Taxes

Attention All Tax Procrastinators!!! A Few Things to Know for April 15th

Here’s another helpful tip from the folks at J.K. Lasser (with some extra links added by Clever Dude)

Need more time to file? Forget to claim deduction or report income? Want to know more about those rebate checks? Faced a foreclosure? JKLasser.com can help you navigate the last days leading up to the 15th and help you save along the way.

#1 File on Time to Get Your Rebate Check Sooner

• Persons who fail to file their 2007 tax returns by April 15, 2008 and request a filing extension may not receive rebate checks until as late as December.
• Individuals who normally do not file a tax return but must do so this year in order to receive their 2008 economic stimulus payment can use the IRS Free File program to help them file returns for 2007.

#2 How to Avoid Tax Problems

• Don’t Panic if You Can’t Pay – If you can’t immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, using their new Web-based Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval.
• Request an Extension of Time to File – But Pay on Time – If the clock runs out, you can get an automatic six month extension of time to file to October 15. However, this extension of time to file does not give you more time to pay any taxes due. File form 4868 by April 15, 2008

#3 How to Correct Mistakes on a Tax Return

• Where to File Your Amended Tax Return– Mail your amendment to the same IRS Service Center that processed your original tax return. If you don’t remember where you mailed your return, or if you efiled your tax return, simply mail the amended return to the IRS Service Center shown on page 1 of the Instructions for Form 1040X.
• What Happens When You File an Amended Return– If you owe additional tax, you should mail in a check to pay the tax in full. If you are due an additional refund, expect your refund to arrive in approximately 8 to 12 weeks.

#4 Special Exclusion Rules for Home Owners

Tax laws consider debt that a lender forgives as taxable income. In a homeowner’s case, for example, if the bank reworks a loan so that the principal is less and writes off that excess, the amount is taxable cancellation of debt income. The same is true in certain situations where a mortgage lender forecloses on a home and sells it for less than the owner’s loan principal.

Under the Mortgage Debt Forgiveness Act of 2007, some homeowners granted forgiveness of mortgage debt won’t have to pay taxes on that amount. But there are some restrictions:

1. There is a limit on the forgiven debt: up to $2 million or $1 million for a married person filing a separate return.
2. The tax break also has a time limit. It only applies to mortgage debt discharged by a lender in 2007, 2008 or 2009.
3. The loan also must have been taken out to buy or build a primary residence, not a second or vacation home. If debt is forgiven on those additional properties, the owner will owe cancellation of debt income as usual.

This new law comes with a brand new form, Form 982.

For more on what can work for you, against you, and how to do better this year, go to our new subscriber-based web service at www.jklasser.com.