Slow Down! Ask First!

slow down!

slow down!       Today TaxMama® wants to talk to you about common errors people are making.

 

 

 

Dear Family,

We have been answering hundreds of questions from taxpayers and tax professionals in the TaxMama® Forum.  http://iTaxMama.com/AskQuestion

Oddly enough, people are upset with our answers. Why? Because they are asking questions AFTER they have taken financial steps without first exploring the consequences. Or they have filed tax returns without waiting for all the W-2s, 1099s, etc. to arrive.

Look, if you don’t want to pay someone for advice – even when your transactions involve over $100,000 or more of sales or distributions – that’s your business. But, at least ask TaxMama®. We point you to useful information for free.  

And sometimes, we even give you tips that would otherwise cost you thousands of dollars if you went to a tax professional for planning. (Yes, really.)

Here are some common issues that are raised:

  • I filed my tax return and then got another W-2 or 1099-MISC
    • Depending on how much income is missing, you can either amend, or wait for the IRS CP-2000 assessment
  • I was given the opportunity to take a distribution from my retirement account of (say) $50,000 – and went ahead and cashed it out. Now I owe thousands of dollars in taxes and penalties! How can I fix this?
    • You can’t. The time to address this is BEFORE taking the distributions.
    • You could have rolled it over to an IRA account with no taxes.
    • You could have taken some money as an annuity. Or other options might have even given you some tax-free access to the cash. IF you asked before acting.
  • My siblings and I inherited our parents’ home and we sold it. All the money was distributed to each of us. How do we report this on our taxes?
    • You should have set up a decedent’s estate, and sold the house using the tax ID number of the estate. Then it would have been simple to report the sale on the estate tax return.
    • And NEVER distribute all the money before the final tax returns are filed and all costs are paid.
    • The executor is responsible to make sure all the tax returns are filed and that the taxes are paid.
  • I am divorced with a child, who lives with me all year. My ex already filed his tax return and claimed my child. What can I do?
    • Discuss these things openly with your ex-spouse (or whoever) before tax season and sort these things out. Even when you have a legal right to claim your child, if someone files first, it can turn into a nasty tax battle – which can result in holding support for ransom, or worse. Easily avoided through communication during the divorce process. This course can help you with that.

There are more, many more questions that arise. Real life is much more bizarre than I could possibly make up. Maybe that’s why there are so many reality shows on TV.

And remember, you can find answers to all kinds of questions about taxes and business issues, and Enrolled Agent tax education, free. Where? Where else? At www.TaxMama.com.

To make comments please drop into the TaxQuips Forum.