Difference between revisions of "Directory:IRS Tax Tips"

MyWikiBiz, Author Your Legacy — Monday November 18, 2024
Jump to navigationJump to search
(TT-2008-28: Can You Use Schedule C-EZ?)
 
(39 intermediate revisions by the same user not shown)
Line 25: Line 25:
 
# Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
 
# Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
 
# Get the right forms. They’re available around the clock on the IRS Web site, [http://irs.gov/ IRS.gov].
 
# Get the right forms. They’re available around the clock on the IRS Web site, [http://irs.gov/ IRS.gov].
−
# Take your time. Don’t forget to leave room for a coffee break when filling out your tax return as rushing can mean making a mistake.
+
# Take your time. Don’t forget to leave room for a [http://www.mywikibiz.com/coffee/ coffee] break when filling out your tax return as rushing can mean making a mistake.
 
# Double-check your math and verify all Social Security numbers. These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS and speed up your refund.
 
# Double-check your math and verify all Social Security numbers. These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS and speed up your refund.
 
# E-filing is easy. E-filing catches math errors and provides confirmation your return has been received and gives you a faster refund.
 
# E-filing is easy. E-filing catches math errors and provides confirmation your return has been received and gives you a faster refund.
Line 32: Line 32:
  
 
Are you concerned that your efforts to get ready early may be affected by the Alternative Minimum Tax legislation passed by Congress in December?  Most individuals will not be impacted, so it is still a good idea to get an early start on your preparations.  Even if you are filing one of five forms affected by the recent legislation, the IRS expects to be ready for your return by February 11.  You can review a list of the impacted forms and find out the latest news about when the IRS will be ready for your return at [http://irs.gov/ IRS.gov].
 
Are you concerned that your efforts to get ready early may be affected by the Alternative Minimum Tax legislation passed by Congress in December?  Most individuals will not be impacted, so it is still a good idea to get an early start on your preparations.  Even if you are filing one of five forms affected by the recent legislation, the IRS expects to be ready for your return by February 11.  You can review a list of the impacted forms and find out the latest news about when the IRS will be ready for your return at [http://irs.gov/ IRS.gov].
−
 
  
 
==  TT-2008-02: SHOULD YOU FILE A TAX RETURN? ==
 
==  TT-2008-02: SHOULD YOU FILE A TAX RETURN? ==
Line 508: Line 507:
  
 
Using Schedule C-EZ can save time and reduce paperwork burden for eligible businesses. More information about Schedule C-EZ and reporting net profit for sole proprietorships can be found on the IRS Web site at IRS.gov.
 
Using Schedule C-EZ can save time and reduce paperwork burden for eligible businesses. More information about Schedule C-EZ and reporting net profit for sole proprietorships can be found on the IRS Web site at IRS.gov.
 +
 +
== TT-2008-29: DIRECT DEPOSIT AND SPLIT REFUND ==
 +
 +
Taxpayers have choices and flexibility for the direct deposit of 2007 federal income tax refunds. They can:
 +
 +
* Split their refunds among up to three accounts held by as many as three different U.S. financial institutions, such as banks, mutual funds, brokerage firms or credit unions;
 +
* Direct deposit their refunds to one account; or
 +
* Opt to receive a slower paper check through the mail.
 +
 +
The split-refund option is available to taxpayers who choose direct deposit regardless of whether they filed the original returns on paper or in electronic format using Form 1040, 1040A, 1040EZ, 1040-PR, 1040NR, 1040NR-EZ or 1040-SS. However, taxpayers filing Form 8379, Injured Spouse Allocation, cannot opt to split their refunds.
 +
 +
To split direct deposit refunds among two or three accounts or financial institutions, taxpayers should complete IRS Form 8888, Direct Deposit of Refund to More Than One Account. Taxpayers can continue, though, to use the direct deposit line on Form 1040 to electronically send their refunds to one account.
 +
 +
The IRS will electronically deposit refunds to taxpayers’ accounts held by a U.S. financial institution, provided that an accurate account number and American Bankers Association (ABA) routing number is supplied and the financial institution accepts direct deposits for the type of accounts designated. Taxpayers should verify routing and account numbers with their financial institutions. IRS assumes no responsibility for taxpayer or preparer error.
 +
 +
Note that taxpayers can do things much faster electronically than by paper. For those filing their taxes electronically, the refund is usually deposited in their account within two weeks. A paper check refund generally takes about three weeks. For those filing taxes on paper, the process is longer. They get their direct deposit refund in around four to six weeks, while paper checks take six weeks or so.
 +
 +
By using the IRS’ popular Where’s My Refund? feature at IRS.gov, taxpayers can check the status of their refunds. Refund information is available in both English and Spanish. Taxpayers without Internet access can call 800-829-1954.
 +
 +
== TT-2008-30: WHAT INCOME IS TAXABLE? NONTAXABLE? ==
 +
 +
Generally, most income you receive is taxable. But there are some situations when certain types of income are partially taxed or not taxed at all. A comprehensive list is available in IRS Publication 525, Taxable and Nontaxable Income.
 +
 +
Some common examples of items that are not included in your income are:
 +
 +
* Adoption Expense Reimbursements for qualifying expenses
 +
* Child support payments
 +
* Gifts, bequests and inheritances
 +
* Workers' compensation benefits
 +
* Meals and Lodging for the convenience of your employer
 +
* Compensatory Damages awarded for physical injury or physical sickness
 +
* Welfare Benefits
 +
* Cash Rebates from a dealer or manufacturer
 +
* Tax Exempt Interest from municipal bonds and tax exempt bond mutual funds. Although this interest is usually not taxed it must be reported on line 8b of Form 1040 or 1040A.
 +
 +
Examples of items that may or may not be included in your income are:
 +
 +
* '''Life Insurance'''. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
 +
* '''Scholarship or Fellowship Grant'''. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
 +
 +
All other items, unless specifically excluded by law, must be included in your income. This income may be in a form other than cash. For example:
 +
 +
* '''Bartering'''. Bartering is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included on Form 1040 in the income of both parties.
 +
 +
These examples are not all-inclusive. For more information, visit the IRS Web site at IRS.gov to view or download Publication 525 from the Forms and Publications section or call 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-31: ARE YOUR SOCIAL SECURITY BENEFITS TAXABLE? ==
 +
 +
How much, if any, of your social security benefits are taxable depends on your total income and marital status. Generally, if social security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.
 +
 +
If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. Your taxable benefits and modified adjusted gross income are figured in a worksheet in the Form 1040A or Form 1040 Instruction booklet.
 +
 +
Before you go to the instruction book, do the following quick computation to determine whether some of your benefits may be taxable:
 +
 +
* First, add one–half of the total social security you received to all your other income, including any tax exempt interest and other exclusions from income.
 +
* Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
 +
 +
The 2007 base amounts are:
 +
 +
* $32,000 for married couples filing jointly
 +
* $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year
 +
* $0 for married persons filing separately who lived together during the year
 +
 +
For additional information on the taxability of social security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-32: PAYING OR RECEIVING ALIMONY? ==
 +
 +
If you were recently divorced and are paying or receiving alimony under a divorce decree or agreement, you need to consider the tax implication for your 2007 federal income tax return.
 +
 +
Here are the general guidelines:
 +
 +
Alimony payments received from your spouse or former spouse are taxable to you in the year you receive them. Because no taxes are withheld from alimony payments, you may need to make estimated tax payments or increase the amount withheld from your paycheck.
 +
 +
Alimony payments you make under a divorce or separation instrument are deductible if certain requirements are met. Any payments not required by such a decree or agreement do not qualify as deductible alimony payments.
 +
 +
Child support you pay is never deductible. Child support you receive is not taxable.
 +
 +
If you paid or received alimony you must use Form 1040. You cannot use Form 1040A or Form 1040EZ. If you received alimony, you must give the person who paid the alimony your social security number or you may have to pay a $50 penalty.
 +
 +
For more information, including rules for divorces and separations before 1985, get Publication 504, Divorced or Separated Individuals, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-33: TIPS ARE SUBJECT TO TAXES ==
 +
 +
Do you work at a hair salon, barber shop, casino, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those and other services is taxable income.
 +
 +
Here are some tips about tips:
 +
 +
* '''Tips are taxable.''' Tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well.  The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.
 +
* '''Include tips on your tax return.''' You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.
 +
* '''Report tips to your employer.''' If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
 +
* '''Keep a running daily log of your tip income. '''You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income. For a free copy of Publication 1244, call the IRS toll free at 800-TAX-FORM (800-829-3676).
 +
 +
For more information, check out IRS Publication 531, Reporting Tip Income, or Publication 3148, Tips on Tips.  They are available by calling 800-TAX-FORM (800-829-3676) or by going to the IRS Web site at IRS.gov.
 +
 +
== TT-2008-34: GAMBLING INCOME AND LOSSES ==
 +
 +
Gambling winnings are fully taxable and must be reported on your tax return. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes.
 +
 +
Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld income federal taxes from the payment.
 +
 +
Here are some general guidelines on gambling income and losses:
 +
 +
* '''Reporting winnings''': The full amount of your gambling winnings for the year must be reported on line 21, Form 1040. You may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form.
 +
* '''Deducting losses''':  If you itemize deductions, you can deduct your gambling losses for the year on line 28, Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings.
 +
 +
It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
 +
 +
For more information see IRS Publication 529, Miscellaneous Deductions, or Publication 525, Taxable and Nontaxable Income, both available on the IRS Web site, IRS.gov, or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-35: TAX FACTS ABOUT CAPITAL GAINS AND LOSSES ==
 +
 +
Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only capital losses on investment property, not personal property.
 +
 +
Here are a few tax facts about capital gains and losses:
 +
 +
* Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
 +
* Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
 +
* Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss.
 +
* The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2007, the maximum capital gains rates are 5%, 15%, 25% or 28%.
 +
* If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).
 +
 +
For more information about reporting capital gains and losses, get Publication 17, Your Federal Income Tax, and Publication 550, Investment Income and Expenses, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-36: TAXES ON EARLY DISTRIBUTIONS FROM RETIREMENT PLANS ==
 +
 +
Payments that you receive from your IRA or qualified retirement plan before you reach age 59½ are normally called ‘early’ or ‘premature’ distributions. These funds are subject to an additional 10 percent tax and must be reported to the IRS.
 +
 +
There are a number of exceptions to this additional tax. Some exceptions apply only to IRAs, some only to qualified retirement plans, and some to both.
 +
 +
If you don’t qualify for an exception, the 10 percent tax on early distributions applies to the portion of the distribution that is taxable. If you received a distribution from an IRA, other than a Roth IRA, to which you made any nondeductible contributions, the portion of the distribution attributable to those contributions is not taxed. If you received an early distribution from a Roth IRA the distribution attributable to contributions is not taxed.  If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.
 +
 +
A ‘rollover” is a way to avoid paying tax on early distributions. Generally, a rollover is a tax-free transfer of cash or other assets from an IRA or qualified retirement plan to another eligible retirement plan. An eligible retirement plan is a traditional IRA, a qualified retirement plan, or a qualified annuity plan. You must complete the rollover within 60 days after the day you received the distribution. The amount you roll over is generally taxed when the new plan pays you or your beneficiary.
 +
 +
For more information see IRS Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), Publication 575, Pension and Annuity Income, or Publication 590, Individual Retirement Arrangements (IRAs), available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-37: INCOME FROM FOREIGN SOURCES ==
 +
 +
Many United States citizens and resident aliens receive money from foreign sources. These taxpayers must remember that they must report all such income on their tax return, unless it is exempt under federal law.
 +
 +
U.S. citizens and residents are taxed on their worldwide income. This applies whether a person lives inside or outside the United States. Foreign income  must be reported on a  U.S. tax return whether or not the person receives a Form W-2, Wage and Tax Statement, a Form 1099 (information return) or the foreign equivalent of those forms.
 +
 +
Foreign source income includes but is not limited to earned and unearned income, such as:
 +
 +
* Wages and tips
 +
* Interest
 +
* Dividends
 +
* Capital Gains
 +
* Pensions
 +
* Rents
 +
* Royalties
 +
 +
An important point to remember is that individuals living outside the U.S. may be able to exclude up to $85,700 of their 2007 foreign earned income if they meet certain requirements. However, the foreign earned income exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S.
 +
 +
For more information, check out IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. It’s available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-38: TAX RATES FOR A CHILD'S INVESTMENT INCOME ==
 +
 +
Part or all of a child's investment income may be taxed at the parent's rate rather than the child's rate. Because a parent's taxable income is usually higher than a child's income, the parent's top tax rate will often be higher as well.
 +
 +
This special method of figuring the federal income tax only applies to children who are under the age of 18. For 2007, it applies if the child's total investment income for the year was more than $1,700. Investment income includes interest, dividends, capital gains, and other unearned income.
 +
 +
To figure the child's tax using this method, fill out Form 8615, Tax for Children Under Age 18 With Investment Income of More Than $1,700, and attach it to the child's federal income tax return.
 +
 +
Alternatively, a parent can, in many cases, choose to report the child's investment income on the parent's own tax return. Generally speaking, this option is available if the child's income consists entirely of interest and dividends (including capital gain distributions) and the amount received is less than $8,500.  However, choosing this option may reduce certain credits or deductions that parents may claim.
 +
 +
For 2007, these special tax rules do not apply to investment income received by children who are age 18 and over. In addition, wages and other earned income received by a child of any age are taxed at the child's normal rate.
 +
 +
More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Form 8615 are available on the IRS Web site at IRS.gov in the Forms and Publications section. You may also order them by calling the IRS at 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-39: IRS TOLL-FREE HELP ==
 +
 +
Free tax help from the IRS is just a phone call away. The IRS provides various services through its toll-free telephone numbers.  Some of these services are available 24 hours a day.
 +
 +
* '''Ask questions about your tax return.''' You can call the IRS Tax Help Line for Individuals customer service line, 800-829-1040, to get answers to your federal tax questions. The IRS Tax Help Line is available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time.
 +
* '''Order forms and publications.''' Call 800-TAX-FORM (800-829-3676). Copies of forms, publications and other helpful information are also available around-the-clock at the IRS Web site at [http://www.irs.gov/ www.irs.gov].
 +
* '''Check the status of your refund.'''  Call the Refund Hotline at 800-829-1954. You will need to know your filing status and the exact whole-dollar amount of your expected refund. The Refund Hotline is available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time. TeleTax, the automated refund line, at 800-829-4477 is available around the clock and will also let you check the status of your income tax refund. Automated refund information is generally available four to five weeks after you have filed your tax return. You can also check the status of your refund at IRS.gov by clicking on Where’s My Refund? This service is available 24 hours a day, seven days a week.
 +
* '''Recorded tax information:'''  The TeleTax line at 800-829-4477 has recorded messages covering more than 100 tax topics. Topics include items such as Who Must File?, Highlights of Tax Changes, Education Credits, Individual Retirement Accounts, Earned Income Tax Credit, What to Do if You Can't Pay Your Tax and more.
 +
* '''Hearing-impaired individuals with access to TTY/TDD equipment.'''  Call 800-829-4059 to ask questions or to order forms and publications. This number is answered only by TTY/TDD equipment. The TTY/TDD numbers are available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time.
 +
 +
The automated services offered on the IRS toll-free lines are also available 24 hours a day 7 days a week on the Internet at IRS.gov.
 +
 +
== TT-2008-40: FREE TAX HELP FOR THE MILITARY ==
 +
 +
If you, or your spouse, are a member of the military, you may be eligible to receive free assistance with the preparation and filing of your federal tax return. The U.S. Armed Forces participate in the Volunteer Income Tax Assistance Program (VITA). The Armed Forces Tax Council (AFTC) oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. The AFTC consists of tax program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard.
 +
 +
Military-based VITA sites provide free tax advice, tax preparation, return filing and other tax assistance to military members and their families. The volunteer assistors are trained to address military-specific tax issues, such as combat zone tax benefits.
 +
 +
Military commanders support the program by detailing members of the military to prepare returns and by providing space and equipment for tax centers. The IRS supports these efforts by providing tax software and training.
 +
 +
To receive this free assistance, you should bring the following records to your military VITA site:
 +
 +
* Valid photo identification
 +
* Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration
 +
* Birth dates for you, your spouse and dependents
 +
* Current year’s tax package, if you received one
 +
* Wage and earning statement(s) -- Form W-2, W-2G, 1099-R
 +
* Interest and dividend statements (Forms 1099)
 +
* A copy of last year’s federal and state tax returns, if available
 +
* Bank routing numbers and account numbers for direct deposit
 +
* Total amount paid for day care
 +
* Day care provider’s identifying number
 +
* Other relevant information about income and expenses
 +
 +
If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.
 +
 +
For more information, review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at IRS.gov or order a free copy by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-41: FREE TAX SERVICES ==
 +
 +
The IRS provides free publications, forms and other tax material and information to help taxpayers meet their tax obligations.  Free help is available on the IRS website, by phone, at local IRS offices and at many community locations.
 +
 +
* '''IRS.gov''' You can access free tax information at IRS.gov. At 1040 Central on the Individuals page, you can obtain forms, instructions and publications, learn about IRS e-file, determine your eligibility for the Earned Income Tax Credit, read about the latest tax changes and find answers to Frequently Asked Questions. Most taxpayers can use Free File, available only through the IRS.gov Web site, to electronically prepare and file their federal tax return – for free! You can also check the status of your refund at IRS.gov by clicking on Where’s My Refund, a service available 24 hours a day, seven days a week.
 +
* '''Telephone'''  Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers to your federal tax questions. To order free forms, instructions and publications call 800-829-3676. To hear pre-recorded messages covering various tax topics or check on the status of your refund, call 800-829-4477. TTY/TDD users may call 800-829-4059 to ask tax questions or to order forms and publications.
 +
* '''Community Resources'''  Free tax preparation is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs in many communities. Volunteer return preparation programs provided through IRS and its partners offer free help in preparing simple tax returns for low- to moderate-income taxpayers. Call 800-829-1040 to find the VITA or TCE site nearest you. You may also call AARP — the largest TCE participant — at 888-227-7669 (888-AARPNOW) or access [http://www.aarp.org/ www.aarp.org] to find the nearest Tax-Aide site.
 +
* '''Taxpayer Assistance Centers''' When you believe your tax issue cannot be handled online or by phone, and you want face-to-face assistance, you can find help at a local Taxpayer Assistance Center.  Locations, business hours and an overview of services are at IRS.gov.
 +
 +
For more information about services provided by the IRS, review Publication 910, IRS Guide to Free Tax Services available at IRS.gov or by calling 800-829-3676.
 +
 +
== TT-2008-42: VOLUNTEER TAX RETURN PREPARATION ==
 +
 +
Are you puzzled by the tax law and which credits and deductions you can take? If so, then why not look into the free, IRS-sponsored, volunteer tax return preparation services?
 +
 +
''Note: Many low-income individuals receiving Social Security, Railroad Retirement, certain veterans benefits, or a small amount of earned income who usually do not file a tax return may want to utilize IRS free services this year. Individuals who might not otherwise be required to file a 2007 tax return will need to file a return this year to receive an economic stimulus payment. For more information see IRS Fact Sheet FS 2008-16 Stimulus Payments: Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans'' Benefits.''  [http://www.irs.gov/irs/article/0,,id=179096,00.html IRS Fact Sheet 2008-16]
 +
 +
For quick refunds, most sites also offer free electronic filing of your tax return. The IRS offers:
 +
 +
* Volunteer Income Tax Assistance (VITA) offers free tax help to people whose incomes are $40,000 or less. Volunteers sponsored by various organizations receive training to prepare basic tax returns in communities across the country. VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations.
 +
* Tax Counseling for the Elderly (TCE) provides free tax help to people aged 60 and older. Trained volunteers from non-profit organizations provide free tax counseling and basic income tax return preparation for senior citizens. Volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.
 +
* AARP Tax-Aide counseling, part of the IRS-Sponsored TCE Program, AARP offers the Tax-Aide counseling program at thousands of sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income with special attention to those aged 60 and older. To locate the nearest AARP Tax-Aide site in your community, call 888-227-7669 (888-AARPNOW) or visit AARP's Web site at www .aarp.org.
 +
 +
Filing your taxes can be easy and free. Take advantage of a volunteer assistance program in your area to receive free income tax preparation assistance. Locations and hours of operation are often available through city information hotlines and local community organizations. Local volunteer tax preparation site information is also available by calling the IRS toll-free number 1-800-829-1040.
 +
 +
== TT-2008-43: ARE YOU ELIGIBLE FOR A TAX CREDIT? ==
 +
 +
Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns.  A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes.
 +
 +
Taxpayers should consider their eligibility for the credits listed below:
 +
 +
* The Earned Income Tax Credit is a refundable credit for low-income working individuals and families.  Income and family size determine the amount of the credit.  For more information, see IRS Publication 596, Earned Income Credit.
 +
* The Child and Dependent Care Credit is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
 +
* The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
 +
* Adoption Credit Adoptive parents may qualify for a tax credit of up to $11,390 for qualifying expenses paid to adopt each eligible child. The credit may be allowed for the adoption of a child with special needs even if you do not have any qualifying expenses. For more information, see the instructions for Form 8839, Qualified Adoption Expenses.
 +
* Credit for the Elderly or the Disabled This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations. For more information, see IRS Publication 524, Credit for the Elderly or the Disabled.
 +
* Savers Credit (formally called the Retirement Savings Contribution Credit) You may be able to take the credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans. For more information, see IRS Publication 590, Individual Retirement Accounts.
 +
 +
There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check the instructions for Form 1040, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-44: BEWARE OF TAX SCAMS ==
 +
 +
Don’t fall victim to tax scams. These schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.
 +
 +
The IRS suggests that you remember three important guidelines:
 +
 +
* You are responsible and liable for the content of your tax return.
 +
* Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and
 +
* Never sign a tax return without looking it over to make sure it is accurate.
 +
 +
Beware of these common schemes:
 +
 +
'''Return Preparer Fraud:'''
 +
 +
Dishonest tax return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares your tax return you are ultimately responsible for its accuracy and for any tax bill that may arise due to a questionable claim.
 +
 +
'''Identity Theft:'''
 +
 +
It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes or scammers posing as the IRS itself. The IRS does not use e-mail to contact taxpayers about issues related to their accounts. If you have any doubt whether a contact from the IRS is authentic call 800-829-1040 to confirm it.
 +
 +
'''Frivolous Arguments:'''
 +
 +
Promoters have been known to make outlandish claims that the Sixteenth Amendment concerning congressional power to establish and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. Such arguments are false and have been thrown out of court. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law.
 +
 +
For more information about these and other tax scams visit the IRS Web site at IRS.gov.
 +
 +
== TT-2008-45: CLAIMING THE CHILD TAX CREDIT ==
 +
 +
With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child under the age of 17.
 +
 +
A qualifying child for this credit is someone who meets the following criteria:
 +
 +
* Age - Was under age 17 at the end of 2007
 +
* Relationship - Is your son, daughter, adopted child, stepchild or eligible foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these individuals
 +
* Citizenship - Is a U.S. citizen, U.S. national or resident of the U.S.
 +
* Support - Did not provide over half of his or her own support, and
 +
* Lived with you - Must have lived with you for more than half of 2007 (note that some exceptions to this criteria exist)
 +
 +
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:
 +
 +
* Married Filing Jointly  $110,000
 +
* Married Filing Separately  $  55,000
 +
* All others    $  75,000
 +
 +
In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
 +
 +
If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an “Additional” Child Tax Credit. The Additional Child Tax Credit may give you a refund even if you do not owe any tax.  For 2007, the total amount of the Child Tax Credit and any Additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.
 +
 +
You may claim the Child Tax Credit on Form 1040 or 1040A. Details on how to compute the credit can be found in the forms’ instructions and in Publication 972, Child Tax Credit. The forms and publications are available from the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-46: CLAIMING THE CHILD AND DEPENDENT CARE CREDIT ==
 +
 +
If you paid someone to care for a child under age 13 or a qualifying spouse or dependent so you could work or look for work, you may be able to reduce your tax by claiming the Child and Dependent Care Credit on your federal income tax return. To qualify, your spouse, children age 13 or older, and other dependents must be physically or mentally incapable of self-care.
 +
 +
The credit is a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can be up to 35 percent of your qualifying expenses, depending upon your income.
 +
 +
For 2007, you may use up to $3,000 of the expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
 +
 +
To claim the credit for child and dependent care expenses, you must meet certain conditions including:
 +
 +
* Income - You must have earned income from wages, salaries, tips, other taxable employee compensation, or net earnings from self-employment (one spouse may be considered as having earned income if they were a full-time student or physically or mentally not able to care for himself or herself)
 +
* Payee - The payments for care cannot be paid to someone you can claim as your dependent on your return or to your child who is under age 19, even if he or she is not your dependent
 +
* Filing Status - Your filing status must be single, married filing jointly, head of household, or qualifying widow(er) with a dependent child
 +
* Care - The care must have been provided for one or more qualifying persons
 +
* Home - The qualifying person must have lived with you for more than half of 2007
 +
 +
There are some limitations on the amount of credit you can claim. If you received dependent care benefits from your employer, other rules apply.
 +
 +
For more information on the Child and Dependent Care Credit, see Publication 503, Child and Dependent Care Expenses. You may download these free publications from IRS.gov or order them by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-47: NEW FORM FOR EMPLOYEES MISCLASSIFIED AS INDEPENDENT CONTRACTORS ==
 +
 +
In 2007 were you an employee whose employer paid you as an independent contractor? Employees usually receive a Form W-2 while independent contractors usually receive a Form 1099-MISC.
 +
 +
Generally, a worker who received a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit using Schedule SE. However, if the worker was actually an employee, rather than an independent contractor, the worker is not required to pay the full self-employment tax, and expenses can only be deducted as an itemized deduction.
 +
 +
Beginning in 2007, Form 8919, Uncollected Social Security and Medicare Tax on Wages, may be used if you were an employee and your employer did not withhold your share these taxes and you meet certain criteria. These taxes will then be credited to you social security records.
 +
 +
To be eligible to use Form 8919 you must meet one of several criteria indicating that you were an employee while performing these services. The criteria include:
 +
 +
* You filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating that you are an employee of the firm.
 +
* You have been designated as a “section 530 employee” by your employer or by the IRS prior to January 1, 1997.
 +
* You have received other correspondence from the IRS that states you are an employee.
 +
* You were previously treated as an employee by the firm and you are performing services in a similar capacity and under similar direction and control.
 +
* Your co-workers are performing similar services under similar direction and control and are treated as employees.
 +
* Your co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
 +
* You have filed Form SS-8 with the IRS and have not yet received a reply.
 +
 +
For more information see Form 8919, Uncollected Social Security and Medicare Tax on Wages available on the IRS Web site at IRS.gov or by calling 800-TAX FORM (800-829-3676).
 +
 +
== TT-2008-48: OFFSET EDUCATION COSTS ==
 +
 +
Education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits, rather than deductions, you may be able to subtract them in full dollar for dollar from your federal income tax.
 +
 +
'''The Hope Credit'''
 +
 +
* Applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.
 +
* It can be worth up to $1,650 per eligible student, per year.
 +
* You're allowed a credit of 100% of the first $1,100 of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,100.
 +
* Each student must be enrolled at least half-time for at least one academic period which began during the year.
 +
* The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.
 +
 +
'''The Lifetime Learning Credit'''
 +
 +
* Applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
 +
* If you qualify, your credit equals 20% of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 per tax return.
 +
 +
You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year.  To qualify for either credit, you must pay post-secondary tuition and certain related expenses  for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.
 +
 +
These credits are phased out for Modified Adjusted Gross Income over $47,000 ($94,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $57,000 or more ($114,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.
 +
 +
For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-49: SAVER'S CREDIT FOR RETIREMENT SAVINGS CONTRIBUTIONS ==
 +
 +
If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be able to take a tax credit.
 +
 +
The Savers Credit formally known as the Retirement Savings Contributions Credit applies to individuals with a filing status and income of:
 +
 +
* Single with income up to $26,000
 +
* Head of Household with income up to $39,000
 +
* Married Filing Jointly, with incomes up to $52,000
 +
 +
To be eligible for the credit you must be at least age 18, not a full-time student, and cannot be claimed as a dependent on another person’s return.
 +
 +
You may be able to take a credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans.
 +
 +
The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
 +
 +
When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.
 +
 +
The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
 +
 +
For more information, review IRS Publication 590, Individual Retirement Arrangements and Form 8880, Credit for Qualified Retirement Savings Contributions. The publication and form can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-50: HOW TO AVOID TAX TIME PROBLEMS ==
 +
 +
Are you looking for ways to avoid the last-minute rush for doing your taxes? Here are some stress-relieving ideas to help you.
 +
 +
• '''Don’t Procrastinate''' Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.
 +
 +
• '''Visit the IRS Online''' In fiscal year 2007, there were more than 214 million visits to IRS.gov and 1.35 billion page views. Anyone with Internet access can find tax law information and answers to frequently asked tax questions.
 +
 +
• '''File Your Return Electronically''' Nearly 80 million taxpayers filed their returns electronically in fiscal year 2007. Aside from ease of filing, IRS e-file is the fastest and most accurate way to file a tax return. If you’re due a refund, the waiting time for e-filers is half that of paper filers.
 +
 +
• '''Don’t Panic if You Can’t Pay''' If you can’t immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, using our new Web-based Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval.  You also have various options for charging your balance on a credit or debit card. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee. Electronic filers with a balance due can also file early and pay their taxes directly from their checking or savings account on the April due date with no service fee.
 +
 +
• '''Request an Extension of Time to File – But Pay on Time''' If the clock runs out, you can get an automatic six month extension of time to file to October 15. However, this extension of time to file does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date. See IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return for a variety of easy ways to apply for an extension. Form 4868 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).  Taxpayers needing Form 4868 should act soon to be sure they have the item in time to meet the April deadline.
 +
 +
== TT-2008-51: ITEMIZERS CAN DEDUCT CERTAIN TAXES ==
 +
 +
Did you know that you may be able to deduct certain taxes on your federal income tax return? You can take these deductions if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation.
 +
 +
There are several types of deductible non-business taxes:
 +
 +
* '''State and local taxes:''' You can choose to claim a state and local tax deduction for either income taxes or sales taxes on your return. You can deduct any state and local income taxes withheld from your salary in 2007, estimated taxes paid to state or local governments and any prior year's state or local income tax as long as they were paid during the tax year. If deducting general sales taxes instead, you may deduct actual expenses or use the optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on certain items such as motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate.
 +
* '''Real estate taxes:''' Deductible real estate taxes are usually any state, local or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information
 +
* '''Personal property taxes:''' Personal property taxes are deductible when they are based only on the value of personal property, such as a boat or car. To be deductible, the tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year.
 +
* '''Foreign income taxes:'''  Generally, you can take either a deduction or a tax credit for foreign income taxes, but not for taxes paid on income that is excluded from U.S. tax.
 +
 +
For detailed information about the sales tax deduction, consult the instructions for Form 1040, Schedule A, Itemized Deductions, and the interactive State and Local Sales Tax Calculator found on IRS.gov. More information about each of these topics is available at IRS.gov.  IRS forms and publications can be downloaded from the Web site or obtained by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-52: DEDUCTION FOR EDUCATOR EXPENSES ==
 +
 +
If you are an eligible educator, you may be able to deduct up to $250 of expenses you paid for purchases of books and classroom supplies. These out-of-pocket expenses may lower your 2007 tax bill even if you don’t itemize your deductions.
 +
 +
* '''Eligible Educator:''' The deduction is available if you are an eligible educator in a public or private elementary or secondary school. To be eligible, you must work at least 900 hours during a school year as a kindergarten through grade 12 teacher, instructor, counselor, principal or aide.
 +
* '''Qualifying Expenses:''' You may subtract up to $250 of qualified expenses when figuring your adjusted gross income. Qualified expenses are unreimbursed expenses you paid or incurred for books, supplies, equipment (including computer equipment, software and services) and other materials that you use in the classroom. Supply expenses for courses in health and physical education are qualified only if they are related to athletics.
 +
 +
To be deductible, the qualified expenses must be more than the savings bond interest excluded on Form 8815, any nontaxable distribution from a qualified tuition program, and any tax-free withdrawals from your Coverdell Education savings account.
 +
 +
The deduction for educator expenses can only be claimed on Form 1040, line 23.
 +
 +
For more information about this topic, see IRS Publication 529, Miscellaneous Deductions. The publication can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-53: HOME OFFICE DEDUCTION ==
 +
 +
If you use a portion of your home for business purposes, you may be able to take a home office deduction whether you are self-employed or an employee. Expenses that you may be able to deduct for business use of the home may include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting and repairs.
 +
 +
You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively:
 +
 +
* As your principal place of business for any trade or business
 +
* As a place to meet or deal with your patients, clients or customers in the normal course of your trade or business
 +
 +
Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.
 +
 +
If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.
 +
 +
There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
 +
 +
If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.
 +
 +
If you are an employee, you have additional requirements to meet. The regular and exclusive business use must be for the convenience of your employer.
 +
 +
For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-54: SALE OF YOUR HOME ==
 +
 +
If you have a gain from the sale or exchange of your main home, you may be able to exclude all or part of the gain from your income.
 +
 +
Individuals may be able to exclude up to $250,000 of capital gain, and married taxpayers filing joint returns may be able to exclude up to $500,000 of gain each time you sell your main home, but generally no more frequently than once every two years.
 +
 +
To qualify for this exclusion of gain, you must meet ownership and use tests.
 +
 +
* Ownership Test: During the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years.
 +
* Use Test: During the 5-year period ending on the date of the sale, you must have lived in the home as your main home at least 2 years.
 +
 +
If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.
 +
 +
If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home because of health reasons, a change in place of employment, or certain unforeseen circumstances.  Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.
 +
 +
If you can exclude all the gain from the sale of your home, you do not report the gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, or you choose not to, use Schedule D, Capital Gains and Losses, of the Form 1040 to report it.
 +
 +
For more details and information see IRS Publication 523, Selling Your Home, available at [http://irs.gov/ IRS.gov] or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-55: DEDUCTING COSTS OF REFINANCING YOUR HOME ==
 +
 +
Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.
 +
 +
The term "points" is used to describe certain charges paid to obtain a home mortgage.
 +
 +
Here are some things to remember when deducting points:
 +
 +
* Taxpayers who itemize deductions generally may be able to deduct the points paid to obtain a home mortgage as mortgage interest
 +
* Points paid solely to refinance a home mortgage usually must be deducted over the life of the loan
 +
* Points can be fully deducted in the year paid if certain tests are met
 +
 +
For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year.
 +
 +
However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible in the year it is paid off.
 +
 +
Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.
 +
 +
For more information on deductions related to refinancing, visit IRS.gov for Tax Topics 504, Home Mortgage Points, and 505, Interest Expenses. You may also review IRS Publication 936, Home Mortgage Interest Deduction, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-56: TAX CREDIT FOR HYBRID VEHICLES ==
 +
 +
If you bought a hybrid vehicle in 2007, you may be entitled to a tax credit on your 2007 return.  The credit is worth as much as $3,000  for the most fuel-efficient models. The precise amount depends on the make and model of the vehicle and when the vehicle was purchased.
 +
 +
The tax credit for hybrid vehicles, called the Alternative Motor Vehicle Credit, applies to vehicles purchased or placed in service on or after January 1, 2006.
 +
 +
Hybrid vehicles have drive trains powered by both an internal combustion engine and a rechargeable battery.  Many currently available hybrid vehicles may qualify for the credit.  Taxpayers may claim the credit on their 2007 tax returns only if they placed a qualified hybrid vehicle in service in 2007.  As of March 2007, more than 40 different models of hybrids were/are eligible for the credit.
 +
 +
The credit is available only to the original purchaser of a new qualifying vehicle.  If the qualifying vehicle is leased the credit is available only to the leasing company.
 +
 +
If 60,000 hybrid or advance lean burn technology vehicles of a particular manufacturer are sold, the tax credit is reduced and eventually eliminated. The full credit can be claimed up to the end of the third month after the quarter in which the manufacturer sells its 60,000th hybrid vehicle.
 +
 +
The credit for qualified Toyota and Lexus vehicles was eliminated for purchases on or after Oct. 1, 2007. The full credit for qualified Honda vehicles was available for all purchases in 2007, but has been reduced for purchases on or after Jan. 1, 2008.
 +
 +
To find out whether your car qualifies for the hybrid tax credit and the maximum amount of that credit, you can go to the IRS.gov website and search for “qualified hybrid vehicles.”
 +
 +
== TT-2008-57: TIPS FOR DEDUCTING CHARITABLE CONTRIBUTIONS ==
 +
 +
When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. Your donations could add up to a sizeable tax deduction if you itemize on IRS Form 1040, Schedule A.
 +
 +
Starting in 2007 to deduct any charitable donation of money, taxpayers must have a bank record or a written communication from the recipient showing the name of the organization and the date and amount of the contribution. Though taxpayers are already required to keep records to support their contribution deductions, this new provision is designed to provide greater certainty, both to taxpayers and the government, in determining what may be deducted as a charitable contribution.
 +
 +
Here are a few tips to ensure your contributions pay off on your tax return:
 +
 +
* You cannot deduct contributions made to specific individuals, political organizations and candidates. Nor can you deduct the value of your time or services and the cost of raffles, bingo or other games of chance.
 +
* Contributions must be made to qualified organizations to be deductible.
 +
* Only contributions actually made during the tax year are deductible.
 +
* If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
 +
* Donations of stock or other property are usually valued at the fair market value of the property.
 +
* Clothing and household items donated must be in good used condition or better to be deductible.
 +
* Special rules apply to donation of vehicles.
 +
* You can claim a deduction for individual contributions of $250 or more only if you obtain a written acknowledgment from the qualified organization.
 +
* If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.
 +
* Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.
 +
 +
For more information, check out Publication 526, Charitable Contributions, which is available at [http://irs.gov/ IRS.gov] or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-58: DEDUCTING VEHICLE DONATIONS ==
 +
 +
If you donated a car or other vehicle to a qualified charitable organization in 2007 and intend to claim a deduction you should review the special rules that apply to vehicle donations.  You can deduct contributions to a charity only if you itemize deductions on Schedule A of Form 1040.
 +
 +
Generally, the amount you may deduct for a vehicle contribution depends upon what the charity does with the vehicle.  Charities typically sell donated vehicles.  If the vehicle is sold by the charitable organization, the deduction claimed by the donor usually may not exceed the gross proceeds from the sale.
 +
 +
If your deduction is $250 or more you must obtain written acknowledgement of the donation from the charity.  If your deduction is more than $500, this written acknowledgment or Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, must be attached to your return. Among other things, the acknowledgment generally must include the gross proceeds of the sale, the vehicle identification number, and a statement certifying the vehicle was sold in an arm's length transaction between unrelated parties.
 +
 +
If the organization intends to make significant intervening use of the vehicle or material improvements to the vehicle, the acknowledgment must include certain certifications. If the organization intends to sell the vehicle to a needy individual at a price significantly below fair market value, or gratuitously transfers the vehicle to a needy individual, the acknowledgment must also include certain certifications.
 +
 +
In addition, for deductions greater than $500, Form 8283, Noncash Charitable Contributions, must be attached to the return.
 +
 +
You can generally deduct the vehicle’s fair market value instead of the amount of gross proceeds from the sale if any of the following situations apply:
 +
 +
* The organization makes significant intervening use of or materially improves the vehicle
 +
* The organization gives or sells the vehicle to a needy individual at a price significantly below fair market value in direct furtherance of its charitable purpose of relieving the poor and distressed or underprivileged who are in need of a means of transportation
 +
* The claimed deduction is $500 or less
 +
 +
The fair market value cannot exceed the private party sales price listed in a used vehicle pricing guide.
 +
 +
For more information see Publication 526, Charitable Contributions, Publication 561, Determining the Value of Donated Property, and Publication 4303, A Donor’s Guide to Car Donations, available on [http://irs.gov/ IRS.gov] or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-59: COVERDELL EDUCATION SAVINGS ACCOUNTS ==
 +
 +
A Coverdell Education Savings Account (ESA) is an account created as an incentive to help parents and students save for education expenses.
 +
 +
The total contributions for the beneficiary of this account cannot be more than $2,000 in any year, no matter how many accounts have been established. A beneficiary is someone who is under age 18 or is a special needs beneficiary.
 +
 +
Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed.  The beneficiary will not owe tax on the distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This benefit applies to qualified higher education expenses as well as to qualified elementary and secondary education expenses.
 +
 +
Here are some things to remember about Distributions from Coverdell Accounts:
 +
 +
* Distributions are tax-free as long as they are used for qualified education expenses, such as tuition and fees, required books, supplies and equipment and qualified expenses for room and board.
 +
* There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. Eligible institutions also include any college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions are eligible.
 +
* The Hope and lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits.
 +
* If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax.  Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship.
 +
 +
There are contribution limits for taxpayers based on the contributor’s Modified Adjusted Gross Income.  Contributions to a Coverdell ESA may be made until the due date of the contributor’s return, without extensions.
 +
 +
If there is a balance in the Coverdell ESA when the beneficiary reaches age 30, it must generally be distributed within 30 days. The portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member. For more details, see IRS Publication 970, Tax Benefits for Higher Education (at IRS.gov) or call 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-60: HOW TO CHECK ON YOUR TAX REFUND ==
 +
 +
If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund.
 +
 +
One way is to use "''Where’s My Refund''?" an interactive tool on the IRS Web site at [http://irs.gov/ IRS.gov]. Simple online instructions guide taxpayers through a process that checks the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:
 +
 +
* Acknowledgement that your return was received and is in processing.
 +
* The mailing date or direct deposit date of your refund.
 +
* Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you can change or correct your address online.
 +
 +
''Where’s My Refund''? is a very flexible tool. Whether you split your refund among several accounts, opt for direct deposit into one account, or ask IRS to mail you a check, ''Where’s My Refund''? gives you online access to your refund information.
 +
 +
''Where’s My Refund''? also include links to customized information based on the taxpayer’s specific situation. The links guide taxpayers through the steps they need to take to resolve any issues that may be affecting their refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on ''Where’s My Refund''?, you can start a refund trace online.
 +
 +
The "''Where’s My Refund''?" service meets stringent IRS security and privacy certifications. Taxpayers enter identifying information that includes their Social Security number, filing status and the exact amount of the refund shown on the return. This specific information verifies that the person is authorized to access that account.
 +
 +
"''Where’s My Refund''?" is accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.
 +
 +
Another option for checking the status of your refund is by calling the IRS TeleTax System at 800-829-4477 or the IRS Refund Hotline at 800-829-1954. When calling, you must provide the first Social Security number shown on the return, your filing status and the amount of the refund. If the IRS processed your return, the system will tell you the date your refund will be sent. The TeleTax refund information is updated each weekend. If you do not get a date for your refund, please wait until the next week before calling back.
 +
 +
* [http://www.irs.gov/individuals/article/0,,id=96596,00.html Where’s My Refund?]
 +
 +
== TT-2008-61: YOU CAN STILL MAKE A 2007 IRA CONTRIBUTION ==
 +
 +
If you haven’t contributed funds to an Individual Retirement Arrangement for tax year 2007, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April due date for filing your tax return for 2007, not including extensions.
 +
 +
Be sure to tell the IRA trustee that the contribution is for 2007. Otherwise, the trustee may report the contribution as being for 2008 when they get your funds.
 +
 +
Generally, you can contribute up to $4,000 of your earnings for 2007 or up to $5,000 if you are age 50 or older in 2007. You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.
 +
 +
* '''Traditional IRA:''' You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you — or your spouse, if filing jointly — are covered by an employer’s pension plan.
 +
* '''Roth IRA: '''You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.
 +
 +
You can file your tax return claiming a traditional IRA contribution before the contribution is actually made. However, the contribution must be made by the due date of your return, not including extensions. If you report a contribution to a traditional IRA on your return, but fail to contribute by the deadline, you must file an amended tax return by using Form 1040X, Amended U.S. Individual Income Tax Return. You must add the amount you deducted to your income on the amended return and pay the additional tax accordingly.
 +
 +
For more information get IRS Publication 590, Individual Retirement Arrangements (IRAs), available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Taxpayers who need to have any IRS publication mailed to them should act soon to be sure they have the item in time to meet the April due date.
 +
 +
== TT-2008-62: TIPS FOR LAST-MINUTE FILERS ==
 +
 +
With the tax filing deadline close at hand, the IRS offers some tips for those still working on their paper tax forms:
 +
 +
* Consider filing electronically instead of using paper tax forms
 +
* Put all required Social Security numbers on the return
 +
* Double-check your figures
 +
* Sign your form
 +
* Attach all required schedules
 +
* Send your return or request an extension by the April filing deadline
 +
 +
Choosing to e-file your tax return instead of preparing a paper tax form is the best step you can take to ensure that your return is accurate and complete.
 +
 +
When you file a paper return, the numbers to check most carefully on the tax return are the identification numbers — usually Social Security numbers — for each person listed. This includes the taxpayer, spouse, dependents and persons listed in relation to claims for the Child and Dependent Care Credit or Earned Income Tax Credit. Missing, incorrect or illegible Social Security Numbers can delay or reduce a tax refund.
 +
 +
Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.
 +
 +
Taxpayers must sign and date their returns. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.
 +
 +
People sending a payment should make the check out to “United States Treasury” and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the taxpayer’s Social Security number, daytime phone number, the tax year and the type of form filed.
 +
 +
By the April due date, taxpayers should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.
 +
 +
Forms and publications and helpful information on a variety of tax subjects are available around the clock on the IRS Web site at IRS.gov.
 +
 +
== TT-2008-63: AVOID COMMON ERRORS ==
 +
 +
The IRS recommends reviewing your entire tax return to be sure it is accurate and complete. Even a simple mistake can cause problems which might lead to delays in processing your return and receiving your refund.
 +
 +
Here are some ways to avoid common tax return errors:
 +
 +
* '''File electronically'''. If you choose to e-file, many common errors are avoided or corrected by the computer software. If your income is under $54,000 you may be able to e-file for free using IRS Free File.
 +
* '''Use the peel-off label''' if you choose to mail a paper return. You may line through and make necessary corrections right on the label. Be sure to fill in your Social Security number in the box provided on the return. If you do not have a peel-off label, fill in all requested information clearly, including the Social Security numbers.
 +
* '''Check only one filing status''' on the tax return and check the appropriate exemption boxes. Enter the correct Social Security numbers for each of those exemptions.
 +
* '''Use the correct Tax Table column''' for your filing status.
 +
* '''Double check''' all figures on the return. Math errors are common mistakes.
 +
* '''Make sure''' that the financial institution routing and account numbers you have entered on the return for a direct deposit of your refund are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.
 +
* '''Sign and date the return'''. If filing a joint return, both spouses must sign and date the return.
 +
* '''Attach''' all Forms W-2, Wage and Tax Statement, and other forms that reflect tax withheld to the front of the return. Attach all other necessary forms and schedules.
 +
* '''Do you owe tax?''' If so, enclose a check or money order made payable to the "United States Treasury" and Form 1040-V, Payment Voucher, if used. Or, you may choose to pay by credit card by contacting one of the credit card service providers.
 +
 +
For a complete checklist and a listing of some of the most common errors, see Tax Topic 303, Checklist of Common Errors When Preparing Your Tax Return, at IRS.gov, or call our TeleTax number, 800-829-4477. For more information about IRS e-file and Free File visit the IRS Web site at IRS.gov.
 +
 +
== TT-2008-64: PREPARING YOUR TAX RETURN FOR MAILING ==
 +
 +
If you are mailing a paper return to the IRS, take a few minutes to make certain that all information is complete and accurate before sealing the envelope. This simple precaution could help you avoid mistakes that can delay your refund or result in correspondence from the IRS.
 +
 +
Here are just a few items to complete prior to mailing your tax return:
 +
 +
* Sign your return Your federal tax return is not considered a valid return unless it is signed. If you are filing a joint return, your spouse also must sign.
 +
* Provide a daytime phone number. This may help speed the processing of your return if the IRS has questions about items on your return.
 +
* Assemble any schedules and forms behind your Form 1040/1040A in the order of the "Attachment Sequence No." shown in the upper right hand corner of the schedule or form. Arrange any supporting statements in the same order as the schedules or forms they support and attach them last.
 +
* Attach all copies of Forms W-2, W-2G and 2439 to the front of Form 1040. Also attach Form 1099-R if federal tax was withheld.
 +
* Use the coded envelope included with your tax package to mail your return. If you did not receive an envelope, check the section called "Where Do You File?" in the tax instruction booklet.  Don’t forget the stamp!
 +
* If you are due a refund, consider direct deposit to receive your refund in the quickest and safest manner. Then make sure that the financial institution routing and account numbers you have entered are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.
 +
* Do you owe tax? If so, enclose a check or money order made payable to the “United States Treasury” and Form 1040-V, Payment Voucher, if used. Make sure you include your correct name, address, the Social Security number that is listed first on the tax form, daytime telephone number, tax year and form number (i.e. Form 1040).  Or, you may choose to pay by credit card by contacting one of the credit card service providers.
 +
 +
For more information, refer to your tax instruction booklet or visit the IRS Web site at IRS.gov.
 +
 +
== TT-2008-65: FILING YOUR FEDERAL TAX RETURN ==
 +
 +
Once you complete your 2007 federal tax return, you can either file it electronically or mail it to the IRS.
 +
 +
More than one-half of all taxpayers file electronically because they know that IRS e-file provides a fast, easy, accurate, secure and convenient way to file.  Taxpayers who file electronically receive an acknowledgement that their return has been received and accepted for processing.
 +
 +
Electronic options include:
 +
 +
* Computer filing using an authorized IRS e-file tax professional
 +
* Using your personal computer to file
 +
* Free File is available at IRS.gov for many taxpayers as an option for filing their returns with no charge
 +
 +
If you choose to mail your return, you will find directions on where to send it on the back cover of your instruction booklet.
 +
 +
When mailing your return, whether enclosing a payment or not, use the envelope and the appropriate mailing label that came with your tax instruction booklet. If you moved during the year, check the tax package to find the mailing address of the appropriate IRS Center. The appropriate address depends on where you live and whether or not you are enclosing a check or money order. Checks or money orders should be payable to the “United States Treasury.”
 +
 +
For more information on where to file your tax return, check out the 1040 Central page on the IRS Web site at IRS.gov. Use the 1040 Central page as your one-stop guide to filing your 2007 federal income tax return.
 +
 +
== TT-2008-66: LAST MINUTE PAYMENT AND FILING TIPS ==
 +
 +
If you’re trying to beat the tax deadline, there are several options for last-minute help:
 +
 +
* Receive a six-month extension of time to file using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
 +
* Payment options are available to taxpayers having trouble paying their tax bill.
 +
* Download forms and publications at IRS.gov.
 +
 +
Filing an extension will give you extra time to get the paperwork to the IRS and avoids the late-filing penalty, but it does not extend the time you have to pay any tax due. You must estimate your tax liability when you apply for an extension.
 +
 +
You will owe interest on any amounts not paid by the April deadline, and you also will be charged a penalty for late payment unless at least 90 percent of your tax liability is paid by the regular due date of your tax return.
 +
 +
You can also e-file an extension request using tax preparation software on your own computer or by going to a tax preparer.
 +
 +
If your return is completed but you are unable to pay the tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due and will charge interest and penalties only on the unpaid balance.
 +
 +
If you cannot pay the full amount due with your return, you can ask to make monthly installment payments for the full or a partial amount.  You can apply for an IRS installment agreement using our Web-based Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement by submitting a completed Form 9465, Installment Agreement Request, either when you file the return or when you later get a bill from the IRS.
 +
 +
For more information regarding extensions of time to file or installment agreements, including options for requesting an installment agreement online, visit the IRS Web site at IRS.gov and click on 1040 Central.
 +
 +
== TT-2008-67: MAKING TAX PAYMENTS CORRECTLY ==
 +
 +
If you have a balance due when filing your 2007 income tax return, remember to make sure your tax payment check or money order is payable to the "United States Treasury."  Complete and include Form 1040-V, Payment Voucher, when sending your payment and tax return to the IRS. This will help the IRS process your payment more accurately and efficiently.
 +
 +
Whether you are filing your current year’s return (2007), a prior year’s return or an amended return, always provide your correct name, address, the Social Security number that is listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order. Enclose your payment with your return, but do not staple it to the form. Do not mail cash with your tax return.
 +
 +
If you are e-filing you have the option of paying by electronic debit of your bank account using Electronic Funds Withdrawal. You will need to know your account number and your financial institution’s routing number. You can check with your financial institution to make sure that an electronic withdrawal is allowed and to get the correct routing and account numbers.
 +
 +
If you are paying by credit card, call or visit the Web site of either service provider listed below and follow the instructions:
 +
 +
* Link2Gov Corporation: 888-PAY-1040 (888-729-1040), pay1040.com.
 +
* Official Payments Corporation: 800-2PAY-TAX (800-272-9829), officialpayments.com.
 +
 +
The service providers charge a convenience fee which may vary between the providers. You will be told what the fee is during the transaction and you will have the option to either continue or cancel the transaction. You can also find out what the fee will be by calling the provider’s automated customer service number or visiting the provider’s website. You will be given a confirmation number for your payment at the end of the call.
 +
 +
For more information, call 800-829-4477 to check out TeleTax Topic 158, "Ensuring Proper Credit of Payments.” This information is also contained in Publication 17, Your Federal Income Tax, available at IRS.gov, as is Form 1040-V.
 +
 +
== TT-2008-68: PAYMENT OPTIONS ==
 +
 +
If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:
 +
 +
* Pay by Credit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover cards. To pay by credit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. The service providers charge a convenience fee based on the amount you are paying. Do not add the convenience fee to your tax payment.
 +
 +
** Link2Gov Corporation: 888-PAY-1040 (888-729-1040), [http://www.pay1040.com/ www.pay1040.com]
 +
 +
** Official  Payments Corporation: 800-2PAY-TAX (800-272-9829), [http://www.officialpayments.com/ www.officialpayments.com]
 +
 +
* Extension of Time to Pay Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A short term extension of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers qualifying for an extension of time to pay of 30 -120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement.
 +
* Installment Agreement The IRS may allow you to pay any remaining balance in monthly installments through an installment agreement. You can apply for an IRS installment agreement using our Web-based Online Payment Agreement application on IRS.gov. Another alternative is to attach a Form 9465, Installment Agreement Request, to the front of your tax return. The IRS charges a $105 fee for setting up an installment agreement. The fee is only $52 if you pay via direct debit. If your income is below a certain level (see Form 13844), you may qualify for a $43 fee. You will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. If you do not file your return by the due date -- including extensions -- you may have to pay a failure-to-file penalty.
 +
 +
In most circumstances, the Online Payment Agreement application provides immediate notification regarding the approval of your request.  There may be times when you will need to mail paperwork or speak with us before we can determine your eligibility for an installment agreement or short term extension to pay.  If that is the case, the online application will provide an address and telephone number that can be used to reach the appropriate IRS office.
 +
 +
For more information about filing and paying your taxes, visit the IRS Web site at IRS.gov and choose “1040 Central” or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-69: NEED MORE TIME TO FILE? ==
 +
 +
If you can't meet the April filing deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.
 +
 +
Here are some things to remember about filing extensions:
 +
 +
* File Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April deadline, or make an extension-related electronic credit card payment.
 +
* The extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due.
 +
* You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.
 +
* You can e-file an extension request using tax preparation software on your own computer or by going to a tax preparer that has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
 +
* You can use Free File to file for an extension.  Many private-sector companies in the IRS Free File Alliance offer extensions for no charge. You can access Free File via the IRS Web site at IRS.gov.  Taxpayers with adjusted gross incomes of $54,000 or less may file their 2007 Federal Income Tax Returns electronically through Free File.
 +
 +
If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers and must also have available the adjusted gross income from your 2006 federal income tax return to verify your identity.  For information on these and other methods of payment, visit the IRS.gov Web site or call 800-TAX-1040 (800-829-1040).
 +
 +
If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due.  To apply online for a payment agreement, go to IRS.gov, use the pull-down menu under “I need to …” and select “Set Up a Payment Plan.”
 +
 +
To obtain a copy of Form 4868 or other forms and publications use E-file tax preparation software, download them from IRS.gov or visit your local IRS office.  Note that forms and publications can be ordered by calling 800-TAX-Form (800-829-3676).  However, telephone requests normally take 10 days to fill and may not arrive before the tax deadline of April 15.
 +
 +
== TT-2008-70: HOW LONG SHOULD IT TAKE TO RECEIVE YOUR TAX REFUND? ==
 +
 +
Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued about six to eight weeks after the IRS receives your return. If you file your return electronically, your refund is issued in about half that time — even faster if you choose direct deposit.
 +
 +
You can check on the status of your refund 72 hours after you e-filed your return or four weeks after mailing your return. There are several ways to check the status of your refund. You will need your Social Security number, filing status and the exact whole dollar amount of your refund to use these applications.
 +
 +
* '''Where's My Refund:''' The fastest, easiest way to find out about your current year refund is to go to the IRS.gov Web site and click on the “Where’s My Refund” link available from the home page.
 +
* '''Refund Hotline:'''  Call the IRS Refund Hotline at 800-829–1954.
 +
* '''TeleTax: ''' Call the IRS TeleTax System at 800-829-4477.
 +
 +
If you do not get a date for your refund, wait until the next week before calling back.
 +
 +
In some circumstances, you may not receive your refund as quickly as you expected. Refund delays can be caused by a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.
 +
 +
For more information on how long it may take the IRS to process your federal tax refund, visit Frequently Asked Questions at IRS.gov.
 +
 +
== TT-2008-71: AMENDING YOUR TAX RETURN ==
 +
 +
Oops! You’ve discovered an error after your tax return has been filed or maybe you need to adjust your 2007 return to include certain non-taxable benefits to reach the $3000 qualifying income level to qualify for an economic stimulus payment. What should you do? You may need to amend your return.
 +
 +
(Note: Generally, the payment of economic stimulus payments is based on the information from your original 2007 federal tax return. However, the only item on an amended return that will affect the economic stimulus payment is when including certain non-taxable benefits not included on the original return. This must be the only reason you were not eligible for the economic stimulus payment on the original return.)
 +
 +
The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return. However, you should file an amended return if any of the following were reported incorrectly:
 +
 +
* Your filing status
 +
* Your dependents
 +
* Your total income
 +
* Your deductions or credits
 +
 +
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A, 1040EZ or electronically-filed return. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.
 +
 +
The Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. There is an area on the back of the form where you explain the specific changes being made on the return and the reason for each change.
 +
 +
If the changes involve another schedule or form, attach it to the 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Form 1040 Schedule EIC to show the qualifying person's name, year of birth and Social Security number.
 +
 +
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for 2007, you should file Form 1040X and pay the tax by the April due date to avoid any penalty and interest.
 +
 +
Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later, to claim a refund.
 +
 +
Form 1040X and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-72: WHAT TO DO IF YOU RECEIVE AN IRS NOTICE ==
 +
 +
It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.
 +
 +
Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
 +
 +
If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
 +
 +
* Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
 +
* Disagree?  If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
 +
 +
Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
 +
 +
Be sure to keep copies of any correspondence with your records.
 +
 +
For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-73: APPEAL RIGHTS ==
 +
 +
Are you in the middle of a disagreement with the IRS? If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case.
 +
 +
IRS Publication 1, Your Rights as a Taxpayer, explains some of your most important taxpayer rights. During their contact with taxpayers, IRS employees are required to explain and protect these taxpayer rights, including the right to appeal.
 +
 +
The Appeals Office, which is independent of the IRS office that proposed the disputed action, can work with taxpayers by correspondence, telephone, or informal conferences.
 +
 +
Through Appeals procedures, taxpayers can settle most differences without expensive and time-consuming court trials. However, if you and the Appeals Officer or Settlement Officer cannot reach agreement, or if you prefer not to appeal within the IRS, in most cases, you may take your disagreement to federal court.
 +
 +
For more information about Appeals and its processes, go to the IRS Web site at IRS.gov and select the link to “Appeal a Tax Dispute”, which is found at the bottom of the home page. The Appeals Web page provides links to assist you in determining if you are ready for Appeals, how to request an appeal, and what you can expect from Appeals.
 +
 +
This page also provides a link to easy-to-use online self-help tools to help you focus on your area of dispute and determine if you will benefit from filing an appeal. You can also link to “Online Videos of the Appeals Process” containing informative online video streams entitled “The Appeals Process (Examination)” and “The Appeals Process (Collection).”
 +
 +
Information is also available in IRS Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don't Agree; Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund; and Publication 1660, Collection Appeal Rights (for Liens, Levies, and Seizures). To get copies of IRS publications, visit the IRS Web site at IRS.gov or call 800-TAX-FORM (800-829-3676).
 +
 +
== TT-2008-74: HELP FROM THE TAXPAYER ADVOCATE SERVICE ==
 +
 +
If you have tried to resolve tax problems with the IRS and are still having problems or facing economic harm, you have somewhere to turn: seek the free assistance of the Taxpayer Advocate Service.
 +
 +
The Taxpayer Advocate Service is an independent organization within the IRS whose employees assist taxpayers in these circumstances or those who believe that an IRS system or procedure is not working as it should.
 +
 +
The service is free, confidential, tailored to meet your needs, and available for businesses as well as individuals.  You may be eligible for assistance if:
 +
 +
* You are experiencing economic harm or significant cost (including fees for professional representation),
 +
* You have experienced a delay of more than 30 days to resolve your tax issue, or
 +
* You have not received a response or resolution to the problem by the date promised by the IRS.
 +
 +
For individuals, examples of economic harm as a result of an IRS action might include an inability to provide for basic necessities such as housing, transportation or food; or for businesses, an inability to meet payroll expenses.
 +
 +
There is at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico.  Because advocates are part of the IRS, they know the tax system and how to navigate it.  If you qualify, you will receive personalized service from a knowledgeable advocate who will:
 +
 +
* Listen to your problem,
 +
* Help you understand what needs to be done to resolve it, and
 +
* <div align="left">Stay with you every step of the way until your problem is resolved.</div>
 +
 +
You can contact the Taxpayer Advocate Service by:
 +
 +
* Calling the TAS case intake line at 877-777-4778 (TTY/TTD 800-829-4059),
 +
* Writing or calling your local taxpayer advocate, whose address and phone number are listed in the government listings in your local telephone directory and in Publication 1546, The Taxpayer Advocate Service of the IRS – How to Get Help With Unresolved Tax Problems,
 +
* Filing Form 911,  Application for Taxpayer Assistance Order, with the Taxpayer Advocate Service, or
 +
* Asking an IRS employee to complete Form 911 on your behalf.
 +
 +
To get a copy of Form 911 or to learn more about the Taxpayer Advocate Service, visit the Web site at IRS.gov and select the link for the Taxpayer Advocate. You can download Form 911 and Publication 1546 from the IRS Web site Forms and Publications section, or order a copy by calling 800-TAX-FORM (800-829-3676).
  
 
== External Links ==
 
== External Links ==
Line 536: Line 1,383:
 
'''Share this page'''
 
'''Share this page'''
 
<sharethis />
 
<sharethis />
−
[[Category:IRS Tax Tips]]
+
[[Category:IRS Tax Tips]] [[Category:Taxation]]

Latest revision as of 18:19, 6 November 2008

The IRS Mission: Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.

This mission statement describes our role and the public’s expectation about how we should perform that role.

  • In the United States, the Congress passes tax laws and requires taxpayers to comply.
  • The taxpayer’s role is to understand and meet his or her tax obligations.
  • The IRS role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.


MyWikiBiz


MyWikiBiz

TT-2008-01: SEVEN WAYS TO GET A JUMP START ON YOUR TAXES

Earlier is better when it comes to working on your taxes. Taxpayers are encouraged to get a head start on tax preparation, especially since early filers avoid the last minute rush and get their refunds sooner.

Here are seven easy ways to get a good jump on your taxes long before the April deadline is here:

  1. Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
  2. Get the right forms. They’re available around the clock on the IRS Web site, IRS.gov.
  3. Take your time. Don’t forget to leave room for a coffee break when filling out your tax return as rushing can mean making a mistake.
  4. Double-check your math and verify all Social Security numbers. These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS and speed up your refund.
  5. E-filing is easy. E-filing catches math errors and provides confirmation your return has been received and gives you a faster refund.
  6. Get the fastest refund. When you e-file file early, you receive your refund faster. When you choose direct deposit, you receive your refund sooner than waiting for a check.
  7. Don’t panic. If you have a problem or a question, remember the IRS is there to help. Try the IRS Web site at IRS.gov or call the IRS customer service number at 800-829-1040.

Are you concerned that your efforts to get ready early may be affected by the Alternative Minimum Tax legislation passed by Congress in December? Most individuals will not be impacted, so it is still a good idea to get an early start on your preparations. Even if you are filing one of five forms affected by the recent legislation, the IRS expects to be ready for your return by February 11. You can review a list of the impacted forms and find out the latest news about when the IRS will be ready for your return at IRS.gov.

TT-2008-02: SHOULD YOU FILE A TAX RETURN?

You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive.

For example, a married couple both under age 65 generally is not required to file until their joint income reaches $17,500. However self-employed individuals generally must file a tax return if their net income from self employment was at least $400.

Check the “individuals” section of the IRS Web site at IRS.gov or consult the instructions for form 1040, 1040A or 1040EZ for specific details that may affect your need to file a tax return with IRS this year.

Even if you do not have to file, you should file to get money back if Federal Income Tax was withheld from your pay, or you qualify for a refundable credit that may give you a refund even if you do not owe any tax. Refundable credits include:

  • Earned Income Tax Credit. The Earned Income Tax Credit is a federal income tax credit for eligible low-income workers. The credit reduces the amount of tax an individual owes, and may be returned in the form of a refund.
  • Additional Child Tax Credit. This credit may be available to you if you have at least one qualifying child and you did not use the full amount of your Child Tax Credit
  • Health Coverage Tax Credit. Limited to certain individuals who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation.

For more information about filing requirements and your eligibility to receive tax credits, visit the IRS Web site at IRS.gov.


TT-2008-03: CHOOSE YOUR CORRECT FILING STATUS

Your federal tax filing status is based on your marital and family situation. It is an important factor in determining whether you must file a return, your standard deduction and your correct amount of tax.

Your marital status on the last day of the year determines your status for the entire year. If more than one filing status applies to you, you may choose the one that gives you the lowest tax obligation.

There are five filing status options:

  1. Single. Generally, if you are unmarried, divorced or legally separated according to your state law, your filing status is Single.
  2. Married Filing Jointly. If you are married, you and your spouse may file a joint return. If your spouse died during the year and you did not remarry, you may still file a joint return with that spouse for the year of death.
  3. Married Filing Separately. Married taxpayers may elect to file separate returns.
  4. Head of Household. You generally must be unmarried and you must have paid more than half the cost of maintaining a home for you and a qualifying person.
  5. Qualifying Widow(er) with Dependent Child. If your spouse died during 2005 or 2006, you have a qualifying child and meet certain other conditions; you may be able to choose this filing status.

For more information about filing status see publication 501, Exemptions, Standard Deduction, and Filing Information available on the IRS website at IRS.gov or by calling 800-TAXFORM (800-829-3676).

TT-2008-04: WILL THE AMT DELAY YOUR REFUND?

This year, some early filers may have to wait a few extra weeks for their refunds. The delay is due to the Alternative Minimum Tax (AMT) legislation enacted in December.

Most tax filers will not be affected by the AMT legislation. The delays in processing and refunds will be experienced only by those who include any of the following five forms with their 2007 individual income tax return:

  • Form 8863, Education Credits.
  • Form 5695, Residential Energy Credits.
  • Schedule 2 (Form 1040A), Child and Dependent Care Expenses for Form 1040A Filers.
  • Form 8396, Mortgage Interest Credit.
  • Form 8859, District of Columbia First-Time Homebuyer Credit

If you are filing using one of the five affected forms you won’t be able to send your return to the IRS for a few weeks until the IRS computers are reprogrammed for the late tax law change. The IRS expects to be ready for these returns by February 11.

Even if you are affected, you should remember that it is always a good idea to start working on your tax return sooner rather than later.

Filing electronically is the best option for everyone, including people impacted by the AMT changes. Whether or not your return claims an AMT related credit, filing electronically results in faster refunds and fewer errors. When you e-file combined with direct deposit you can expect your refund in as little as 10 days. Refunds from paper returns typically take four to six weeks.

For the latest information on the AMT, e-file, direct deposit and other tax matters visit the IRS website at IRS.gov.

TT-2008-05: CHOOSE THE SIMPLEST FEDERAL TAX FORM FOR YOUR NEEDS

The three forms used for filing individual federal income tax returns are Form 1040EZ, Form 1040A and Form 1040. If you are filing a federal income tax return on paper, use the simplest form you can. Using the simplest allowable form will reduce the chance of an error that may cost you money or delay the processing of your return.

1040EZ You may qualify to use Form 1040EZ, the simplest form, if:

  • Your taxable income is below $100,000
  • Your filing status is Single or Married Filing Jointly
  • You (and spouse) are under age 65 and not blind
  • You are not claiming any dependents
  • Your interest income is $1,500 or less

1040A You may be able to use Form 1040A if:

  • Your taxable income is below $100,000
  • You have capital gain distributions
  • You claim certain tax credits
  • You claim deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees

1040 If you cannot use either a 1040EZ or 1040A, you probably need to use Form 1040. You must file form 1040 if:

  • Your taxable income is $100,000 or more
  • You claim itemized deductions
  • You are reporting self-employment income
  • You are reporting income from sale of property

Choosing the correct tax form could mean money in your pocket. Check your tax instructions carefully. Publication 17, Your Federal Income Tax, is a helpful guide to preparing your federal tax forms. It is available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-06: SHOULD I ITEMIZE?

Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.

The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2007, they are:

Single $5,350

Married Filing Jointly $10,700

Head of Household $7,850

Married Filing Separately $5,350

• Some taxpayers have different standard deductions. The standard deduction is more for taxpayers age 65 or older and for those who are blind. It is generally less for those who can be claimed as a dependent on some other taxpayer’s return.

• Limited itemized deductions. Your itemized deductions may be limited if your adjusted gross income is more than $156,400 or $78,200 for Married Filing Separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses, gambling losses, and investment interest.

• Married Filing Separately. When a married couple files separate returns and one spouse itemizes deductions, the other spouse must also itemize and cannot claim the standard deduction.

• Some taxpayers are not eligible for the standard deduction. They include nonresident aliens, dual-status aliens, and individuals who file returns for periods of less than 12 months.

• Forms to use. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

TT-2008-07: ADVICE FOR CHOOSING A TAX RETURN PREPARER

Taxpayers who pay someone to do their taxes should choose a preparer wisely. If you choose to use a paid tax preparer, it is important that you find a qualified tax professional. Taxpayers are ultimately responsible for everything on their return even when it’s prepared by someone else

The most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions, and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS contacts.

While most tax return preparers are professional and honest, taxpayers can use the following tips to choose a preparer who will offer the best service for their tax preparation needs.

• Ask about service fees. Avoid preparers who claim they can obtain larger refunds than other preparers, or those who guarantee a refund or base fees on a percentage of the amount of the refund.

• Plan Ahead. Choose a preparer you will be able to contact after the return is filed and one who will be responsive to your needs.

• Get References. Ask questions and get references from clients who have used the tax professional before. Were they satisfied with the service received?

• Research. Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.

• Determine if the preparer’s credentials meet your needs. Does your state have licensing or registration requirements for paid preparers? Is he or she an Enrolled Agent, Certified Public Accountant, or Attorney? If so, the preparer can represent taxpayers before the IRS on all matters – including audits, collections, and appeals. Other return preparers can represent taxpayers only in audits regarding a return signed as a preparer.

You can report suspected tax fraud and abusive tax preparers to the IRS on Form 3949-A, Information Referral or by sending a letter to Internal Revenue Service, Fresno, CA 93888. Download Form 3949-A from IRS.gov or order by mail at 800-829-3676.

TT-2008-08: KEEPING GOOD RECORDS

You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good recordkeeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.

Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return.

Good recordkeeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.

For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-09: 1040 CENTRAL — ONE CLICK AWAY

Don’t wait in line, go on-line. The IRS Web site is a great resource for answers to tax questions that arise during the filing season. Access 1040 Central at IRS.gov under the “Individuals” tab and discover user-friendly tools that will make completing your 2007 tax return quick and easy.

No matter which form you use, 1040 Central has the links you’ll need to file your tax year 2007 federal income tax return:

  • Tax law changes. 1040 Central highlights changes in the tax law that directly affect taxpayers.
  • Current News. Access the latest IRS News Releases, Tax Tips and customer alerts.
  • Alternative Minimum Tax. Tax season will start on time for everyone except certain taxpayers affected by the Alternative Minimum Tax legislation, known as the AMT Patch, that was enacted late last year. 1040 Central has a link to check how AMT might affect your return.
  • Answers to important questions. 1040 Central includes Frequently Asked Questions on a broad range of tax issues.
  • Forms and Publications. 1040 Central also has links to all the tax forms, instructions and publications you may need.
  • Filing Options. 1040 Central links you to information about IRS e-file and Free File. Join the millions of people who already file their tax returns electronically. IRS e-file is the most accurate way to file, the fastest way to get your refund and get your taxes where you want them – done!
  • See the latest tax Fraud Alerts. Don't be taken in by scam artists. If it sounds too good to be true, it probably is. Learn how to recognize a “phishing” e-mail and what to do if you receive one.
  • Check on your refund. Track your refund by clicking on the “Where’s My Refund?” link on 1040 Central.
  • Details about important tax credits. Find information about special tax credits like the Earned Income Tax Credit and Saver’s Credit.

TT-2008-10: IRS HAS FREE PUBLICATIONS ON EVERY TOPIC YOU NEED

The IRS has free publications to answer just about any tax question you have. Publications on a variety of tax-related topics are available by phone or the Internet at IRS.gov. From students to seniors, first-time home buyers to landlords…everyone can find useful information in IRS forms and publications.

To find what you’re looking for, follow any one of these easy steps:

  • Access the IRS Web site. Click on the Forms and Publications resource page to find what you need. There’s a search feature you can use if you know the topic but not the number of the form or publication.
  • Read Publication 910. The Guide to Free Tax Services identifies the many IRS tax materials and services available. You’ll also find information about accessing tax materials, filing options, tax publications, tax education and assistance programs.
  • Call Toll-free. If you know the name or number of the form or publication you need, call the toll-free Forms and Publications telephone line at 800-TAX-FORM (800-829-3676) to place your order.

If you still can’t find the information you need, visit IRS.gov or call the IRS toll-free customer service line at 800-829-1040.

TT-2008-11: IRS PUBLICATION 17 - NOW EASIER TO NAVIGATE ONLINE

Are you facing a lot of different tax questions this year? IRS experts have pulled together an overview of common tax issues in one convenient place — Publication 17, Your Federal Income Tax. This updated publication, available on the IRS Web site, IRS.gov, contains a vast array of helpful information for individual taxpayers.

This year the IRS has added new features to assist taxpayers to more easily navigate this widely-used publication. The on-line version of Publication 17 now contains electronic links for greater ease of use. Both the downloadable PDF and on-line HTML 2007 Publication 17 have over 800 hyperlinks. These hyperlinks allow users to immediately go to other parts of the publication, reducing the time it takes to access key information.

From stock sales to student loans, this nearly 300-page publication holds the answers to many of your questions:

  • Need help deciphering the mysteries of the Roth IRA? Try Chapter 17 for Individual Retirement Arrangements.
  • Do you have a new child in the house? See Chapter 34 for the Child Tax Credit.
  • Are you selling stock for the first time? Check Chapter 16 for reporting capital gains. If you’re unloading losers, reporting capital losses is there, too.
  • Do you need to report the profit on your home sale? See Chapter 15 for some good news. Generally, if you qualify you only need to report the sale of your home if your gain is more than $250,000 ($500,000 if married filing a joint return).

And the best part about Publication 17? It’s free. To get a copy, visit the IRS Web site at IRS.gov or call 800-TAX-FORM (800-829-3676).

TT-2008-12: TAX INFORMATION AVAILABLE IN SPANISH INFORMACIÓN TRIBUTARIA EN ESPAÑOL

If you need federal tax information, the IRS provides free Spanish language products and services. Pages on the Internal Revenue Service’s Web site, pre-recorded tax topics, refund information, tax publications and toll-free telephone assistance are all available in the Spanish language.

  • The Spanish language page (El IRS en Español) on the IRS Web site is located at IRS.gov/espanol. You will find links to tax related information like forms and publications, warnings about tax scams that victimize taxpayers, information on the Earned Income Tax Credit, Child Tax Credit, various other tax credits, and more.
  • TeleTax is a toll-free, automated telephone service available in English and Spanish. TeleTax provides helpful pre-recorded tax topic messages and refund information. You can find a list of over 150 TeleTax topics in the instructions for Form 1040, 1040A or 1040EZ. TeleTax can also help if at least four weeks have passed since you filed your tax return and you want to check on the status of your federal refund. Having a copy of the tax return handy will help you respond to the prompts on the automated system. TeleTax is available 24 hours a day, 7 days a week at 800-829-4477.
  • Spanish Publications are available by calling 800-TAX-FORM (800-829-3676) or on the IRS Web site, IRS.gov.
  • Toll-Free Telephone Assistance is available from Spanish-speaking IRS representatives by calling the IRS customer service line at 800-829-1040.

TT-2008-13: HOW TO GET A COPY OF YOUR TAX RETURN INFORMATION

There are two easy and convenient options for obtaining copies of your federal tax return information — tax return transcripts and tax account transcripts — by phone or by mail.

A tax return transcript shows most line items from the tax return (Form 1040, 1040A or 1040EZ) as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions such as those offering mortgages and student loans. You should receive your tax return transcript within 10 working days from the time the IRS receives your request.

A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income. The IRS does not charge a fee for transcripts, which are available for the current and three prior calendar years. Allow 30 calendar days for delivery of a tax account transcript.

To request either transcript:

  • Phone: Call 800-829-1040 and follow the prompts in the recorded message
  • Mail: Complete IRS Form 4506-T, Request for Transcript of Tax Return. If you need a photocopy of a previously processed tax return and attachments, complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. There is a fee of $39.00 for each tax period requested. Copies are generally available for the current and past 6 years.

Forms 4506-T and 4506 can be found on the IRS Web site at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

TT-2008-14: QUICK AND EASY ACCESS TO IRS FORMS AND PUBLICATIONS

The Internal Revenue Service has many forms and free publications on a wide variety of topics to help you understand and meet tax filing requirements. If you need IRS materials try one of these easy options:

  • Internet: You can access forms and publications on the IRS website 24 hours a day, 7 days a week, at IRS.gov.
  • Phone: Call 800-TAX-FORM (800-829-3676) to order current year forms, instructions and publications and prior year forms and instructions. You should receive your order within 10 days.
  • Walk-in: During the tax-filing season, many libraries and post offices offer free tax forms to taxpayers. Some libraries also have copies of commonly-requested publications. Braille materials may also be available. Many large grocery stores, copy centers, and office supply stores have forms you can photocopy or print from a CD.
  • Mail: Send your order for tax forms and publications to National Distribution Center, P.O. Box 8903, Bloomington, IL 61702-8903. You should receive your products within 10 days after we receive your order.

You may be concerned about whether the forms you file are affected by the Alternative Minimum Tax legislation passed by Congress in late December. You can download the updated forms and get the latest news about when the IRS will be ready for your return at IRS.gov.

TT-2008-15: GIFT TAXES

If you gave any one person gifts in 2007 that are valued at more than $12,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts. The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts generally are not taxable and do not count against the annual limit:

  • Tuition or Medical Expenses that you pay directly to an educational or medical institution for someone's benefit
  • Gifts to your Spouse
  • Gifts to a Political Organization for its use
  • Gifts to Charities

If you are married, both you and your spouse can give separate gifts of up to the annual limit of $12,000 to the same person without making a taxable gift.

Alternatively, with consent from your spouse, you can make a gift of up to $24,000 ($12,000 x 2) to the same person without making a taxable gift. This is commonly known as splitting gifts between spouses. Essentially, it means a gift by you or your spouse to a third person can be considered as made one-half by each of you provided there is consent by both spouses.

For more information, get the IRS Publication 950, Introduction to Estate and Gift Taxes, IRS Form 709, United States Gift Tax Return, and Instructions for Form 709. They are available at the IRS Web site at IRS.gov in the Forms and Publications section or by calling 800-TAX-FORM (800-829-3676).

TT-2008-16: MOVING SOON? LET THE IRS KNOW

If you changed your home or business address, notify the IRS to ensure that you receive any refunds or correspondence. While the IRS uses the Postal Service’s change of address files to update taxpayer addresses, notifying the IRS directly is still a good idea.

There are several ways to do this.

  • On your tax return. You may correct the address legibly on the mailing label that comes with your tax package or write the new address in the appropriate boxes on your tax return when you file.
  • Form 8822. You may use Form 8822, Change of Address, to submit an address or name change at any time during the year.
  • Written Notification. To give written notification, write to the IRS center where you file your return and provide your new address. The addresses for the IRS centers are listed in the tax instructions. In order to process an address change, the IRS will need your full name, old and new addresses, and your social security number or employer identification number, and signatures. If you filed a joint return, you should provide the same information for both spouses. If you filed a joint return and have since established separate residences, you each should notify the IRS of your new addresses.
  • Verbal Notification. If an IRS employee contacts you about your account, you may be able to verbally provide a change of address.

It's a good idea to notify your employer of your new address so that you can get your W-2 forms on time.

If you change your address after filing your return, don't forget to notify the post office at your old address so your mail can be forwarded.

You should also notify the IRS if you make estimated tax payments and you change your address during the year. You should mail a completed Form 8822, Change of Address, or write the IRS center where you file your return. You can continue to use your old pre-printed payment vouchers until the IRS sends you new ones. However, do not correct the address on the old voucher.

You can download Form 8822, Change of Address at the IRS Web site, IRS.gov, or order by calling 800-TAX-FORM (800-829-3676).

TT-2008-17: TIPS FOR RECENTLY MARRIED OR DIVORCED TAXPAYERS

Newlyweds and the recently divorced should ensure the name on their tax return matches the name registered with the Social Security Administration (SSA). A mismatch could unexpectedly delay a tax refund.

• For recently married taxpayers, the tax scenario begins when the bride says "I do." If she takes her husband's last name, but doesn't tell the SSA about the name change, a complication may result. If the couple files a joint tax return with her new name, the IRS computers will not be able to match the new name with the Social Security Number (SSN).

• After a divorce, a woman who had taken her husband’s name and made that change known to the SSA should contact the SSA if she reassumes a previous name.

It's easy to inform the SSA of a name change by filing Form SS-5 at a local SSA office. It usually takes two weeks to have the change verified. The form is available on the agency's Web site, www.socialsecurity.gov, by calling 800-772-1213 and at local offices. The SSA Web site provides the addresses of local offices.

Generally, taxpayers must provide SSNs for each dependent claimed on the tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number, or ATIN, by filing Form W-7A with the IRS. The ATIN is a temporary number used in place of the SSN on the tax return. The form is available on the IRS Web site, IRS.gov, or by calling 800-TAX-FORM (800-829-3676).

TT-2008-18: WHAT TO DO IF YOU HAVEN'T FILED YOUR 2006 RETURN

There are several reasons taxpayers don’t file their taxes. Perhaps you didn’t know you were required to file. Maybe, you just kept putting it off and simply forgot. Whatever the reason, it’s best to file your return as soon as possible. If you need help, even with a late return, the IRS is ready to assist you.

Here are some things to consider:

  • Failure to File penalty. If you owe taxes, a delay in filing may result in a "failure to file" penalty, also known as the “late filing” penalty, and interest charges. The longer you delay, the larger these charges grow.
  • Losing your Refund. There is no penalty for failure to file if you are due a refund. However, you cannot obtain a refund without filing a tax return. If you wait too long to file, you may risk losing the refund altogether. The deadline for claiming refunds is three years after the return due date. For example, the last day for claiming a refund for your 2004 tax return will be April 15, 2008.
  • EITC. Individuals who are entitled to the Earned Income Tax Credit must file their return to claim the credit even if they are not otherwise required to file.

Whether or not you must file a tax return will depend upon a number of factors, including your filing status, age, and gross income.

If your income was $40,000 or less, your local Taxpayer Assistance Center may be able to assist you in preparing your prior year return. You can locate your nearest center at http://www/irs.gov/localcontacts/index.html. For more information on how to file a tax return for a prior year, visit the IRS Web site at IRS.gov or call the IRS Tax Help Line for Individuals at 800-829-1040.

TT-2008-19: e-file - A SMART WAY TO DO YOUR TAXES

Every year, more taxpayers discover the benefits of filing their tax return electronically. Whether you use a professional tax preparer authorized by the IRS or do it yourself from a home computer, there are many reasons to consider e-filing your tax return this year.

  • Fast. No more last minute trips to the Post Office – with e-file, just hit Send!
  • Accurate. e-file checks for errors and necessary information, increasing the accuracy of your return and reducing the need for correspondence with the IRS to clarify errors or omissions.
  • Easy. e-file leads you step-by-step. You can usually file a state tax return at the same time you electronically file your federal return.
  • Quicker Refunds. Generally, when you use e-file, your refund will be issued in about half the time it would take if you filed a paper return. Those who choose Direct Deposit will get their refund in even less time.
  • Peace of mind. With e-file, once the return is accepted for processing, the taxpayer is notified electronically, acknowledging the IRS received the return.
  • Payment options. With e-file, you can file your return early but wait to pay any balance due by the April deadline. You can also pay electronically, using a credit card, electronic funds withdrawal or, in some cases, the Electronic Federal Tax Payment System.

The IRS is again offering eligible taxpayers the opportunity to electronically prepare and file their tax returns for free through Free File, a program offered in partnership between the IRS and private-sector software companies. For information on taxpayer eligibility, access the Free File Web page at IRS.gov.

For more information on e-file, check the IRS Web site at www.irs.gov/efile. You will also find a withholding calculator and worksheet, along with Form W-4, Employee’s Withholding Allowance Certificate, on the Web site. You may also get Form W-4 from your employer or by calling the IRS at 800-TAX-FORM (800-829-3676).

TT-2008-20: RECEIVE YOUR REFUND FASTER WITH DIRECT DEPOSIT

Want your refund faster? Have it deposited directly into your bank account. More taxpayers are choosing direct deposit as the way to receive their federal tax refunds. More than 61 million people had their tax refunds deposited directly into their bank accounts in 2007. It’s a secure and convenient way to get your money in your pocket faster.

  • Security. The payment is secure — there is no check to get lost. Each year thousands of refund checks are returned by the US Post Office to the IRS as undeliverable mail. Direct deposit eliminates undeliverable mail and is also the best way to guard against having a tax refund stolen.
  • Convenience. There’s no special trip to the bank to deposit a check!

To request direct deposit, follow the instructions for “Refund” on your tax return.

Want an even faster refund? Try e-file! Taxpayers who file electronically get their refunds in about half the time as those who file paper returns.

You can also electronically direct your refund to multiple accounts. With the new “split refund” option, taxpayers can divide their refunds among as many as three checking or savings accounts and three different U.S. financial institutions. The split refund option, using Form 8888, is also available for paper returns.

A word of caution — some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted. Also, make sure you have the correct nine-digit routing number and your account number when selecting direct deposit.

For more information about direct deposit of your tax refund and the split refund option, check the instructions for your tax form. This and other helpful tips are available in IRS Publication 17, Your Federal Income Tax. To get a copy, visit the Forms and Publications section of the IRS Web site, IRS.gov, or call 800-TAX-FORM (800-829-3676).

TT-2008-21: CHECK OUT FREE FILE

If you have access to a computer and the Internet you may be eligible to prepare and file your 2007 federal tax return electronically—for free. Free File is an easy way to file your taxes and get your refund in half the time.

The IRS and the Free File Alliance, a private-sector consortium of tax software companies, continue their partnership to help taxpayers earning $54,000 or less electronically prepare and file their federal tax returns for free. Free File made its debut during the 2003 filing season as a way to provide free services to moderate and low-income taxpayers. For the 2007 filing season 97 million taxpayers will be eligible for these free tax services.

Taxpayers access Free File through the IRS Web site at IRS.gov. Each company sets its own criteria for free usage. The criteria are usually based on income, state residency and age.

Filing electronically is fast, accurate and secure. Last year almost 60% of all taxpayers filed their tax returns electronically including 3.8 million who used Free File through the IRS website. The benefits of using Free File, like those of e-file, include:

  • Reduced tax return preparation time
  • Faster refunds
  • Accuracy of return
  • Acknowledgement that the return is received

For more information on Free File, check out the IRS Web site at IRS.gov.

TT-2008-22: THE EARNED INCOME TAX CREDIT

The EITC is for people who work, but have lower incomes. If you qualify, it could be worth up to $4,700 this year. So you could pay less federal tax or even get a refund. That’s money you can use to make a difference in your life.

Did you know that in Tax Year 2006, over 22.4million taxpayers received $43.7 billion dollars in EITC – making the credit a great investment in the lives of those who claim it? However, the IRS estimates 20 percent to 25 percent of people who qualify for the credit do not claim it. At the same time, there are millions of Americans who have claimed the credit in error, many of whom simply don’t understand the criteria.

It’s easy to determine whether you qualify for the EITC. The EITC Assistant, an interactive tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions about yourself, your children, your living situation and your income to find out if you qualify and to estimate the amount of your EITC. You will see the results of your responses right away.

The EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. If you have children, they must meet the relationship, age and residency requirements. Additionally, you must file a tax return to claim the credit.

If you were employed for at least part of 2007, you may be eligible for the EITC based on these general requirements:

  • You earned less than $12,590 ($14,590 if married filing jointly) and did not have an any qualifying children
  • You earned less than $33,241 ($35,241 if married filing jointly) and have one qualifying child
  • You earned less than $37,783 ($39,783 if married filing jointly) and have more than one qualifying child

In addition you must meet a few basic rules:

  • You must have a valid Social Security Number
  • You must have earned income from employment or from self-employment.
  • Your filing status cannot be married, filing separately.
  • You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
  • You cannot be a qualifying child of another person.
  • If you do not have a qualifying child, you must:
  • be age 25 but under 65 at the end of the year,
  • live in the United States for more than half the year, and
  • not be a qualifying child of another person
  • You cannot file Form 2555 or 2555-EZ (related to foreign earn income)

Members of the military can elect to include their nontaxable combat pay in earned income for the earned income credit. If you make the election, you must include in earned income all nontaxable combat pay you received. If you are filing a joint return and both you and your spouse received nontaxable combat pay, then each of you can make your own election. The amount of your nontaxable combat pay should be shown on your Form W-2 in box 12 with code Q.

For more information about the EITC, go to IRS.gov or see Publication 596, Earned Income Credit, which contains eligibility criteria and instructions for claiming the tax credit. Copies of the publication are available in English and Spanish and can be found on IRS.gov or by calling 800-TAX-FORM (800-829-3676). Free help and tax preparation is available at our Volunteer Income Tax Assistance sites or contact your tax preparer for more details.


TT-2008-23: USE EFTPS TO PAY YOUR TAXES ELECTRONICALLY

If you are going to owe taxes when you file your federal tax return, consider paying through the Electronic Federal Tax Payment System (EFTPS). EFTPS is a fast, easy, convenient and secure service provided free by the U.S. Department of the Treasury.

  • EFTPS is available to both individual and business taxpayers. With EFTPS, you can pay all your federal tax payments through the internet or by telephone. These payments include corporate, excise and employment taxes as well as your 1040 quarterly estimated tax payments.
  • EFTPS is convenient and flexible. It allows individual taxpayers to schedule payments up to 365 days—and businesses up to 120 days—in advance of the payment due date. With the ability to schedule payments in advance, you can avoid missing deadlines and incurring penalties. Scheduled payments can be cancelled up to two business days before the scheduled payment due date.
  • EFTPS is available around-the-clock. The electronic payment system and a live Customer Service representative are available 24 hours a day, 7 days a week. Other features include an immediate, printable acknowledgement number which acts as a receipt for your payment.

After you enroll in EFTPS, you will receive a confirmation package by mail. In a separate mailing you will receive an EFTPS Personal Identification Number (PIN) with instructions for activating your enrollment. Employers who apply for and receive a new Employer Identification Number and have a federal tax obligation are automatically enrolled in EFTPS Express Enrollment to make their Federal Tax Deposits.

For more information visit the EFTPS page on IRS.gov. To enroll, visit www.eftps.gov or call EFTPS Customer Service at 800-555-4477.

TT-2008-24: Missing Your Form W-2?

Did you get your W-2? These documents are essential to filling out most individual tax returns. You should receive a Form W-2, Wage and Tax Statement, from each of your employers each year. Employers have until January 31, 2008 to provide or send you a 2007 W-2 earnings statement either electronically or in paper form. You should allow two weeks to receive your W-2 from employers who send them by mail.

If you do not receive your Form W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to your employer because of an incorrect or incomplete address. After contacting your employer, allow a reasonable amount of time for your employer to resend or to issue the W-2.

If you still do not receive your W-2 by February 15th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:

  • Employer's name, address, city, and state, including zip code.
  • Your name, address, city and state, including zip code, and Social Security number, and
  • An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

If you misplaced your W-2, contact your employer. Your employer can replace the lost form with a “reissued statement.” Be aware that your employer is allowed to charge you a fee for providing you with a new W-2.

You still must file your tax return on time even if you do not receive your Form W-2. If you do not receive the missing information in time to file, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

On occasion you may get back conflicting documents. You may receive a Form W-2 or W-2C (corrected form) after you filed your return using Form 4852, and the information differs from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-25: MISSING A FORM 1099?

If you receive certain types of income, you may get a Form 1099 for use with your federal tax return. Form 1099 is an information return provided by the payer of the income. The payer should send or provide your Form 1099-series information returns by January 31, 2007.

If you have not received an expected Form 1099 by a few days after that, contact the payer. If you still do not receive the form by February 15th, call the IRS for assistance at 800-829-1040.

In some cases, you may obtain the information that would be on the Form 1099 from other sources. For example, your bank may put a summary of the interest paid during the year on the December or January statement for your savings or checking account. If you are able to get the accurate information needed to complete your tax return, you do not have to wait for the Form 1099 to arrive.

You will not usually attach a 1099-series form to your return, except when you receive a Form 1099-R that shows income tax withheld. You should keep a copy of all the 1099s that you receive with your tax records for the year. There are several different forms in this series, including:

  • Form 1099–B, Proceeds From Broker and Barter Exchange Transactions
  • Form 1099–DIV, Dividends and Distributions
  • Form 1099–INT, Interest Income
  • Form 1099–MISC, Miscellaneous Income
  • Form 1099–OID, Original Issue Discount
  • Form 1099–R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
  • Form SSA–1099, Social Security Benefit Statement

If you file your return and later receive a Form 1099 for income that you did not fully include on that return, you should report the income and take credit for any income tax withheld by filing Form 1040X, Amended U.S. Individual Income Tax Return. Form 1040X and instructions are available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-26: GUIDELINES FOR ROTH IRA CONTRIBUTIONS

Although Roth IRAs are popular retirement arrangements, some taxpayers may be confused about whether they can contribute to a Roth IRA. Here are some helpful guidelines:

  • Income Limits To contribute to a Roth IRA, you must have taxable compensation (e.g., wages, salary, tips, professional fees, bonuses). These limits vary depending on your filing status.
  • Age There is no age limitation for Roth IRA contributions.
  • Contribution Limits In general, if your only IRA is a Roth IRA, the maximum 2007 contribution limit is the lesser of your taxable compensation or $4,000 ($5,000 if age 50 or older). The maximum contribution limit phases out depending on your modified adjusted gross income.
  • Spousal Roth IRA You can make contributions to a Roth IRA for your spouse provided you meet the income requirements.

Time Contributions to a Roth IRA can be made at any time during the year or by the due date of your return for that year (not including extensions).

Roth IRA contributions are not tax deductible and are not reported on your tax return. On the other hand, you do not have to pay tax on any qualified distributions, distributions that are a return of your regular Roth IRA contributions, or distributions that are rolled over into another Roth IRA.

For complete information and definitions of terms, get Publication 590,

Individual Retirement Arrangements. Visit the IRS Web site at IRS.gov, or call 800-TAX-FORM (800-829-3676) to request a free copy of the publication.

TT-2008-27: Changes to Tax Laws in 2007

Taxpayers should be aware of important changes to the tax law before they complete their 2007 federal income tax forms. Here are some changes that may affect your return.

  • AMT Exemption Increased for One Year. For tax-year 2007, Congress raised the alternative minimum tax exemption to $66,250 for a married couple filing a joint return. The exemption rises to $33,125 for a married person filing separately and to $44,350 for singles and heads of household. While the vast majority of taxpayers can file as usual, about 13.5 million taxpayers who file any of five tax forms affected by recent tax law changes related to the AMT will have to wait until Feb. 11, 2008, to file their returns. IRS.gov has more information on this important subject, including downloadable copies of affected forms and questions and answers.
  • Extender Tax Breaks Reappear on IRS Forms. Several popular tax breaks, renewed too late to be included on 2006 forms, once again appear as separate items on various 2007 IRS forms. As a result, unlike last year, eligible taxpayers will no longer have to follow special instructions in order to claim the deduction for state and local sales taxes, the educator expense deduction and the tuition and fees deduction.
  • Saver’s Credit. This year for the first time income limits for the saver’s credit are adjusted for inflation. The saver’s credit supplements other tax benefits available to low- and- moderate income taxpayers who save for retirement. Begun in 2002 as a temporary provision, the saver’s credit is now a permanent part of the tax code. Use Form 8880 to claim the credit.
  • Mortgage Insurance Premiums May be Deductible. Some borrowers may be able to deduct mortgage insurance premiums paid on mortgages taken out or refinanced during 2007. The deduction for mortgage insurance premiums is phased out for taxpayers with adjusted gross incomes exceeding $100,000 ($50,000, if married filing separately). Claim this deduction on Schedule A, Line 13. Further details are in Publication 936.
  • New Rules for Giving to Charity. To deduct any charitable donation of money, taxpayers must have a bank record or a written communication from the recipient showing the name of the organization and the date and amount of the contribution. Though taxpayers are already required to keep records to support their contribution deductions, this new provision is designed to provide greater certainty, both to taxpayers and the government, in determining what may be deducted as a charitable contribution. See Publication 526.

More information about the changes can be found on IRS.gov and in various IRS documents, including the Instructions for Form 1040.

TT-2008-28: Can You Use Schedule C-EZ?

Want to save time and trouble when filing taxes for your small business? You may be eligible to use the abbreviated Schedule C-EZ instead of the longer Schedule C when reporting business income and expenses on your 2007 Form 1040 federal income tax return. The maximum deductible business expense threshold for filing Schedule C-EZ is $5,000.

Schedule C-EZ, Net Profit from Business (Sole Proprietorship), is the simplified version of Schedule C, Profit or Loss from Business (Sole Proprietorship).

Schedule C-EZ:

  • Has an instruction page and a one-page form with three short parts — General Information, Figure Your Net Profit, and Information on Your Vehicle.
  • Includes a simple worksheet for figuring the amount of deductible expenses. If that amount does not exceed $5,000, and if your business did not have a net loss, you may be able to use the C-EZ instead of Schedule C. (Other restrictions apply; be sure to read the instructions carefully.

Schedule C:

  • Is two pages long and is divided into five parts — Income, Expenses, Cost of Goods Sold, Information on Your Vehicle, and Other Expenses.
  • Requires more detailed information than the C-EZ. The instruction package is 10 pages long.
  • Must be used when deductible business expenses exceed $5,000 or when a business has a net loss.

Using Schedule C-EZ can save time and reduce paperwork burden for eligible businesses. More information about Schedule C-EZ and reporting net profit for sole proprietorships can be found on the IRS Web site at IRS.gov.

TT-2008-29: DIRECT DEPOSIT AND SPLIT REFUND

Taxpayers have choices and flexibility for the direct deposit of 2007 federal income tax refunds. They can:

  • Split their refunds among up to three accounts held by as many as three different U.S. financial institutions, such as banks, mutual funds, brokerage firms or credit unions;
  • Direct deposit their refunds to one account; or
  • Opt to receive a slower paper check through the mail.

The split-refund option is available to taxpayers who choose direct deposit regardless of whether they filed the original returns on paper or in electronic format using Form 1040, 1040A, 1040EZ, 1040-PR, 1040NR, 1040NR-EZ or 1040-SS. However, taxpayers filing Form 8379, Injured Spouse Allocation, cannot opt to split their refunds.

To split direct deposit refunds among two or three accounts or financial institutions, taxpayers should complete IRS Form 8888, Direct Deposit of Refund to More Than One Account. Taxpayers can continue, though, to use the direct deposit line on Form 1040 to electronically send their refunds to one account.

The IRS will electronically deposit refunds to taxpayers’ accounts held by a U.S. financial institution, provided that an accurate account number and American Bankers Association (ABA) routing number is supplied and the financial institution accepts direct deposits for the type of accounts designated. Taxpayers should verify routing and account numbers with their financial institutions. IRS assumes no responsibility for taxpayer or preparer error.

Note that taxpayers can do things much faster electronically than by paper. For those filing their taxes electronically, the refund is usually deposited in their account within two weeks. A paper check refund generally takes about three weeks. For those filing taxes on paper, the process is longer. They get their direct deposit refund in around four to six weeks, while paper checks take six weeks or so.

By using the IRS’ popular Where’s My Refund? feature at IRS.gov, taxpayers can check the status of their refunds. Refund information is available in both English and Spanish. Taxpayers without Internet access can call 800-829-1954.

TT-2008-30: WHAT INCOME IS TAXABLE? NONTAXABLE?

Generally, most income you receive is taxable. But there are some situations when certain types of income are partially taxed or not taxed at all. A comprehensive list is available in IRS Publication 525, Taxable and Nontaxable Income.

Some common examples of items that are not included in your income are:

  • Adoption Expense Reimbursements for qualifying expenses
  • Child support payments
  • Gifts, bequests and inheritances
  • Workers' compensation benefits
  • Meals and Lodging for the convenience of your employer
  • Compensatory Damages awarded for physical injury or physical sickness
  • Welfare Benefits
  • Cash Rebates from a dealer or manufacturer
  • Tax Exempt Interest from municipal bonds and tax exempt bond mutual funds. Although this interest is usually not taxed it must be reported on line 8b of Form 1040 or 1040A.

Examples of items that may or may not be included in your income are:

  • Life Insurance. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
  • Scholarship or Fellowship Grant. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.

All other items, unless specifically excluded by law, must be included in your income. This income may be in a form other than cash. For example:

  • Bartering. Bartering is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included on Form 1040 in the income of both parties.

These examples are not all-inclusive. For more information, visit the IRS Web site at IRS.gov to view or download Publication 525 from the Forms and Publications section or call 800-TAX-FORM (800-829-3676).

TT-2008-31: ARE YOUR SOCIAL SECURITY BENEFITS TAXABLE?

How much, if any, of your social security benefits are taxable depends on your total income and marital status. Generally, if social security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.

If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. Your taxable benefits and modified adjusted gross income are figured in a worksheet in the Form 1040A or Form 1040 Instruction booklet.

Before you go to the instruction book, do the following quick computation to determine whether some of your benefits may be taxable:

  • First, add one–half of the total social security you received to all your other income, including any tax exempt interest and other exclusions from income.
  • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

The 2007 base amounts are:

  • $32,000 for married couples filing jointly
  • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year
  • $0 for married persons filing separately who lived together during the year

For additional information on the taxability of social security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-32: PAYING OR RECEIVING ALIMONY?

If you were recently divorced and are paying or receiving alimony under a divorce decree or agreement, you need to consider the tax implication for your 2007 federal income tax return.

Here are the general guidelines:

Alimony payments received from your spouse or former spouse are taxable to you in the year you receive them. Because no taxes are withheld from alimony payments, you may need to make estimated tax payments or increase the amount withheld from your paycheck.

Alimony payments you make under a divorce or separation instrument are deductible if certain requirements are met. Any payments not required by such a decree or agreement do not qualify as deductible alimony payments.

Child support you pay is never deductible. Child support you receive is not taxable.

If you paid or received alimony you must use Form 1040. You cannot use Form 1040A or Form 1040EZ. If you received alimony, you must give the person who paid the alimony your social security number or you may have to pay a $50 penalty.

For more information, including rules for divorces and separations before 1985, get Publication 504, Divorced or Separated Individuals, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-33: TIPS ARE SUBJECT TO TAXES

Do you work at a hair salon, barber shop, casino, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those and other services is taxable income.

Here are some tips about tips:

  • Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.
  • Include tips on your tax return. You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.
  • Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
  • Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income. For a free copy of Publication 1244, call the IRS toll free at 800-TAX-FORM (800-829-3676).

For more information, check out IRS Publication 531, Reporting Tip Income, or Publication 3148, Tips on Tips. They are available by calling 800-TAX-FORM (800-829-3676) or by going to the IRS Web site at IRS.gov.

TT-2008-34: GAMBLING INCOME AND LOSSES

Gambling winnings are fully taxable and must be reported on your tax return. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes.

Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld income federal taxes from the payment.

Here are some general guidelines on gambling income and losses:

  • Reporting winnings: The full amount of your gambling winnings for the year must be reported on line 21, Form 1040. You may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form.
  • Deducting losses: If you itemize deductions, you can deduct your gambling losses for the year on line 28, Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings.

It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.

For more information see IRS Publication 529, Miscellaneous Deductions, or Publication 525, Taxable and Nontaxable Income, both available on the IRS Web site, IRS.gov, or by calling 800-TAX-FORM (800-829-3676).

TT-2008-35: TAX FACTS ABOUT CAPITAL GAINS AND LOSSES

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only capital losses on investment property, not personal property.

Here are a few tax facts about capital gains and losses:

  • Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
  • Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
  • Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss.
  • The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2007, the maximum capital gains rates are 5%, 15%, 25% or 28%.
  • If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).

For more information about reporting capital gains and losses, get Publication 17, Your Federal Income Tax, and Publication 550, Investment Income and Expenses, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-36: TAXES ON EARLY DISTRIBUTIONS FROM RETIREMENT PLANS

Payments that you receive from your IRA or qualified retirement plan before you reach age 59½ are normally called ‘early’ or ‘premature’ distributions. These funds are subject to an additional 10 percent tax and must be reported to the IRS.

There are a number of exceptions to this additional tax. Some exceptions apply only to IRAs, some only to qualified retirement plans, and some to both.

If you don’t qualify for an exception, the 10 percent tax on early distributions applies to the portion of the distribution that is taxable. If you received a distribution from an IRA, other than a Roth IRA, to which you made any nondeductible contributions, the portion of the distribution attributable to those contributions is not taxed. If you received an early distribution from a Roth IRA the distribution attributable to contributions is not taxed. If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.

A ‘rollover” is a way to avoid paying tax on early distributions. Generally, a rollover is a tax-free transfer of cash or other assets from an IRA or qualified retirement plan to another eligible retirement plan. An eligible retirement plan is a traditional IRA, a qualified retirement plan, or a qualified annuity plan. You must complete the rollover within 60 days after the day you received the distribution. The amount you roll over is generally taxed when the new plan pays you or your beneficiary.

For more information see IRS Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), Publication 575, Pension and Annuity Income, or Publication 590, Individual Retirement Arrangements (IRAs), available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-37: INCOME FROM FOREIGN SOURCES

Many United States citizens and resident aliens receive money from foreign sources. These taxpayers must remember that they must report all such income on their tax return, unless it is exempt under federal law.

U.S. citizens and residents are taxed on their worldwide income. This applies whether a person lives inside or outside the United States. Foreign income must be reported on a U.S. tax return whether or not the person receives a Form W-2, Wage and Tax Statement, a Form 1099 (information return) or the foreign equivalent of those forms.

Foreign source income includes but is not limited to earned and unearned income, such as:

  • Wages and tips
  • Interest
  • Dividends
  • Capital Gains
  • Pensions
  • Rents
  • Royalties

An important point to remember is that individuals living outside the U.S. may be able to exclude up to $85,700 of their 2007 foreign earned income if they meet certain requirements. However, the foreign earned income exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S.

For more information, check out IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. It’s available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-38: TAX RATES FOR A CHILD'S INVESTMENT INCOME

Part or all of a child's investment income may be taxed at the parent's rate rather than the child's rate. Because a parent's taxable income is usually higher than a child's income, the parent's top tax rate will often be higher as well.

This special method of figuring the federal income tax only applies to children who are under the age of 18. For 2007, it applies if the child's total investment income for the year was more than $1,700. Investment income includes interest, dividends, capital gains, and other unearned income.

To figure the child's tax using this method, fill out Form 8615, Tax for Children Under Age 18 With Investment Income of More Than $1,700, and attach it to the child's federal income tax return.

Alternatively, a parent can, in many cases, choose to report the child's investment income on the parent's own tax return. Generally speaking, this option is available if the child's income consists entirely of interest and dividends (including capital gain distributions) and the amount received is less than $8,500. However, choosing this option may reduce certain credits or deductions that parents may claim.

For 2007, these special tax rules do not apply to investment income received by children who are age 18 and over. In addition, wages and other earned income received by a child of any age are taxed at the child's normal rate.

More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Form 8615 are available on the IRS Web site at IRS.gov in the Forms and Publications section. You may also order them by calling the IRS at 800-TAX-FORM (800-829-3676).

TT-2008-39: IRS TOLL-FREE HELP

Free tax help from the IRS is just a phone call away. The IRS provides various services through its toll-free telephone numbers. Some of these services are available 24 hours a day.

  • Ask questions about your tax return. You can call the IRS Tax Help Line for Individuals customer service line, 800-829-1040, to get answers to your federal tax questions. The IRS Tax Help Line is available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time.
  • Order forms and publications. Call 800-TAX-FORM (800-829-3676). Copies of forms, publications and other helpful information are also available around-the-clock at the IRS Web site at www.irs.gov.
  • Check the status of your refund. Call the Refund Hotline at 800-829-1954. You will need to know your filing status and the exact whole-dollar amount of your expected refund. The Refund Hotline is available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time. TeleTax, the automated refund line, at 800-829-4477 is available around the clock and will also let you check the status of your income tax refund. Automated refund information is generally available four to five weeks after you have filed your tax return. You can also check the status of your refund at IRS.gov by clicking on Where’s My Refund? This service is available 24 hours a day, seven days a week.
  • Recorded tax information: The TeleTax line at 800-829-4477 has recorded messages covering more than 100 tax topics. Topics include items such as Who Must File?, Highlights of Tax Changes, Education Credits, Individual Retirement Accounts, Earned Income Tax Credit, What to Do if You Can't Pay Your Tax and more.
  • Hearing-impaired individuals with access to TTY/TDD equipment. Call 800-829-4059 to ask questions or to order forms and publications. This number is answered only by TTY/TDD equipment. The TTY/TDD numbers are available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time.

The automated services offered on the IRS toll-free lines are also available 24 hours a day 7 days a week on the Internet at IRS.gov.

TT-2008-40: FREE TAX HELP FOR THE MILITARY

If you, or your spouse, are a member of the military, you may be eligible to receive free assistance with the preparation and filing of your federal tax return. The U.S. Armed Forces participate in the Volunteer Income Tax Assistance Program (VITA). The Armed Forces Tax Council (AFTC) oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. The AFTC consists of tax program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard.

Military-based VITA sites provide free tax advice, tax preparation, return filing and other tax assistance to military members and their families. The volunteer assistors are trained to address military-specific tax issues, such as combat zone tax benefits.

Military commanders support the program by detailing members of the military to prepare returns and by providing space and equipment for tax centers. The IRS supports these efforts by providing tax software and training.

To receive this free assistance, you should bring the following records to your military VITA site:

  • Valid photo identification
  • Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration
  • Birth dates for you, your spouse and dependents
  • Current year’s tax package, if you received one
  • Wage and earning statement(s) -- Form W-2, W-2G, 1099-R
  • Interest and dividend statements (Forms 1099)
  • A copy of last year’s federal and state tax returns, if available
  • Bank routing numbers and account numbers for direct deposit
  • Total amount paid for day care
  • Day care provider’s identifying number
  • Other relevant information about income and expenses

If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.

For more information, review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at IRS.gov or order a free copy by calling 800-TAX-FORM (800-829-3676).

TT-2008-41: FREE TAX SERVICES

The IRS provides free publications, forms and other tax material and information to help taxpayers meet their tax obligations. Free help is available on the IRS website, by phone, at local IRS offices and at many community locations.

  • IRS.gov You can access free tax information at IRS.gov. At 1040 Central on the Individuals page, you can obtain forms, instructions and publications, learn about IRS e-file, determine your eligibility for the Earned Income Tax Credit, read about the latest tax changes and find answers to Frequently Asked Questions. Most taxpayers can use Free File, available only through the IRS.gov Web site, to electronically prepare and file their federal tax return – for free! You can also check the status of your refund at IRS.gov by clicking on Where’s My Refund, a service available 24 hours a day, seven days a week.
  • Telephone Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers to your federal tax questions. To order free forms, instructions and publications call 800-829-3676. To hear pre-recorded messages covering various tax topics or check on the status of your refund, call 800-829-4477. TTY/TDD users may call 800-829-4059 to ask tax questions or to order forms and publications.
  • Community Resources Free tax preparation is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs in many communities. Volunteer return preparation programs provided through IRS and its partners offer free help in preparing simple tax returns for low- to moderate-income taxpayers. Call 800-829-1040 to find the VITA or TCE site nearest you. You may also call AARP — the largest TCE participant — at 888-227-7669 (888-AARPNOW) or access www.aarp.org to find the nearest Tax-Aide site.
  • Taxpayer Assistance Centers When you believe your tax issue cannot be handled online or by phone, and you want face-to-face assistance, you can find help at a local Taxpayer Assistance Center. Locations, business hours and an overview of services are at IRS.gov.

For more information about services provided by the IRS, review Publication 910, IRS Guide to Free Tax Services available at IRS.gov or by calling 800-829-3676.

TT-2008-42: VOLUNTEER TAX RETURN PREPARATION

Are you puzzled by the tax law and which credits and deductions you can take? If so, then why not look into the free, IRS-sponsored, volunteer tax return preparation services?

Note: Many low-income individuals receiving Social Security, Railroad Retirement, certain veterans benefits, or a small amount of earned income who usually do not file a tax return may want to utilize IRS free services this year. Individuals who might not otherwise be required to file a 2007 tax return will need to file a return this year to receive an economic stimulus payment. For more information see IRS Fact Sheet FS 2008-16 Stimulus Payments: Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans Benefits. IRS Fact Sheet 2008-16

For quick refunds, most sites also offer free electronic filing of your tax return. The IRS offers:

  • Volunteer Income Tax Assistance (VITA) offers free tax help to people whose incomes are $40,000 or less. Volunteers sponsored by various organizations receive training to prepare basic tax returns in communities across the country. VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations.
  • Tax Counseling for the Elderly (TCE) provides free tax help to people aged 60 and older. Trained volunteers from non-profit organizations provide free tax counseling and basic income tax return preparation for senior citizens. Volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.
  • AARP Tax-Aide counseling, part of the IRS-Sponsored TCE Program, AARP offers the Tax-Aide counseling program at thousands of sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income with special attention to those aged 60 and older. To locate the nearest AARP Tax-Aide site in your community, call 888-227-7669 (888-AARPNOW) or visit AARP's Web site at www .aarp.org.

Filing your taxes can be easy and free. Take advantage of a volunteer assistance program in your area to receive free income tax preparation assistance. Locations and hours of operation are often available through city information hotlines and local community organizations. Local volunteer tax preparation site information is also available by calling the IRS toll-free number 1-800-829-1040.

TT-2008-43: ARE YOU ELIGIBLE FOR A TAX CREDIT?

Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes.

Taxpayers should consider their eligibility for the credits listed below:

  • The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit. For more information, see IRS Publication 596, Earned Income Credit.
  • The Child and Dependent Care Credit is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
  • The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
  • Adoption Credit Adoptive parents may qualify for a tax credit of up to $11,390 for qualifying expenses paid to adopt each eligible child. The credit may be allowed for the adoption of a child with special needs even if you do not have any qualifying expenses. For more information, see the instructions for Form 8839, Qualified Adoption Expenses.
  • Credit for the Elderly or the Disabled This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations. For more information, see IRS Publication 524, Credit for the Elderly or the Disabled.
  • Savers Credit (formally called the Retirement Savings Contribution Credit) You may be able to take the credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans. For more information, see IRS Publication 590, Individual Retirement Accounts.

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check the instructions for Form 1040, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).

TT-2008-44: BEWARE OF TAX SCAMS

Don’t fall victim to tax scams. These schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.

The IRS suggests that you remember three important guidelines:

  • You are responsible and liable for the content of your tax return.
  • Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and
  • Never sign a tax return without looking it over to make sure it is accurate.

Beware of these common schemes:

Return Preparer Fraud:

Dishonest tax return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares your tax return you are ultimately responsible for its accuracy and for any tax bill that may arise due to a questionable claim.

Identity Theft:

It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes or scammers posing as the IRS itself. The IRS does not use e-mail to contact taxpayers about issues related to their accounts. If you have any doubt whether a contact from the IRS is authentic call 800-829-1040 to confirm it.

Frivolous Arguments:

Promoters have been known to make outlandish claims that the Sixteenth Amendment concerning congressional power to establish and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. Such arguments are false and have been thrown out of court. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law.

For more information about these and other tax scams visit the IRS Web site at IRS.gov.

TT-2008-45: CLAIMING THE CHILD TAX CREDIT

With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child under the age of 17.

A qualifying child for this credit is someone who meets the following criteria:

  • Age - Was under age 17 at the end of 2007
  • Relationship - Is your son, daughter, adopted child, stepchild or eligible foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these individuals
  • Citizenship - Is a U.S. citizen, U.S. national or resident of the U.S.
  • Support - Did not provide over half of his or her own support, and
  • Lived with you - Must have lived with you for more than half of 2007 (note that some exceptions to this criteria exist)

The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:

  • Married Filing Jointly $110,000
  • Married Filing Separately $ 55,000
  • All others $ 75,000

In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an “Additional” Child Tax Credit. The Additional Child Tax Credit may give you a refund even if you do not owe any tax. For 2007, the total amount of the Child Tax Credit and any Additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.

You may claim the Child Tax Credit on Form 1040 or 1040A. Details on how to compute the credit can be found in the forms’ instructions and in Publication 972, Child Tax Credit. The forms and publications are available from the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-46: CLAIMING THE CHILD AND DEPENDENT CARE CREDIT

If you paid someone to care for a child under age 13 or a qualifying spouse or dependent so you could work or look for work, you may be able to reduce your tax by claiming the Child and Dependent Care Credit on your federal income tax return. To qualify, your spouse, children age 13 or older, and other dependents must be physically or mentally incapable of self-care.

The credit is a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can be up to 35 percent of your qualifying expenses, depending upon your income.

For 2007, you may use up to $3,000 of the expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.

To claim the credit for child and dependent care expenses, you must meet certain conditions including:

  • Income - You must have earned income from wages, salaries, tips, other taxable employee compensation, or net earnings from self-employment (one spouse may be considered as having earned income if they were a full-time student or physically or mentally not able to care for himself or herself)
  • Payee - The payments for care cannot be paid to someone you can claim as your dependent on your return or to your child who is under age 19, even if he or she is not your dependent
  • Filing Status - Your filing status must be single, married filing jointly, head of household, or qualifying widow(er) with a dependent child
  • Care - The care must have been provided for one or more qualifying persons
  • Home - The qualifying person must have lived with you for more than half of 2007

There are some limitations on the amount of credit you can claim. If you received dependent care benefits from your employer, other rules apply.

For more information on the Child and Dependent Care Credit, see Publication 503, Child and Dependent Care Expenses. You may download these free publications from IRS.gov or order them by calling 800-TAX-FORM (800-829-3676).

TT-2008-47: NEW FORM FOR EMPLOYEES MISCLASSIFIED AS INDEPENDENT CONTRACTORS

In 2007 were you an employee whose employer paid you as an independent contractor? Employees usually receive a Form W-2 while independent contractors usually receive a Form 1099-MISC.

Generally, a worker who received a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit using Schedule SE. However, if the worker was actually an employee, rather than an independent contractor, the worker is not required to pay the full self-employment tax, and expenses can only be deducted as an itemized deduction.

Beginning in 2007, Form 8919, Uncollected Social Security and Medicare Tax on Wages, may be used if you were an employee and your employer did not withhold your share these taxes and you meet certain criteria. These taxes will then be credited to you social security records.

To be eligible to use Form 8919 you must meet one of several criteria indicating that you were an employee while performing these services. The criteria include:

  • You filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating that you are an employee of the firm.
  • You have been designated as a “section 530 employee” by your employer or by the IRS prior to January 1, 1997.
  • You have received other correspondence from the IRS that states you are an employee.
  • You were previously treated as an employee by the firm and you are performing services in a similar capacity and under similar direction and control.
  • Your co-workers are performing similar services under similar direction and control and are treated as employees.
  • Your co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
  • You have filed Form SS-8 with the IRS and have not yet received a reply.

For more information see Form 8919, Uncollected Social Security and Medicare Tax on Wages available on the IRS Web site at IRS.gov or by calling 800-TAX FORM (800-829-3676).

TT-2008-48: OFFSET EDUCATION COSTS

Education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits, rather than deductions, you may be able to subtract them in full dollar for dollar from your federal income tax.

The Hope Credit

  • Applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.
  • It can be worth up to $1,650 per eligible student, per year.
  • You're allowed a credit of 100% of the first $1,100 of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,100.
  • Each student must be enrolled at least half-time for at least one academic period which began during the year.
  • The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.

The Lifetime Learning Credit

  • Applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
  • If you qualify, your credit equals 20% of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 per tax return.

You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.

These credits are phased out for Modified Adjusted Gross Income over $47,000 ($94,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $57,000 or more ($114,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).

TT-2008-49: SAVER'S CREDIT FOR RETIREMENT SAVINGS CONTRIBUTIONS

If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be able to take a tax credit.

The Savers Credit formally known as the Retirement Savings Contributions Credit applies to individuals with a filing status and income of:

  • Single with income up to $26,000
  • Head of Household with income up to $39,000
  • Married Filing Jointly, with incomes up to $52,000

To be eligible for the credit you must be at least age 18, not a full-time student, and cannot be claimed as a dependent on another person’s return.

You may be able to take a credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans.

The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.

The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.

For more information, review IRS Publication 590, Individual Retirement Arrangements and Form 8880, Credit for Qualified Retirement Savings Contributions. The publication and form can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

TT-2008-50: HOW TO AVOID TAX TIME PROBLEMS

Are you looking for ways to avoid the last-minute rush for doing your taxes? Here are some stress-relieving ideas to help you.

• Don’t Procrastinate Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.

• Visit the IRS Online In fiscal year 2007, there were more than 214 million visits to IRS.gov and 1.35 billion page views. Anyone with Internet access can find tax law information and answers to frequently asked tax questions.

• File Your Return Electronically Nearly 80 million taxpayers filed their returns electronically in fiscal year 2007. Aside from ease of filing, IRS e-file is the fastest and most accurate way to file a tax return. If you’re due a refund, the waiting time for e-filers is half that of paper filers.

• Don’t Panic if You Can’t Pay If you can’t immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, using our new Web-based Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval. You also have various options for charging your balance on a credit or debit card. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee. Electronic filers with a balance due can also file early and pay their taxes directly from their checking or savings account on the April due date with no service fee.

• Request an Extension of Time to File – But Pay on Time If the clock runs out, you can get an automatic six month extension of time to file to October 15. However, this extension of time to file does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date. See IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return for a variety of easy ways to apply for an extension. Form 4868 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Taxpayers needing Form 4868 should act soon to be sure they have the item in time to meet the April deadline.

TT-2008-51: ITEMIZERS CAN DEDUCT CERTAIN TAXES

Did you know that you may be able to deduct certain taxes on your federal income tax return? You can take these deductions if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation.

There are several types of deductible non-business taxes:

  • State and local taxes: You can choose to claim a state and local tax deduction for either income taxes or sales taxes on your return. You can deduct any state and local income taxes withheld from your salary in 2007, estimated taxes paid to state or local governments and any prior year's state or local income tax as long as they were paid during the tax year. If deducting general sales taxes instead, you may deduct actual expenses or use the optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on certain items such as motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate.
  • Real estate taxes: Deductible real estate taxes are usually any state, local or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information
  • Personal property taxes: Personal property taxes are deductible when they are based only on the value of personal property, such as a boat or car. To be deductible, the tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year.
  • Foreign income taxes: Generally, you can take either a deduction or a tax credit for foreign income taxes, but not for taxes paid on income that is excluded from U.S. tax.

For detailed information about the sales tax deduction, consult the instructions for Form 1040, Schedule A, Itemized Deductions, and the interactive State and Local Sales Tax Calculator found on IRS.gov. More information about each of these topics is available at IRS.gov. IRS forms and publications can be downloaded from the Web site or obtained by calling 800-TAX-FORM (800-829-3676).

TT-2008-52: DEDUCTION FOR EDUCATOR EXPENSES

If you are an eligible educator, you may be able to deduct up to $250 of expenses you paid for purchases of books and classroom supplies. These out-of-pocket expenses may lower your 2007 tax bill even if you don’t itemize your deductions.

  • Eligible Educator: The deduction is available if you are an eligible educator in a public or private elementary or secondary school. To be eligible, you must work at least 900 hours during a school year as a kindergarten through grade 12 teacher, instructor, counselor, principal or aide.
  • Qualifying Expenses: You may subtract up to $250 of qualified expenses when figuring your adjusted gross income. Qualified expenses are unreimbursed expenses you paid or incurred for books, supplies, equipment (including computer equipment, software and services) and other materials that you use in the classroom. Supply expenses for courses in health and physical education are qualified only if they are related to athletics.

To be deductible, the qualified expenses must be more than the savings bond interest excluded on Form 8815, any nontaxable distribution from a qualified tuition program, and any tax-free withdrawals from your Coverdell Education savings account.

The deduction for educator expenses can only be claimed on Form 1040, line 23.

For more information about this topic, see IRS Publication 529, Miscellaneous Deductions. The publication can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

TT-2008-53: HOME OFFICE DEDUCTION

If you use a portion of your home for business purposes, you may be able to take a home office deduction whether you are self-employed or an employee. Expenses that you may be able to deduct for business use of the home may include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting and repairs.

You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively:

  • As your principal place of business for any trade or business
  • As a place to meet or deal with your patients, clients or customers in the normal course of your trade or business

Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.

If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.

There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.

If you are an employee, you have additional requirements to meet. The regular and exclusive business use must be for the convenience of your employer.

For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-54: SALE OF YOUR HOME

If you have a gain from the sale or exchange of your main home, you may be able to exclude all or part of the gain from your income.

Individuals may be able to exclude up to $250,000 of capital gain, and married taxpayers filing joint returns may be able to exclude up to $500,000 of gain each time you sell your main home, but generally no more frequently than once every two years.

To qualify for this exclusion of gain, you must meet ownership and use tests.

  • Ownership Test: During the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years.
  • Use Test: During the 5-year period ending on the date of the sale, you must have lived in the home as your main home at least 2 years.

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.

If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home because of health reasons, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.

If you can exclude all the gain from the sale of your home, you do not report the gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, or you choose not to, use Schedule D, Capital Gains and Losses, of the Form 1040 to report it.

For more details and information see IRS Publication 523, Selling Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-55: DEDUCTING COSTS OF REFINANCING YOUR HOME

Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

The term "points" is used to describe certain charges paid to obtain a home mortgage.

Here are some things to remember when deducting points:

  • Taxpayers who itemize deductions generally may be able to deduct the points paid to obtain a home mortgage as mortgage interest
  • Points paid solely to refinance a home mortgage usually must be deducted over the life of the loan
  • Points can be fully deducted in the year paid if certain tests are met

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible in the year it is paid off.

Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.

For more information on deductions related to refinancing, visit IRS.gov for Tax Topics 504, Home Mortgage Points, and 505, Interest Expenses. You may also review IRS Publication 936, Home Mortgage Interest Deduction, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-56: TAX CREDIT FOR HYBRID VEHICLES

If you bought a hybrid vehicle in 2007, you may be entitled to a tax credit on your 2007 return. The credit is worth as much as $3,000 for the most fuel-efficient models. The precise amount depends on the make and model of the vehicle and when the vehicle was purchased.

The tax credit for hybrid vehicles, called the Alternative Motor Vehicle Credit, applies to vehicles purchased or placed in service on or after January 1, 2006.

Hybrid vehicles have drive trains powered by both an internal combustion engine and a rechargeable battery. Many currently available hybrid vehicles may qualify for the credit. Taxpayers may claim the credit on their 2007 tax returns only if they placed a qualified hybrid vehicle in service in 2007. As of March 2007, more than 40 different models of hybrids were/are eligible for the credit.

The credit is available only to the original purchaser of a new qualifying vehicle. If the qualifying vehicle is leased the credit is available only to the leasing company.

If 60,000 hybrid or advance lean burn technology vehicles of a particular manufacturer are sold, the tax credit is reduced and eventually eliminated. The full credit can be claimed up to the end of the third month after the quarter in which the manufacturer sells its 60,000th hybrid vehicle.

The credit for qualified Toyota and Lexus vehicles was eliminated for purchases on or after Oct. 1, 2007. The full credit for qualified Honda vehicles was available for all purchases in 2007, but has been reduced for purchases on or after Jan. 1, 2008.

To find out whether your car qualifies for the hybrid tax credit and the maximum amount of that credit, you can go to the IRS.gov website and search for “qualified hybrid vehicles.”

TT-2008-57: TIPS FOR DEDUCTING CHARITABLE CONTRIBUTIONS

When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. Your donations could add up to a sizeable tax deduction if you itemize on IRS Form 1040, Schedule A.

Starting in 2007 to deduct any charitable donation of money, taxpayers must have a bank record or a written communication from the recipient showing the name of the organization and the date and amount of the contribution. Though taxpayers are already required to keep records to support their contribution deductions, this new provision is designed to provide greater certainty, both to taxpayers and the government, in determining what may be deducted as a charitable contribution.

Here are a few tips to ensure your contributions pay off on your tax return:

  • You cannot deduct contributions made to specific individuals, political organizations and candidates. Nor can you deduct the value of your time or services and the cost of raffles, bingo or other games of chance.
  • Contributions must be made to qualified organizations to be deductible.
  • Only contributions actually made during the tax year are deductible.
  • If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
  • Donations of stock or other property are usually valued at the fair market value of the property.
  • Clothing and household items donated must be in good used condition or better to be deductible.
  • Special rules apply to donation of vehicles.
  • You can claim a deduction for individual contributions of $250 or more only if you obtain a written acknowledgment from the qualified organization.
  • If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.
  • Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.

For more information, check out Publication 526, Charitable Contributions, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-58: DEDUCTING VEHICLE DONATIONS

If you donated a car or other vehicle to a qualified charitable organization in 2007 and intend to claim a deduction you should review the special rules that apply to vehicle donations. You can deduct contributions to a charity only if you itemize deductions on Schedule A of Form 1040.

Generally, the amount you may deduct for a vehicle contribution depends upon what the charity does with the vehicle. Charities typically sell donated vehicles. If the vehicle is sold by the charitable organization, the deduction claimed by the donor usually may not exceed the gross proceeds from the sale.

If your deduction is $250 or more you must obtain written acknowledgement of the donation from the charity. If your deduction is more than $500, this written acknowledgment or Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, must be attached to your return. Among other things, the acknowledgment generally must include the gross proceeds of the sale, the vehicle identification number, and a statement certifying the vehicle was sold in an arm's length transaction between unrelated parties.

If the organization intends to make significant intervening use of the vehicle or material improvements to the vehicle, the acknowledgment must include certain certifications. If the organization intends to sell the vehicle to a needy individual at a price significantly below fair market value, or gratuitously transfers the vehicle to a needy individual, the acknowledgment must also include certain certifications.

In addition, for deductions greater than $500, Form 8283, Noncash Charitable Contributions, must be attached to the return.

You can generally deduct the vehicle’s fair market value instead of the amount of gross proceeds from the sale if any of the following situations apply:

  • The organization makes significant intervening use of or materially improves the vehicle
  • The organization gives or sells the vehicle to a needy individual at a price significantly below fair market value in direct furtherance of its charitable purpose of relieving the poor and distressed or underprivileged who are in need of a means of transportation
  • The claimed deduction is $500 or less

The fair market value cannot exceed the private party sales price listed in a used vehicle pricing guide.

For more information see Publication 526, Charitable Contributions, Publication 561, Determining the Value of Donated Property, and Publication 4303, A Donor’s Guide to Car Donations, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-59: COVERDELL EDUCATION SAVINGS ACCOUNTS

A Coverdell Education Savings Account (ESA) is an account created as an incentive to help parents and students save for education expenses.

The total contributions for the beneficiary of this account cannot be more than $2,000 in any year, no matter how many accounts have been established. A beneficiary is someone who is under age 18 or is a special needs beneficiary.

Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. The beneficiary will not owe tax on the distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This benefit applies to qualified higher education expenses as well as to qualified elementary and secondary education expenses.

Here are some things to remember about Distributions from Coverdell Accounts:

  • Distributions are tax-free as long as they are used for qualified education expenses, such as tuition and fees, required books, supplies and equipment and qualified expenses for room and board.
  • There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. Eligible institutions also include any college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions are eligible.
  • The Hope and lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits.
  • If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship.

There are contribution limits for taxpayers based on the contributor’s Modified Adjusted Gross Income. Contributions to a Coverdell ESA may be made until the due date of the contributor’s return, without extensions.

If there is a balance in the Coverdell ESA when the beneficiary reaches age 30, it must generally be distributed within 30 days. The portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member. For more details, see IRS Publication 970, Tax Benefits for Higher Education (at IRS.gov) or call 800-TAX-FORM (800-829-3676).

TT-2008-60: HOW TO CHECK ON YOUR TAX REFUND

If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund.

One way is to use "Where’s My Refund?" an interactive tool on the IRS Web site at IRS.gov. Simple online instructions guide taxpayers through a process that checks the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:

  • Acknowledgement that your return was received and is in processing.
  • The mailing date or direct deposit date of your refund.
  • Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you can change or correct your address online.

Where’s My Refund? is a very flexible tool. Whether you split your refund among several accounts, opt for direct deposit into one account, or ask IRS to mail you a check, Where’s My Refund? gives you online access to your refund information.

Where’s My Refund? also include links to customized information based on the taxpayer’s specific situation. The links guide taxpayers through the steps they need to take to resolve any issues that may be affecting their refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you can start a refund trace online.

The "Where’s My Refund?" service meets stringent IRS security and privacy certifications. Taxpayers enter identifying information that includes their Social Security number, filing status and the exact amount of the refund shown on the return. This specific information verifies that the person is authorized to access that account.

"Where’s My Refund?" is accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

Another option for checking the status of your refund is by calling the IRS TeleTax System at 800-829-4477 or the IRS Refund Hotline at 800-829-1954. When calling, you must provide the first Social Security number shown on the return, your filing status and the amount of the refund. If the IRS processed your return, the system will tell you the date your refund will be sent. The TeleTax refund information is updated each weekend. If you do not get a date for your refund, please wait until the next week before calling back.

TT-2008-61: YOU CAN STILL MAKE A 2007 IRA CONTRIBUTION

If you haven’t contributed funds to an Individual Retirement Arrangement for tax year 2007, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April due date for filing your tax return for 2007, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2007. Otherwise, the trustee may report the contribution as being for 2008 when they get your funds.

Generally, you can contribute up to $4,000 of your earnings for 2007 or up to $5,000 if you are age 50 or older in 2007. You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.

  • Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you — or your spouse, if filing jointly — are covered by an employer’s pension plan.
  • Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.

You can file your tax return claiming a traditional IRA contribution before the contribution is actually made. However, the contribution must be made by the due date of your return, not including extensions. If you report a contribution to a traditional IRA on your return, but fail to contribute by the deadline, you must file an amended tax return by using Form 1040X, Amended U.S. Individual Income Tax Return. You must add the amount you deducted to your income on the amended return and pay the additional tax accordingly.

For more information get IRS Publication 590, Individual Retirement Arrangements (IRAs), available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Taxpayers who need to have any IRS publication mailed to them should act soon to be sure they have the item in time to meet the April due date.

TT-2008-62: TIPS FOR LAST-MINUTE FILERS

With the tax filing deadline close at hand, the IRS offers some tips for those still working on their paper tax forms:

  • Consider filing electronically instead of using paper tax forms
  • Put all required Social Security numbers on the return
  • Double-check your figures
  • Sign your form
  • Attach all required schedules
  • Send your return or request an extension by the April filing deadline

Choosing to e-file your tax return instead of preparing a paper tax form is the best step you can take to ensure that your return is accurate and complete.

When you file a paper return, the numbers to check most carefully on the tax return are the identification numbers — usually Social Security numbers — for each person listed. This includes the taxpayer, spouse, dependents and persons listed in relation to claims for the Child and Dependent Care Credit or Earned Income Tax Credit. Missing, incorrect or illegible Social Security Numbers can delay or reduce a tax refund.

Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.

Taxpayers must sign and date their returns. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.

People sending a payment should make the check out to “United States Treasury” and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the taxpayer’s Social Security number, daytime phone number, the tax year and the type of form filed.

By the April due date, taxpayers should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.

Forms and publications and helpful information on a variety of tax subjects are available around the clock on the IRS Web site at IRS.gov.

TT-2008-63: AVOID COMMON ERRORS

The IRS recommends reviewing your entire tax return to be sure it is accurate and complete. Even a simple mistake can cause problems which might lead to delays in processing your return and receiving your refund.

Here are some ways to avoid common tax return errors:

  • File electronically. If you choose to e-file, many common errors are avoided or corrected by the computer software. If your income is under $54,000 you may be able to e-file for free using IRS Free File.
  • Use the peel-off label if you choose to mail a paper return. You may line through and make necessary corrections right on the label. Be sure to fill in your Social Security number in the box provided on the return. If you do not have a peel-off label, fill in all requested information clearly, including the Social Security numbers.
  • Check only one filing status on the tax return and check the appropriate exemption boxes. Enter the correct Social Security numbers for each of those exemptions.
  • Use the correct Tax Table column for your filing status.
  • Double check all figures on the return. Math errors are common mistakes.
  • Make sure that the financial institution routing and account numbers you have entered on the return for a direct deposit of your refund are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.
  • Sign and date the return. If filing a joint return, both spouses must sign and date the return.
  • Attach all Forms W-2, Wage and Tax Statement, and other forms that reflect tax withheld to the front of the return. Attach all other necessary forms and schedules.
  • Do you owe tax? If so, enclose a check or money order made payable to the "United States Treasury" and Form 1040-V, Payment Voucher, if used. Or, you may choose to pay by credit card by contacting one of the credit card service providers.

For a complete checklist and a listing of some of the most common errors, see Tax Topic 303, Checklist of Common Errors When Preparing Your Tax Return, at IRS.gov, or call our TeleTax number, 800-829-4477. For more information about IRS e-file and Free File visit the IRS Web site at IRS.gov.

TT-2008-64: PREPARING YOUR TAX RETURN FOR MAILING

If you are mailing a paper return to the IRS, take a few minutes to make certain that all information is complete and accurate before sealing the envelope. This simple precaution could help you avoid mistakes that can delay your refund or result in correspondence from the IRS.

Here are just a few items to complete prior to mailing your tax return:

  • Sign your return Your federal tax return is not considered a valid return unless it is signed. If you are filing a joint return, your spouse also must sign.
  • Provide a daytime phone number. This may help speed the processing of your return if the IRS has questions about items on your return.
  • Assemble any schedules and forms behind your Form 1040/1040A in the order of the "Attachment Sequence No." shown in the upper right hand corner of the schedule or form. Arrange any supporting statements in the same order as the schedules or forms they support and attach them last.
  • Attach all copies of Forms W-2, W-2G and 2439 to the front of Form 1040. Also attach Form 1099-R if federal tax was withheld.
  • Use the coded envelope included with your tax package to mail your return. If you did not receive an envelope, check the section called "Where Do You File?" in the tax instruction booklet. Don’t forget the stamp!
  • If you are due a refund, consider direct deposit to receive your refund in the quickest and safest manner. Then make sure that the financial institution routing and account numbers you have entered are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.
  • Do you owe tax? If so, enclose a check or money order made payable to the “United States Treasury” and Form 1040-V, Payment Voucher, if used. Make sure you include your correct name, address, the Social Security number that is listed first on the tax form, daytime telephone number, tax year and form number (i.e. Form 1040). Or, you may choose to pay by credit card by contacting one of the credit card service providers.

For more information, refer to your tax instruction booklet or visit the IRS Web site at IRS.gov.

TT-2008-65: FILING YOUR FEDERAL TAX RETURN

Once you complete your 2007 federal tax return, you can either file it electronically or mail it to the IRS.

More than one-half of all taxpayers file electronically because they know that IRS e-file provides a fast, easy, accurate, secure and convenient way to file. Taxpayers who file electronically receive an acknowledgement that their return has been received and accepted for processing.

Electronic options include:

  • Computer filing using an authorized IRS e-file tax professional
  • Using your personal computer to file
  • Free File is available at IRS.gov for many taxpayers as an option for filing their returns with no charge

If you choose to mail your return, you will find directions on where to send it on the back cover of your instruction booklet.

When mailing your return, whether enclosing a payment or not, use the envelope and the appropriate mailing label that came with your tax instruction booklet. If you moved during the year, check the tax package to find the mailing address of the appropriate IRS Center. The appropriate address depends on where you live and whether or not you are enclosing a check or money order. Checks or money orders should be payable to the “United States Treasury.”

For more information on where to file your tax return, check out the 1040 Central page on the IRS Web site at IRS.gov. Use the 1040 Central page as your one-stop guide to filing your 2007 federal income tax return.

TT-2008-66: LAST MINUTE PAYMENT AND FILING TIPS

If you’re trying to beat the tax deadline, there are several options for last-minute help:

  • Receive a six-month extension of time to file using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
  • Payment options are available to taxpayers having trouble paying their tax bill.
  • Download forms and publications at IRS.gov.

Filing an extension will give you extra time to get the paperwork to the IRS and avoids the late-filing penalty, but it does not extend the time you have to pay any tax due. You must estimate your tax liability when you apply for an extension.

You will owe interest on any amounts not paid by the April deadline, and you also will be charged a penalty for late payment unless at least 90 percent of your tax liability is paid by the regular due date of your tax return.

You can also e-file an extension request using tax preparation software on your own computer or by going to a tax preparer.

If your return is completed but you are unable to pay the tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due and will charge interest and penalties only on the unpaid balance.

If you cannot pay the full amount due with your return, you can ask to make monthly installment payments for the full or a partial amount. You can apply for an IRS installment agreement using our Web-based Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement by submitting a completed Form 9465, Installment Agreement Request, either when you file the return or when you later get a bill from the IRS.

For more information regarding extensions of time to file or installment agreements, including options for requesting an installment agreement online, visit the IRS Web site at IRS.gov and click on 1040 Central.

TT-2008-67: MAKING TAX PAYMENTS CORRECTLY

If you have a balance due when filing your 2007 income tax return, remember to make sure your tax payment check or money order is payable to the "United States Treasury." Complete and include Form 1040-V, Payment Voucher, when sending your payment and tax return to the IRS. This will help the IRS process your payment more accurately and efficiently.

Whether you are filing your current year’s return (2007), a prior year’s return or an amended return, always provide your correct name, address, the Social Security number that is listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order. Enclose your payment with your return, but do not staple it to the form. Do not mail cash with your tax return.

If you are e-filing you have the option of paying by electronic debit of your bank account using Electronic Funds Withdrawal. You will need to know your account number and your financial institution’s routing number. You can check with your financial institution to make sure that an electronic withdrawal is allowed and to get the correct routing and account numbers.

If you are paying by credit card, call or visit the Web site of either service provider listed below and follow the instructions:

  • Link2Gov Corporation: 888-PAY-1040 (888-729-1040), pay1040.com.
  • Official Payments Corporation: 800-2PAY-TAX (800-272-9829), officialpayments.com.

The service providers charge a convenience fee which may vary between the providers. You will be told what the fee is during the transaction and you will have the option to either continue or cancel the transaction. You can also find out what the fee will be by calling the provider’s automated customer service number or visiting the provider’s website. You will be given a confirmation number for your payment at the end of the call.

For more information, call 800-829-4477 to check out TeleTax Topic 158, "Ensuring Proper Credit of Payments.” This information is also contained in Publication 17, Your Federal Income Tax, available at IRS.gov, as is Form 1040-V.

TT-2008-68: PAYMENT OPTIONS

If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:

  • Pay by Credit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover cards. To pay by credit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. The service providers charge a convenience fee based on the amount you are paying. Do not add the convenience fee to your tax payment.
  • Extension of Time to Pay Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A short term extension of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers qualifying for an extension of time to pay of 30 -120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement.
  • Installment Agreement The IRS may allow you to pay any remaining balance in monthly installments through an installment agreement. You can apply for an IRS installment agreement using our Web-based Online Payment Agreement application on IRS.gov. Another alternative is to attach a Form 9465, Installment Agreement Request, to the front of your tax return. The IRS charges a $105 fee for setting up an installment agreement. The fee is only $52 if you pay via direct debit. If your income is below a certain level (see Form 13844), you may qualify for a $43 fee. You will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. If you do not file your return by the due date -- including extensions -- you may have to pay a failure-to-file penalty.

In most circumstances, the Online Payment Agreement application provides immediate notification regarding the approval of your request. There may be times when you will need to mail paperwork or speak with us before we can determine your eligibility for an installment agreement or short term extension to pay. If that is the case, the online application will provide an address and telephone number that can be used to reach the appropriate IRS office.

For more information about filing and paying your taxes, visit the IRS Web site at IRS.gov and choose “1040 Central” or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

TT-2008-69: NEED MORE TIME TO FILE?

If you can't meet the April filing deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.

Here are some things to remember about filing extensions:

  • File Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April deadline, or make an extension-related electronic credit card payment.
  • The extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due.
  • You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.
  • You can e-file an extension request using tax preparation software on your own computer or by going to a tax preparer that has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
  • You can use Free File to file for an extension. Many private-sector companies in the IRS Free File Alliance offer extensions for no charge. You can access Free File via the IRS Web site at IRS.gov. Taxpayers with adjusted gross incomes of $54,000 or less may file their 2007 Federal Income Tax Returns electronically through Free File.

If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers and must also have available the adjusted gross income from your 2006 federal income tax return to verify your identity. For information on these and other methods of payment, visit the IRS.gov Web site or call 800-TAX-1040 (800-829-1040).

If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to IRS.gov, use the pull-down menu under “I need to …” and select “Set Up a Payment Plan.”

To obtain a copy of Form 4868 or other forms and publications use E-file tax preparation software, download them from IRS.gov or visit your local IRS office. Note that forms and publications can be ordered by calling 800-TAX-Form (800-829-3676). However, telephone requests normally take 10 days to fill and may not arrive before the tax deadline of April 15.

TT-2008-70: HOW LONG SHOULD IT TAKE TO RECEIVE YOUR TAX REFUND?

Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued about six to eight weeks after the IRS receives your return. If you file your return electronically, your refund is issued in about half that time — even faster if you choose direct deposit.

You can check on the status of your refund 72 hours after you e-filed your return or four weeks after mailing your return. There are several ways to check the status of your refund. You will need your Social Security number, filing status and the exact whole dollar amount of your refund to use these applications.

  • Where's My Refund: The fastest, easiest way to find out about your current year refund is to go to the IRS.gov Web site and click on the “Where’s My Refund” link available from the home page.
  • Refund Hotline: Call the IRS Refund Hotline at 800-829–1954.
  • TeleTax: Call the IRS TeleTax System at 800-829-4477.

If you do not get a date for your refund, wait until the next week before calling back.

In some circumstances, you may not receive your refund as quickly as you expected. Refund delays can be caused by a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.

For more information on how long it may take the IRS to process your federal tax refund, visit Frequently Asked Questions at IRS.gov.

TT-2008-71: AMENDING YOUR TAX RETURN

Oops! You’ve discovered an error after your tax return has been filed or maybe you need to adjust your 2007 return to include certain non-taxable benefits to reach the $3000 qualifying income level to qualify for an economic stimulus payment. What should you do? You may need to amend your return.

(Note: Generally, the payment of economic stimulus payments is based on the information from your original 2007 federal tax return. However, the only item on an amended return that will affect the economic stimulus payment is when including certain non-taxable benefits not included on the original return. This must be the only reason you were not eligible for the economic stimulus payment on the original return.)

The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return. However, you should file an amended return if any of the following were reported incorrectly:

  • Your filing status
  • Your dependents
  • Your total income
  • Your deductions or credits

Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A, 1040EZ or electronically-filed return. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.

The Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. There is an area on the back of the form where you explain the specific changes being made on the return and the reason for each change.

If the changes involve another schedule or form, attach it to the 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Form 1040 Schedule EIC to show the qualifying person's name, year of birth and Social Security number.

If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for 2007, you should file Form 1040X and pay the tax by the April due date to avoid any penalty and interest.

Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later, to claim a refund.

Form 1040X and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-72: WHAT TO DO IF YOU RECEIVE AN IRS NOTICE

It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

  • Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
  • Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Be sure to keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

TT-2008-73: APPEAL RIGHTS

Are you in the middle of a disagreement with the IRS? If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case.

IRS Publication 1, Your Rights as a Taxpayer, explains some of your most important taxpayer rights. During their contact with taxpayers, IRS employees are required to explain and protect these taxpayer rights, including the right to appeal.

The Appeals Office, which is independent of the IRS office that proposed the disputed action, can work with taxpayers by correspondence, telephone, or informal conferences.

Through Appeals procedures, taxpayers can settle most differences without expensive and time-consuming court trials. However, if you and the Appeals Officer or Settlement Officer cannot reach agreement, or if you prefer not to appeal within the IRS, in most cases, you may take your disagreement to federal court.

For more information about Appeals and its processes, go to the IRS Web site at IRS.gov and select the link to “Appeal a Tax Dispute”, which is found at the bottom of the home page. The Appeals Web page provides links to assist you in determining if you are ready for Appeals, how to request an appeal, and what you can expect from Appeals.

This page also provides a link to easy-to-use online self-help tools to help you focus on your area of dispute and determine if you will benefit from filing an appeal. You can also link to “Online Videos of the Appeals Process” containing informative online video streams entitled “The Appeals Process (Examination)” and “The Appeals Process (Collection).”

Information is also available in IRS Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don't Agree; Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund; and Publication 1660, Collection Appeal Rights (for Liens, Levies, and Seizures). To get copies of IRS publications, visit the IRS Web site at IRS.gov or call 800-TAX-FORM (800-829-3676).

TT-2008-74: HELP FROM THE TAXPAYER ADVOCATE SERVICE

If you have tried to resolve tax problems with the IRS and are still having problems or facing economic harm, you have somewhere to turn: seek the free assistance of the Taxpayer Advocate Service.

The Taxpayer Advocate Service is an independent organization within the IRS whose employees assist taxpayers in these circumstances or those who believe that an IRS system or procedure is not working as it should.

The service is free, confidential, tailored to meet your needs, and available for businesses as well as individuals. You may be eligible for assistance if:

  • You are experiencing economic harm or significant cost (including fees for professional representation),
  • You have experienced a delay of more than 30 days to resolve your tax issue, or
  • You have not received a response or resolution to the problem by the date promised by the IRS.

For individuals, examples of economic harm as a result of an IRS action might include an inability to provide for basic necessities such as housing, transportation or food; or for businesses, an inability to meet payroll expenses.

There is at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico. Because advocates are part of the IRS, they know the tax system and how to navigate it. If you qualify, you will receive personalized service from a knowledgeable advocate who will:

  • Listen to your problem,
  • Help you understand what needs to be done to resolve it, and
  • Stay with you every step of the way until your problem is resolved.

You can contact the Taxpayer Advocate Service by:

  • Calling the TAS case intake line at 877-777-4778 (TTY/TTD 800-829-4059),
  • Writing or calling your local taxpayer advocate, whose address and phone number are listed in the government listings in your local telephone directory and in Publication 1546, The Taxpayer Advocate Service of the IRS – How to Get Help With Unresolved Tax Problems,
  • Filing Form 911, Application for Taxpayer Assistance Order, with the Taxpayer Advocate Service, or
  • Asking an IRS employee to complete Form 911 on your behalf.

To get a copy of Form 911 or to learn more about the Taxpayer Advocate Service, visit the Web site at IRS.gov and select the link for the Taxpayer Advocate. You can download Form 911 and Publication 1546 from the IRS Web site Forms and Publications section, or order a copy by calling 800-TAX-FORM (800-829-3676).

External Links

en Espanol:


MyWikiBiz

Name: IRS Tax Tips

Country: US
Web: http://www.irs.gov/


Share this page <sharethis />

Retrieved from "https://mywikibiz.com/index.php?title=Directory:IRS_Tax_Tips&oldid=72881"