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Do New IRS Changes Stand for It's Really Simple?
Tax refunds have risen an average of $200 for people who have filed their 2008 tax returns early, the Internal Revenue Service reports.
Part of the reason for the increase -- the IRS has made several changes aimed at helping taxpayers save money this year.
Really? That's right. In an ongoing effort to make what has evolved into a burdensome system less so, they are trying to make things simpler for filers, enabling them to save in the process of doing their returns.
How can you possibly be one of them? Ask yourself the following five simple questions to see if you're affected by these changes that could result in more deductions and even that hoped-for larger refund -- and, remember, returns must be submitted no later than April 15 unless you have filed for an extension:
· Did you experience any major life changes in 2008? Job change, marriage, divorce, childbirth, adoption, relocation, bankruptcy and other life changes can result in major deductions. Taxpayers who didn't receive any or all of the Recovery Rebate last year, and experienced a life change that dramatically affected their financial situation this year, may qualify for the Recovery Rebate Credit.
However, it's best to be aware of the Recovery Rebate Credit's ramifications. According to the IRS, some 15 percent of sampled returns so far this year "have errors involving the recovery rebate credit. Some tax returns erroneously claim the credit, do not claim the proper amount of recovery rebate credit or mistakenly enter the amount of the stimulus payment they received on the recovery rebate credit line."
For those whose records may be spotty or can't remember how much they received, the IRS recommends that taxpayers revisit Notice 1378, which the IRS sent out last year to those affected, for the amount received.
· Are you a homeowner? Did you purchase a home for the first time or refinance your home during the last year? Did you install a clean fuel energy source, such as a wind turbine, solar panels, fuel cells or geothermal heat pump? Americans affected by storms, flooding, wildfires or hurricanes may also be entitled to extra relief.
· Did you donate cash or non-cash items to charities last year? If so, and this is important, find the receipts. If you don't have receipts, ask the charities for one or ask your credit-card company for a copy of the transaction.
Determine the value for your non-cash donations, maybe with the help of some software. One of the leading tax-preparation software products can help with this. Donation Assistant in TaxACT Online Deluxe provides values for more than 700 non-cash charitable donations that are IRS-approved and backed by a 100 percent audit guarantee.
· Did you contribute to a retirement fund? Moderate- and low-income taxpayers may receive a credit of as much as 50 percent of the first $2,000 invested in a 401(k), 403(b), SEP, SIMPLE, Governmental 457 or IRA (traditional or Roth).
Single taxpayers with adjusted gross incomes (AGIs) up to $26,500 and joint filers with AGIs up to $53,000 are likely eligible for the same benefits coming to others.
· Do you work, but have a lower income? A quarter of all taxpayers who qualify for the Earned Income Tax Credit don't claim the credit as they should. If you qualify, it could be worth up to $4,800 this year.
Generally, earned income and AGI must each be less than $38,646 ($41,646 married filing jointly) with two or more qualifying children; $33,995 ($36,995 married filing jointly) with one qualifying child; $12,880 ($15,880 married filing jointly) with no qualifying children.
Now that you're armed with money-saving information, do your taxes today. The sooner you file, the faster you'll have your refund. If you owe money, you may be able to pay your taxes in installments or obtain a short-term extension.
To make the process of preparing your taxes easier and quicker, follow these simple tips:
· Check www.IRS.gov on a regular basis for the latest tax hints and news. The information is extensive, yet is really easy to understand. You may find the detailed information about the Earned Income Tax Credit and Recover Rebate Credit especially helpful this year.
· Use tax-preparation software. You have nothing to lose because leading products like TaxACT allow you to try it for free. If you like TaxACT, you can prepare, print and e-file your Federal return for free, and then use that information to quickly complete and file your state return for a relatively modest fee.
· E-file your return. It's fast, easy and secure, and allows you to have your refund in half the time -- in as few as eight days with direct deposit.
More about IRS tax changes for the 2008 tax year can be found at: www. IRS.gov.