Time Is Running Out to Collect 2006 Refund

Here is a persistent myth about taxes: If you are getting a refund, there is no time limit on how long you have to file your federal income-tax return.
That may sound logical. After all, if you don't claim your refund on time, you're just hurting yourself.
But it's flat wrong. There are strict time limits -- and many people appear to be unaware of that.
The Internal Revenue Service announced recently that it's trying to deliver refunds totaling more than $1.3 billion to nearly 1.4 million people who still haven't bothered to file a federal income-tax return for the 2006 tax year.
To collect, these people typically must file their returns with the IRS no later than April 15 of this year, the IRS says.
"In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund," according to the IRS. "If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2006 returns, the window closes on April 15, 2010."
The law requires that the return be "properly addressed, mailed and postmarked by that date," the IRS says. There's no penalty for filing a late return that qualifies for a refund.
Maybe some of those nonfilers didn't bother filing because the expected refund amount was tiny. But the median unclaimed refund amount for 2006 is $604, the IRS says.
The IRS offers another possible explanation: Maybe some didn't file because they didn't have enough income to require them to file for that year.
Whatever the case, make sure you're up to date on filing your returns not only for 2006 but also for 2007 and 2008. The IRS says taxpayers seeking a 2006 refund will discover that their checks will be held if they haven't filed for 2007 or 2008.
Also, the refund "will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past-due federal debts such as student loans," the IRS says.
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IRS Has $1.3 Billion for People Who Have Not Filed a 2006 Tax Return

Unclaimed refunds totaling more than $1.3 billion are awaiting nearly 1.4 million people who did not file a federal income tax return for 2006, the Internal Revenue Service announced today. However, to collect the money, a return for 2006 must be filed with the IRS no later than Thursday, April 15, 2010.

The IRS estimates that the median unclaimed refund for tax-year 2006 is $604.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury.

For 2006 returns, the window closes on April 15, 2010. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2006 refund that their checks will be held if they have not filed tax returns for 2007 or 2008. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2006. For example, most telephone customers, including most cell-phone users, qualify for the one-time telephone excise tax refund. Available only on the 2006 return, this special payment applies to long-distance excise taxes paid on phone service billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. For details, see the Telephone Excise Tax Refund page on IRS.gov.

In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2006 were $38,348 for those with two or more children, $34,001 for people with one child and $14,120 for those with no children. For more information, visit the EITC Home Page.

Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 1-800-TAX-FORM (1-800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2006, 2007 or 2008 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by calling 1-800-829-1040, or by filing Form 4506-T, Request for Transcript of Tax Return, with the IRS.

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UK Government Pays Eastern Europeans to Go Home

UK government is searching for a way to limit unemployment under crisis.

British government will cover the costs for air tickets for homeless immigrants in order to make them go back home. Government measures are due to crisis and rising unemployment.

In regions where the percentage of unemployed is high authorities will buy air ticket for those Eastern Europeans who want to go home.

Many of them have no access to social benefits after losing their job.

One-third of the immigrants arrived on the Island under students visa. In order to reduce abuses, government will lower the issuing of this type of visa and will introduce stricter criteria. Only applicants with good English will be approved.

Students admitted in the country will have the right to work 10 hours weekly instead of 20 hours weekly, as it was until now.

2009 tax break may cost some taxpayers a refund

Expecting a fat tax refund this season? Not so fast.

Part of the economic stimulus law enacted a year ago created a new tax break, called the Making Work Pay tax credit. It reduced the amount of federal income tax withheld from workers’ paychecks.

But the new law had some unintended consequences. As a result, some taxpayers may receive a smaller refund during the current tax-filing season — or owe tax, said Jacquelyn H. Tracy, president of the Rhode Island Society of Certified Public Accountants.

Overall, about 15.4 million taxpayers nationwide — about 10.4 percent of the total — may be in this predicament, according to projections by the U.S. Treasury’s Inspector General for Tax Administration. In Rhode Island, that would work out to about 53,000 taxpayers.

It may come as a surprise especially to those taxpayers who count on receiving a federal income tax refund each year. They typically have more than enough in federal tax withheld each year “with the hope of getting something back,” said Tracy, partner in Mandel & Tracy, LLC, a CPA firm in Providence. “Many people use it as a savings plan,” she said.

At issue is economic stimulus legislation approved by Congress and signed into law by President Obama in February 2009. The law reduced the amount of federal income tax withheld from most workers’ paychecks throughout much of 2009. The idea was to boost the amount of workers’ take-home pay, so they could buy more goods and services and help boost the economy.

For many taxpayers, the reduction in withholding for 2009 should equal $400 for someone who is single, $800 for a married couple filing a joint return, said Robert J. Sclama, former head of the Rhode Island Society of Certified Public Accountants’ federal and state tax committee.

Those who had the correct amount withheld last year should see no problems on their returns now as a result of the new law, said Sclama, who runs his own tax-consulting and financial-planning practice in North Providence.

But some people, through no fault of their own, may have had too little in tax withheld from their pay last year. As a consequence, they may now wind up with a smaller refund than expected — or a balance due. That includes taxpayers in the following categories, according to recent reports by the U.S. Treasury and the Congressional Research Service:

•A single taxpayer who worked more than one job last year.

•A married couple, filing a joint return, where both spouses worked — and either or both worked more than one job.

•Taxpayers who receive pensions.

13 tax changes you need to know before filing your 2009 returns

If it seems like tax laws are changing every time you time around, it's not your imagination. Over the past eight years, changes to the Tax Code have been made at a rate of more than one a day. According to the office of the National Taxpayer Advocate, there were 500 changes in 2008 alone, many of them related to the 2009 tax year.

Trying to make sense of it all can be overwhelming. To help you out, here's a rundown of 13 changes that may impact your 2009 taxes:

1. Making Work Pay Credit. In order to put a little more cash in consumers' pockets last year, the government reduced the amount it withheld from workers' paychecks. Most W-2 earners have already felt the effect of the Making Work Pay Credit, which totals 6.2% of earned income. The credit, which cannot exceed $400 ($800 if married filing jointly), should have been paid out as reduced federal withholding over the year. If you're self-employed and haven't already adjusted for the credit, you calculate the credit on your 2009 federal income tax form. The unemployed and pensioners don't qualify for the credit, unless they receive earned income. You also don't qualify for the credit if your modified adjusted gross income (AGI) is $95,000 or more ($190,000 if married filing jointly), you are a nonresident alien, or you can be claimed as a dependent on someone else's return.
2. Economic Recovery Credit. Retirees and/or disabled persons were eligible to receive a one-time payment of $250 during 2009; eligible government retirees (generally, those receiving a government pension or annuity) qualify for a similar payment. Any amounts received as part of the Making Work Pay Credit should be reduced by any economic recovery payments or credit for government retirees. For example, if you're working and receiving Social Security, your Making Work Pay Credit would only be $150: $400 less the $250 economic recovery payment.
3. Unemployment Compensation Partially Exempt. The current unemployment rate has more than doubled since the recession began in December 2007. To offer some relief, taxpayers who received unemployment compensation for 2009 may exempt up to $2,400 of that compensation for federal income tax purposes. Amounts over $2,400 are still taxable.
4. COBRA Subsidy Not Taxable. Plenty of unemployed workers found themselves facing some seriously steep COBRA health care coverage premiums last year. To help them afford the health care coverage, the government offered to subsidize 65% of their payments. Luckily for those who needed to take advantage of that perk, the subsidy is not taxable for federal income tax purposes.
5. AMT Relief. There is yet another one-year "patch" to shield middle class taxpayers from the AMT (Alternative Minimum Tax). The AMT, which disallows tax preference items such as deductions for medical expenses and state and local property taxes, was initially targeted toward high-income taxpayers but has increasingly affected middle class taxpayers because of relatively low exemptions. For 2009, the exemption amount is bumped up a few hundred dollars to $70,950 for married couples and $46,700 for individual taxpayers.
6. Child Tax Credit Income Limit Lowered. As the cost of raising children has increased, families are looking for ways to cut costs. The child tax credit, which is in addition to the personal exemption for children, has allowed many families to put more money back in their pockets, since it is a dollar for dollar reduction in the amount of tax due. If you don't owe any tax, you may still qualify for a refund if you meet other criteria. For 2009, the income threshold for the child tax credit has been temporarily lowered to $3,000 (the income threshold for 2008 was $8,500). This means that, so as long as you have one or more qualifying children and earned income of more than $3,000, you may be entitled to a refund.
7. Increase in Earned Income Tax Credit (EITC). The EITC is a refundable credit aimed at providing relief from payroll taxes for low wage earners. For 2009, the EITC has increased for people with three or more children and for many married couples filing jointly. The maximum amount of income you can earn and still qualify for the credit has also increased.
8. "Kiddie Tax" Tweaked. The so-called "kiddie tax" is the tax that applies to investment income reportable by children. Generally, if a child is under the age of 18, or under the age of 23 and a full-time student, the parents have the option to report the income on their own return or on the child's return (at the child's tax rate) so long as the income is under a certain amount. For 2009, the amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900.
9. American Opportunity Tax Credit.The Hope Scholarship tax credit has been temporarily expanded and now applies to the first four years of college; the increased credit is now referred to as the American Opportunity Tax Credit. The credit provides 100% credit for the first $2,000 and 25% for the next $2,000 on qualified expenses such as tuition and books; it's also 40% refundable, meaning even taxpayers who have no tax liability can receive up to $1,000.

10. Personal Casualty and Theft Loss Floors Increased. The "floor" for personal casualty or theft loss has been increased. Under the old rules, a taxpayer could only deduct personal casualty and theft losses if the yearly total of those losses exceeded 10% of his or her AGI after subtracting a $100 floor per event. The floor for each casualty and theft loss for 2009 has increased from $100 to $500. Additionally, for 2009, the 10% of AGI limit for losses in federal disaster areas has been eliminated; you can find a list of federal disaster declarations for 2009, including those for Hurricane Ike and Hurricane Gustav, on FEMA's Web site.
11. Sales Tax Deductions for New Car Buyers. Taxpayers can deduct state and local sales taxes paid on the purchase of a new car, light vehicle, recreational vehicle, or motorcycle on their federal income tax; leased vehicles do not qualify. In states without a sales tax, certain other taxes or fees may be deductible. There's a $49,500 limit on the cost of the vehicle and income restrictions apply (upper limits of $125,000 for individual taxpayers and $250,000 for married taxpayers). The deduction is available for qualifying purchases made after February 16, 2009, through the end of the year: best of all, you don't have to itemize to take advantage of the deduction.
12. Temporary Credit for Home Buyers. The temporary, refundable first-time home buyer credit has been increased to $8,000 for sales of homes made after December 31, 2008, and before May 1, 2010. The requirement that the credit be paid back over 15 years has been removed; however, if you sell the home within three years (some exceptions for hardship and divorce apply), the credit must be paid back. Income limits apply. A reduced credit up to $6,500 is available for homeowners who have lived in their homes at least 5 consecutive years out of the 8 years before buying and moving into a new principal residence; this new credit is for homes purchased after November 6, 2009.
13. Expansion of Residential Energy Credits. The residential energy property tax credit has been increased from 10% to 30%, with a cap of $1,500, total, for 2009 and 2010. Qualifying modifications include energy efficient insulation, exterior windows (including skylights) and doors, central air conditioners and some water heaters or furnaces.

If you're not sure whether any of these changes apply to you, ask your tax professional. And keep checking for more tax information and tips throughout the tax season!

Tax refund deadline cut this year under new law

A new state chief information officer is included in 2010 laws.
OKLAHOMA CITY — About a dozen new laws are taking effect Friday, including an effort to speed tax refunds and the creation of a chief information officer for the state.
Senate Bill 11 reduces the amount of time that the Oklahoma Tax Commission has to remit tax refunds. For electronic returns, a refund must be made in 20 days rather than 30 days, said Rep. Randy Terrill, D-Moore, who sponsored the bill in the House.
For paper returns, the agency must provide a refund within 90 days instead of 150 days, Terrill said.
If the Tax Commission misses the deadline, it must pay interest of 1.25 percent a month, according to the agency.
Terrill said the agency has indicated it would not have a problem complying with the measure.
Most taxpayers are not interested in making an involuntary loan to the government without some interest being attached, Terrill said.
"We wanted to ensure there was an incentive for the Oklahoma Tax Commission to process a timely filed return and return the money in a similarly timely fashion," he said.
Efforts to install a chief information officer are under way.