Q. I just completed my return and find that I owe the IRS money. What should I do?
A. You should file the return even if you can't pay all of the money you owe. File by April 15 and pay as much as possible. By filing on time, you avoid the late filing penalty. By paying as much as possible you reduce the amount of interest and penalties.

Q. Can I make installment payments on the amounts I owe?
A. Yes. However, you will be charged interest and late payment penalty on the tax not paid by April 15, even if your request to pay in installments is granted.

Q. I received an IRS notice. I've contacted the IRS at least 3 times about it, but the problem still hasn't been fixed. What can I do?
A. The IRS has a Problem Resolution Program to deal with problems of this kind. Call your local IRS office and ask for Problem Resolution assistance.

Q. What records should I keep?
A. You must keep records so that you can prepare a complete and accurate tax return. The law does not require any special form of records. However, you should keep all receipts and cancelled checks or other proof of payment.

Q. My mother died last June and I inherited a house that she purchased many years ago. How do I compute my gains or losses?
A. Your cost basis in property that you inherit is usually the fair market value at the date of the decedent's death. You should have the house appraised if the sale will not take place within six months of your mother's death.

Q. Can I take an IRA deduction if I am covered by a pension plan at work?
A. Generally you can not take an IRA deduction if you are covered by a pension plan at work. However, if your adjusted gross income is under a certain amount, you will be able to take the deduction or at least a percentage of it.

Q. For several years, I've been a self-employed consultant and have been contributing to a Keogh account. In 1994, I started a catalogue mail order business, and would now like to make Keogh contributions for the new business. Do I have to incur the cost of setting up a second Keogh plan or can I avoid the extra cost and administrative paperwork merely by contributing to the established plan?
A. Although there is no specific statute or regulation that prevents you from setting up one Keogh plan for multiple businesses there are provisions which imply that separate Keogh plans must be used for each.

Q. I've taken an early retirement at age 50 and I will receive a pension from my company. I also have an IRA account of $100,000 from which I would like to withdraw money to supplement my income. May I do this without incurring the 10% penalty tax on early distribution before age 59 1/2.
A. Yes, you may start taking early retirement distributions provided you do it under an annuity-like schedule allowed by law. The annuity payments may be limited to the period during which you are under age 59 1/2. During this period the arranged annuity-type schedule may not be changed.

Q. I refinanced my home in 1995 and paid `points.` Can I deduct the entire amount as interest on my 1995 return?
A. No. Points paid solely to refinance your home cannot be deducted in full in the year paid. Instead, they must be amortized over the life of the loan. For more details get Pub. 936, Home Mortgage Interest Deduction.

Q. I'm single, live alone, and have no dependents. Can I file as head of household?
A. No. To file as head of household, you must have paid over half the cost of keeping up a home for a child or other qualifying person.

Q. I received an IRS notice. I've contacted the IRS at least 3 times about it, but the problem still hasn't been fixed. What can I do?
A. The IRS has a Problem Resolution Program to deal with problems of this kind. Call your local IRS office and ask for Problem Resolution assistance.

Q. For how long should I keep employees records?
A. You must keep all your records on employment taxes (income tax withholding, Social Security, Medicare, and federal employment tax) for at least four years after the due date or the date the tax is paid, whichever is later.

Q. What is a CALENDAR TAX YEAR, a FISCAL TAX YEAR or a SHORT YEAR?
A. A calendar year always ends on December 31. If you adopt the calendar year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year.

A regular fiscal tax year is 12 consecutive months ending on the last day of any month except December. If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year.

A short tax year is a tax year of less than 12 months. There are two situations that can result in a short tax year. The first usually occurs in the first year of business operations. The second occurs when you change your accounting period. Each situation results in a different way of figuring tax for the short tax year.

Q. What is cost basis?
A. When you make a capital expense your cost becomes a part of `basis.` Basis is a way of measuring your investment in your business and its assets for tax purposes. It is used in many ways: to figure gain or loss on a sale; to figure the amount of a casualty loss; to figure depreciation deductions, etc. Your original basis in an asset is the amount you must spend to acquire it.

Q. How do I deduct the business start up costs and capital expenses such as equipment, improvements and computers?
A. Although you generally cannot directly deduct a capital expense, you can often "recover" your cost (i.e., subtract it from income) one part at a time over a number of years. This is done by deducting a percentage each year under one of the following methods: Depreciation, Amortization or Depletion.

Q. I just completed my return and find that I owe the IRS money. What should I do? A. You should file the return even if you can't pay all of the money you owe. File by April 15 and pay as much as possible. By filing on time, you avoid the late filing penalty. By paying as much as possible you reduce the amount of interest and penalties.

Q. Can I make installment payments on the amounts I owe?
A. Yes. However, you will be charged interest and late payment penalty on the tax not paid by April 15, even if your request to pay in installments is granted.

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