I used TurboTax to prepare and file my tax return using the 1040PC form. The printed instruction told me to put the return and Form W-2 in one envelope; the voucher and check in another envelope. The only address supplied was the Austin, Texas center. I did exactly as instructed, then two days after the deadline I found out through someone else's IRS publication that returns without taxes due should go to Austin, while those with tax payments should go to Missouri! What should I do? -- Liem Nguyen Liem, According to the instructions for
Form 1040 , the Internal Revenue Service center in Austin serves four states: Texas, Kansas, New Mexico and Oklahoma. I assume you live in one of them. Since you apparently printed your tax return and mailed it, your return and your payment went to the right place, the Austin service center. Had you electronically filed your tax return, things would have been different. In that case, according to the instructions for Form 1040-V -- Payment Voucher, you would have been required to send your check to the St. Louis, Mo., service center. But Form 8453-OL -- U.S. Individual Income Tax Declaration for On-Line Services Electronic Filing, the signature form required with e-filing, would have gone to a second address in Austin. Again, the details are in the instructions for that form. Only slightly confusing, right? But what if you had sent your return or check to the wrong address? "It's not a problem," says IRS spokesman Don Roberts. Mailing returns and payments to the correct address helps the IRS sort everything out, says Roberts. If they go the wrong address, it slows things down, but there's no penalty to the taxpayer. It will be forwarded to the right address. Some IRS service centers process only payments -- not tax returns. So sending your payment to that proper address expedites the processing of your check. Yes, there is a rationale for these different addresses. The IRS process returns and payments in a specific order, so having them sorted at different locations helps cut down the confusion for the IRS (though not necessarily the taxpayer). First, the IRS processes your payments and cashes your checks ASAP. The returns that accompany the checks are set aside for later. Tax returns requiring a refund get attention next. The Service has 45 days from the April 17 deadline (or from the day it receives your return, if you filed late) to process your return. If not, it owes you interest on your refund. "But we make one heck of an effort to get them done," says Roberts. So don't bank on an IRS interest payment. When all the returns requiring a refund are done -- probably around the end of May -- the payment-due tax returns will be processed. Dear Dagen for more details on HOLDRs.) Since that gives you direct ownership of the stocks, the wash sale rule applies. Even if you don't redeem the HOLDRs, technically you still own them, says Erik Hendrickson, a Merrill Lynch spokesman. Remember the wash sale rule says that if you sell a security at a loss, you can't deduct the loss on your tax return as long as you acquire a "substantially identical" security 30 days before or after the sale. Read our mega-piece for further details on the wash sale. Let's say you sold 100 shares of Genentech ( DNA), the biotech company that uses human genetic information to develop pharmaceuticals, at a loss. (FYI: If you bought the stock on March 1, your position is down 48.4% as of April 27.) Instead, you decided to buy 100 shares of Biotech HOLDRs ( BBH) (which, by the way, are also down 44.1% over the same period). In this instance, you'd have a partial wash sale. Here's why. There are 22 shares of Genentech in each round lot of the Biotech HOLDRs. (Check out this section of the American Stock Exchange's Web site for more details.) So the loss on 22 of the Genentech shares you sold would be disallowed. Keep in mind that the disallowed loss can be added to the cost basis of the repurchased security. In other words, you can add the disallowed loss on your Genentech shares to the cost basis of your Biotech HOLDRs. But if you redeem the shares of the HOLDRs, you must attach that loss to the HOLDRs' Genentech shares only -- you can't apportion it among all the stocks in the HOLDRs, says Jim Calvin, an investment management tax partner at Deloitte & Touche in Boston and editor-in-chief of the Journal of Taxation of Investments. See this previous Tax Forum to help you figure out your basis in the HOLDRs after redemption.
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HOLDRs and the Wash Sale RuleIn the recent downturn, I sold several stocks. In every case, there were some shares that were sold at a loss. Can I get back into those stocks using HOLDRs before 60 days without losing the losses? Or is the answer "nice try"? -- Bob Zeek Bob, Nice try. The short answer is: The wash sale rule does indeed apply. Merrill Lynch's HOLDRs offer ownership in a basket of 20 stocks through a single investment. A perk to these securities is that you have the option to redeem them (in 100-share lots) and get shares of the underlying stocks in return. (See a recent
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