IRS Tax Tips

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.

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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:

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, 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.
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.
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.
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:

Single. Generally, if you are unmarried, divorced or legally separated according to your state law, your filing status is Single.
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.
Married Filing Separately. Married taxpayers may elect to file separate returns.
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.
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.

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