Members of the Maryland Association of Certified Public...

Tax answers

March 06, 1996

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: I have discovered that I made an error on my 1994 federal tax return and overpaid. How can I proceed to correct the error and receive reimbursement?

A: You should file Form 1040X, Amended U.S. Individual Income Tax Return, to correct the Form 1040, 1040A or 1040EZ that you have already filed. After you've filed the 1040X, the IRS will issue a refund check for the overpayment. Generally you must file a 1040X to claim a refund or credit within three years from the date your original return was filed, or within two years from the date the tax was paid. Additionally, you should determine if the changes on the federal return affect your state return filed for the same period; if so, you should file an amended state tax return using Form 502X.

Q: My wife's mother sold her house and gave my wife some of the proceeds. Does she have to pay taxes on that money?

A: Your wife's receipt of money as a gift has no income tax consequences (i.e. the gift is not taxable to your wife nor deductible to her mother). However, to the extent that the total of all gifts from your mother-in-law to your wife exceeded $10,000 during the calendar year, your mother-in-law may be required to file a gift tax return Form 709. Gift tax provisions can be extremely complicated and should be discussed with your financial adviser.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

A joint service from The Sun and the Maryland Association of Certified Public Accountants can help you with your tax queries. Association members, all CPAs, will answer questions from readers until April 15. To ask a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. Using a touch-tone phone, enter 6225 after you hear the greeting.

Callers are asked to leave their names and phone numbers, should questions need to be clarified. Selected questions will be answered in the Business section. No questions will be answered by phone. Names and numbers will not be published.

Pub Date: 3/06/96

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