Written by Patty Decker Tuesday, 03 March 2009 14:14
Last year in Marion County 717 individuals and families received more than $1.2 million, or an average of $1,752 from the Earned Income Tax Credit, said Internal Revenue Services spokesman Michael Devine.
"This year, the EITC can put an extra $400 to $4,800 into the pockets of low income working individuals and families," Devine said.
In addition, if people qualify and claim the credit, they may pay less federal tax, pay no tax or even receive a refund beyond the amount of tax withheld.
For those unfamiliar with earned income tax credit, he said, it was created in 1975 in part to offset the burden of Social Security taxes and to serve as a work incentive.
To find out if someone is eligible, the IRS suggests using the EITC Assistant on the IRS.gov Web site.
"It is an easy-to-use interactive tool to help determine if you are qualified," Devine said.
The Internal Revenue Service announced Monday that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.
Free tax preparation
Free tax preparation is available through the IRS Web site and local volunteer return preparation programs. The IRS and its community partners offer free help in preparing simple tax returns for low- to moderate-income taxpayers.
Free tax help is available from the on-line, by phone, at local IRS offices and at community locations.
n On-line access — Get free tax information by going to http://www.irs.gov.
At 1040 Central on the Individuals page, taxpayers can obtain forms, instructions and publications, learn about IRS e-file, determine eligibility for the Earned Income Tax Credit, read about the latest tax changes and find answers to frequently asked questions, Devine said.
Most taxpayers can use Free File, available only through the IRS Web site, to electronically prepare and file their federal tax return – for free.
Taxpayers can also check the status of refunds at www.IRS.gov by clicking on “Where’s My Refund,” a service available 24 hours a day, seven days a week.
n Telephone — Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers to federal tax questions. TTY/TDD users may call 800-829-4059 to ask tax questions or to order forms and publications. To hear pre-recorded messages covering various tax topics or check on the status of your refund, call 800-829-4477.
To order free forms, instructions and publications call 800-829-3676.
For more information, visit www.irs.gov or call the IRS toll-free at 800-829-1040.
First time homebuyers
Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.
“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit, “ said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”
Picking a tax return preparer
More than 575,000 Kansas taxpayers will hire someone to prepare and e-file their 2008 federal tax return, IRS officials estimate.
While most tax return preparers provide excellent service to their clients, the IRS urges taxpayers to be careful picking a tax professional.
“Remember, no matter who prepares your tax return, you are responsible for all of the information on it,” Divine said.
Reputable preparers will ask questions about income, expenses, deductions and contributions. They will also ask to see receipts to help the taxpayer avoid penalties, interest or additional taxes that could result from an IRS examination.
Here are some things to think about when choosing a tax return preparer:
n Do you know anyone who has used the tax preparer in the past?
n Were they satisfied with the cost and service they received?
n What are the preparer’s qualifications?
n Are they affiliated with a professional organization that holds them to a code of ethics?
n How long have they been in business?
n Will the individual or firm be around to answer questions about your tax return months, or even years, after it has been filed?
n Does the Better Business Bureau have any information on the preparer?
n How much will it cost?
n Avoid preparers who base their fee on a percentage of the refund or claim they can obtain larger refunds than other preparers.
n A reputable tax professional signs your tax return and provides a copy for your records.
n Review your return and ask questions about entries you don't understand.
n Never sign a blank tax form.
When the IRS detects a return with errors or false information, the taxpayer, not the return preparer, must pay any additional taxes, interest and penalties.
Make sure it’s official
Many Marion County residents will go online this filing season to retrieve tax forms, publications and other information from the IRS.
“Unfortunately, some of those people will end up at Web sites that have no affiliation with the IRS,” Devine said.
The official Web site for the Internal Revenue Service is
“There are many phony Internet sites that impersonate federal or state tax agency sites,” he said.
Scammers operate these sites as a means of getting visitors to reveal personal and financial information that can be used to steal the visitors’ identity and access their bank accounts, credit cards and more.
In addition to Web sites established by scammers, some commercial Internet sites resemble the authentic IRS site or contain some form of the IRS name in the address but use domain names such as .com, .net, .org or instead of .gov.
“These sites have no connection to the IRS,” Devine said.
As a rule, the IRS does not send unsolicited e-mail and does not use e-mail to discuss tax account information with –– or request personal or financial information from –– taxpayers.
Additionally, the IRS never asks people for PIN numbers or passwords for their credit card, bank or other financial accounts, Devine said.
The recipient of this type of e-mail should never open an attachment to the e-mail or click on any link within the e-mail.
When clicked, the attachments or links in the bogus e-mails may send the recipient to phony Web sites or download malicious computer codes onto the recipient’s computer. Malicious codes may look for passwords and other information and send them to the scammer, allowing the scammer to control the victim’s computer, or more.
“The safest way to access a federal or state tax agency Web site is to close the e-mail and type the address of the site directly in the Internet browser,” Devine said.
Myths on reporting
An early sampling of tax returns shows a large number of errors involving how to account for last year’s Economic Stimulus Payments on 2008 tax returns.
Those payments affect taxpayers’ eligibility for the Recovery Rebate Credit, a special one-time benefit that nearly 119 million Americans received last year in the form of the Economic Stimulus Payment.
“Taxpayers should not report the stimulus payment directly on their tax return,” Devine said. “They should only use that figure to calculate the Recovery Rebate Credit and if they are not sure what number to use, let the IRS calculate the credit.”
Most taxpayers who received a stimulus payment last year are not eligible for the Recovery Rebate Credit, but there are some exceptions. Those who earned more or less in 2008 than in 2007, added a qualifying child, or ceased being a dependent in 2008, may qualify for some or all of the new credit.
Also, seniors and retirees who did not file for a stimulus payment last year may qualify.
The following are some myths and misunderstandings that may be causing increased filing errors.
Myth: The economic stimulus payment received last year must be paid back, is taxable or lowers the refund.
Fact: The stimulus payment does not have to be paid back, is not taxable federally and does not lower a tax refund.
Myth: Taxpayers must report the stimulus payment received last year on the 2008 tax return.
Fact: Taxpayers do not report the stimulus payment directly on a tax return. Those using tax software, enter the stimulus payment amount when prompted and the software will complete the calculation and enter the correct credit on your return.
Those filing a paper return, enter the stimulus payment amount on the Recovery Rebate Credit worksheet in the instruction booklet then complete the worksheet and enter the result on the return.
Myth: When using tax software, the amount of the refund displayed on the screen decreases as soon as the taxpayers enter their stimulus payment, so that proves that it's either taxable or it reduces a refund.
Fact: Some tax software adds the Recovery Rebate Credit to refunds up front then subtracts stimulus payments from the credit as soon as a taxpayer enters the amount of payment received. With some exceptions, people are only entitled to either the economic stimulus payment or the Recovery Rebate Credit on their 2008 tax return, not both.
Myth: If tax filers enter the amount of their stimulus payment directly on the tax return, their refund will be delayed for weeks.
Fact: Entering the amount of the stimulus payment directly on a tax return is an error and may delay the refund, usually by no more than one week.
Myth: If a taxpayer can't find the amount of their stimulus payment or don't remember it, they can't get the Recovery Rebate Credit.
Fact: The IRS provides an online tool (How Much Was My Stimulus Payment?) at www.irs.gov that allows access to the amount of a stimulus payment by entering the Social Security number, 2007 filing status and number of exemptions claimed.
“If you don't have Web access, call IRS toll-free at 866-234-2942 and provide the same information,” Devine said. “However, if for some reason you are unable to find out your stimulus payment amount, as a last resort make certain that the return you file claims a zero amount for the Recovery Rebate Credit on the actual return.”
In this situation, in which your return claims a zero amount of Recovery Rebate Credit, the IRS will automatically send you the amount of credit to which you are entitled. If you are filing a paper return, entering “RRC” on the Recovery Rebate Credit line will prompt the IRS to figure the credit for you.
Myth: If taxpayers got a stimulus payment last year, they are not eligible for the Recovery Rebate Credit.
Fact: This is true for many but not all. For example, taxpayers who added a qualifying child in 2008 or who ceased being a dependent may qualify for the credit. Seniors or retirees who did not file for the stimulus payment last year or if their financial situation changed dramatically from 2007 to 2008, may also qualify for the credit.
Myth: The Recovery Rebate Credit will be sent as a separate check.
Fact: Any credit will be added to the taxpayer’s 2008 tax refund. It will not be a separate payment.