do I have to claim interest on my taxes?
I’ve never claimed interest on my taxes — now I’ve found out I’m supposed to. I earned 6 dollars from my checking account, and 2.44 from my son’s savings account (he’s a minor). In previous years, the amounts have been even less than this — often just pennies, so I assumed I didn’t need to claim it as income. This year, since I actually made a few dollars (8.44 in total) I’ve read the instructions on the tax form and it looks like you have to claim any amount of interest, plus fill in a form if you receive any of it as a ‘nominee’ for another person (which is what I assume the situation is with the bank account my son has that earned 2.44). Honestly, I’d rather just tell the bank to take the money back than have to fill out a separate tax form and then pay interest on the money. Is that really the case? What’s the point? Also, I’m worried about all the previous years that I never claimed interest, even though it was never more than a couple of dollars. Is the IRS going to come after me and make me pay huge penalties? I’ve heard of cases where people had to pay thousands of dollars even though they originally only owed a couple of dollars. Is that going to happen to me?
Originally posted 2010-04-29 06:03:34. Republished by Blog Post Promoter
,,Will I be able to use student loan interest paid during 2006-2007 on my 2008 tax return? Didn’t claim it in 07? ,Can I customer claim money back for taxes overcharged? ,Does a quick claim deed protect us from the IRS? ,How do I claim penalties and interest credit in my 2008 return? ,I haven’t filed taxes for 2005. The IRS says I owe tens of thousands in pentalties and interest. What do I do? ,Comments (2)
Sarah -
Although it seems small, you do need to pay taxes on interest earned (unless you earn less than 50 cents). For this year, your taxes may only be $1 or $2, depending on what tax bracket you’re in. For prior years, it may be less but then you may have to pay a few cents in penalties.
You’ll need to file an amended tax return for your prior years – you will probably want to have an accountant help you. They should be able to do that – plus your current return – for a reasonable amount. Also, since your only change is interest, they may be able to cut you a deal on the preparation fees.
For tax preparation help, you could try the site below…I found it very helpful and they are extremely fast and friendly. They are CPA’s but I think they moonlight and prepare taxes so they have “day jobs”…it’s not like they are doing it for the money. They’re just trying to help people out. Also, their rate can’t be beat…last year, I paid something like $50 and they prepared my return for me and got me the refund fast. I didn’t even have to do too much work…just sent them the forms I received in the mail (W-2, etc.) and I was done!
Yes you are required to claim the interest that’s in your name. Not your son’s – that’s HIS income and he’d be far below the amount where he has to file a return.
An amount like 6 or 8 dollars probably won’t even change your tax bill, and while you should have been reporting it, the IRS isn’t likely to care enough to come after you. Even if they did, which is so unlikely that you shouldn’t worry about it, a couple dollars wouldn’t have grown to thousands – $10 maybe……
If you get over $10 in one year, the institution will send you a 1099-int for it and report it to the IRS, and it will be in their computers so if any additional tax is due on it (still probably wouldn’t be) the computers would automatically send you a bill for the extra couple dollars.