Tax Refund Withholdings and Offsets

If you owe money because of certain delinquent debts, the IRS or the Department of Treasury's Financial Management Service (FMS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt.

FMS
Outstanding debts include past–due child support, federal agency nontax debts such as student loans, or state income tax obligations.

Do I have to make Estimated Tax Payments

You may need to make estimated tax payments if you do not pay enough tax on your income during the year.

Typically employees have taxes withheld by their employer throughout the year. For taxpayers with income from interest, dividends, alimony, rent, partnerships, self-employment and capital gains may need to make estimated payments. Taxpayers with this scenario can avoid making estimated tax payments by adjusting Form W-4 and rely on their employer's payroll department to withhold additional taxes.

In general, you must make estimated payments during the tax year if you expect to owe at $1,000 in tax for 2011 after subtracting withholding and credits, and you expect your withholding and credits to be less than the smaller of:

1. 90% of the tax shown on your 2011 tax return; or
2. 100% of the tax shown on your 2010 tax return.

Paying money to your ex? There is tax relief.

Generally, alimony you pay is deductible (even if you don't itemize) while alimony you receive is taxable income. Alimony received is considered earned income for purposes of contributing to an Individual Retirement Arrangement (IRA).

Report alimony received on Form 1040 line 11 and alimony payments can be deducted on Form 1040 line 31a. Income taxes are not withheld from alimony payments - you may need to make estimated tax payments or increase the amount withheld from your paycheck.

Child support payments are NOT alimony – these payments received are not taxable income and child support payments paid are not deductible.

For more information, review IRS Publication 504.

Common tax return mistakes

10 things to watch for as you prepare your tax return.

1. Incorrect Social Security numbers or misspelled names
2. Using incorrect forms and schedules
3. Wrong filing status
4. Claiming ineligible dependents
5. Misapplied Earned Income Credit and Child Tax Credit
6. Lack of receipts
7. Failure to report all income
8. Not checking for Alternative Minimum Tax
9. Not signing the return – note the taxpayer and the spouse must sign and date the tax return
10. Not attaching Form W-2 and other forms that indicate taxes withheld during the year

Bonus items:

1. Applying for a Refund Anticipation Loan (RAL) without W-2 Earned Income
2. Omitting the Social Security Number or EIN of your caregiver for the Child and Dependent Care Credit
3. Mailing the tax return to the wrong address. Here is where to mail tax forms.
4. Making your check payable to the IRS. The correct payee on checks and money orders should be the United States Treasury.
5. Misreading the income tax tables
6. Failure to make a copy of the return for the taxpayer's records
7. Computation errors
8. Incorrect bank account numbers for Direct Deposit
9. Insufficient postage on envelopes. Better yet, use registered mail so there is a record that IRS received your tax return especially if you are paying a balance due.

Here are some other suggestions to avoid tax problems.

You could owe the IRS this year

Taxpayers could have a surprise when they file their taxes this year. It's the result of the Making Work Pay credit.

The credit began in 2009 and is also available to taxpayers in 2010 as part of the American Recovery and Reinvestment Act (ARRA). It consists of two components:

1. the new form Schedule M which includes a $400 credit for most taxpayers ($800 for married couples filing together) and
2. a change in employer withholding.

Starting April 1, 2009 employers began withholding less federal income tax so most workers may have noticed an increase in their take-home pay. The idea is this decrease in withholding will be offset by the Making Work Pay Credit when taxpayers include the Schedule M as part of their income tax return.

Still haven't received your W-2? Here's what to do

Employers have until January 31, 2011 to deliver your 2010 Form W-2. If you haven't received it, take these steps

1. Contact your employer. Inquire if the W-2 has been mailed and confirm the address it was mailed to. Allow a reasonable amount of time to re-issue or re-send.
2. Contact the IRS. Contact the IRS for assistance at 800-829-1040. Provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:
   
   • Employer's name, address, city and state, including zip code and phone number
   • Dates of employment
   • An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub.
3. File your return You still must file your tax return or request an extension to file by April 18, even if you do not receive your Form W-2. If you have not received your Form W-2 by April 18th, and have completed steps 1 and 2, you may attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. You may be unable to e-file the tax return so be prepared to file your taxes using the old fashioned paper method. There may be a delay in any refund due while the information is verified.