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CNN Live At Daybreak
Tax Expert Answers Some Questions
Aired April 10, 2002 - 06:20 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: Our tax expert, Rayed Bukhari, good morning.
RAYED BUKHARI, TAX EXPERT: Good morning, Carol.
COSTELLO: Are you ready to answer some questions?
BUKHARI: Yes I am.
COSTELLO: Hey, how many procrastinators are there this year?
BUKHARI: Well there'll be about 8.5 million people who will be filing tax extensions this year, so quite a few. And, also, about 25- 30 million people still haven't filed their return.
COSTELLO: Oh my goodness. And it is important to file that extension, because what can happen if you don't?
BUKHARI: Well if you don't file your tax extension then you can get hit with a five percent penalty per month. So that's five percent per month penalty for late filing your return.
COSTELLO: Is it easy to file an extension? I mean how do you get the form, how do you go about that?
BUKHARI: Well the easiest way this year to file a tax extension is to either go online, there's a Web site called Taxgaga.com, and you can e-file your tax return from there. And it usually will take you less than four minutes to file your tax extension. So it's very quick and the best way to do it.
There's also another way that the IRS provides you to do your tax extension. You can call the IRS tele-file (ph) number, which is 1- 888-796-1074, or you can paper file and you can get the forms from IRS.gov. Or, again, you can go back to Taxgaga.com and download the form from there.
COSTELLO: Let's talk a little bit about e-filing, because that's something fairly new to most people. Are a lot of people taking advantage of that this year?
BUKHARI: There are quite a few people taking advantage of it. There are about 42 million people who will be e-filing their tax returns this year. COSTELLO: And that's -- explain to us what that is. You can file online, and then you get your refund earlier.
BUKHARI: Yes. With e-file -- e-filing is a great program. When you e-file a tax return, you can get your refund within two to four weeks, compared to six to eight weeks.
There are also other methods that have been better provided now for e-filing tax returns. For example, (UNINTELLIGIBLE), where you can get a loan and get your refund within 48 hours. Or, you can also e-file and get your return within two to three weeks. So there are quite a few options available with e-filing that you didn't have with paper filing.
COSTELLO: I wanted to ask you about this, because I think a lot of people are still confused about it. That federal rebate, apparently that is the biggest mistake that people are making on their tax forms this year.
BUKHARI: Yes. Well, if you got a federal rebate this year for $600 or $300, depending if you were single or married, then you cannot take a deduction. But if you didn't, then in your 1040 you have to -- you can put in your -- put the information in that $600 deduction -- I guess the $600 deduction can be taken.
COSTELLO: OK. I didn't get that. So if you got a rebate last year, are you eligible for a rebate this year?
BUKHARI: No you're not. Because of all the deficit in the budget, that you're not, but you can -- IRS has done something that gives you a deduction for that.
COSTELLO: Oh, got you. So if you didn't get it all last year you can file for it this year?
BUKHARI: Yes.
COSTELLO: OK, got you. OK, we want to get to some e-mails right now. Our viewers have many, many questions for you.
This is from Steve M. He says, "I've recently found out that I owe taxes from over 10 years ago. My documents were destroyed in a flood for those years and I don't have the W2s. Where do I begin to bring my past years' taxes up to date?"
BUKHARI: OK. Well this is a special kind of procrastinator, I guess. What we need to do is, first of all, because this is a special case, you have to call the IRS at 800-829-1040 and you have to let the IRS know. Also, you cannot e-file your tax return because they're 10 years old. You can e-file the tax return for this year.
So the best thing for you to do is go to a tax professional and they'll have to take you through the whole process.
COSTELLO: How many years should you keep your tax records?
BUKHARI: You should keep your tax records for about three years.
COSTELLO: Three years. So he would be out of luck anyway. Now let's say he calls the IRS and he says, "I have a problem over the last 10 years," are they going to be understanding?
BUKHARI: Well IRS has become a lot more understanding. With all the new changes going on, they're becoming a lot more (UNINTELLIGIBLE) friendly, if you want to say that. And they do help out a lot more.
COSTELLO: OK. I'm looking on our computer right now. This question is from Dr. Jim Oyla (ph). Gee, and I hope I have your name right.
He says, "Good morning, CNN. If you discover that you owe no taxes because you've been abroad for 25 years but haven't filed in the last 10 years, now what?"
BUKHARI: OK. Again, what I recommend is even if you don't owe any taxes, it's always a good idea to file a tax return. If you again owe 10 years back taxes, you have to go to a tax professional and they will work through with you, because if you are talking for returns more than a year, it's always a good idea to go to a tax professional.
COSTELLO: OK. I have another question for you. This one is from (UNINTELLIGIBLE) New York from Rachel (ph). She asks, "Is there any way to get credit on my taxes for the $2,000 I gave my married working son?"
BUKHARI: Well, Rachel (ph), you can only take a credit for your son if it went towards his education. But, otherwise, you won't be able to take a deduction.
COSTELLO: OK. Here's another question. Can we put that one up on screen so that we can all read along together? "Is the IRS giving people any breaks if they were indirectly effected by 9-11? For example, having to take money from their IRA in order to pay for the mortgage of an apartment which could not be rented in Miami Beach due to lack of tourism."
BUKHARI: Well, IRS is giving breaks for 9-11 this year. There are a few deductions, and also if you're directly effected by it. But I don't think in your case it would be applicable.
COSTELLO: Can 9-11 -- people directly effected by 9-11, can they file late and will that be OK with the IRS?
BUKHARI: Well, even if you were effected by 9-11, it's recommended by the IRS always file a tax extension. Again, as I said, it only takes about four minutes to file a tax extension. It's better to be safe and file one now so that you won't get hit by a five percent penalty.
COSTELLO: OK. We have another question on the screen. "Is there any way to get credit -- oh we already answered this question, so let's go to the next one. This one is from Beth (ph). She says, "I managed to keep up with all of my tax documents, except my W2 form. It's too late to wait two weeks on one from my employer. Do I have to file an extension even if it's the IRS that owes me money?"
BUKHARI: Yes. As I said before, everybody is required to file a tax extension even if you owe money or not owe money. So you should file an extension and it will give you four months automatic extension. It's form 4868, or go on line at Taxgaga.com and file the extension, and it will give you four months to get your information, get your W2s together.
COSTELLO: All right. Thank you very much, Rayed Bukhari, our tax expert this morning. We appreciate all of your help and hope you come back again.
BUKHARI: Thank you, Carol.
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