. You can also order the forms by mail or occasionally find paper copies of tax forms at your local library or post office.
What if I can’t pay my taxes?
In today’s economic situation, many individuals who have not faced difficulty paying their taxes in the past may find themselves in a situation where savings has been depleted and they are unable to pay.
If you cannot pay the full amount of taxes you owe, don’t skip filing your returns. The IRS says that you should still file your return and pay as much as you can to avoid penalties and interest. You should also contact the IRS at 1-800-829-1040.
The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise.
How do I know my rights are being protected as taxpayer?
Money is a very personal issue, and individuals want to know that they are not being taken advantage of when it comes to paying taxes. You deserve to know your rights as a taxpayer, whether you file a Form 1040EZ or a complicated corporate return.
The Taxpayer Rights Corner provides information on taxpayer rights that will be helpful during your interactions with the IRS. You will benefit from knowing your rights as a taxpayer and being familiar with the IRS’ obligations to protect them.
How do I contact the IRS?
There are a number of ways to contact the IRS by phone or online. A list of contact links at the IRS tells you exactly who to contact depending on specific issues you may be faced with.
For your convenience, any tax questions you have that cannot be answered online or over the phone can be brought to Taxpayer Assistance Centers located nationwide. The centers accept walk-ins, but may require appointments in special circumstances.
The centers will help you with inquiries or adjustments to tax accounts, questions about IRS letters and notices, and payment plans for those who owe and cannot pay the full amount.
If you have additional questions regarding your taxes, or have further questions regarding these resources, visit the IRS website at www.irs.gov.