December 26, 1990
Some Help in Getting Refunds Quicker,
With Less Hassle
Taxpayers are eager to get their refunds. Sometimes they are so eager, they concern
themselves mostly with the bottom line -- finding their tax in the tax table. They speed
through the information at the top of the return not realizing how important it is in
determining their correct tax. Along the way, taxpayers sometimes make mistakes.
In fact, many of the most frequent mistakes taxpayers make have to do with information
on these lines -- filing status, exemptions, standard deductions and the earned income
The IRS can fix many errors without bothering the taxpayer, but not all. Sometimes
there is not enough information on the return to know that the taxpayer has made a
mistake. To correct some mistakes, IRS has to write to the taxpayer to get missing
information. This costs time and money. The taxpayer is inconvenienced. and, of course,
the refund is delayed until the mistake can be corrected.
What advice does the Internal Revenue Service have? Please slow down -- long enough to
read the instructions for lines one through six very carefully before you begin to prepare
your 1990 returns. These lines contain information about filing status and exemptions that
establish who the taxpayer is and whether they have computed the correct tax.
The IRS has one convenient publication to answer questions about lines one through six
-- Publication 501, Exemptions, Standard Deductions and Filing Information. It's available
free from the IRS by calling toll-free 1-800-TAX-FORM (1-800-829-3676.)
FILING STATUS - Sometimes taxpayers fail to claim the most
advantageous filing status -- the one that means the lowest tax bill. Or they fail to
enter all the required information such as the name of the "Qualifying Person"
for Head of Household filing status.
EXAMPLE: John and his wife divorced in 1987. His daughter
lives with him and he has custody, but their divorce decree says his wife can claim the
child as a dependent on her return. John assumed his filing status was single and that's
how he filed. On his $38,000 of income, he paid $6,635 on his 1990 return - $1,278 more
than the $5,357 he should have paid filing as head of household.. Sadly, John made a
similar mistake on his 1988 and 1989 returns. There is no way IRS can tell that John is
making this mistake. But John can -- by reading the instructions on filing status in his
DEPENDENCY EXEMPTIONS - The rules for claiming dependency
exemptions can be complex, particularly for divorced or separated parents. When claiming a
dependent it is important to enter all the required information regarding the dependent,
particularly if the dependent child did not live with you.
EXAMPLE: Ed and his wife have been
divorced since 1980. He doesn't have custody of their son, but there is an agreement that
Ed will be able to claim the dependency exemption. Ed was expecting a refund of more than
$2,000. Instead, he got a letter from the IRS, because Ed failed to check the box on line
6d of the form to show why he was claiming a deduction for a child that did not live with
EXAMPLE: Fred and Sue
had plans for their $1,700 refund check. But instead of a check, they received a letter
from IRS. Why? Because in her rush to finish the return, Sue listed only two of their
three children as dependents on line 6c of the return by then wrote "3" in the
box on the right. Without knowing whether there were two or three dependents, IRS couldn't
process the return without writing to Fred and Sue. The good news was they got their full
refund -- the bad news was an unnecessary delay in getting their check.
STANDARD DEDUCTION -
Taxpayers sometimes do not claim the full standard deduction to which they're entitled.
This can mean paying too much tax. Others fail to check and total the boxes to support
their claim for the additional standard deduction amounts.
EXAMPLE: Tom and Sally
both turned 65 in 1990. Tom thought this meant a new tax break, but he wasn't sure how to
claim it. When he did his return, Tom didn't take the higher standard deduction he should
have. Unfortunately, since he didn't check the boxes to show that he and Sally were 65,
IRS couldn't discover and fix the mistake. This meant he paid tax on $1,300 of income he
EARNED INCOME CREDIT -
Taxpayers often claim the earned income credit when they do not qualify. Factors that
determine whether a taxpayer qualifies include filing status, requirements regarding
dependents and income restrictions. Some taxpayers who qualify may neglect to claim the
credit because they are unaware of the tax benefits or they filed using the wrong filing
status. A good source for more information about the earned income credit is IRS
Publication 596, Earned Income Credit.
EXAMPLE: Beth and her husband
separated in May of 1990. Beth assumed the cost of maintaining the home and support of
their child. By the end of the year, the divorce was still not final, so Beth filed using
the married filing separate status. On her $17,000 of wages, she paid 1990 taxes of
$1,526. What Beth didn't know was that she qualified to file as head of household and pay
only $1,26 in taxes. Beth also missed out on the earned income credit -- in her case $325.
The total tax she paid in 1990 but did not owe was $625.
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