With the tax filing deadline only four months away, the Internal Revenue Service has announced a number of new steps that are supposed to help financially distressed taxpayers get the most out of their refunds and speed up payments.
Credits, deductions and exclusions
One of the new credits offered this year is the Recovery Rebate Credit, which is a lot like last year’s Economic Stimulus Payment. However, the Recovery Rebate Credit amounts are based on tax year 2008 instead of 2007, so taxpayers can qualify for this rebate if they had a child in 2008 or a change in income level.
Congress also recently approved a tax credit for first-time homebuyers that can be worth up to $7,500. The credit does act more like a no-interest loan because it must be repaid to the government over 15 years. Another benefit for homeowners is that they can exclude debt forgiven on their principal residence if the balance of the loan was less than $2 million. The limit is $1 million for a married person filing a return.
Taxpayers can also 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.
E-file, E-pay and direct deposit
This year, electronic filing options will speed the payment of refunds to millions of taxpayers, and those that e-file and choose direct deposit for their refunds will get money back in as little as 10 days.
Taxpayers can begin filing electronically now.
To make filing simpler, anyone with an adjusted gross income of up to $56,000 can take advantage of the IRS’ free tax preparation and filing program. Others who can file taxes without any help can use a Free File tax form, which allows taxpayers to enter their tax data, perform basic math calculations, sign electronically and e-file their returns.
More information on both programs will be available next week.
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