Helpful Tax Hints

Tax Irs Make sure you're getting every penny the IRS owes you.

by The Associated Press

Published: Mon, March 02, 2009 - 12:02 pm CST

What's new this year?
- It was a tough year in 2008. Is there any good news on taxes?

UNDATED (AP) - Financially speaking, 2008 was a year to forget.
Fortunately, the IRS is waiving late penalties, negotiating new
payment plans and putting off asset seizures for some delinquent
taxpayers who are hurting. That's as long as they make a good faith
attempt to settle their tax debts.
The government has given tax agents new authority to work with
folks who've fallen behind on their bills.
At the same time, this isn't a free ride for everybody. People
will need to demonstrate their inability to pay. Taxpayers who need
help are advised to call the IRS, or walk into a local office to
speak to a representative. Those who ignore collection notices or
fail to file tax returns won't find any sympathy from the tax
collector.

Help for distressed homeowners
- When a federal tax lien blocks a refinancing or home sale.

UNDATED (AP) - Troubles can escalate quickly when a person loses
his or her job or falls behind on income taxes or mortgage
payments.
Trying to provide some relief, the IRS has made changes to make
it easier for distressed homeowners to avoid having a federal tax
lien block either a mortgage refinancing or sale of a home. This is
where the government makes a claim on property where income taxes
are owed.
While it can take 30 days to process an application to get rid
of a tax lien, or to have it take a back seat to a lender's claim,
the IRS says it's working to speed the requests because of the
recession.
There's no official form for such a request, but Publication 784
provides additional information on this potentially troublesome challenge.

What if you've lost your job?

UNDATED (AP) - With so many people losing their jobs, Americans
are learning firsthand about the implications related to taxes.
First, you should know that severance pay and unemployment
checks are treated as income, and as such are taxable. And so are
any payouts coming from a former employer covering any unused
vacation and sick time you've piled up.
The good news is that some expenses involved with your search
for a new job may be deductible whether or not you actually get
that job. Such things as employment agency fees, resume help and
travel expenses for interviews fall into this area. Also
potentially deductible are moving costs you've had to pay out of
your own pocket because of a change in your work location. There
are some requirements you'll have to meet, however, involving the
timing of the move and the distance.

Why does this have to be so complicated?

UNDATED (AP) - The IRS Taxpayer Advocate is a kind of ombudsman
for the tax agency.
Nina Olson, who holds the post, complains that the nation's tax
code is so complicated that taxpayers pay nearly $200 billion a
year just to comply with its requirements.
She notes that Congress has been talking for years about
simplifying tax laws. But the tax code continues to grow, surging
to 3.7 million words at last count. She notes that it has grown by
at least a word a day over the past eight years.
Olson wants the IRS to do more to help people who have fallen
behind on their taxes, before taking the drastic and devastating
step of seizing assets. She says payment plans can be more
effective in collecting back taxes.

Choosing a tax professional
- Watch out for these red flags when hiring a tax pro.

UNDATED (AP) - For many people, the older they get, the more
complicated their lives become financially, and the more difficult
it is to accurately prepare their own tax returns.
And when it comes to tax preparation, that might mean you need
the help of a tax return specialist.
When shopping around for help, you should probably try to avoid
choosing someone who promises that they can get you a larger
refund.
And stay away from someone who guarantees results, or bases
their fees on a percentage of the refund given to you.
If you get audited, remember that only an enrolled agent, a tax
law specialist or a certified public accountant or tax attorney can
represent you before the IRS. You can check with your local Better
Business Bureau or the state bar association to see whether or not
a tax professional has a bad track record.

Tax guides

UNDATED (AP) - There are a number of printed tax guides
available to help you when it comes to filling out and filing your
return, either electronically or on paper.
One of the best deals around is the IRS' own Publication 17,
which is some 300 pages long. You can download it for free from the
IRS Web site, or request a printed copy over the phone. If you
don't want to go to the trouble and expense of printing it all out,
you can download the PDF file and keep it on your computer for use
when needed.
If you don't mind spending money on a commercially prepared
guide, one of the more popular versions is the J.K. Lasser guide
"Your Income Tax 2009." It weighs in at more than 800 pages. The
guide is user friendly, includes tax tables, a glossary as well as
some basic tax forms.

Credit for first-time homebuyers

UNDATED (AP) - For people who sense a bargain in depressed home
prices, some possible help from Uncle Sam.
For a limited time, there's a new tax credit available for
first-time homebuyers. It applies to home purchases made after
April 8, 2008.
Remember that a tax credit reduces your tax bill, or increases
your refund dollar-for-dollar. This is essentially an interest-free
loan from the government.
Taxpayers should claim the credit using new federal form 5405.
The credit is 10 percent of the purchase price for a single
taxpayer or a married couple filing jointly, or $7,500, whichever
is less. The maximum credit is available for homes costing at least
$75,000. And it is reduced or eliminated for higher-income
taxpayers.

Changes this tax season

UNDATED (AP) - There are a number of changes worth noting as you
fill out your 2008 tax return. They include increased exemptions
approved by Congress for the alternative minimum tax. It has risen
to nearly $70,000 for a married couple filing a joint return and
more than $46,000 for singles and heads of households.
Several breaks due to expire have been extended, including the
deduction for state and local sales taxes, a tuition and fees
deduction and an educator expense deduction.
The standard deduction, chosen by most taxpayers who prefer not
to itemize, has risen. It is $10,900 for married couples filing
jointly, and $5,450 for singles and married individuals filing
separate returns.

Didn't get your rebate in 2008?

UNDATED (AP) - There's a one-time tax credit available for
people who didn't get a full economic stimulus payment in 2008. If
your circumstances have changed making you newly eligible, the
recovery rebate credit may be worth pursuing.
The IRS will figure what the credit will be for individual
filers or you can do the figuring yourself. Among those who might
be eligible are families who had an additional child last year, and
people who didn't have a Social Security number in 2007, but
obtained one last year.
Unlike the stimulus payments which were made by check or direct
deposit, the credit adds to the amount of a tax refund, or
decreases the amount of taxes owed. The maximum payment was $600
per taxpayer, or $1,200 for those married filing jointly.

Gone phishing
- The high risk of being ripped off

UNDATED (AP) - Even with spam filters on their computers, people
get bombarded by e-mail scams, some of which involve income taxes
or the IRS. For the scammers, tax filing season means opportunities
to try to fool people.
The goal of these crooks is to get people to provide their
personal and financial information, whether it is Social Security,
bank account or credit card numbers. Then, they can steal money
through identity theft. How to know whether it's a "phishing"
scheme? Remember, the IRS does not send unsolicited e-mail about
tax matters to individuals, businesses or other taxpayers. The
typical scam e-mail isn't personalized because the senders
typically need to send messages in large volume to successfully
trip someone up. The IRS asks that if you have gotten what appears
to be a suspicious e-mail, that you forward it to the agency. You
can find out how on the IRS Web site.

The right form for you

UNDATED (AP) - There's a choice to make when filing your federal
income taxes. You'll need to choose from one of three tax forms,
whether filing electronically or on paper.
The 1040EZ is the simplest tax form that you can file, and is
ideal for people who have less complicated finances. Use the 1040EZ
when your income is primarily from salary or wages and is below
$100,000, your filing status is single or married filing jointly.
The 1040A is the way to go when your income is below 100K, you
are claiming certain tax credits and deductions for IRA contributions, student loan interest or higher education costs or
have capital gains distributions.
If you need to itemize your deductions, or your income is
$100,000 or more, then the long form 1040 is the way to go. It also
is needed for reporting income from self-employment, or from the
sale of a property.

Taxing mistakes
- If you filed a return and then realize that you goofed.

UNDATED (AP) - We're only human after all. Given that, and the
fact that filing income tax forms can be complicated stuff, there
is a risk of making an honest mistake. So, what do you do if you've
filed a federal return and realize after the fact that you made a
mistake?
If it is a simple math error, chances are that it will be caught
and corrected by the IRS as the return is processed.
If you didn't report all of your income or failed to claim a tax
credit that you are due, then you should file an amended return,
using Form 1040X.
Submit it after you get your refund, or by the time the return
is due, whichever comes first.
If you need to file an amended return, do it within 3 years
after the date you filed the original, or within 2 years after the
date you paid the tax, whichever is later. A return filed early is
considered filed on its due date.

Changes for 401b retirement plans

UNDATED (AP) - If you teach, or are otherwise working in the
nonprofit world, tougher IRS rules cover your retirement plan.
The result for millions of workers is fewer investment choices
and tighter restrictions how funds may be used.
The changes involve 403(b) plans. For the past 40 years, these
plans have been allowed to operate with less oversight than the
401(k) plans in the for-profit sector.
It means employers now have to take a more active role in
managing the plans. The IRS is requiring organizations offering
403(b) plans to adopt more detailed documents listing specific
vendors, eligibility rules and guidelines for withdrawals, as well
as loans and distribution upon retirement. While the goal is to
provide improved retirement plans for these workers, some employers
have been left with higher-cost investment options. Many employees
are having to switch their investment providers.

A good time to study
- When the job market is weak, study hard and possibly save on
your taxes.

UNDATED (AP) - With job opportunities in short supply, the
attraction of either going to college or staying in school becomes
greater.
For those looking to get smarter, there's a payoff come tax time
that will make you feel intelligent as well.
That's because you may be able to deduct eligible tuition and
related expenses that you pay for either yourself, a spouse or a
dependent.
It might be that you claim one or more adjustment to your income
or you are eligible for the Hope or Lifetime Learning Credit. Another option is claiming certain education costs as business
expenses.
The deductions begin to phase out or are eliminated as taxable
income rises.
For more information, check out the free IRS Publication 970.

Tax advice for the unemployment

UNDATED (AP) - If you've lost your job, it is time to think
about letting the tax system work for you. The folks who publish
the "JK Lasser Your Income Tax" guide have some suggestions.
First, if you are collecting unemployment benefits, remember that
they are taxable. But you can elect to have the federal income tax
withheld from your benefits. That could help you to avoid paying
later.
If you are continuing your health benefits, the JK Lasser people
remind us that you may be able to deduct what you pay to your
former employer for COBRA health insurance coverage, but only if you itemize your medical expenses. Only medical costs that are more
than 7.5% of your adjusted gross income is deductible as an
itemized deduction. If your old employer decides to continue your
health care coverage at its expense, that benefit is tax free, even
if you are no longer at work.

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