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IRS is set to begin processing tax returns

Wednesday, January 7, 2009

Taxpayers have questions on what changes lie ahead

SIKESTON -- As Jan. 16 -- the first day the IRS begins processing tax returns -- approaches, taxpayers want to know what changes are ahead this filing season, and they have many questions for their tax preparation professionals.

"We are getting a lot of questions such as when is the IRS accepting electronically filed returns," said Karen Martin of H&R Block of Sikeston.

Martin said she is fielding a lot of questions over the economic stimulus payments received over the summer, mostly from people wanting to know how the rebates will affect their returns this year.

"It's an additional credit on the return if you received a rebate in advance, but if you didn't receive one and qualified for one, then you will receive it on the 2008 return," Martin said.

For those who didn't receive the full economic stimulus payment last year and whose circumstances may have changed, the recovery rebate credit is available for them.

The most common question Phil Cluck, owner of Fax Tax of SEMO in Sikeston, hears from individuals is if they can file a return with their last paycheck stub, which they can't, he said.

"The IRS has rules and regulations, and you are required to use the W-2 form, and that's the reason for the W-2," Cluck said.

President-elect Barack Obama has a another rebate credit he's wanting to push, and people want to know about that, Cluck said. On Monday, Obama proposed a massive economic stimulus plan to congressional leaders. His proposal includes tax cuts of up to $300 billion -- including $500 for most individuals and $1,000 for couples if one spouse is employed -- as well as more than $100 billion for businesses.

"Other calls we get are pretty broad. People want to know what some of the newer deductions are and what they'll need this year," Cluck said.

New this year is the standard deduction for real estate taxes, Cluck said.

"It has never been done before," Cluck said. "(Because of this) homeowners no longer have to itemize in order to file."

Instead taxpayers can claim an additional standard deduction, based on the state or local real estate taxes paid in 2008. The maximum deduction is $500, or $1,000 for joint filers.

Also those who bought a main home recently or are considering buying one may qualify for the first-time homebuyer credit.

"Child tax credits are still in place," Cluck said.

A taxpayer who has a dependent child under age 17 probably qualifies for the child tax credit. This credit, which can be as much as $1,000 per eligible child, is in addition to the regular $3,500 exemption claimed for each dependent. A change in the way the credit is figured means that more low- and moderate-income families will qualify for the full credit on their 2008 returns.

An individual who pays for someone to care for a child so he or she can work or look for work probably qualifies for the child and dependent care credit. Education credits are also still in place, too, Cluck said.

"Make sure you have all of your information because a lot of information (like W-2s and 1099s) doesn't come out until end of month," Cluck said. "Waiting to have all of the information saves you from making mistakes and saves you from having to do mini returns later."

Documents or forms needed when filing taxes include: receipts, canceled checks and other documents that support an item of income or a deduction you're taking on your return.

The IRS recommended the following tips for the this tax filing season:

-- Double-check the return. Mistakes will slow down the processing of a return. In particular, make sure all the Social Security numbers and math calculations are correct as these are the most common errors made by taxpayers.

-- Consider e-file. When individuals file electronically, the computer will handle the math calculations, and refunds arrive in about half the time it takes when a paper return is filed.

-- Those who elect to have their refund directly deposited into their bank account will receive it faster than waiting for a check by mail.

-- Visit IRS.gov. The official IRS Web site has tax forms, tips, FAQs and updates on tax law changes.