When Should You File an Amended Return

Say you inadvertently forgot to include income from a 1099 in your return. Should you wait for a notice from the IRS or should you just go ahead and file an amended return? What should you do about the state return? Know that eventually the IRS will see that the 1099 was not included and send you a notice probably two years down the road. They will also share this info with your state. If you are going to owe more than $5,000 or 10% of the correct tax with the addition of the income from the 1099, then you should file an amended federal and state return since the IRS could charge you an accuracy related penalty of 20% of any underpayment if you wait for them to find the error. Under those amounts you may want to wait for the notice and pay from that, but you will still owe interest (4%) and late payment penalties(.5% on unpaid balance per month up to 25% max).

Things the IRS Will Not Do

The IRS will not call and demand payment or threaten you with court action over the phone. They will also not email you. If you get approached in this way just know that it is a scam and ignore it. They use the US postal service. Now if you get a letter from the IRS please allow me to help you respond.

Nonspouse Beneficiaries of Inherited IRAs

The rules are a little complicated. A beneficiary of an inherited IRA must calculate a required minimum distribution (RMD). The RMD is the longer of the nonspouse beneficiary's life expectancy or the owner's life expectancy if the owner died after their RMD beginning date. If the owner died before their RMD beginning date, then you have the option of using the nonspouse beneficiary life expectancy or electing to distribute the IRA by December 31 of the fifth year following the owner's death. A spousal beneficiary can treat the inherited IRA as his or her own so they can wait until they turn age 70 1/2 to start the RMD.

Investment Expenses

Brokerage commissions for the direct buying and selling of securities add to the basis of the stock and either reduce the capital gain or increase the capital loss when the security is sold. Trips to look after investment property like rental property are tax deductible. Trips to shareholder meetings are not deductible as well as trips for investment seminars. Trips to meet with your broker and lunches with your broker are tax deductible.

Georgia Transfers to Minors Act (GTMA)

The age of majority in Georgia is 18 for entering into contracts or consenting to medical treatment. However if you set up a custodial account for a minor for something like cash or securities, the gift doesn't become available to the minor until the age of 21. At that time they have free use of the account. Once a transfer is made into a custodial account, the gift cannot be taken back.