Twice weekly on Tuesday and Friday from now until April 15, we will bring you tax tips from PBS Tax and Bookkeeping Service. Howard Abrams and PBS have been providing income tax and bookkeeping services to the trucking industry for more than 25 years. OOIDA features Howard’s column, “Tax Tips,” in each issue of Land Line Magazine.
Today’s tax tip is: Some relief for people with tax debt. If you were rejected for an “Offer in Compromise” – an agreement to settle your tax debt for less than you owe – because you had home equity, the IRS will review those rejected applications, because the equity may now be gone.
If you were on an installment payment plan with the IRS previously, all the debt was due if a payment was missed. Now you might stay on the payment program even if you skip a payment or send a reduced amount. Each case is different.
If you have suffered financial hardship, such as loss of work, the IRS may postpone collection action temporarily. Contact the IRS.
Previous tax tips
Net operating loss carryback. New Rule: In this horrible economic period, many of you will have losses (operating losses) that appear on your 1040 Schedule C where your net income usually is. Prior law allowed net operating losses (NOLs) to be carried back two years and carried forward 20 years. For 2008, a new law allows you to carry back up to five years. This allows you to possibly realize much-needed cash. An election must be made on your 2008 tax return or, if already filed, you must submit a new election by April 17, 2009.
If you are doing an extension, you have until the extended due date of your tax return to make the election (Oct. 15, 2009).
Retirement Savers Credit. If you are able to make a contribution to your IRA or 401K Plans (including elective deferral), you may be eligible for a non-refundable credit (Retirement Savings Contributions Credit) on your income tax return.
There are adjusted gross income limitations. You are eligible for a portion of the credit if you are married filing jointly and your AGI is $53,000 or less, or if you are head of household with income up to $39,750. If single, your AGI needs to be $26,500 or less.
Suspicious e-mails. You will never receive an unsolicited e-mail from the IRS asking for personal information of any kind – including financial, PIN, credit card or your Social Security number.
If you receive an unsolicited e-mail from the IRS, do not open it, reply or click on any links. Forward the e-mail or Web site URL to the IRS at email@example.com and then just hit the delete button.
Recovery Rebate Credit. The Internal Revenue Service reports that there are errors occurring in filings so far involving the Recovery Rebate Credit. If you received your entire stimulus checks last year, the credit does not pertain to you unless:
1. Your family gained an additional qualifying child in 2008;
2. You did not file a 2007 tax return;
3. You were claimed as a dependent on someone else’s return in 2007 but cannot be claimed by someone else in 2008.
Otherwise, the IRS will figure the credit for you.
First-time homebuyer tax credit – update. The American Recovery and Reinvestment Act of 2009 modified the first-time homebuyer tax credit. Effective for home purchases (principal residence) Jan. 1, 2009, through Nov. 30, 2009, a credit up to $8,000 is available for first-time buyers who have not owned a home for the previous three years.
Unlike the $7,500 credit for residences purchased on or after April 9, 2008, through Dec. 31, 2008, the new $8,000 credit does not have to be paid back unless the home is sold within three years of purchase.
Qualifying residences include manufactured homes as well as houseboats.
First-time homebuyer credit as created July 2008. First-time homebuyers can take advantage of a tax credit that applies to home purchases on or after April 9, 2008, and before Jan. 1, 2009. The credit reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar and will be paid out to eligible taxpayers even if they owe no tax or the credit is more than the tax that they owe.
The credit is repaid in equal installments over a 15-year period.
Per diem. Remember – you can claim “Per Diem” for your meals of 80 percent of $52 per day but, in order to claim lodging, you must have the receipts.
Earned income tax credit. If you are in a low tax bracket – that is, you did not earn a lot of money – you may qualify for the credit. There are many factors that determine whether you qualify, but primarily your total income must be below $15,880 if you have no children; less than $36,995 if you have one qualifying child; and not more than $41,464 if you have two or more qualifying children.
Get a jump on your taxes
Follow the checklist:
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. Compare amounts on 1099s and W-2s with your records to make sure they agree.
3. If the amounts don’t agree call the payor or use the amount you think it is by doing an adjustment on your tax return.
4. You must have receipts and back up information for everything that appears on your tax return. Using an income tax organizer that outlines everything you need will be very helpful.
5. E-filing is easy. E-filing catches math errors and provides confirmation your return has been received and gives a faster refund.
6. Get the fastest refund. When you e-file early, you receive your refund faster. When you choose direct deposit, you receive your refund sooner than waiting for a check.