By Johnny Jackson
Tax professionals believe there are still benefits to be had this tax season, from marriage credits to stimulus payment credits.
Taxpayers who were married or divorced in 2008, for instance, could be eligible for additional recovery rebate credit money, depending on their income level and what they received in economic stimulus payments.
"Most new couples are thinking about how to start their marriage off with a strong foundation, including a focus on money matters," said Tax Pro Donna Huffman of H&R Block. "And as recent divorcees rebuild their lives, their financial situation is top of mind."
Married taxpayers typically file a joint return because of the added tax benefits and credits, and filing separately can reduce or eliminate the amount of deductions and credits taxpayers can receive. In certain cases, however, filing separately can lower a tax bill.
Taxpayers might want to figure out their taxes both ways to determine which is better for them, Huffman said.
Someone who was divorced as of the last day of 2008, who paid more than half the cost of keeping up their home, and whose dependent lived in their home more than half the year, may be eligible to claim this status.
For those who are still married but separated, they may qualify to file tax returns as an unmarried couple for tax purposes.
In divorce, alimony is deductible by the payer and considered taxable income to the payee. The payer and recipient need to have alimony payments clearly defined in the divorce agreement.
Child support is another tax issue for couples to consider, said Huffman.
"Child support is not deductible by the payer, and it's not income to the recipient," she added. "If you're the custodial parent, you can claim the child as a dependent. The noncustodial parent can claim the dependent exemption for the child only with consent of the custodial parent." Huffman said the consent must be attached in writing.
Huffman said many more taxpayers could benefit from last year's economic stimulus payments.
The Tax Institute at H&R Block estimates about 25 million taxpayers may have a second chance for rebate money from last year's economic stimulus package.
The Internal Revenue Service urges taxpayers and tax preparers to make sure they properly determine eligibility for the recovery rebate credit before they file their 2008 federal tax returns.
Some individuals who did not get the economic stimulus payment, and fewer of those who did, may be eligible for the recovery rebate credit. Most taxpayers who received some of the $119 million economic stimulus package last year will not qualify for the recovery rebate credit on their 2008 federal income tax return.
An early sampling revealed about 15 percent of tax return errors involved the recovery rebate credit, according to IRS spokesman Mark Green.
"Some tax returns erroneously claim the credit, do not claim the proper amount of recovery rebate credit, or mistakenly enter the amount of the stimulus payment they received on the recovery rebate credit line," said Green.
The economic stimulus payment is not taxable and should not be reported as income on the 2008 Form 1040, 1040A, or 1040EZ. The payment amount will not be entered directly on the tax return.
"To avoid delays in tax refunds," Green said, "it is critical that taxpayers know the correct amount of the stimulus payment they received last year, if any, to help determine whether they qualify for the recovery rebate credit now."
For people using a paper tax return, the stimulus payment amount will be required when completing a related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.
Individuals can find out how much they received in stimulus money by checking the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment. Taxpayers may also call the IRS at 1-866-234-2942 or visit the IRS web site.
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