By Johnny Jackson
As the tax season gets underway, millions of Georgians will begin considering how they can best take advantage of tax incentives and credits.
The Internal Revenue Service (IRS) expects to begin processing tax returns within the next few weeks.
IRS officials anticipate a bigger load of early tax returns this year compared to years passed.
"You'll have more early filers this year, with the anticipation of getting their refunds," said IRS spokesman Mark Green. "Additionally, you'll see more individuals taking advantage of tax credits."
As the economy goes, so goes the individual taxpayer. Many taxpayers are struggling to pay their bills and have defaulted on their federal tax payments, resulting in tax liens on their homes and other property, officials say. According to the IRS, there are more than one million federal tax liens outstanding which are tied to both real and personal property.
"These are difficult times for the U.S. economy," said IRS Commissioner Doug Shulman. "Many homeowners are at risk of losing their homes. Many are hoping to refinance at lower rates and, in some cases, homeowners are forced to sell their homes and get the best deal they can in the current marketplace."
In December, the IRS announced an expedited process to make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.
"For taxpayers who are trying to refinance their mortgage, the existence of a tax lien generally means that the new lender will not go through with the refinancing," Shulman said.
The IRS is able to work with homeowners and their financial institutions in order for them to refinance their homes and obtain money to help pay off their creditors as well as the IRS. The process would release the federal tax lien long enough for the homeowner to negotiate (refinancing) a loan; it takes about 30 days to apply for and receive either a discharge or a subordination of a federal tax lien.
"I want to stress," Shulman added, "the IRS is doing whatever it can, under the constraints of the law and with common sense, to avoid getting in the way of people trying to save their homes or sell their homes."
Also, the National Association of Tax Professionals (NATP) reminds taxpayers to be aware that the Emergency Economic Stabilization Act of 2008 can have a positive affect on their 2008 tax filing.
Under the act, an increased amount of lower-income earners will be eligible for the child tax credit this year, because the earned income threshold has decreased from $12,050 to $8,500.
The above-the-line tax deduction for qualified higher education expenses was also extended through 2009. Taxpayers will receive this "qualified tuition deduction" benefit whether they itemize or not. Likewise, teachers will be able to deduct up to $250 for educational expenses.
Some taxpayers may be eligible for the IRA rollover provision, which allows qualified taxpayers to make tax-free contributions from their IRA plans to qualified charitable organizations.
The standard deduction for real property taxes has been extended through 2009 as well. Taxpayers who do not itemize can add the lesser of their real estate taxes or $500 ($1,000, if married) to the standard deduction.
The 15-year, straight-line cost recovery for qualified leasehold, restaurant, and retail improvements allows for improvements put in service before Jan. 1, 2010, to be written off over 15 years, not at the current standard of 39 years.
Additionally, the $500 residential energy efficient property credit was reinstated for energy-efficient property - doors, windows, water heaters, and central air units. Those considering energy-efficient improvements to their home can do it this year to receive a credit.
Taxpayers are allowed a credit for expenditures for qualified solar electric property, qualified solar water heating property, and qualified fuel cell property. The credits have been extended eight years through 2016.
Tax professionals warn against taxpayers taking refund-anticipated loans. Green said taxpayers are better off waiting for their tax returns and filing them, only after they have received the proper tax-filing documentation, like the W2 Form.
"We would definitely suggest and encourage taxpayers not to use their last pay check stub in order to file their return," Green added.
There are free tax filing services through the IRS. For more information, visit the IRS web site.
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