(Click on image for full size)

Except for the “Evil Rich,” who are not allowed any tax breaks for their kids.

Q:

Hi Kerry,
Here’s another question for you… I filed my taxes electronically this year and everything was processed through when I discovered I failed to include some income on my Schedule C-SE. I filled out the amended return forms and now know I owe a little more tax, how do I go about paying them? How do I show that I’ve already paid some portion of them and do I include a check or will they know where to direct debit?

Also, do I include the original 1040 or just mail the 1040X form and the changed schedules?

Thanks!

A:

As I said previously, you really should be working with a professional tax practitioner to ensure that your tax returns are prepared properly.

To correct any material mistakes on previously filed Federal tax returns, you need to prepare Form 1040X and send it along with copies of all forms and schedules that have changed since the previously filed return.  The 1040X has spots to show what you have already paid in for  the year, as well as any overpayment you may have already received as a refund or rolled over to 2007.

If you live in a taxable state, you will need to file a similar X form with your state tax agency.

IRS is currently charging interest at the annual rate of 8.0%, compounded daily; so you should include a check for the taxes and your best calculation of the interest from April 17, 2007 until the check is received by IRS.  Since that start date hasn’t arrived yet, if you get your 1040X in by that date, there should be zero interest.

Again, a tax pro can help make sure that this is the final amended return you have to send in for 2006, as well as help you find other deductions that you overlooked that could very easily turn the tax due situation into a refund. 

Good luck.

Kerry Kerstetter

Q:

Subject: Re: Vacant Land Sale Question

 

Kerry, I hate to bother you again, but I successfully sold the lot in January 2006 for 112,000.  My house is on the market, we have since bought a new house.  Do I have to claim the lot sale on my 06 taxes, or can I wait till my house sells and roll it in together?  I want to make sure I get the exemption, but do not want to mis-report.  I really appreciate your advice, you are a kind man.

 

-Regards,

A:

The 2006 sale must be reported on your 2006 1040 or else IRS will later discover it as missing and assume the full sales price is taxable income.

How the 2006 sale is reported has a number of potential ways, as I mentioned in my previous email.  This needs to be handled with the services of a tax professional to see which method would be the most appropriate for your unique circumstances. 

Good luck.

Kerry Kerstetter