CLARK BEHIND THE HEADLINES

I talk about us all being part of a team: Team Clark. We'll get tips from listeners to my radio show, and I'll say to the listener, "You are now a member of our team." Well, just such a thing happened recently, and this story is all over the news now.

HLN's Money Expert Clark Howard

A listener called and she was talking about how when the feds redid withholding at people's work early this year, the consequences of that are going to be really awful for a lot of people when they file income tax after the first of the year.

It was called the Making Work Pay tax credit. The problem is that the feds apparently messed up the tables, didn’t take some things into account and were too generous. And there is now a guess from the IRS - are you ready for this number? - 15 million Americans may have to pay back some of that tax credit. That's going to be ugly.

Who are the likeliest, according to the IRS? If you moonlight at a second job, if you're married and both spouses work, or if you’re an early retiree who receives Social Security and works part time, your withholding could be all messed up and you may owe taxes that you ordinarily wouldn’t.

So you only have a few pay periods left this year if you fit any of those circumstances. If you can afford it in your budget, boost your withholding, which you can do very easily through a little form on the IRS website. Do that and you will eliminate some of the surprise that you would have when you do your returns next year.

As an alternative, what I would recommend you do is start a savings account now, and pop some money in it each week or each month or each pay period until April 15, so if you do end up with a significant tax bill due, you would have already budgeted for it and started saving for it. If you end up not owing money, look at the great thing that's occurred: you’ve saved money! And you know how much I like for you to do that.

HELP ME CLARK!

TERRI:

I recently discovered my stepson has never filed income taxes. He just turned 22 and worked when he was in high school. I'm trying to help him straighten this out, but I don't know where to start. He made approximately $45,000 in 2008 and I don't have all the W2s for the previous years. Any advice?

CLARK:

HLN's Money Expert Clark Howard

In recent years where he's been making a substantial amount of money, he needs to file a return and the IRS will actually help you with that.

I know that sounds crazy, but if you contact the IRS at the taxpayer advocate office and you tell them, "Hey, I didn't file I know I should have, I need your help in filing returns for the last three years,” you file returns, and if you don't owe money because of the amount that was already withheld then there's no harm, no foul.

If you owe money, you will pay the taxes you owe plus interest and penalties. But the amount you'll be charged if you come forward is more favorable than if they find you later.

For earlier years while he was a teenager, odds are that he didn't owe any money so there's no real problem not having filed, if there were years that there was no tax liability.

Clark Behind The Headlines
From HLN's Money Expert Clark Howard

I have a special warning for you, and I don’t want you to forget what I am about to tell you.

If you had to put your hands on your oldest tax returns, how many consecutive years can you go back and find those documents?

Most people who are very detail-oriented can go back six years, because the official answer has always been that you’re liable for your taxes going back six tax years.

The real and right answer is that from the point you become an adult and start filing a tax return, you want to have those records.

The rule of thumb has always been six years, but there’s a big exception: If you’re either accused of failing to file or have grossly underpaid your taxes at federal or state levels, you could be held liable for a tax bill from forever ago.

What’s been going on is that states have been starving for money. Many states have been going after people for tax debts from way back in the past.

There’s a story in the Chicago Tribune about a married couple getting hit for a tax due bill from 1983. That’s a long time ago, isn’t it? But some states need every penny they can get, and fair play doesn’t enter into this.

But this does not just apply to tax returns. In the last five years, parking tickets have become an issue. If you have ever received a parking ticket or a moving violation and have no proof of paying that ticket, the unfortunate circumstance is that people are getting billed for those old items.

But do you know that a parking ticket or a moving violation from 20 or 30 years ago can result in the suspension of your driver’s license?

There is a federal law that is designed to keep repeat D.U.I. offenders from jumping across state lines and getting a new license after their license has been revoked. But the law isn’t limited to that purpose.

And now, state and local governments desperate for revenue are using it to try to collect on parking tickets, and using the power to suspend your license to collect those tickets.

So keep your records whenever you do pay a ticket. Because otherwise, you might have to pay it a second time.