Question 1. I owe back taxes, and
the IRS took this year's tax refund. Can the IRS do this?
The IRS can garnish a refund if the IRS
previously sent notice to the taxpayer of its intention to
start tax collection procedures, including garnishment of
salary or tax return. The notice usually advises the
taxpayer to pay the tax liability or contact the IRS to
make payment arrangements. The IRS usually garnishes the
return of the taxpayer who does not respond to this
notice.
Question 2. I'm the custodial
parent, but my former spouse is claiming the child on
his/her income tax as well. Am I going to get in trouble?
Your former spouse is not entitled to an
exemption unless the divorce court order specifically
designated him/her as the party entitled to claim the
child on his/her return. Payment of child support does not
automatically entitle a former spouse to claim children as
dependents for income tax deduction purposes. If both
divorced parents claim a child on his/her respective tax
return, the IRS traditionally sends a letter to both
parties asking the party who is not entitled to the
deduction to file an amended return, and specifically
instructs the party entitled to the dependent to not
respond to the IRS letter. If neither party responds, the
IRS usually requests both parents submit documents proving
their respective positions. The custodial parent needs to
timely respond and request a meeting with an assigned IRS
agent to submit the required documents.
Question 3. How much can I give
my child/grandchild/friend each year as a gift? Do I have
pay taxes on it?
A parent can give as much as he/she desires;
however, up to $11,000 per year (was $10,000 in 2001) per
donee (person receiving the gift) per
parent/grandparent/friend may be gifted tax-free.
Question 4. What is the minimum
value for an estate to be subject to federal estate taxes?
The amount of property exempt from transfer tax
is currently $1,000,000. The exempt amount is scheduled to
increase to $1,500,000 in 2004, $2,000,000 in 2006 and
$3,500,000 in 2009. The portion of the estate exceeding
the exempt amount is currently taxed at graduated rates
ranging from 41%to 49% pursuant to Section 2502(a) of the
IRS Code.
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