Ask Liz Weston

Get smart with your money

IRS

Q&A: How do I get tax forms from my online bank?

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Dear Liz: I have a savings account and a revocable trust money market account with an online bank. They provide the 1099-INT tax form for the savings account as a downloadable file. However, they do not provide a downloadable form for the trust account money market.

They insist that it can only be mailed after Jan. 31 and cannot be downloaded online. When I complained several times, saying that I received trust account tax forms from other financial institutions, I received frivolous answers.

Can you explain what is going on here and what I should do to get my 1099-INT early so I can do my taxes without having to wait for it?

Answer: What’s going on is that the bank and its customer service reps are ignorant of the law.

There’s no requirement that the form be downloadable, but the Internal Revenue Service does require 1099-INT forms to be provided to recipients and to the IRS by Jan. 31, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. This year, the deadline was actually Feb. 2, since Jan. 31 fell on a weekend.

Since the IRS can levy penalties for late filing, you can be sure the bank has found a way to electronically provide the forms to the tax authorities, even if it can’t be bothered to get them to you.

As you’ve personally experienced, other financial institutions give their customers access to the forms well before the deadline. You can’t personally reform a dysfunctional institution, so consider moving your business to one that provides actual customer service.

Q&A: Foreign tax credit delays substantial IRS refund

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Dear Liz: My tax professional submitted amended tax returns for 2023, 2022 and 2021 a year ago. I’m supposed to receive a nice refund for those years but I have heard nothing from the IRS and cannot get any information from its website. I asked my tax professional about it and she said the foreign tax credit claimed on the amended returns must be reviewed by the foreign tax department, which is very far behind. This just feels like a black hole. The IRS wants me to pay my taxes but drags its feet on giving me my refund.

Answer: The foreign tax credit is designed to prevent double taxation. If you earn income abroad, you may be able to deduct taxes paid to another country on your U.S. tax return.

Unfortunately, this is an area where there has been substantial fraud and noncompliance. That raises the odds of a manual review and potential audit. The fact that you’re claiming large refunds, and doing so by amending returns, also increases the chance your filings will be scrutinized.

Still, a year is a long time to wait. Consider reaching out to the Taxpayer Advocate Service, which may be able to help you break the logjam.

Q&A: IRS tax payment problem can be frustrating to fix

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Dear Liz: In a recent column, you advised people to pay IRS tax bills online. Have you done this yourself? The wording of the choices to click on can be confusing. I tried to help my son pay online last year. We evidently chose the wrong type of tax and it went to “la la land.” He got late letters and fines. It took quite a while to get it rectified because you are on hold for HOURS. Who has time for that? Next year I’ll have him mail it and take our chances.

Answer: I’ve made exactly the mistake you describe and am aware of how frustrating it can be trying to get the situation rectified. But dealing with mail theft and check fraud is frustrating too.

Both of us would have benefited from consulting a tax pro first to ensure we were clicking the right buttons. A tax pro can also help in straightening out a snafu. The IRS was understaffed and struggling to answer its phones even before the government shutdown, but the dedicated number for tax pros often has shorter wait times than the one for the general public.

Q&A: Future mate hasn’t filed tax returns. Am I liable?

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Dear Liz: I’m engaged to someone who just confessed that they have not filed tax returns for the last several years. How do we fix this? If they owe a lot of money, could the IRS come after me if we’re married?

Answer: Technically, debts incurred before marriage are considered separate. But there are many ways premarital debt can affect postmarital life.

If you live in a community property state, for example, creditors could come after jointly owned assets if your spouse fails to pay what they owe. Your spouse’s debt could affect how much you two can borrow if you want to apply for a mortgage or other joint obligation. And the money your spouse uses to pay off the debt isn’t available for other uses that could benefit both of you. That could include everything from paying bills to going on vacation to saving for retirement.

The IRS is not a good creditor to have, in case you had any doubts. The agency has many enforcement powers, such as withholding refunds, taking part of someone’s paycheck and seizing property to pay debts. Consider working with a tax pro to get the missing returns filed as quickly as possible. The IRS also offers payment plans for those who can’t pay in full.

Q&A: A greedy friend eyes a suitcase of (suspected) drug money

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Dear Liz: A person I know who is in his 80s and very wealthy recently described having a suitcase of old cash. The bills date from the time before the electronic strip was introduced. He said, “I don’t know what to do with this.” Long ago he sold marijuana. I immediately thought that this should pass into the hands of those who are struggling (which includes me). How could this be done legally?

Answer: Your acquaintance should talk to his tax pro. Money is supposed to be declared to the IRS as it’s earned, and that includes proceeds from illegal activities.

There are statutory limits to how long a person can be prosecuted for dealing drugs. There’s no statute of limitations, however, if a taxpayer files a fraudulent return or fails to file a return at all. That’s how the feds ultimately got gangster Al Capone: He was convicted of tax evasion for failing to file tax returns declaring his illegal income.

What your acquaintance should not be doing is talking to anyone else about this cash — particularly someone whose immediate thought is how to get their hands on it. He should consider getting evaluated for cognitive decline, and putting measures in place to protect himself from fraud and elder abuse.

Q&A: Avoid deducting personal expenses

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Dear Liz: I am the sole owner of a condo. I am getting ready to realize a dream of mine by traveling around the world. I will be gone indefinitely. Thus, I am thinking about renting out my condo. I know I get a write-off for repairs on the unit, cleaning supplies, etc. What about the storage unit where I will need to store my things from my unit. Can I write off the storage unit?

Answer: Congratulations on your upcoming adventure! You’ll have excitement enough without defending yourself in an IRS audit, so avoid deducting personal expenses such as a storage unit.

The IRS says you can deduct the “ordinary and necessary” expenses for managing and maintaining a rental property. That includes mortgage interest, taxes, operating expenses, depreciation and repairs.

“If the storage unit was used in conjunction with the rental activity, such as storing maintenance supplies for doing work on the rental property, a deduction could perhaps be justified,” says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

However, you won’t be around to do that work, so deducting the storage unit isn’t going to fly.