“The IRS Didn’t Have A Problem About That” or The Process of Tax Return Processing

Many people replace the initials IRS with ESP. They believe that if their return has omitted some income, or included a deduction that they were not entitled to, that the IRS will respond right back to them after receiving their tax return. Not really; the IRS processes millions of tax returns every year, the majority of them by April 15 but continually all year long.

The immediate processing of tax returns involves the correct matching of social security numbers and names, making sure all necessary forms and attachments are present, that the math is correct, and that the returns are signed. Although electronic filing has greatly streamlined this kind of checking by rejecting tax returns that do not meet these standards, the IRS still has its hands full in the processing of currently filed tax returns. Statements like “they didn’t catch that”, or “I wasn’t audited” miss the point.

Detailed review of tax returns usually occurs no sooner than the year following the year in which the return was filed. Some significant time after filing is when taxpayers receive notices about omitted income, requests for certain documentation, or correspondence involving a detailed review of a tax return: the dreaded audit.

These facts emphasize the importance of getting professional assistance in tax return preparation, and keeping a copy of your tax return and appropriate related documents.

At Line One we have been trained to help you include all applicable amounts, and to include all deductions and credits to which you are entitled. As professional tax preparers, we always provide a full copy of your tax return to you including your copies of tax-related documents. And you have help available to you should you receive inquiries about the return we prepared for you, long after it has been filed. TOP

My Return Is So “Simple”, Even I Can Do It or
What You Don't Know Can Cost You

We all would like life to be as uncomplicated as possible. Telephone calls are usually a simple matter, but ask a phone technician about what is really involved with the completion of that call. It’s easy to go to the store and get apples from Washington, potatoes from Idaho, and artichokes from California; but how many people with professional skills were needed to make those products available to you? Your car started making a funny little noise, but it didn’t hurt the running of it so a mechanic wasn’t needed, until three weeks later when your engine blew up.

How about this: your tax refund could have been $250 more; you could have owed $300 less tax? You could have made a tax-deductible retirement contribution, that daycare or medical plan at work would have saved some money, the tuition for that English course was deductible, there were deductions hidden in that mortgage refinance, you would have deducted that property tax you paid if you had only known. And sometimes it is as simple as you thought it was, but it was good to know that you did the best you could do with that “simple“  tax return. That’s the way it was last year, and this year (as it turned out) but will it be that way next year?

At Line One you are thoroughly interviewed to insure that your tax return is as complete and accurate as it can be and we will answer any questions you may have concerning your present and future situation. And if you receive an IRS inquiry about a return that we prepared for you, we’re here to help with it, because we are fully committed to the work we perform for you. We’re here for you all year long to stand behind the return we prepared, and assist you with new situations and options that may arise for you. TOP

A Personal Message To You From The IRS or
Correspondence From The IRS

Sighting an Eagle is a great experience. They’re beautiful to behold, and a symbol of our country. However when they’re flying in the upper left-hand corner of that letter you received, their beauty may be obscured.

The US Treasury just wanted to say hello, and via the IRS to give you a gentle reminder of some income, or other transaction that wasn’t included on a tax return you filed. And if that omission resulted in an increase to your income tax, the additional tax has been calculated with interest and penalties included, for your convenience, so that you can pay the balance and go on with your life. The letter tells you that you have options. . .but you couldn’t read any further than the sighting of the Eagle, and seeing the amount owed.

If Line One prepared this return—you have an advocate and friend. You can come right down to our office all year long, and we’ll interpret the IRS-ese in language you can understand, and tell you in English about the options you have. The IRS could be wrong. If they’re right, and the omission was due to some oversight on our part, we will pay the interest and penalty incurred—that's our guarantee: you only pay the tax that would have been due if the item had not been omitted. We stand behind our work. TOP

I Better Put That On My Tax Return or
Not All Income Is Taxable

Don’t confuse the terms “income” and “taxable income”. There are many kinds of payments you may receive that are not taxable or reportable. Workers Compensation benefits for wages while you are disabled, certain payments by insurance companies, many portions of retirement benefits, and interest earned on some kinds of bonds are examples.

On the other hand there other payments or credits you get that you may not recognize as income because you don’t get cash in hand. The dividends that you chose to be reinvested back into stocks and mutual funds are taxable income, even though they weren’t paid directly to you. A part of this, all of that, none of the other; it’s part of a puzzle and you may not even be able to find all the pieces.

At Line One we can tell you about the pieces of the puzzle that you’re looking for and we will help you to find them.

That Was Then, This Is Now or
Correcting A Tax Return For A Previous Year

You forgot about that IRA contribution you made in 2003. You could have itemized deductions on your 2004 income tax return, but didn’t. You could have included your parent on your 2005 tax return as a dependent. Well you won’t forget any of that stuff this year. In the words of the great Casey Stengel “It ain’t till it’s over”.  You can include a deduction or credit on a tax return for as early as 2003, that wasn’t on the original filing and get a refund of the reduction in income tax plus interest.

At Line One we are familiar with amending previous tax returns: how to present them, and where to send them. TOP

The State Of The Union or
State Income Tax Returns

Here in Wyoming we don’t have a State Income Tax, and so far no complaints have been received. But sometimes Wyomingites will wander over to another state and realize some income. If you earn income from work in another state, or sell some property there you may have a requirement to file a State Income Tax Return. If you are a resident of another state, but work here in Wyoming, that work income is taxable to your resident state. And if you moved from another state to Wyoming in the course of the year, you may need to file a return for the part of the year that you resided there.

Teton and Lincoln counties are located very close to the Idaho state line. It is not uncommon for a Wyoming resident to work in Idaho, and so have income taxable to Idaho; also an Idaho resident may work in Wyoming and so need to include that income on their Idaho State Income Tax Return.

At Line One we can prepare a return for every state that has an income tax for residents, part-year residents, and non-residents. We can tell you if you are required to file a State Income Tax Return at all and for the year 2006 virtually every State Income Tax Return can be electronically filed from our office. TOP

“Switching” Mutual Funds or
How Was I Supposed to Know That?

You may have investments in a brokerage account, holding shares in various mutual funds. From time to time your broker may suggest switching from one mutual fund to another. Most people do not associate this change in investment with the sale of stock. However the process that happens is the sale of shares in one fund and the purchase of shares in another fund. You usually receive more or less money that you had invested in the shares sold or redeemed. Further the broker is required to file to file a form 1099-B with the IRS to report the proceeds of the “sale” if $600 or more (many brokerages will issue these forms for all such transactions to make sure that they are in full compliance with the law).

It is up to you to provide the detail to account for a taxable gain, or tax deductible loss by showing your “cost basis” in the shares that were sold; all the IRS knows about is the money received for the shares sold. If you have purchased and sold shares in a fund, and the same broker was involved in the purchase and sale (or redemption) that broker will usually be able to supply you with the “cost basis” information that you need for your tax return.

Many brokerages provide this information with the final account statement for the year, if applicable. In addition the date of the original purchase is important because different tax treatment applies to property held for one year or less versus property held for more than one year.   

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