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CNN Live At Daybreak

Tax Expert Answers Tax Questions

Aired April 10, 2002 - 06:18   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: I was just thinking about your refund, Chad.

CHAD MYERS, CNN METEOROLOGIST: Yes. Yes.

COSTELLO: Your new wife, Sally, is going to take your refund and spend it as she sees fit.

MYERS: That's already gone. It's completely spent. I'm still waiting for my e-file. My e-file's not back yet. It was supposed to be like two weeks or three weeks, I'm still waiting for it. It's been like four.

COSTELLO: Well we'll ask our tax expert about that too.

MYERS: Fair enough.

COSTELLO: We want your tax questions, by the way. E-mail us at daybreak@cnn.com and we'll have our tax expert answer all of your questions you procrastinators out there.

Oh, do we have our tax expert right now? Oh he's ready in New York City. See we were killing time until he sat down in his seat and got all comfortable.

Our tax expert, Rayed Bukhari, good morning.

RAYED BUKHARI, TAXGAGA.COM: 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 will be about 8.5 million people who will be filing tax extensions this year so quite a few. And also about 25 to 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 5 percent penalty per month so that's 5 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 -- T-A-X-G- A-G-A -- .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 IRS provides you to do tax extensions. You can call the IRS tele-file 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 -- that are provided now for e-filing tax return. For example, Rouse (ph) 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 have got a federal rebate this year for $600 or $300, depending on 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 the deficit and the budget this year, you're not, but you can -- the IRS has done something to give 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 have 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 kinder and 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 Ola (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 would 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 is from Wappingers Falls, New York from Rachel. 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, you can only take 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 affected 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 were directly affected by it. But I don't think in your case it will be applicable.

COSTELLO: Can 9/11 people directly affected by 9/11, can they file late and will that be OK with the IRS?

BUKHARI: Well even if you were affected 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 5 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. 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 online 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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