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When to file an amended tax return – Macomb Daily

Q: My neighbor mentioned that I-bonds pay 7.12%. What are I-bonds? Why do these bonds pay over 7% when most banks pay close to zero?

A: I-bonds are savings bonds guaranteed by the US government. The I stands for inflation-adjusted bonds. The current interest rate is 7.12% and resets every six months on May 1 and November 1. The interest rate is high because the inflation rate is high. For more information, visit treasurydirect.gov.

Q: What is the base of funds in a traditional IRA?

A: The base of the IRA is the funds in a traditional IRA that have already been taxed, either as non-deductible IRA contributions or as after-tax rollovers from retirement plans. You must track your basis to determine the taxable portion of any future distribution. The basis of the IRA is tracked by IRS Form 8606, which must be filed when after-tax dollars are added to a traditional IRA and when future distributions are made. Form 8606 keeps a historical cumulative record of the IRA base, but this form is only as good as the entry. Many inherited IRAs ignore Form 8606 and beneficiaries pay unnecessary double taxes.

Q: Is it necessary to keep track of the basis in a ROTH IRA since all money is after-tax money?

A: In most cases, this doesn’t matter, except when you withdraw money before five years and the owner of ROTH is under 59.5 years old. To calculate the amount excluding taxes, you must follow the ROTH ordering rules. The first ROTH dollars released are ROTH contributions, then ROTH conversions, and finally earnings. For the ROTH conversion, the funds go first in, first out, and if the conversion included both pre-tax and post-tax funds, the pre-tax funds are distributed first. ROTH contributions and conversions can still be withdrawn tax-free at any time. However, ROTH conversions not held for five years are subject to the 10% early distribution penalty if withdrawn before age 59.5.

Q: My brother made a math error on his 1040 tax return. Should he file an amended return?

A: If it’s an addition or subtraction error, the IRS will correct it automatically and your brother won’t need an amended form. If your brother forgot to add income or deduct an expense, he must complete an amended form.

Q: Are alimony received taxable?

A: Yes, all support payments received are taxable income.

Q: I have accumulated significant airline miles from my company. Are these airline miles taxable if I use them for personal travel?

A: Frequent airline miles are not taxable for employees if used for personal purposes.

Q: I have five IRAs and will be 72 in September 2022. When should I make my first distribution? Do I have to take a distribution from each IRA?

A: Your first Required Minimum Distribution (RMD) must be made before April 1, 2023. Additionally, another RMD must be made before December 31, 2023. Optionally, you can take your first RMD before December 31, 2022 and the next before December 31, 2023. The RMD can be from a single IRA or any combination of IRAs. Each IRA trustee will contact you about the RMD. You must aggregate your IRAs to determine your annual RMD.

Q: Are there any changes to the rules for Social Security survivor benefits?

A: No, surviving spouses who are equally entitled to both pension benefits can always choose to apply for survivor benefits first and then move on to their own pension benefits, or vice versa.

Q: My wife answered a suspicious phone call from the IRS demanding immediate payment of taxes owed. The caller pressured my wife for banking information and threatened that my bank accounts would be frozen and the collection process would begin if no payment was made. Would you confirm that the phone call from the IRS was fake?

A: The phone call was fake. The IRS does not threaten taxpayers and never demands immediate payment. If you receive one of these phone calls, write down the number and hang up. Remember that some scammers use what you say to create a profile that they hone for future scams. Report the phone call to the Treasury Inspector General for Tax Administration (TIGTA) and the IRS. This involves contacting TIGTA through their “Report a Crime or IRS Employee Misconduct” page or calling 800-366-4484.

David Dalton

Richard Rysiewski

Useful phone numbers for any tax questions:

• IRS Help (800)829-1040 • MI Help (517)636-4486

• IRS Forms (800)829-3676 • MI Forms (517)636-4486

• IRS refund information. (800)829-4477 • MI reimbursement information. (517)636-4486

Useful websites:

• irs.gov

• michigan.gov/revenuetax

Richard Rysiewski, a Certified Financial Planner®, welcomes all questions on tax and financial matters. Please send to Richard Rysiewski, Financial Doctor, 3001 Hartford Lane, Shelby Twp., MI 48316 or call (248) 651-7710.