Question: I made a mistake on my federal return. How do I correct a return that has already been filed?
Answer: What you do depends on the type of mistake that you made:
- Many mathematical errors are caught in the processing of the tax return itself, so they will notify you
- If you did not attach a required schedule, the IRS will contact you and ask for the missing information.
- If you did not report all your income or did not claim a credit, you should file an amended or corrected return using Form 1040X (PDF), Amended U.S. Individual Income Tax Return.
Question: How do I know if I have to file quarterly individual estimated tax payments?
Answer:You must make estimated tax payments for the current tax year if both of the following apply:
- You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.
- You expect your withholding and credits to be less than the smaller of:
- 90% of the tax to be shown on your current year’s tax return, or
- 100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)
Special rules may apply and it is important that you talk to a tax expert.
Question: I sold my principal residence this year. What form do I need to file?
Answer: Generally, you need only report the sale of your principal residence if you realized a gain on the sale. To determine if you may exclude up to $250,000 of gain on the sale of your principal residence (up to $500,000 for a joint return or a return by a surviving spouse), refer to Publication 523, Selling Your Home.
There are certain instances where you may be entitled to exclude from income all or a portion of the gain realized on the sale of your principal residence.
Question: I received a 1099-DIV showing a capital gain. Why do I have to report capital gains from my mutual funds if I never sold any shares?
Answer: A mutual fund is a regulated investment company that pools funds of investors allowing them to take advantage of a diversity of investments and professional asset management.
Essentially this is how it works. You own shares in the fund, but the fund owns assets such as shares of stock, corporate bonds, government obligations, etc. To make money for you assets are sold at a gain. If the asset was held by the mutual fund for more than one year, the nature of the income is capital gain, which gets passed on to you. These are called capital gain distributions, which are distinguished from other types of income such as ordinary dividends.
Capital gains distribution are taxed as long term capital gains regardless of how long you have owned the shares in the mutual fund. If your capital gains distribution is automatically reinvested, the reinvested amount is the basis of the additional shares purchased.