Tax Updates courtesy of

Whether you have years to go before your children are ready for college or you already have a coed in the house, there are options available to help minimize your expenses by taking advantage of tax benefits.
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The IRS has issued Notice 2008-28 explaining what individuals who are not otherwise required to file an income tax return for 2007, must do so to receive an economic stimulus rebate. Basically, the individual must file a return containing certain information. For eligible individuals (or married couples filing jointly) who are not required to file an income tax return, but who had qualifying income in 2007 that equals or exceeds $3,000, the IRS will treat a Form 1040A for 2007 as a valid claim for refund in the amount of the 2008 economic stimulus payment. Eligible individuals should do the following:
 

• Write the words "Stimulus Payment" in the blank space at the top of page 1 of Form 1040A above the title of the form.

• Enter names, mailing address, and social security numbers on the appropriate lines of Form 1040A and enter filing status and exemption information on lines 1 through 6d of the form.

• Enter wages and other compensation (including net earnings from self-employment) received in 2007 on line 7 of Form 1040A.

• Enter qualifying income received in 2007 in the form of social security benefits, Tier 1 railroad retirement benefits, and certain veterans' disability or survivor benefits on line 14a of Form 1040A. Individuals who do not have documentation of the exact amount of these government-provided benefits may estimate their annual benefit by multiplying their monthly benefit, before any deductions for withheld taxes or Medicare premiums, by the number of months during 2007 that they received the benefit.

• If they are members of the U.S. Armed Forces, enter any nontaxable combat zone compensation received in 2007 that they elect to treat as earned income on line 40b of Form 1040A.

• Complete lines 44b through 44d of Form 1040A if they want to request direct deposit of their economic stimulus payment into their account at a bank or other financial institution.

• Sign and date the form under the penalties of perjury statement, and enter the identifying information of any third party designee or paid preparer, if applicable, at the bottom of page 2 of Form 1040A.

On a recent Tax Talk Today program, Pamela Walker, Deputy Director of Submission Processing, indicated that the IRS would be implementing what it calls a paper-check conversion. The IRS will begin using a micro-reader for check processing which means that the tax payment will be immediately debited from the taxpayer's account. Taxpayers who are used to having some float time aren't going to have that any longer. Eventually, the IRS plans to use this technology at walk-in sites as well.

-Permission Granted, NATP Copyright 2008

WASHINGTON — The Internal Revenue Service today launched a campaign to help educate new self-employed small business owners about federal tax responsibilities. 

The campaign will provide new Schedule C, Profit or Loss from Business, filers with improved and updated educational materials through a variety of channels, including IRS.gov, small business workshops and other outreach events.

In this introductory phase of the campaign, IRS is offering some basic tips to avoid potential problems:

• Classify workers properly as employees or independent contractors as determined by law, not the choice of the worker or business owner;

• Deposit federal employment taxes, called trust fund taxes, according to the appropriate schedule;

• Start making quarterly estimated-tax payments to cover your own income tax and social security self-employment tax liability;

• Keep good records to protect your personal and financial investment and to make tax filing easier;

• Consider a tax professional to help you with Schedule C;

• File and pay your taxes electronically; it’s fast, easy, and secure;

• Protect financial and tax records to ensure business continuity in the event of a disaster; and

• Avoid abusive tax avoidance schemes such as the IRS’s 2008 "Dirty Dozen."

March 2008 - Estimated Tax Payment Vouchers
 

The IRS has discontinued mailing paper Form 1040-ES, Estimated Tax for Individuals, vouchers and envelopes to those who file electronically. 1040-ES filers who file a paper return will receive only one mailing instead of quarterly mailings. More information is in the Form 1040-ES instructions available on the IRS website.

The new law allows a refundable credit against tax (the “recovery rebate credit”) to low and middle-income individuals for 2008 in an amount calculated as the greater of: (1) Net income tax liability, not to exceed $600 ($1,200 for joint filers), or (2) $300 ($600 for joint filers) if the individual has either: (a) At least $3,000 of any combination of earned income, Social Security benefits and certain veterans’ benefits (including survivors of disabled veterans), or (b) Net income tax liability of at least $1 and gross income greater than the sum of the applicable basic standard deduction amount and one personal exemption (two if a joint return).