Most people look right to the bottom line of their income tax return to see what they owe or what they are getting back. However, your tax return can contain a lot of questions that you may not have noticed previously.
The first thing you may have overlooked is on the first page of your return, right next to your name and address. It is here you are asked if you wish to contribute $3 to the Presidential Election Campaign for either yourself, your spouse, or both. It doesn’t have any impact on your tax as it simply earmarks $3 of your taxes paid for this specific purpose. Only 6% of American taxpayers in 2013 opted to check yes to this on their returns. In 2014, President Obama signed a bill which redirected the portion of these public campaign funds used for conventions towards pediatric medical research.
Now if you have interest and dividend income, your return will include Schedule B. If this income exceeds $1,500, you are required to answer some questions on the bottom of the form related to foreign accounts and trusts. With these inquiries, the IRS is throwing out an information net to locate any individuals with foreign assets that may not be reporting them properly. If you have any interest in, or control over, any kind of foreign financial account, then you would answer yes to one, or possibly several of these questions. Each yes answer may lead to a requirement to file additional informational forms, such as the FinCen Form 114, most commonly known as the FBAR. So pay attention carefully to this section if any of these questions apply to you as failure to file any required informational forms can lead to penalties.
Lastly, if you had a business reported on your return (Schedule C), rental or pass-through income (Schedule E), or ran a farm (Schedule F), then you should have seen a question on the top of each form asking if you made any payments that would require you to file form 1099. A 1099 is generally required to be issued to any individual or partnership to whom you paid $600 or more as part of your business in a given year for services, not goods. If you answer yes on either of these forms, and have not filed your 1099s, this will potentially open the door for the IRS to hit you with some penalties ranging from $30 to $100 per 1099, depending on timing of when they were filed correctly.
As you can see, it pays to really look at your entire return, not just the bottom line. As always, you should consult your tax advisor if you have any questions about the above items, or please contact us at firstname.lastname@example.org
Ray Neubauer, CPA, CGMA, Partner