Thursday, March 1, 2012

Finding your Refund

Q.  I think I should have received my federal refund by now. Other than calling the IRS and waiting for an hour or so to get through, is there an easy way to find out?

A.  Fortunately, yes. Just go to the IRS Website and follow the steps as outlined.

Wednesday, February 29, 2012

Basis of Inherited Stock

Q.  My husband passed away a few years ago, and now I need to sell some of the stock we held. Do I use the purchase price as my cost basis? That was so long ago, how on earth would I ever find the paperwork, assuming it still exists?

A.  In the case of jointly held stock, if you live in a community property state, the stock is revalued as of the date of death. You use the average trading price of the stock on the date of death or closest date the stock was traded to the date of death. For example, if your husband died on a Saturday, if the market was open the previous day, you would choose that day. If you live in a non-community property state, then you will have to ascertain how title was held to the stock. In jointly held property, you may need to use your cost basis for your half of the shares, and the stepped-up-basis for your husband's half. Many families have grantor trusts which also impacts how title is held. If in doubt, it is also wise to seek counsel from an attorney familiar with such matters.

Tuesday, February 28, 2012

How to eFile when Attachments are Needed

Q.  I'm not sure what the difference between IRS Form 8879 and Form 8453 is. Can you explain?

A.  When eFiling your return, Form 8879 is almost always used. You use Form 8453 when attachments or explanations need to be submitted to the IRS. This would include items such as multiple listings of security transactions, release of dependents, etc. You can download Form 8453 and it will give you a list of what may be attached along with proper addresses depending on what part of the country you live it.

Monday, February 27, 2012

Filing a Return with No Tax Due or Refund Issues.

Q.  Now that I am no longer married, I am working on my own return. I find that I will not owe any taxes, and will not have a refund. Is there any point in filing a tax return?

A.  Usually I am not in favor or filing a tax return that is truly unnecessary. However, you mentioned that you are no longer married. I take it that you were recently divorced. If this is the case, there is one excellent reason to file a return, to start the statute of limitations running. Very occasionally I file returns for clients even when they have zero income to report. I do this especially in cases of divorce where I feel it important to establish a separate identity, especially if the marriage has been a long one, and there are possible innocent spousal issues. At least by filing a return, it does start the statute of limitations which then expires 3 years after the later of the due date of the return or the filing date. You didn't mention which state you are in, but you need to check with your state to clarify if filing with them is an issue. Good luck!