Publication 17
Your Federal Income Tax

For Individuals

For use in preparing 2002 Returns

Paid Preparer

Generally, anyone you pay to prepare, assist in preparing, or review your tax return must sign it and fill in the other blanks in the paid preparer's area of your return. Signature stamps and labels are not acceptable.

If the preparer is self-employed (that is, not employed by any person or business to prepare the return), he or she should check the self-employed box in the Paid Preparer's Use Only space on the return.

The preparer must give you a copy of your return in addition to the copy filed with the IRS.

If you prepare your own return, leave this area blank. If another person prepares your return and does not charge you, that person should not sign your return.

If you have questions about whether a preparer must sign your return, please contact any IRS office.

Refunds

When you complete your return, you will determine if you paid more income tax than you owed. If so, you can get a refund of the amount you overpaid or, if you file Form 1040 or Form 1040A, you can choose to apply all or part of the overpayment to your next year's (2003) estimated tax. You cannot have your overpayment applied to your 2003 estimated tax if you file Form 1040EZ.

If you choose to have a 2002 overpayment applied to your 2003 estimated tax, you cannot change your mind and have any of it refunded to you after the due date of your 2002 return.

Follow the form instructions to complete the entries to claim your refund and/or to apply your overpayment to your 2003 estimated tax.

If your refund for 2002 is large, you may want to decrease the amount of income tax withheld from your pay in 2003. See chapter 5 for more information.

Direct Deposit.   Instead of getting a paper check, you may be able to have your refund deposited directly into your account at a bank or other financial institution. Follow the form instructions to request Direct Deposit.

If the Direct Deposit cannot be done, the IRS will send a check instead.

Overpayment less than one dollar.   If your overpayment is less than one dollar, you will not get a refund unless you ask for it in writing.

Cashing your refund check.   Cash your tax refund check soon after you receive it. Checks not cashed within 12 months of the date they are issued will be canceled and the proceeds returned to the IRS.

If your check has been canceled, you can apply to the IRS to have it reissued.

Refund more or less than expected.   If you receive a check for a refund you are not entitled to, or for an overpayment that should have been credited to estimated tax, do not cash the check. Call the IRS.

If you receive a check for more than the refund you claimed, do not cash the check until you receive a notice explaining the difference.

If your refund check is for less than you claimed, it should be accompanied by a notice explaining the difference. Cashing the check does not stop you from claiming an additional amount of refund.

If you did not receive a notice and you have any questions about the amount of your refund, you should wait 2 weeks. If you still have not received a notice, call the IRS.

Offset against debts.   If you are due a refund but have not paid certain amounts you owe, all or part of your refund may be used to pay all or part of the past-due amount. This includes past-due federal income tax, other federal debts (such as student loans), state income tax, and child and spousal support payments. You will be notified if the refund you claimed has been offset against your debts.

Joint return and injured spouse.   When a joint return is filed and only one spouse owes a past-due amount, the other spouse can be considered an injured spouse. An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount.

To be considered an injured spouse, you must:

1. File a joint return,
2. Have reported income (such as wages, interest, etc.),
3. Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed the earned income credit or other refundable credit, and
4. Have an overpayment, all or part of which may be applied against the past-due amount.

If you are an injured spouse, you can obtain your portion of the joint refund by completing Form 8379, Injured Spouse Claim and Allocation. Follow the instructions on the form.

Amount You Owe

When you complete your return, you will determine if you have paid the full amount of tax that you owe. If you owe additional tax, you should pay it with your return.

If the IRS figures your tax for you, you will receive a bill for any tax that is due. You should pay this bill within 30 days (or by the due date of your return, if later). See Tax Figured by IRS in chapter 31.

If you do not pay your tax when due, you may have to pay a failure-to-pay penalty. See Penalties, later. For more information about your balance due, see Publication 594, The IRS Collection Process.

If the amount you owe for 2002 is large, you may want to increase the amount of income tax withheld from your pay or make estimated tax payments for 2003. See chapter 5 for more information.

How To Pay

If you have an amount due on your tax return, you can pay by check, money order, or credit card. If you filed electronically, you also may be able to make your payment by electronic funds withdrawal.

You do not have to pay if the amount you owe is less than $1.

Payment by check or money order.   If you pay by check or money order, make it out to the United States Treasury. Please show your correct name, address, social security number, daytime telephone number, and the tax year and form number on the front of your check or money order.

For example, if you file Form 1040 for 2002 and you owe additional tax, show your name, address, social security number, daytime telephone number, and 2002 Form 1040 on the front of your check or money order. If you file an amended return (Form 1040X) for 2001 and you owe tax, show your name, address, social security number, daytime telephone number, and 2001 Form 1040X on the front of your check or money order.

Enclose your payment with your return, but do not attach it to the form. If you filed Form 1040, please complete Form 1040-V, Payment Voucher, and enclose it with your payment and return. Form 1040-V will help us process your payment more accurately and efficiently. Follow the instructions that come with the form.

Do not mail cash with your return. If you pay cash at an IRS office, keep the receipt as part of your records.

Payment not honored.   If your check or money order is not honored by your bank (or other financial institution) and the IRS does not receive the funds, you still owe the tax. In addition, you may be subject to a dishonored check penalty.

Payment by credit card.   You can use your American Express®, Discover®, MasterCard®, or Visa® credit card.

To pay by credit card, call a service provider and follow the recorded instructions. You can also pay by credit card over the Internet using a service provider's web site.

The service providers charge a convenience fee based on the amount you are paying. Fees may vary between the providers. You will be told what the fee is during the transaction and will have the option to continue or end the transaction. You may also obtain the convenience fee by calling the service provider's automated customer service telephone number or visiting their respective web site.

Do not add the convenience fee to your tax payment.

If you pay by credit card, write the confirmation number you were given at the end of the transaction and the tax payment amount in the upper left corner of page 1 of your tax return.

Electronic payment options.   Electronic payment options are convenient, safe and secure methods for paying individual income taxes. There's no check to write, money order to buy, or voucher to mail.

Electronic funds withdrawal.   You can e-file and pay in a single step by authorizing an electronic funds withdrawal from your checking or savings account. This option is available through tax software packages, tax professionals, and TeleFile. If you select this payment option, you will need to have your account number, your financial institution's routing transit number, and account type (checking or savings). You can schedule the payment for any future date up to and including the return due date (April 15, 2003).

Be sure to check with your financial institution to make sure that an electronic funds withdrawal is allowed and to get the correct routing and account numbers.

Credit card.   You can e-file and pay in a single step by authorizing a credit card payment. This option is available through some tax software packages and tax professionals. You can also pay by credit card using the telephone or the Internet. See Payment by credit card, earlier.

Electronic Federal Tax Payment System (EFTPS).   EFTPS offers another way to pay your federal taxes. Best of all, it's free and available to business and individual taxpayers. In fact, it's recommended for estimated tax payments (Form 1040-ES) and installment agreement payments. For details on how to enroll, visit www.EFTPS.gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400.

Estimated tax payments.   Do not include any 2003 estimated tax payment in the payment for your 2002 income tax return. See chapter 5 for information on how to pay estimated tax.

Interest

Interest is charged on tax you do not pay by the due date of your return. Interest is charged even if you get an extension of time for filing.

If the IRS figures your tax for you, interest cannot start earlier than the 31st day after the IRS sends you a bill. For information, see Tax Figured by IRS in chapter 31.

Interest on penalties.   Interest is charged on the failure-to-file penalty, the accuracy-related penalty, and the fraud penalty from the due date of the return (including extensions) to the date of payment. Interest on other penalties starts on the date of notice and demand, but is not charged on penalties paid within 21 calendar days from the date of the notice (or within 10 business days if the notice is for $100,000 or more).

Interest due to IRS error or delay.   All or part of any interest you were charged can be forgiven if the interest is due to an unreasonable error or delay by an officer or employee of the IRS in performing a ministerial or managerial act.

A ministerial act is a procedural or mechanical act that occurs during the processing of your case. A managerial act includes personnel transfers and extended personnel training. A decision concerning the proper application of federal tax law is not a ministerial or managerial act.

The interest can be forgiven only if you are not responsible in any important way for the error or delay and the IRS has notified you in writing of the deficiency or payment. For more information, get Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund.

Interest and certain penalties may also be suspended for a limited period if you filed your return by the due date (including extensions) and the IRS does not provide you with a notice specifically stating your liability and the basis for it before the close of the 18-month period beginning on the later of:

• The date the return is filed, or
• The due date of the return without regard to extensions.

For more information, get Publication 556.

Installment Agreement

If you cannot pay the full amount due with your return, you can ask to make monthly installment payments. However, you will be charged interest and may be charged a late payment penalty on the tax not paid by April 15, 2003, even if your request to pay in installments is granted. If your request is granted, you must also pay a fee. To limit the interest and penalty charges, pay as much of the tax as possible with your return. But before requesting an installment agreement, you should consider other less costly alternatives, such as a bank loan.

To ask for an installment agreement, use Form 9465, Installment Agreement Request. You should receive a response to your request within 30 days. But if you file your return after March 31, it may take longer for a reply.

You can use a credit card to make installment agreement payments. See Payment by credit card, under How To Pay, earlier.

Guaranteed availability of installment agreement.   The IRS must agree to accept the payment of your tax liability in installments if, as of the date you offer to enter into the agreement:

1. Your total taxes (not counting interest, penalties, additions to the tax, or additional amounts) do not exceed $10,000,
2. In the last 5 years, you (and your spouse if the liability relates to a joint return) have not:
   1. Failed to file any required income tax return,
   2. Failed to pay any tax shown on any such return, or
   3. Entered into an installment agreement for the payment of any income tax,
3. You show you cannot pay your income tax in full when due,
4. The tax will be paid in full in 3 years or less, and
5. You agree to comply with the tax laws while your agreement is in effect.

Gift To Reduce
the Public Debt

You can make a contribution (gift) to reduce the public debt. If you wish to do so, make a separate check payable to Bureau of the Public Debt. You can send it to:

Bureau of the Public Debt
Department G
P.O. Box 2188
Parkersburg, WV 26106-2188.

Or, you can enclose the check in the envelope with your income tax return. Please do not add this gift to any tax you owe.

You can deduct this gift as a charitable contribution on next year's tax return if you itemize your deductions on Schedule A (Form 1040).

Peel-Off Address Label

After you have completed your return, peel off the label with your name and address from the inside of your tax return package and place it in the appropriate area of the Form 1040, Form 1040A, or Form 1040EZ you send to the IRS. If you have someone prepare your return, give that person your label to use on your tax return.

If you file electronically and you are not eligible or choose not to sign your return using your self-selected PIN, use your label on Form 8453 or 8453-OL. (More information on electronic filing is found earlier in this chapter.)

The label helps the IRS to correctly identify your account. It also saves processing costs and speeds up processing so that refunds can be issued sooner.

You must write your SSN in the spaces provided on your tax return.

Correcting the label.   Make necessary name and address changes on the label. If you have an apartment number that is not shown on the label, please write it in. If you changed your name, see the discussion under Social Security Number, earlier.

No label.   If you did not receive a tax return package with a label, print or type your name and address in the spaces provided at the top of Form 1040 or Form 1040A. If you are married filing a separate return, do not enter your spouse's name in the space at the top. Instead, enter his or her name in the space provided on line 3.

If you file Form 1040EZ and you do not have a label, print (do not type) this information in the spaces provided.

P.O. box.   If your post office does not deliver mail to your street address and you have a P.O. box, print your P.O. box number on the line for your present home address instead of your street address.

Foreign address.   If your address is outside the United States or its possessions or territories, enter the information on the line for City, town or post office, state, and ZIP code in the following order:

1. City,
2. Province or state, and
3. Name of foreign country. (Do not abbreviate the name of the country.)

Follow the country's practice for entering the postal code.

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