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WASHINGTON — Tax year 2008 is quickly nearing an end. The
Internal Revenue Service reminds taxpayers to avoid putting off
important financial tasks until the last minute. The important
deadline of Dec. 31 is fast approaching for many tax-planning
issues.
The IRS also urges taxpayers as part of their year-end tax planning
to be aware of recent tax changes as well as recently reinstated tax
deductions. Some tax breaks and a review of your current tax
situation may result in a bigger refund or less taxes to be paid
come tax time.
Also, the IRS wants to make filing your tax return less stressful.
Consider e-filing your tax return to ensure you maximize tax
deductions, claim deserved credits, and take advantage of tax
benefits. You may even be able to file electronically free of charge
using IRS Free File.
The IRS offers these tax tips for you to consider:
First-Time Homebuyers Tax Credit — First-time homebuyers
should begin planning now to take advantage of a new tax credit
available for a limited time. The credit applies to primary home
purchases between April 9, 2008, and June 30, 2009. Normally,
this tax credit must be paid back in equal payments over 15 years.
The credit is 10 percent of the purchase price of the home, with a
maximum available credit of $7,500 for either a single taxpayer or a
married couple filing jointly. First-time homebuyers are those who
have not owned a home in the three years prior to a purchase.
Real Estate Tax Deduction — There is an additional standard
deduction for those who don’t itemize their deductions, but pay real
estate taxes. The additional deduction amount is equal to the
amount of real estate taxes paid up to $500 for single filers or up to
$1,000 for joint filers. This deduction is available for the 2008 and
2009 tax years and increases your standard deduction.
Tuition and Fees Deduction — You may be able to deduct qualified
tuition and required enrollment fees up to $4,000 that you pay for
yourself, your spouse or a dependent. You do not have to itemize to
take this deduction. However, a taxpayer cannot take both the tuition
and fees deduction and education credits (Hope & Lifetime
Learning Credits) for the same student in the same year. Income
limits and other special rules apply to each of these provisions. To
determine whether your expenses are qualified, refer to IRS
Publication 970, Tax Benefits for Education. The 2008 edition is
available soon online. This publication also describes other
education-related tax benefits.
Educators’ Out of Pocket Expense Deduction — The educator
expense deduction allows teachers and other educators to deduct
the cost of books, supplies, equipment and software used in the
classroom. Eligible educators include those who work at least 900
hours during a school year as a teacher, instructor, counselor,
principal or aide in a public or private elementary or secondary
school. Worth up to $250, the educator expense deduction is
available whether or not the educator itemizes deductions on
Schedule A.
Recovery Rebate Credit — If you did not qualify or did not receive
the maximum amount for the 2008 economic stimulus payment
you may be entitled to a recovery rebate credit when you file your
2008 tax return. Review the tax return filing instructions including
the recovery rebate credit worksheet. You need to know the amount
of the payment you received in 2008, which can be found on your
Economic Stimulus Payment Notice (Notice 1378). Two online
tools on IRS.gov will be available soon — the Recovery Rebate
Credit Calculator will help taxpayers figure the amount they should
claim on their 2008 tax return, and How Much Was My 2008
Stimulus Payment? helps you determine what your stimulus
payment was.
New Rules for “Cash” Charitable Contributions — Since tax year
2007, to deduct any charitable donation of money, you must have a
bank record, credit card statement or a written communication from
the recipient showing the name of the organization and the date
and amount of the contribution. In determining what may be
deducted as a charitable contribution, see IRS Publication 526 for
2008 to be released in the near future.
Earned Income Tax Credit (EITC) — This credit is offered by the
federal government to working families and individuals. You may
qualify for the earned income tax credit, or EITC, if you worked, but
did not earn a lot of money. EITC is a refundable tax credit meaning
you could qualify for a tax refund even if you did not have federal
income tax withheld. If you qualify, the amount of your EITC will
depend on whether you have children, the number of children you
have, and the amount of your wages and income. For more
information, go to www.irs.gov/eitc or see IRS Publication 596 for
2008.
Recordkeeping — Are your tax records organized? The IRS
encourages taxpayers to take the time now to gather and organize
their records to reduce stress at tax time. For tips, see Publication
552, Recordkeeping for Individuals, for 2008.
Electronic Filing — The IRS encourages taxpayers to consider e-
filing their tax returns. Nearly 90 million returns were filed
electronically this year, accounting for about 58 percent of all filers.
E-filing is easy, safe and accurate. The fastest way for you to
receive a tax refund is to use IRS e-file and choose direct deposit.
You can receive your refund in as little as ten days with IRS e-file
and direct deposit. The error rate of an e-filed return is less than 1
percent compared to 20 percent for a paper tax return. IRS e-file is
the most efficient way to prepare your taxes, particularly taking into
consideration the 2008 tax law changes. About 70 percent of
taxpayers can prepare and file electronically for free when they
enter through IRS.gov and use Free File.
Tax Forms and Publications — Tax forms and publications can be
accessed on this Web site or requested by calling the IRS toll-free
at 1-800-TAX-FORM (1-800-829-3676).
Beware of Bogus E-mails — The IRS does not send unsolicited e-
mails about your taxes. If you get an e-mail that appears to be from
the IRS, it may be an attempt to steal your private information. Don’t
click on any links in the message. Rather, forward the e-mail to
phishing@irs.gov using the instructions at www.irs.gov.
IRS.gov Web site — Remember to use .gov when seeking the
genuine IRS Web site. The address of the official IRS Web site is
www.irs.gov. The IRS Web site contains a wealth of information for
your tax planning and filing needs. Check out the latest tax changes
on the site, and remember to e-file your tax return, which helps
ensure you do not miss out on any tax deductions, credits and
benefits.
Planning Your Income — Some taxpayers, such as the self-
employed, may have some discretion regarding when they receive
income. Properly deferring income until next year can lower your
taxable income and tax bill this year. This strategy will, however,
raise your tax bill next year. Publication 334, Tax Guide for Small
Business, may be of help. And many taxpayers also have some
control over their income via the sale of investments to incur a gain
or loss. This is generally a key area of decision-making for
investors. These decisions must be made and executed by Dec. 31
to be counted on a 2008 tax return. Publication 550, Investment
Income and Expenses, for 2008, explains the rules.
Retirement Savings — Taxpayers have various options to save for
retirement. You need to be mindful of their contribution deadlines
and limits. For example, Dec. 31 is the deadline for contributions to
a 401(k) plan, while April 15 is the deadline for IRA contributions.
Taxpayers can get help from their 401(k) plan administrators where
they work. Publication 560, Retirement Plans for Small Business,
and Publication 575, Pensions and Annuity Income, may also help.
You have more time to make contributions to individual retirement
arrangements (IRAs) for a given tax year. You generally have until
April 15 of the following year. Publication 590, Individual Retirement
Arrangements, for 2008, can answer most questions.
New children — If you had or adopted a child in 2008, you should
get a Social Security number for that child as soon as possible to
ensure that you can include the child as a dependent on your 2008
return. Also, having or adopting a child in 2008 may mean you will
receive a larger recovery rebate credit.
Internal Revenue Service reminds taxpayers to avoid putting off
important financial tasks until the last minute. The important
deadline of Dec. 31 is fast approaching for many tax-planning
issues.
The IRS also urges taxpayers as part of their year-end tax planning
to be aware of recent tax changes as well as recently reinstated tax
deductions. Some tax breaks and a review of your current tax
situation may result in a bigger refund or less taxes to be paid
come tax time.
Also, the IRS wants to make filing your tax return less stressful.
Consider e-filing your tax return to ensure you maximize tax
deductions, claim deserved credits, and take advantage of tax
benefits. You may even be able to file electronically free of charge
using IRS Free File.
The IRS offers these tax tips for you to consider:
First-Time Homebuyers Tax Credit — First-time homebuyers
should begin planning now to take advantage of a new tax credit
available for a limited time. The credit applies to primary home
purchases between April 9, 2008, and June 30, 2009. Normally,
this tax credit must be paid back in equal payments over 15 years.
The credit is 10 percent of the purchase price of the home, with a
maximum available credit of $7,500 for either a single taxpayer or a
married couple filing jointly. First-time homebuyers are those who
have not owned a home in the three years prior to a purchase.
Real Estate Tax Deduction — There is an additional standard
deduction for those who don’t itemize their deductions, but pay real
estate taxes. The additional deduction amount is equal to the
amount of real estate taxes paid up to $500 for single filers or up to
$1,000 for joint filers. This deduction is available for the 2008 and
2009 tax years and increases your standard deduction.
Tuition and Fees Deduction — You may be able to deduct qualified
tuition and required enrollment fees up to $4,000 that you pay for
yourself, your spouse or a dependent. You do not have to itemize to
take this deduction. However, a taxpayer cannot take both the tuition
and fees deduction and education credits (Hope & Lifetime
Learning Credits) for the same student in the same year. Income
limits and other special rules apply to each of these provisions. To
determine whether your expenses are qualified, refer to IRS
Publication 970, Tax Benefits for Education. The 2008 edition is
available soon online. This publication also describes other
education-related tax benefits.
Educators’ Out of Pocket Expense Deduction — The educator
expense deduction allows teachers and other educators to deduct
the cost of books, supplies, equipment and software used in the
classroom. Eligible educators include those who work at least 900
hours during a school year as a teacher, instructor, counselor,
principal or aide in a public or private elementary or secondary
school. Worth up to $250, the educator expense deduction is
available whether or not the educator itemizes deductions on
Schedule A.
Recovery Rebate Credit — If you did not qualify or did not receive
the maximum amount for the 2008 economic stimulus payment
you may be entitled to a recovery rebate credit when you file your
2008 tax return. Review the tax return filing instructions including
the recovery rebate credit worksheet. You need to know the amount
of the payment you received in 2008, which can be found on your
Economic Stimulus Payment Notice (Notice 1378). Two online
tools on IRS.gov will be available soon — the Recovery Rebate
Credit Calculator will help taxpayers figure the amount they should
claim on their 2008 tax return, and How Much Was My 2008
Stimulus Payment? helps you determine what your stimulus
payment was.
New Rules for “Cash” Charitable Contributions — Since tax year
2007, to deduct any charitable donation of money, you must have a
bank record, credit card statement or a written communication from
the recipient showing the name of the organization and the date
and amount of the contribution. In determining what may be
deducted as a charitable contribution, see IRS Publication 526 for
2008 to be released in the near future.
Earned Income Tax Credit (EITC) — This credit is offered by the
federal government to working families and individuals. You may
qualify for the earned income tax credit, or EITC, if you worked, but
did not earn a lot of money. EITC is a refundable tax credit meaning
you could qualify for a tax refund even if you did not have federal
income tax withheld. If you qualify, the amount of your EITC will
depend on whether you have children, the number of children you
have, and the amount of your wages and income. For more
information, go to www.irs.gov/eitc or see IRS Publication 596 for
2008.
Recordkeeping — Are your tax records organized? The IRS
encourages taxpayers to take the time now to gather and organize
their records to reduce stress at tax time. For tips, see Publication
552, Recordkeeping for Individuals, for 2008.
Electronic Filing — The IRS encourages taxpayers to consider e-
filing their tax returns. Nearly 90 million returns were filed
electronically this year, accounting for about 58 percent of all filers.
E-filing is easy, safe and accurate. The fastest way for you to
receive a tax refund is to use IRS e-file and choose direct deposit.
You can receive your refund in as little as ten days with IRS e-file
and direct deposit. The error rate of an e-filed return is less than 1
percent compared to 20 percent for a paper tax return. IRS e-file is
the most efficient way to prepare your taxes, particularly taking into
consideration the 2008 tax law changes. About 70 percent of
taxpayers can prepare and file electronically for free when they
enter through IRS.gov and use Free File.
Tax Forms and Publications — Tax forms and publications can be
accessed on this Web site or requested by calling the IRS toll-free
at 1-800-TAX-FORM (1-800-829-3676).
Beware of Bogus E-mails — The IRS does not send unsolicited e-
mails about your taxes. If you get an e-mail that appears to be from
the IRS, it may be an attempt to steal your private information. Don’t
click on any links in the message. Rather, forward the e-mail to
phishing@irs.gov using the instructions at www.irs.gov.
IRS.gov Web site — Remember to use .gov when seeking the
genuine IRS Web site. The address of the official IRS Web site is
www.irs.gov. The IRS Web site contains a wealth of information for
your tax planning and filing needs. Check out the latest tax changes
on the site, and remember to e-file your tax return, which helps
ensure you do not miss out on any tax deductions, credits and
benefits.
Planning Your Income — Some taxpayers, such as the self-
employed, may have some discretion regarding when they receive
income. Properly deferring income until next year can lower your
taxable income and tax bill this year. This strategy will, however,
raise your tax bill next year. Publication 334, Tax Guide for Small
Business, may be of help. And many taxpayers also have some
control over their income via the sale of investments to incur a gain
or loss. This is generally a key area of decision-making for
investors. These decisions must be made and executed by Dec. 31
to be counted on a 2008 tax return. Publication 550, Investment
Income and Expenses, for 2008, explains the rules.
Retirement Savings — Taxpayers have various options to save for
retirement. You need to be mindful of their contribution deadlines
and limits. For example, Dec. 31 is the deadline for contributions to
a 401(k) plan, while April 15 is the deadline for IRA contributions.
Taxpayers can get help from their 401(k) plan administrators where
they work. Publication 560, Retirement Plans for Small Business,
and Publication 575, Pensions and Annuity Income, may also help.
You have more time to make contributions to individual retirement
arrangements (IRAs) for a given tax year. You generally have until
April 15 of the following year. Publication 590, Individual Retirement
Arrangements, for 2008, can answer most questions.
New children — If you had or adopted a child in 2008, you should
get a Social Security number for that child as soon as possible to
ensure that you can include the child as a dependent on your 2008
return. Also, having or adopting a child in 2008 may mean you will
receive a larger recovery rebate credit.
| Steve Brigati Notary Public Military Tax and Family Specialist |