Last-minute tax filing questions answered by WalletPop experts

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last-minute tax adviceApril 15 is almost here, and you're frantically trying to get your tax forms done. If you think you'll need an extension, you still have file something before April 15: Form 4868. That will give you procrastinators until Oct. 15 to file your tax returns. Meanwhile, here's what our WalletPop experts have to say about tax questions concerning school tuition, dependent credit, a court judgment and a payment plan.

Question:
I'm attending school right now and am filling out my tuition tax form. What is my qualified expense? What about scholarships?
-- Mariela

Answer from Jennifer Lane, owner of Compass Planning Associates Inc. and author of "The Complete Idiot's Guide to Protecting Your 401(k) and IRA"
Your school should provide you with a Form 1098-T Tuition Statement. Qualified tuition expense will show in box 2 and scholarships and grants in box 5. Many schools have added information about the 1098-T to their Web sites, but you can also find out information direct from the IRS at Instructions for 1098-T.

Question:
My parent is in a nursing home and has been there all year. I have paid all of her expenses. Can I claim her as my dependent?
-- Ron

Answer from John Tracy, CPA, author of "Accounting for Dummies."
You should look in the instructions for the 1040 booklet (for 2009) and read the conditions for claiming someone as a dependent on your individual income tax return. Based on what you say, your mother should qualify as a dependent -- but I stress that to claim someone as a dependent, you must satisfy all the conditions that the IRS requires.

Question:
We received a court judgment against Lehman Bros. in May 2008, and then they claimed bankruptcy in September 2008. However, my attorney did not file that I had received a judgment in that four-month period. Thus, I am now out the money, and I'm looked upon as a creditor. I also suspect that my attorney has not informed Lehman Bros. of this court judgment so I really don't think they even know that I'm a creditor. So, it looks like I'm really out the $11,200 that I had originally won in my court action and also my attorney's fee of $2,340. Can I claim both these costs on my taxes for 2009?

P.S. My attorney did not inform me that I had won the case until I went in and saw him about it in February 2009. I contacted him when it was almost a full year before I had heard anything about my case.
-- Cal

Answer from Mark Britton, founder of
Avvo.com, a free online legal directory
You'll need to talk to two professionals: First, a local tax accountant to review your situation and determine whether the judgment can be written off of your taxes. There are complicated rules on deductibility that will depend on the nature of the judgment, the size of your income, other deductions taken, etc. Second, you'll want to find a lawyer who specializes in legal malpractice. If your first attorney did not take reasonable steps to perfect your judgment against Lehman, you may have a claim against him or her.

Question:
I owe about $5,000 in back taxes for which I have an installment plan. Due to several pay cuts, I have already lowered my installment payment to about $100 a month. I still find I cannot pay this most of the time and am trying to get out of a rental property that would help my cash flow tremendously. My question is, do I have any recourse to deal with the IRS and their threatening letters until then?
-- Jerry

Answer from Scott Testa, professor of business administration at Cabrini College in Philadelphia
Installment agreements are used by the IRS to collect taxes owed to them in small increments or payments. Installment agreements allow for the full payment of the tax debt in smaller, more manageable amounts.

Ultimately, these are agreements that are put in place when people cannot pay their liability in one lump sum. You can save money by paying the full amount you owe as quickly as possible to minimize the interest and penalties the IRS charges, which can be very steep. For those who cannot resolve their tax debt immediately, however, an installment agreement can be a reasonable payment option.

The worst thing you can do is ignore the IRS requests. You need to contact them immediately via phone or in person and state your case.

Taxpayers wishing to pay off a tax debt through an installment agreement, and owe:
  • $25,000 or less in combined tax, penalties, and interest can use the Online Payment Agreement, Form 9465, which is available online and can be mailed to the address on your tax bill. Note: If you recently filed your income tax return and owe but have NOT yet received a bill from the IRS, you can use the Online Payment Agreement to establish an installment agreement on current year returns. To determine the information needed to establish a pre-assessed installment agreement, refer to What Information Do I Need to Use OPA?
  • More than $25,000 in combined tax penalties and interest may still qualify for an installment agreement, but Collection Information Statement, Form 433F, may need to be completed for this process. Call the number on the tax bill or mail the Request for Installment Agreement, Form 9465 and Form 433F to the address on the bill. You will receive a written notification telling you whether your terms for an installment agreement have been accepted or if they need to be modified.
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