IRS, FTB Give Last-Minute Tax Tips
Monday, April 12, 2010
Are you struggling to finish your tax returns in time for the April 15 filing deadline? We have representatives from the IRS and the California Franchise Tax Board on to take your calls, and offer last-minute tax tips
MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. If you haven't filed your state or federal income taxes yet, there's no reason to panic. You have until Thursday at midnight to file and many software programs, including the free ones, make filing your taxes easier than ever. Maybe though, one of the reasons you haven't gotten it done, is because you've got a lingering question about this year's taxes, or you're confused about something. Well, we’ll try to help you this morning. I’d like to welcome back my guests. Raphael Tulino is IRS spokesperson for Southern California and Nevada. Raphael, welcome back.
RAPHAEL TULINO (IRS Spokesman, Southern California and Nevada regions): Hi, Maureen, thanks for having me.
CAVANAUGH: And Brenda Voet – it is ‘vote’ (phonetically), right, Brenda? Good morning, Brenda?
BRENDA VOET (Spokesperson, California Franchise Tax Board): Good morning.
CAVANAUGH: Yes, it is – your last name is Voet, right?
VOET: It is, like elections.
CAVANAUGH: You’re a spokesperson for the California Franchise Board (sic). And, Brenda, welcome back.
VOET: Thank you so much.
CAVANAUGH: And for the rest of this hour, as I say, we’ll be taking your calls about last minute tax questions. Call us with your questions and your concerns and, if you don’t mind, maybe you can tell us why you waited this long. Our number is 1-888-895-5727, that’s 1-888-895-KPBS. I want to start out by asking you, Raphael, do we know the percentage of taxpayers who kind of wait until the last minute?
TULINO: Yeah, we do. We get about 30%, somewhere in that range, of all volume individually, at least, individual returns, in April. So…
CAVANAUGH: And, Brenda, is it basically the same for California?
VOET: Yeah, we are expecting about 4 million returns here in the next couple of days to come on in. We get 15 million overall. 1.5 usually take advantage of our automatic extension to file, so we’ve still got quite a few coming on in.
CAVANAUGH: Now I want to ask you both, why – do you know why people wait?
TULINO: Well, I can say the one thing. One or two reasons, at least from my point of view, then, Brenda, you can add in or – But, generally procrastination seemingly is the American pastime on something like this.
TULINO: That’s the one thing. The other thing is you have until April 15th in order to pay, so a lot of folks may wait until filing the return and then make the payment at the same time. Now on the other hand, real quick, about 75% or so of all taxpayers have a refund coming so you get a lot of volume earlier but later you may see folks who have that balance due and the law says you have until April 15th in order to make that payment.
CAVANAUGH: I see.
TULINO: So, therefore, you may wait until—and that’s fine, that’s perfectly okay for folks to hang onto their money as long as they can, so those two things together probably amount for a good chunk of it.
CAVANAUGH: Now, Brenda, that makes more sense but I have a feeling a lot of people just wait because they wait.
VOET: You know, everybody loves tax season especially when they have all those records and they’re trying to figure out what they need to do with them. So, yeah, it’s really something that people like to think of only for a couple hours out of the year…
VOET: …so I think they wait until the last minute to do that.
CAVANAUGH: Okay, so, Raphael, tell us what are your tips for people who haven’t started their tax returns yet. You know, what’s the first thing that they should do?
TULINO: Well, get to a computer. That’s the quickest and easiest way at this point with just three days left. You’d be surprised. If you can get your paperwork together and get everything that you have due you, your 1099s, 1098s, W-2s, that kind of information, get it in front of you and then get to a computer. You’d be very surprised how easy and convenient it is to file a return at the federal and state level because most software programs just mailed it over to the state, and you’d be done in an hour or two, maybe a little longer, depending on your situation. Even if you have rental property or you have a business and that kind of thing, you’d be surprised how easy it is because the software holds your hand and gives you the opportunity. The other thing you can do is take the extension and on the federal side you can request it one of two ways, either electronically or a small little paper form, Form 4868, takes about three minutes to fill it out and send it in. And that gives you until October 15th. But really quick on extensions, is it’s an extension of time to file the return and not necessarily to pay.
CAVANAUGH: Extension to pay, right.
TULINO: Yeah, so if you owe or you think you owe, April 15th is your deadline. Well, what’s going to happen, just get penalities and interest that can accrue on top of the balance that you owe, theoretically, beginning on April 16th, in theory of course, and that running until you finally take care of your obligation one way or another. So that’s why we always caution, hey, it’s an extension of time to file but just take a look at your situation and see where you are.
CAVANAUGH: We are taking your calls on last minute tax tips, last minute tax questions. 1-888-895-5727 is our number. And let’s take a call from Juan, calling from San Diego. Good morning, Juan. Welcome to These Days.
JUAN (Caller, San Diego): Good morning, everybody. Thank you for taking my call.
CAVANAUGH: You’re welcome.
JUAN: My question is this. I used to work for a small construction company that went under and this was last year, obviously, and I never received my W-2. Can I still file?
TULINO: You can. You can contact the IRS and we’ll help you get that information. At this point, you might want to take an extension because we’re three days away, and that way you have that extra six months to get all your paperwork together. But if they’re gone, and that’s happened, the IRS will help you with information to give to you so you can file your return.
CAVANAUGH: Well, this is a question that’s always occurred to me because in a case like Juan’s you file an extension but you don’t know whether or not you owe anything because you don’t know what your W-2s are going to say. So how do you pay before – by April 15th if you’re going to owe anything?
TULINO: Last year’s return is a good guide. Knowing where you are financially in your situation is a picture. A lot of folks have an idea. Another thing Juan can do is get to a computer and begin the software based on the information he does have, based on an estimate of the amount of money that would be shown on his W-2 because I’m sure, as most of us know, how much money we make per year and that can give you an idea. But other than that, the April 15th deadline if you – Juan, a lot of folks know, I know I’m getting a refund…
TULINO: …but to be sure, you run the programs a couple of ways and see where you are.
CAVANAUGH: Same thing…
CAVANAUGH: Yeah, go ahead, Brenda, I’m sorry.
VOET: Well, I was going to let you know that we have a free product available online and it’s called My FTB Account and if Juan’s employer did provide his W-2 information, we’ll have that available for him. Alls he needs to do is go to FTB.ca.gov and key in some information to identify who he is and if we received a W-2, we’ll have the information there. We also have how many estimated tax payments were made to the State of California and if you received any interest from California. So we may have the information available for Juan at FTB.ca.gov.
CAVANAUGH: And, Brenda, I just want to confirm, it’s the same thing for California, right? You can file for an extension but if you owe something you kind of have to pay by April 15th?
VOET: The only difference between state and federal is the state automatically gives you an extension. You don’t have to file any return, you don’t have to – or, any paper or request anything. If you don’t file by April 15th, we’re presuming that you’re going to wait until October 15th to…
VOET: …get the return in, so we make it kind of simple that way but, again, as Raphael was saying, April 15th is the day that the taxes need to be paid and you could get interest and penalties if it isn’t done by then.
TULINO: And what if you can’t pay? It’s a question I’ve been getting a lot. And what if you can’t pay, contact both agencies, the IRS and the FTB. I’m assuming the FTB has the same posture based on what I understand.
TULINO: Let us know where you are. We know a lot of taxpayers are struggling. We know a lot of folks are in a position, where, geez, you know, I can’t full pay this year. What do I do? Let the agency know. Send a payment in, something in, contact, be proactive. And that way we know the situation you’re in and can work with you as best for the agency and the individual. We want to be a help and not a hinderer. And we realize where the economy is, where we are, and that’s the posture we have.
CAVANAUGH: We’re taking your calls about your questions about filing your 2009 tax returns as the deadline closes in. And also we’re asking you why did you wait? If you want to give us a call with your questions, your comments, 1-888-895-5727, that’s 1-888-895-KPBS. Emma’s calling us from Chula Vista. And good morning, Emma. Welcome to These Days.
EMMA (Caller, Chula Vista): Thank you. Good morning. My question is I’m receiving unemployment and I’m having a bit of a difficulty figuring out if I do file or if I don’t.
CAVANAUGH: Oh, okay. Thank you.
TULINO: Well, based on the unemployment part of it, on the federal side, and I’ll let Brenda – I know the state doesn’t tax unemployment but Brenda can chime in. On the federal side, the first $2400 of unemployment per the Recovery Act of last year is exempt from tax. So for Emma and a lot of the folks out there who have received unemployment, you can know that the first $2400 provided to you, you don’t have to claim. Above that, you do on a 2009 tax return. Now to answer her question, I don’t know, depending on all of the facts and circumstances and other income Emma might have. She may not have any other income. In that case, she may not have to file a return at all. She may have just some income, she may be eligible for the earned income tax credit, I don’t know. So the answer, Emma, is I’m not quite sure unless I knew more about you and I suppose I wouldn’t want to know too much about you on the radio…
TULINO: …but it depends.
CAVANAUGH: I’m wondering, though, if Emma would go online and use one of the free online services, would that tell her, hey, you know, you don’t really have to file?
VOET: Yes, exactly. It would let her know that she had no tax liability and no return needed to be filed. But the other thing, too, is that if she did have any other income and did have any withholding, she will need to file a return for the state and for the federal government to request that refund of overpayment. So even if she had zero tax liability and she had $200 withheld, she needs to file a return to get that back.
TULINO: It’s a good point. There’s a lot of folks that don’t file because they don’t have to because there’s a certain threshold that says if you don’t make this much money, you don’t have to file a return at all. And for seniors, for example, if your income is just from Social Security, chances are you don’t have to file. But for those who have that – who aren’t seniors who might be eligible for what is known as earned income tax credit and some withholdings you might have from a part time job, you might find yourself in for a rather large refund. So it may behoove you to figure it out that way.
CAVANAUGH: Got you. 1-888-895-5727 is our number. And Afma is calling from Clairemont. Good morning, and welcome to These Days.
AFMA (Caller, Clairemont): Hi. Good morning. My question is simple. Actually, you just mentioned something about it. So I am a student and I am work as a part time and I am taking the minimum, 8.5, and like I already filed for my taxes but there is just like – kind of like a rumor I’m hearing from people around me that if I am earning this amount of money, like so long and so little, they’re saying that I do not have to file for taxes. So I just want to know how true is this? Thank you.
CAVANAUGH: Thank you. Thank you for calling, Amfa. So we touched on some of that but it certainly isn’t a problem if you do file if you don’t have to, right?
TULINO: No, and it depends if Afma’s a student being claimed by a parent on another return. In other words, she could be – her parents could be putting her on their return for her depending on her situation, and if she has income or not, other income or investment income, that kind of thing. So there is a crossover between Afma and her mom and dad maybe, or if she’s on her own. And it depends so much on what her situation is on…
TULINO: …whether she has to file or can file or should file herself.
CAVANAUGH: Let’s take another call. Sally’s calling us from South Park. Good morning, Sally. Welcome to These Days.
SALLY (Caller, South Park): Hi. Good morning.
CAVANAUGH: Good morning.
SALLY: Thank for taking my call. I have sort of two parts to this. One is a quick response to your question about why’d you put it off?
SALLY: I don’t know that I have a really great reason but we’ve actually fallen behind a couple of years in filing our taxes and probably the best response I can give you is, yeah, we had started a home-based business and we did do it the first year that we had started and then it just kind of got overwhelming with a lot of paperwork and a lot of other personal circumstances coming up and we just kind of let it fall behind. And we just didn’t get around to it until finally this year. We theoretically shouldn’t have a tax liability but we’re about to find out if that’s really the case. But my question is also, we really missed out—and this is where we’re really kicking ourselves, we think—on the tax credits that were offered up in I think it was those last two years of the Bush administration. And we’re wondering if maybe if there’s any chance we can get access to those still or are those gone?
TULINO: Well, okay, Sally, so can I ask you what credits you refer to?
SALLY: There was – oh, gosh, I forgot what they called them. They were like the – maybe they were like the stimulus ones. There was like a $600 for individuals or $1200 for maybe joint tax returns or something like that?
TULINO: Well, that came along a couple of years ago, the stimulus payments and that should’ve been sent to you if you were eligible. If you were not eligible then you didn’t receive a check. As for anything else, any deduction and credit, and I hate to go general on you here because I don’t really know specific what you’re saying, any deduction or credit that you’re able to take, you should. Several of them will sunset or expire after this year and Congress has come along the last several years and extended them by a year or two, depending on the tax credit, for example, I’ll throw one out for teachers out there. For 2009 at least still in play for the tax year 2009 is the teacher deduction. So if you spend money out of your own pocket for expenses you pay up to $250.00 in the classroom, you can take this deduction for 2009, up through 2009, but it hasn’t been renewed for 2010. So the short answer there in that example is, depends on what Congress does for a lot of these deductions and credits but the general answer again is you should take advantage of them if you can, of course, if your situation calls for it, no question.
VOET: And you can also…
VOET: …file an amended return if you find out you…
VOET: …qualified for a credit or a deduction that you didn’t take…
VOET: …as long as it didn’t have to be claimed on the original return as filed. So there’s always the amended return option where you can go back and request a refund by substantiating that you were entitled to that credit but did not take it on your original return.
TULINO: Right, and that’s generally three years. Thanks, Brenda. Three years, you can go back.
SALLY: Okay, thank you. That’s helpful.
CAVANAUGH: I’m speaking with Raphael Tulino. He is an IRS spokesman. And Brenda Voet is spokesperson for the California Franchise Tax Board. We’re talking about last minute tax tips and taking your last minute tax questions at 1-888-895-5727. And I hope Sally will forgive me if I say she sounded a little confused by this whole thing. Probably starting the business and so forth was a little bit more tax problem than she was willing – than she was able to cope with. I’m wondering, Raphael, when is a point where, you know, you can get helpful assistance online and so forth, but when is the point where you should say to yourself, you know, I really need some guidance on this, I need to really take this to a tax preparer?
TULINO: A couple things. For those who have businesses, sole proprietors, partnerships and the such, you find about 80% of all those businesses have outsourced that particular component of their business taxes and the such. That’s the general rule, 4 out of 5. The other thing is, we have a lot of—a lot of—and I’m sure the Franchise Tax Board does, too, with the EDD and the BOE, those are the two other state agencies that handle taxes. There’s basically four 3-letter acronyms you want to know about if you’re in business here in California, IRS being one. But all of the information we have on IRS.gov is just a slew of it related to small business owners. We have free workshops that are out in the community where we partner with the state to provide that outreach and education. Because when you start a business, it’s going to behoove you to understand all the responsibilities that come from opening a business and taxes, all the different taxes that are there are obviously a big part of that. So the outreach education is there and, certainly, Sally would benefit from all the different things we have. IRS.gov has a slew of things and things you can download and, as I say, free classes. And I’m sure Brenda can provide some as well from the state level.
CAVANAUGH: And yet, Brenda, as Raphael says, it sounds like most businesses do sort of outsource their tax prep.
VOET: Yeah, well, it’s really important because if a business is not filing the state or federal return and not paying the taxes that are due, they can become suspended and what that means is that legally they should not be conducting business in the State of California. So we don’t want to see that happen because somebody’s overwhelmed with the amount of, you know, paperwork and accounting that needs to be done. And if it does appear that it’s getting overwhelming, the best thing for them to do is to seek out good professional advice and get that in because they want to stay current with these things so that they can continue to practice business and have all the benefits and protections that they should be getting as a corporation.
CAVANAUGH: A lot of people want to join our conversation. We have to take a short break but before we do, I want to ask a quick question. How exactly do people file an extension?
TULINO: Easy. Paper form 4868, you can download at IRS.gov, takes about three minutes to fill it out and mail it in by April 15th and you’re done. We have an automatic – basically, an automatic answer for you. You just have to request it. The State of California just assumes. We don’t assume but it’s easy. All you have to do is let us know basically or electronically in your software.
CAVANAUGH: So you can submit it either electronically…
CAVANAUGH: …or mail it.
CAVANAUGH: Okay, terrific. We’re taking your calls at 1-888-895-5727. We have to take a short break and when we return, we’ll be answering more of your tax questions here on These Days on KPBS.
CAVANAUGH: I'm Maureen Cavanaugh. You're listening to These Days on KPBS. My guests are Raphael Tulino. He’s IRS spokesperson for Southern California and Nevada. And Brenda Voet, spokesperson for the California Franchise Tax Board. And we’re taking your calls and questions about last minute tax questions. We’ve got tips for you. Or if you’d like to tell us why it is you waited until just a couple of days before the deadline, 1-888-895-5727. And let’s start right off with a phone call from Kelly in Escondido. Good morning, Kelly. Welcome to These Days.
KELLY (Caller, Escondido): Good morning. Good morning. Basically, my question evolves around the mortgage crisis, if you want to call it a crisis, wherein a lot of people are getting loans or mortgages forgiven partially and interest owed. And to take a hypothetical situation, let’s say you had a house worth $400,000 with $20,000 or $30,000 of back interest due and let’s say the interest was forgiven and a settlement reduced the mortgage by 50% to $200,000, what are the tax consequences?
TULINO: Well, I’ll let Brenda chime in first because California provided some good news last week. Wasn’t it last Thursday or Friday, Brenda, on that?
VOET: Well, we’re anticipating the governor signing…
TULINO: Oh, he has to sign it? Okay.
VOET: Yeah, SB-401, which will bring us into conformity with the federal law. And, basically, what had happened before is it depended on what kind of note you entered into with your mortgage. If you had non-recourse that meant they could only take the house if you were foreclosed on, if you had recourse they could take all the other assets. When it was a recourse note, the State of California was requiring you to pay tax on that amount but if SB-401 gets signed here in the next few days as anticipated, we’ll be in conformity with the federal law and what the federal government and the State of California are going to be doing is when you’re forgiven debt and it’s on your principle residence and it doesn’t exceed a certain threshold, you don’t have to include that as income and be taxed on it. So most people who are experiencing this should benefit from the conformity that we have to the federal law.
TULINO: And I’ll expand on the federal law real quick. It has to be a home that is secured by the loan of up to $2 million and basically in his example, Kelly, that $200.00 that is forgiven to you from the lender for the Mortgage Debt Relief Act of 2007, which is in play through 2012 now, basically says that cancellation of debt income is generally not taxable at the federal level and at the state level, if this happens here, if it’s signed so basically your – that cancellation of debt, that phantom income or whatever you want to call it that I’ve heard that would be there for you, is not taxed and you don’t get the 1099-C as it is on the federal side to pay tax on that, generally speaking per this law. Now there’s more information on the IRS website on that because there’s a lot of things you want to read about. There’s a good web page. Just type in ‘mortgage forgiveness’ to IRS.gov and take a look at all the information there. Publication 4681 is a good publication that came into play a couple years ago based on where we are in the economy and the such, and take a look at that and just read through there, Kelly, to make sure you understand how it applies to you.
CAVANAUGH: And that would apply to both a loan modification and a short sale?
TULINO: A short sale and a foreclosure. Now the loan mod is something, at least off the top of my brain, I’m not so familiar with…
TULINO: …but a foreclosure when you walk away…
TULINO: …and/or the short sale is what I would refer to more than the loan mod.
CAVANAUGH: Okay, let’s take another call. Russ is calling us from San Diego. Good morning, Russ, and welcome to These Days.
RUSS (Caller, San Diego): Good morning. Thanks for taking my call. My situation is kind of a bummer. I – My wife and I both are unemployed so 2009 we show – I mean, I did a project for someone so my income was like $800.00 for the entire year, which is embarrassing to say. But we did launch a business from our home over the course of 2009. It showed no income at the startup, which is okay, but the bottom line is we’ve got two children and, you know, the tax credits that go along with them, of course. In addition to being great kids, they’re also great tax credits. But also it seems as though I’ve got a lot of business expenses that has no, you know, income to set against it. Is there any way—finally, to my question—is there any way I can enjoy those tax credits in 2010 for, you know, a year from now? So…
CAVANAUGH: Thank you.
RUSS: …if you don’t mind, I’ll take your answer off the air.
CAVANAUGH: Thank you, Russ.
TULINO: Yes, so for, Russ, I would say, generally speaking, you should file a return because you may benefit from several things. I mentioned an earned income tax credit. You might fall in for that based on your income level. You also – you’re probably should file a schedule C for the business information or a CEZ based on the expenses and the such you had. Yes, your two children may get you benefits that you would realize in the tax code. The other answer is, just generally speaking, a tax credit or deduction is very rare that you’re able to take it in a year you don’t incur it. So if ’09 is the year you incur a credited deduction, that is the year from which you should take the credited deduction, so you might find, Russ, that you should file the extension through October but in 2010, that’s going to play into 2011, generally, so I hope that answers some of…
CAVANAUGH: And, Brenda, is there any reason that Russ should file a California return?
VOET: Just based on the facts he said, no. We don’t tax the unemployment and if he only had $800 in income, there’s not going to be any tax liability and there’s no refundable credits that are available to him right now. So it doesn’t appear that he should have to file a state return.
TULINO: But, Russ, take advantage of the ITC and it could get you a nice substantial refund on top of the income – that few hundred dollars of income. So, consider it.
CAVANAUGH: Before we take another call, I wanted to ask a question about ‘making work pay’ because when I was filing out my taxes, I was a little confused with that additional money that showed up on the rundown of things while I was making out the form. Now the ‘making work pay’ amount doesn’t add necessarily to your incomes, does it?
TULINO: No. ‘Making work pay’ was one of the major provisions that came along in the Recovery Act. And just a few seconds of background for your listeners out there, it gave you $400.00 up to single, $800 married filing joint, in a tax credit that was administered as opposed to getting one big check like you did a couple of years ago, through your employer using a withholding table that gave you a few more dollars in each paycheck. So everybody say, oh, great, I got an extra fifteen dollars or whatever. Up to $400 or $800. That’s also happening in 2010, so you already got the credit, basically, last year. Through your withholding, you had a few more dollars in your pocket. When you come to your return here in 2010 for the ’09 year, you need to let the federal government know that you were eligible for it. Your software will tell you and you need to reconcile that so they know. Also, if you didn’t take advantage of it, let’s say you were self-employed and maybe you didn’t adjust your quarterlies, then you could take advantage of it then. It might boost your refund.
TULINO: So it isn’t the most set in stone kind of thing, it didn’t come so cut and dried like the stimulus, but still it’s there and you might want to account for it. And on top of that, I might just say, you might consider ‘making work pay’ and everything else because the average refund up over $3000 to do some tax planning here in 2010 while you’re doing your return or thinking about it to bring the tax you pay closer to what you owe.
CAVANAUGH: I want to ask you a little bit more about that but first I want to take another call. Michael is calling us from Encinitas. Good morning, Michael. Welcome to These Days.
MICHAEL (Caller, Encinitas): Oh, good morning. Thanks for taking my call.
CAVANAUGH: Yes. How can we help you?
MICHAEL: Yes, I was wondering how you report a sale of a stock within an IRA account? Since I don’t want it to look like it’s decrease – I mean, the value of the IRA has decreased and I don’t want it to look like a withdrawal so I’m wondering how you report that or if you do report it until you close the IRA or…
TULINO: You don’t. You don’t report it. It’s within an IRA. What you report from an IRA generally is the distributions you take from it. So any movement you make inside it generally is not needed to be reported.
CAVANAUGH: Okay, short and sweet. Thank you, Michael. Rob is calling us from San Diego. Good morning, Rob. Welcome to These Days.
ROB (Caller, San Diego): Hi. I’m calling to find out what the possible outcome can be for not having ever filed a return. I have never made enough that I should’ve – I should’ve always received money back but I’ve never filed a return.
TULINO: The only thing you’re doing, Rob, is if you’ve never been required to and maybe you should’ve, you’re just leaving money on the table that should come to you from a refund in some way, shape or form. So nothing happening unless you’re – basically, you’re missing out on money that could come your way, I suppose that’s the quick answer off the top.
CAVANAUGH: Rob, I wonder why? Why have you never filed a tax? Is it too confusing or is it just a time-waster? Why?
ROB: Nah, it was always something I never knew that I was supposed to do, and I don’t know.
TULINO: You – Well, at least on the federal side, if you had owed for some way, shape or form and hadn’t filed, you would probably know it because a letter might come to you in the mail. But if that’s not the case, then what you’re doing basically, to be redundant, is leaving money on the table.
CAVANAUGH: And, Brenda, what kind of money is Rob potentially leaving on the table here in California?
VOET: Well, any of the withholding that he had on his wages. If he didn’t have a filing requirement, we get to keep all the withholding money until they – he submits a return and says, hey, I’d like a refund back. If he only had one employer last year, he might want to either try to see if we have a ready return available for him or try the Cal File program and go ahead and start filing and getting that money back.
CAVANAUGH: Suppose Rob decided, you know, okay, I’m going to file last five years, I want to file backwards, retroactively, and get my refunds back. Could he do that?
TULINO: Three years.
CAVANAUGH: Three years.
TULINO: So basically we come out with a release, a news release, right around February and throw our hands up in the air and wave as much as we can, hey, you have until April 15th, 2010 to file for 2006 tax year refunds…
TULINO: …that are sitting there waiting for you as a taxpayer. But per the law, you have three years in order to file and get it, otherwise it becomes property of the Treasury. So if you haven’t filed, like Rob, you can go back, well, all the way through Thursday to get ’06, ’07, ’08. After Thursday it’d be ’07 and ’08 and then ’09. But to get that money and it could be a substantial refund through earned income credit or something like that that you have three years to go back so it might behoove you.
VOET: And you’ve got four years to go back for the state…
TULINO: There you go, so…
VOET: …so he could have four years of refunds waiting for him.
CAVANAUGH: That’s interesting. Okay. Let’s hear from Mary in Hillcrest. Good morning, Mary. Welcome to These Days. Hi, Mary, are you there?
MARY (Caller, Hillcrest): Hi.
MARY: Good morning, thank you for taking my call.
CAVANAUGH: You’re welcome.
MARY: Okay, I am a part-time student. And last year – First of all, I don’t have a job. However, last year I did an internship at UCLA and I received $5,500, which allows me $6,000. My question is should I file income taxes or not given that that was pretty much my only source of income. And I also got a private scholarship from a private organization for $2,000. Should I be filing taxes for this?
TULINO: It depends. If your parents file and claim you as a dependent?
MARY: They do not.
TULINO: They do not? Then you – I think the threshold, off the top, Mary, you’d want to check this, is $5,700. Then you have to file your own. Or and/or investment income a certain amount above. The scholarship I don’t think comes into play but, off the top, you may want to file because I’m not quite sure of that $5,700 threshold right off the top of my head in terms of that depending on – for you, as a student. Lots of things come into play, just like the other person who called. I forgot her name, I think it was Afma.
TULINO: Same kind of thing, when you have students and parents and certain amount of incomes and such, it depends on more than what I’m hearing for her to maybe have to file that return or not.
CAVANAUGH: Gotcha. Thank you. Thank you for calling, Mary. Let’s squeeze in one last call. Laura’s calling us from Rancho Bernardo. Good morning, Laura. Welcome to These Days. Laura, are you with us? Okay. We’ll just move on. And I wanted to move on, Raphael to talk a little bit about 2010, 2010 taxes. You said that, you know, while we’re thinking about getting in our 2009 return, there are things we should be thinking about right now about the way we use our finances, the kind of credits we think about for next year’s taxes.
TULINO: Well, the average refund being up over $3,000, a lot of folks might have the posture that, hey, I know I’m getting a big refund and that’s a good thing. But it’s your money you’re getting the government – or giving the government to hold for you. In this case, it’s going to be until the spring of 2011, so if you adjust things, the IRS has a good little withholding calculator on IRS.gov. Go check out the withholding calculator, punch in and follow along your situation. It’ll give you a pretty good idea of what you want to withhold or what you want to pay based on your situation, children or not, rental income or not, all those different things to bring it as close to zero as you can. Also considering the making work pay credit is still in play here for 2010 as well. So the whole point being you don’t have to be so overwithheld. You don’t have to have – Treasury last year sent about $320 billion, with a ‘b’, back to taxpayers. You should pay what you pay and that’s it. No more, no less. And part of a sound financial picture, it can be argued, is making some planning notes while you’re doing return here for last year.
CAVANAUGH: But some people, myself included, like…
TULINO: Oh, yeah.
CAVANAUGH: …to get a refund.
TULINO: In that case, no argument. I’m just saying that…
TULINO: …if you have that money in your pocket, why, real quick. Let’s say you’re carrying a credit card balance and that could be 20 to 25%, whatever that is. If you have that money at, let’s say, $300 bucks a month, something like that, $200 a month, that could be going to knocking down that interest as opposed to giving it to the government then you’re using your money more wisely. I’m not – As a spokesman for the agency, I’m not saying that’s what you should do…
TULINO: …it’s just something to consider…
TULINO: …and look at as part of your financial picture.
CAVANAUGH: And, Brenda, I wanted to mention, you know, with California being in such terrible financial shape, some people have been concerned about whether or not they actually will get their refunds mailed to them. Have there been any problems with that?
VOET: There have been no problems this year. The State Controller’s told us that there’s plenty of cash available to issue the refunds. And if most people want to get it quick, they should do it into a direct deposit right into their account. That way it doesn’t take the six to eight weeks for us to issue a paper check and it to get sent through the mail and if they’ve moved then they won’t get it unless they tell us the address has changed. So direct deposit is definitely the way to go. And the other tax tip that I’d give is while you’re planning this, is a lot of people miss a lot of deductions because they lose the paperwork. The easiest thing to do is get a shoebox, get an envelope, get a bucket, something and throughout the year just put all the potential tax documents in one place and you can have that available. And then that’s most of the time that people are spending and procrastinating is because they don’t know where half their documents are. So if you can get just one location, put all the documents there, you’ve got them. It can make the job of filing tax returns that much simpler the next year.
TULINO: Two well said points that I would concur with, so…
CAVANAUGH: We are just plumb out of time. We’re up to our own last minutes here. I want to thank Brenda Voet, spokesperson for the California Franchise Tax Board, and Raphael Tulino, IRS spokesperson for Southern California and Nevada. And thanks to everyone who called. If you’d like to post online, KPBS.org/thesedays. You’ve been listening to These Days right here on KPBS.
To view PDF documents, Download Acrobat Reader.