Kathleen R "Billie" Lovett CPA AC
P. O. Box 642   Reedsville, WV  26547
Tel: 304-864-6618 Fax: 304-864-3744
e-mail me

PERSONAL TAX FAQs

WHAT IF I CAN'T PAY MY INCOME TAX BALANCE DUE?

WHERE DO I MAIL MY RETURN?

INDEPENDENT CONTRACTOR OR EMPLOYEE?

WHAT IS MY FILING STATUS?

CAN YOU FILE AS MARRIED IF YOU JUST LIVE TOGETHER?

WHO MUST FILE?

WHAT IS AN INJURED SPOUSE?

WHAT IS ITEMIZING AND IS IT BENEFICIAL TO ME?

DO I HAVE TO REPORT ALL INTEREST AND DIVIDEND INCOME?

   BUSINESS TAX FAQs

WHAT IS A 941 DEPOSIT AND WHEN IS IT DUE?

WHAT IS A 940 DEPOSIT AND WHEN IS IT DUE?

WHAT ABOUT TIPPED EMPLOYEES?

	Q. WHAT IF I CAN'T PAY MY INCOME TAX BALANCE DUE?
	For various reasons, you may not be able to pay your federal individual income tax in full. Do not delay filing your tax return because you are unable to pay in full. If your tax return, or an extension, is not filed on time, you may have to pay a "failure-to-file" penalty, in addition to a "failure-to-pay" penalty, and interest.  If you can't pay in full, file your tax return on time and attach either a completed Form 9465, Installment Agreement Request, or your own written request for a payment plan, to the front of your return. (Specify the amount you can pay and the day you wish to make your payment each month.) You should pay as much as you can with the return, (to lower the interest and penalty charges). If you have already filed your return and have received a notice, or bill, requesting payment, you may attach a completed Form 9465 or your own request to the notice and mail it in the envelope provided. The IRS will let you know, usually within 30 - 45 days, whether your request is approved, denied, or if additional information is needed.  If approved, a one-time user fee of $43 will be charged. Before requesting an installment agreement from the IRS, you should consider other less costly alternatives, such as a bank loan. The interest rate a bank charges may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. Remember, penalties and interest will be added to the balance due even if an installment agreement is approved. It is important not to ignore an IRS notice. If you neglect or refuse to make payment or other arrangements to satisfy your obligation in full, the IRS may take enforced collection action (filing a notice of federal tax lien, serving a notice of levy, or offset of a tax refund, or seizing your property). TOP
	Q. WHERE DO I MAIL MY RETURN?
	FOR FEDERAL RETURNS... The first line of the address should be:   Internal Revenue Service If you live in WEST VIRGINIA ... and you are filing a Form ... and you ARE NOT ENCLOSING A PAYMENT, then use this address ... and you ARE ENCLOSING A PAYMENT, then use this address ... 1040 Austin, TX 73301-0002 Austin, TX 73301-0102 1040A Austin, TX 73301-0015 Austin, TX 73301-0115 1040EZ Austin, TX 73301-0014 Austin, TX 73301-0114 1040-ES N/A P.O. Box 660406 Austin, TX 75266-0406 4868 Austin, TX 73301 P.O. Box 660575 Austin, TX 75266-0575 WEST VIRGINIA INCOME TAX FORMS SHOULD BE MAILED TO: West Virginia State Tax Department P O Box 1071 Charleston, WV 25324-1071 WEST VIRGINIA ESTIMATED TAX PAYMENTS SHOULD BE MAILED TO: West Virginia State Tax Department Internal Auditing Division - EST P O Box 342 Charleston, WV 25322-0342 TOP
	Q. INDEPENDENT CONTRACTOR OR EMPLOYEE?
	A. Independent Contractor or Employee The tax law covering independent contractors is very complicated. Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. It is critical that you, the employer, correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. Who is An Independent Contractor? A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor and not the means and methods of accomplishing the result. Example: Steve Smith, the owner of a multi-service convenience store, has a service bay at his location. Steve rents the service bay to Joe Dell, a mechanic. Steve and Joe have a written contract, which provides that Joe is considered to be an independent contractor and is required to pay Federal and state taxes. Joe Dell pays all operating expenses including insurance coverage, equipment, tools, and maintenance. Joe is an independent contractor. Who is An Employee? A general rule is that anyone who performs services for you is your employee if you can control what will be done and how it will be done. Example: Donna Lee is a mechanic employed on a full-time basis by Bob Blue, a service station owner. She works 6 days a week and is on duty in Bob's garage on certain assigned days and times. She repairs and performs State Inspections on vehicles, but her work is subject to the office manager's approval. Bob also pays the cost of health insurance and group-term life insurance for Donna. Donna is an employee of Bob Blue. For additional information on how to determine whether an individual providing services is an independent contractor or an employee, see page 5 Publication 15-A, Employer's Supplemental Tax Guide (PDF). For additional information regarding Independent Contractor or Employee see IRS Publication 1779 (PDF)
	Q. WHAT IS MY FILING STATUS?
	Your marital status on the last day of the year determines your status for the entire year. There are five filing statuses: If you are unmarried, divorced, or legally separated according to your state law from your spouse under a separate maintenance decree and you do not qualify for another filing status, your filing status is SINGLE Generally, to qualify for HEAD OF HOUSEHOLD status, you must be unmarried and have provided more than half the cost of keeping up a home that was the main home for yourself and a qualifying relative for more than one half of the year. You may also qualify if you are married, but have not lived with your spouse at any time during the last six months of the tax year and you provided more than half the cost of keeping up a home for you and your dependent child for more than one half of the year. If you are married, you and your spouse may file as MARRIED FILING JOINT or MARRIED FILING SEPARATE. If your spouse died in 2004 and you have not re-married during the remaining part of the year, you may still file a joint return with your deceased spouse. This is the last year for which you may file a joint return with that spouse. If your spouse died during 2002 or 2003, you may be able to file as a QUALIFYING WIDOW OR WIDOWER. To do this, you must meet all four of the following tests: 1. You were entitled to file a joint return with your spouse in the year he or she died. It does not matter whether you actually filed a joint return. 2. You did not remarry before the end of 2004. 3. You have a child, stepchild, adopted child, or foster child who qualified as your dependent for the year 4. You paid more than half the cost of keeping up your home, which was the main home of that child, for the whole year. TOP
	Q. CAN YOU FILE AS MARRIED IF YOU JUST LIVE TOGETHER?
	You are considered married if you are living together in a common law marriage that is recognized in the state where you now live or in the state where the common law marriage began.  If you are considered married, then you may file as married filing jointly. If you are not considered married, then you would have to file as single or head of household. In order to claim your girlfriend/boyfriend as a dependent, your relationship must not be in violation of local law (see WV Code § 61-8-4 Lewd and lascivious cohabitation and conduct.)  §61-8-4. Lewd and lascivious cohabitation and conduct; penalty; when persons presumed to be unmarried.      If any persons, not married to each other, lewdly and lasciviously associate and cohabit together, or, whether married or not, be guilty of open or gross lewdness and lasciviousness, they shall be guilty of a misdemeanor, and, upon conviction, shall be fined not less than fifty dollars, and may, in the discretion of the court, be imprisoned not exceeding six months, and, upon a repetition of the offense, they shall, upon conviction, be confined in jail not less than six nor more than twelve months.  In prosecutions for adultery and fornication, and for lewdly and lasciviously cohabiting together, the persons named in the indictment shall be presumed to be unmarried persons in the absence of proof to the contrary.    your girlfriend/boyfriend must have lived with you for the entire year, and the following 5 dependency exemption tests must be met: Member of household or relationship test.  Citizenship test.  Joint return test.  Gross income test.  Support test. TOP
	Q. WHO MUST FILE?
	Whether you have to file a tax return for 2008, depends on your filing status, age, and gross income. Listed below are the filing status, age, and amount of gross income that would require you to file.   FILING STATUS AGE GROSS INCOME SINGLE UNDER 65 AT LEAST $  SINGLE 65 OR OVER AT LEAST $  MARRIED FILING JOINT BOTH UNDER 65 AT LEAST $ MARRIED FILING JOINT ONE OVER 65 AT LEAST $ MARRIED FILING JOINT BOTH OVER 65 AT LEAST $ MARRIED FILING SEPARATE AT LEAST $ HEAD OF HOUSEHOLD UNDER 65 AT LEAST $ HEAD OF HOUSEHOLD 65 OR OVER AT LEAST $ QUALIFYING WIDOW/WIDOWER UNDER 65 AT LEAST $ QUALIFYING WIDOW/WIDOWER 65 OR OVER AT LEAST $ Gross income includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. Even though your gross income may be less than that stated above, there are several other factors that could require you to file a tax return. Please consult a tax advisor. You must file a return if you are self-employed and had net earnings from self-employment of $400 or more. Net earnings from self-employment is your total self-employment income less the expenses paid in operating your trade or business, multiplied by 92.35%.
	Q. WHAT IS AN INJURED SPOUSE?
	You are an injured spouse if you file a  joint return and all or part of your share of the overpayment was, or is expected to be offset against your spouse's past-due Federal tax debt, past-due child support, or past-due spousal support, past-due non tax Federal debt, such as a student loan, or state income tax debt.  If this situation applies to you, file Form 8379, Injured Spouse Claim and Allocation, to recover your share of the joint refund. To be considered an injured spouse, you must have received income (such as wages, interest, etc.) have made tax payments (such as withholding), report the income and tax payments on the joint return, and have a refund due, all or part of which was, or is expected to be, applied against your spouse's past-due amount. The processing of your return by the IRS and the WV Tax Department will take longer than the regular amount of time, but it may be worth it to you in the long run. TOP
	Q. WHAT IS ITEMIZING AND IS IT BENEFICIAL TO ME?
	Itemizing is listing on Form 1040, SCHEDULE A all amounts you paid during the year for certain items such as medical and dental care, state and local income taxes, real estate taxes, home mortgage interest, and gifts to charity. When you complete your list, you total the amount spent and compare the total with your standard deduction. The larger of the two deductions, standard or itemized, will be the deduction to choose, since it will lower the amount of federal income tax for which you will be liable. Itemized deductions are certain expenses that you can use to lower your taxes. For 2007, the categories of itemized deductions are:  Medical and dental expenses  State and local taxes  Home mortgage and investment interest Charitable contributions Casualty and theft losses Job expenses Miscellaneous deductions Real estate and personal property taxes. Generally, you must decide whether to itemize or to use the standard deduction. It is usually to your benefit to itemize if your allowable itemized deductions are more than your standard deduction. Some taxpayers should itemize because they do not qualify for the standard deduction. The standard deduction varies according to your filing status, age, whether you are blind, and whether you can be claimed as a dependent on another taxpayer's return. The basic standard deductions for 2007 are as follows: Single - $5,350 Head of Household - $7,850 Married, filing a joint return - $10,700 Married, filing a separate return - $5,350 Qualifying Widow or Widower with dependent child - $10,700 An additional amount of standard deduction will be allowed if: a) you or your spouse turn 65 on or before January 2, 2007 $1,050 b) you're single and turn 65 on or before January 2, 2007 $1,300  c) you or your spouse are blind (Dr.'s certified statement is required for first-timers) $1,050 d) you're single & blind (Dr.'s certified statement is required for first-timers) $1,300 If you can be claimed as a dependent on another person's return, your standard deduction may be limited. When a married couple files separate returns and one spouse can and does itemize deductions, the other spouse may not claim the standard deduction and must also itemize. Some taxpayers are not eligible for the standard deduction. They include nonresident aliens, dual-status aliens, and individuals who file returns for periods of less than 12 months. You may be subject to a limit on some of your itemized deductions. For 2007, this limit applies if your adjusted gross income is more than $156,400, or $78,200 if you are married filing separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses, gambling losses, and investment interest. TOP
	Q. DO I HAVE TO REPORT ALL INTEREST AND DIVIDEND INCOME?
	All interest and dividend income is reportable, even if you did not receive Form 1099-INT or Form 1099-DIV. Forms 1099-INT and 1099-DIV are required to be issued if the amount of interest income or dividend income exceeds $10.00 annually. Interest income is required to reported in detail on  Schedule 1 (if filing Form 1040-A) or on Schedule B (if filing Form 1040) if the total amount  is in excess of $2,500.00 Dividend income is required to reported in detail on  Schedule 1 (if filing Form 1040-A) or on  Schedule B (if filing Form 1040)  if the total amount  is in excess of $2,500.00 TOP
	Q. WHEN IS MY 941 DEPOSIT DUE?
	Form 941 – Deposit Requirements The 941 tax liability on a Form 941, Employer's Quarterly Federal Tax Return includes your employees' withheld Federal income tax, social security tax, Medicare tax, and your share of social security and Medicare tax. If you accumulate a liability for these taxes of $2,500 or more per quarter, you must deposit this amount by making payment to an authorized financial institution. Deposits are made either by the Electronic Federal Tax Payment System (EFTPS), or by using a Form 8109, Federal Tax Deposit Coupon, which must accompany your payment. If you use the coupon, it is very important that it show the correct employer identification number, name, and type of tax and tax period; as this information is used by the IRS to credit your account. Your check or money order should be made payable to the financial institution where you make your deposit, not to the IRS. New employers who apply for an employer identification number are sent a federal tax deposit (FTD) coupon book. The IRS is supposed to keep track of the number of coupons you use and should automatically send you additional FTD coupons when you need them. If necessary, the IRS can assist you in completing blank coupons, which can be used to make a deposit if you do not have preprinted form 8109. For more information, call the IRS at 1–800–829–4933. You must deposit the Form 941 taxes based on either a monthly or semiweekly deposit schedule. Which schedule you use for the calendar year 2008 is based on the amount of taxes you reported on Form 941 for the four calendar–quarters from July 1, 2006, through June 30, 2007. This is called the look-back period. If you reported taxes of $50,000 or less on Form 941 for the look-back period, you are a monthly schedule depositor, and generally must deposit each month's Form 941 taxes on or before the 15th day of the following month. For example, taxes for January must be deposited by February 15th. If you reported taxes of more than $50,000 for the lookback period, you are a semiweekly schedule depositor, and generally deposit due dates will fall on Wednesday or Friday, based on the following schedule: The employment taxes on payments made to your employees on Wednesday, Thursday, and/or Friday, must be deposited by the following Wednesday. The taxes on payments made to your employees on Saturday, Sunday, Monday, and/or Tuesday, must be deposited by the following Friday. You always have at least 3 banking days to make a deposit. If any of the 3 weekdays after the end of the semiweekly period is a holiday on which banks are closed, you have one additional day to deposit. Whether you are a monthly depositor or a semiweekly schedule depositor, if you accumulate taxes of $100,000 or more on any day during a deposit period, you must deposit them on the next banking day. If this happens, you become a semiweekly depositor for the remainder of the calendar year and for the following calendar year. If the deposit due date falls on a Saturday, Sunday, or legal holiday, the deposit will be considered timely if made by the next banking day. If you are a new employer, your taxes in the lookback period are considered to be zero. Therefore, in the first year of business you are a monthly schedule depositor unless the $100,000 next day deposit rule applies. There are severe penalties for depositing late, or for mailing payments directly to IRS that are required to be deposited. You must make electronic deposits for all depository tax liabilities for the year 2008 if you made more than $200,000 in aggregate deposits for all types of Federal depository taxes in 2007 or if you were required to make electronic deposits in 2007. If you are required to make electronic deposits through EFTPS and fail to do so or make your deposit using a paper coupon Form 8109, you may be subject to a 10% penalty. Even if you do not have to make electronic deposits, you may voluntarily participate in EFTPS. To enroll in EFTPS, call 1–800–945–8400 or 1–800–555–4477, or to enroll online, visit www.eftps.gov. For general information about EFTPS, call 1–800–829–1040 for individuals or 1–800–829–4933 for businesses. TOP
	Q. WHAT IS A 940 DEPOSIT AND WHEN IS IT DUE?
	Form 940 and 940–EZ – Deposit Requirements Form 940 (or Form 940EZ), Employer's Federal Unemployment (FUTA) Tax Return, is generally due by January 31st. Although Form 940 covers a calendar year, you may have to make deposits of the tax before filing the return. Deposit FUTA tax quarterly if your FUTA tax liability exceeds $100. Determine your FUTA tax liability for each of the first three quarters by multiplying that quarter's part of the first $7,000 of each employee's annual wages by .008. If, however, any part of the amounts you paid to employees is exempt from state unemployment tax, you may be required to use a greater rate. For example, in certain states, wages paid to corporate officers, certain payments of sick pay by unions, and certain fringe benefits are exempt from state unemployment tax. If your FUTA tax for any of the first three quarters of the year (plus any undeposited amount of $100 or less from an earlier quarter) is over $100, deposit it by the last day of the month after the end of the quarter. If it is $100 or less, carry it to the next quarter; a deposit is not required. If your FUTA tax for the fourth quarter (plus any undeposited amount from an earlier quarter) is over $100, deposit the entire amount by January 31st. If it is $100 or less, you can either make a deposit or pay it with your timely filed Form 940. For example, if your tax at the end of the first quarter, March 3lst, is $60, you do not have to make a deposit. If your tax for the second quarter, which ends on June 30th, is $70, your total liability through the end of June is now $130. You must deposit $130 by July 31st. If your FUTA tax liability is over $100 for any calendar quarter, you must deposit your FUTA tax liability through the Electronic Federal Tax Payment System (EFTPS) or by using Form 8109, Federal Tax Deposit Coupon. If you use Form 8109, it is very important that it shows your correct employer identification number, name, type of tax, and tax period. This information is used by the IRS to credit your account. Your check or money order should be made payable to the authorized bank where you make your deposit, not to the IRS. If you are required to use EFTPS for your Form 941 deposits, you must use EFTPS to deposit your Form 940 taxes. If your total tax is more than $100, you must complete the Record of Quarterly Federal Unemployment Tax Liability on Form 940 or Form 940-EZ. This part of the form shows the IRS whether you deposited your tax on time. You may be charged a penalty for late deposits, for mailing your payment to the IRS instead of depositing it, or for failing to use EFTPS, when required. TOP
	Q. WHAT ABOUT TIPPED EMPLOYEES?
	Tips – Withholding and Reporting Your employees who receive tips of $20 or more in a calendar month, while working for you, are required to report to you the total amount of tips they receive. They must give you written reports by the tenth of the following month. Employees who receive tips of less than $20 in a calendar month are not required to report their tips. Employees must report to you tips received directly from customers, tips from other employees, and tips customers charge to their bills. Service charges added to a bill and paid to your employees are not considered tips for tax reporting purposes. Employees can use Form 4070A, Employee's Daily Record of Tips, to keep a daily record of their tips and Form 4070, Employee's Report of Tips to Employer, to report their tips to you. Both of these forms are in Publication 1244 (PDF), Employee's Daily Record of Tips and Report to Employer. When you receive the tip report from your employee, use it to figure the amount of social security, medicare, and income taxes to withhold for the pay period on both wages and reported tips. You are responsible for paying the employer's portion of the Social Security and Medicare tax. You must collect the employee's portion of the Social Security and Medicare taxes and the income tax. You can collect these taxes from the employee's wages or from other funds the employee gives you up to the close of the calendar year. If you don't have enough money from the employee's wages and other funds, apply them in the following order. First, withhold all taxes due on regular wages. Second, withhold Social Security and Medicare taxes due on reported tips. Finally withhold any federal, state or local income tax on reported tips. You can withhold any remaining unpaid taxes from the employee's next paycheck. If you cannot collect all of the employee's Social Security and Medicare taxes on tips, show the uncollected amount in Box 12 on the employee's Form W-2, Wage and Tax Statement. Also, show the uncollected amount as an adjustment on your Form 941, Employer's Quarterly Federal Tax Return. When preparing your employee's Form W–2, include wages, tips and other compensation in Box 1. In Box 5, include Medicare wages and tips, and in Box 7 include Social Security tips. When figuring your liability for federal unemployment tax, add the reported tips to your employee's wages. If you operate a large food or beverage establishment where tipping is customary and you normally employ more than ten people on a typical business day, you must file Form 8027, Employer's Annual Information Return of Tips Income and Allocated Tips, each calendar year. If you have more than one food or beverage operation, you must file a separate Form 8027 for each. Form 8027 is due on the last day of February of the next year (or the first business day in April if you are filing electronically) and is filed with the Internal Revenue Service Center, Andover, MA, 05501. If the total tips reported by all employees are less than 8 percent of your gross receipts (unless a lower rate has been approved by the IRS), you must allocate the difference among the employees who received tips. The allocation may be based on each employee's share of gross receipts or share of total hours worked, or on a written agreement between you and your employees. Show the amount allocated in Box 8, Allocated Tips, of the employee's Form W–2. Do not withhold income, Social Security or Medicare taxes on allocated tips. If you are required to allocate tips, your employees must continue to report all tips to you, and you must use the amounts they report to figure payroll taxes. TOP
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