Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, April 16, 1990 TAG: 9004140277
SECTION: EXTRA PAGE: E-1 EDITION: METRO
SOURCE: TRACY WIMMER STAFF WRITER
DATELINE: LENGTH: Long
Life becomes a mad search for W-2s and 1099s, for credit-card receipts and business travel logs.
Parents begin to grumble. Colleagues begin to complain. And every late talk-show host has at least one lame financial joke that only makes matters worse.
It's tax time, folks. You have until midnight tonight to mail your return to the Internal Revenue Service.
Remember: The IRS is here to help you. (How else could we afford those Stealth bombers?)
Whether you're pondering line 52 on the long form or gloating because you got your refund six weeks ago, we trust you'll enjoy the following tax trivia:
Why was the IRS created?
The Internal Revenue Office was established by the United States government in 1862 to collect funds to pay for the Civil War.
The federal income tax system began in 1913. In its first full year of operation, total income tax collected was only $41 million. Last year, the IRS collected over $935 billion.
In 1943, the IRS adopted the pay-as-you-go plan in which employers automatically deducted money from employee's paychecks and sent it directly to the IRS.
Why is the form numbered 1040?
That just happened to be the next number that was to be assigned on a government document.
Why is April 15 tax day?
Originally, tax day was March 1. It was moved April 15 in 1954.
Why do we get an extra day this year?
Whenever April 15 falls on a Saturday or Sunday, it's shifted to the first business day afterwards, generally Monday. The good news:
The IRS predicts that its outdated tax-processing system may overload as early as 1992. The structure for tax return processing systems dates back to the early '60s.
The bad news:
They're working on a new system. The agency established the Tax System Redesign modernization program in 1982, although there is still no solution to the processing systems' capacity problems.
Electronic filing:
Last year over a million taxpayers shaved at least three weeks off the time it normally takes to get a federal tax refund and decreased the likelihood of error in their tax returns by filing electronically.
This year for the first time, electronic filing of tax was offered nationwide for those who expect to receive a federal tax refund.
These returns are transmitted over telephone 6 1 TAXES Taxes lines directly to IRS computers by tax practitioners, financial institutions and others who have been accepted in the program by the IRS.
Top 10 Taxpayer Errors:
1) Wrong taxpayer identification number (Social Security number or Employer Identification number) entered.
2) Did not enter standard deduction.
3) Did not claim earned credit when entitled.
4) Name entered on wrong line.
5) Wrong name entered (following a change in marital status)
6) Wrong entry for estimated payments.
7) Did not enter total tax.
8) Math error in computing refund.
9) Didn't check dependency status indicator box.
10) Second return filed without notifying IRS.
Who got refunds last year?
Almost 75 million taxpayers received 1988 tax refunds totaling $65.5 billion - an average of $877 per taxpayer.
What was the largest refund ever?
Sorry. The IRS does not keep track of refund amounts - so they say - unless the return cannot be delivered.
Refund checks that haven't been cashed:
More than $40 million in 1988 tax refund checks are waiting to be claimed by about 72,000 taxpayers nationwide. Many of these individual income tax refunds couldn't be delivered because of a wrong address or because the taxpayer moved and failed to leave a forwarding address.
In Virginia, more than $760,000 in tax refund checks are yet to be claimed by about 1,600 Virginians. The checks range in amounts from $1 to $19,600.
Who gets the dough?
When a refund check is returned to the IRS, it is redeposited and credit is given to the taxpayer's account. If the money is not claimed within seven years, the refund is deposited in the general treasury fund for the federal government.
The only way the taxpayer can get it back will be by proving to the IRS through extended documentation that the money really belongs to him.
Will I be audited?
Possibly. Here are some red flags the IRS looks for:
In general, the higher your income, the greater the likelihood you'll be audited. If you make less than $25,000 a year and file an uncomplicated return, your chance of being audited is less than 1 in 100.
The odds are about 2 in 100 if your income is $50,00 or more.
How does the IRS pick people to audit?
The IRS uses a computer program to select most of the returns it examines. It searches returns for certain credits, deductions and exemptions that the IRS has established as abnormal for taxpayers at a certain income level.
Your return may also be chosen if you received a large portion of your income in cash; if you have invested in a tax shelter; if you claim certain deductions, such as those for home, office or business travel and entertainment expenses; or if your tax preparer is known by the IRS to take questionable tax deductions.
When will I hear the bad news?
The IRS usually begins sending out audit notices four or five months after the April tax filing deadline. If the IRS feels you have understated your income by more than 25 percent, it has up to six years to schedule an audit.
There is no time limit if the IRS suspects fraud.
If it happens . . .
Consult your tax preparer about strategy if you didn't complete your own return.
Show the auditor only relevant receipts and other documents.
Stay cool. It doesn't pay to miff an IRS auditor. Ultimately, the agents have a lot of discretion in interpreting tax law.
by CNB