Does The IRS Owe You Money?

Who couldn’t use a little extra cash this summer! The IRS may have some money for you.

If you have not filed a prior year tax return and are due a refund, you should consider filing the return to claim that refund. If you are missing a refund for a previously filed tax return, you should contact the IRS to check the status of your refund and confirm your current address.

Unclaimed Refunds

Some people may have had taxes withheld from their wages but were not required to file a tax return because they had too little income. Others may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit.

To collect this money a return must be filed with the IRS no later than three years from the due date of the return.

If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury.

There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

Current and prior year tax forms and instructions are available on the Forms and Publications web page of IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov.
Undeliverable Refunds

Were you expecting a refund check but didn't get it?

Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.

You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.

You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.

Tax Help - "What's Next"

By now your 2007 tax return should be filed or you should have applied for an extension of time to file.

Now it's time to prepare for the 2008, and this can include several major situations to keep in mind as you go through the coming year.

First on the list is checking on the status of your refund. If your refund hasn't been deposited to your bank account or been mailed to you in the three to four weeks after you filed, you can check its status on the IRS Web site using the Where's My Refund application. You should allow at least 7 days from the time you file your return before checking with the IRS.

You will also want to find out how much of the stimulus rebate you might receive later this summer. The IRS has an Online Stimulus Payment Calculator. Simply type in some numbers from your completed tax return and you'll see how much of an additional rebate you'll be receiving. The IRS has also posted a schedule of when these payments will be sent out.

Now may be the time to adjusted your paycheck withholding, but be careful not to over do it and claim to many exemptions. By adjusting your withholding, you'll make sure that you have just enough money deducted from your paycheck to cover your taxes, but not too much to have a huge refund, nor too little to have a sizable balance due. You can calculate how many withholding allowances to claim using the IRS' withholding calculator, and then use those figures to fill out a new W-4 and submit it to your employer's payroll department.

You will also want to keep your finished tax returns in a safe place. You'll want to keep a copy of the return, plus any supporting documents, for at least three years. That's how long the IRS has to ask any additional questions or basically audit your return.

As I always say, "It's better to be proactive than reactive!"

Tax Help - "Where's My Refund?"

Nearly 9.7 million taxpayers have checked the status of their 2007 federal income tax refunds online, up about 18 percent over the same time period last year.

To get to personalized refund information, taxpayers should be ready to enter their:Social Security Number (or Taxpayer Identification Number),

Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)),

Exact refund amount shown on their tax returns.

Taxpayers can check on the status of their refund seven days after e-filing a return. For a paper return, check four to six weeks after mailing the return.

“Where’s My Refund?” also includes links to customized information based on a taxpayer’s specific situation. For example if “Where’s My Refund?” shows that the IRS was unable to deliver a refund, a taxpayer can change his or her address online. Taxpayers can avoid undelivered refund checks by having their refunds directly deposited into a personal checking or savings account.

If 28 days have passed after the IRS says it mailed a refund check, “Where’s My Refund?” enables taxpayers to initiate a trace.

New this year Spanish-speaking taxpayers can get information about the status of their federal refunds using Dónde Está mi Reembolso? available by entering the Spanish language area of the web site by clicking the Espanol link on IRS.gov. The refund trace and address change features are only available in English at this time.

Taxpayers without internet access can check the status of their refunds by calling the IRS TeleTax System at 800-829-4477 or the IRS Refund Hotline at 800-829-1954. The TeleTax refund information is updated each weekend. If you do not get a date for your refund, please wait until the next week before calling back.

Where’s My Refund? is also accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

Some scam artists are sending phony emails, including those relating to “Where’s My Refund?”, to trick individuals into revealing personal financial information that can be used to access their financial accounts. People who want to access the genuine IRS Web site and the “Where’s My Refund?” feature should go directly to the IRS Web site by typing the address, http://www.irs.gov/, into the address` line of their Internet window. The only genuine IRS Web site is IRS.gov.

Tax Prep 101 - Lesson #1

In the course of the next few weeks, I'm going to be guiding you through the preparation of a "basic" tax return. And along the way, I'm going to throw in some vital information that will help you to understand the process.

These guidelines will be based on simple or basic returns and will both educate and enlighten you on some of the things that the IRS will be looking for and could help you to avoid the possibility of an audit.

First and foremost, always have your return prepared each year. I know that some of those 1099's, W-2 G's (gambling) and 1099-B (stock sales), not to mention the dreaded 1099-R (withdrawal from pension plans) can scare you to death at tax time. But generally, I have found that the fear is worse than the outcome of the return. Have your return prepared to see what that outcome is first, then panic if you must.

Failure to file a return is one of the worse scenarios that you can find yourself facing. No, the IRS may not get you in the first or second year, but you can bet on the fact that within a couple of years they will be sending out those SFR's (Substitute For Returns) which they have graciously filed for you.

If a taxpayer has not filed a return and the IRS feels it can collect from the money earned, an IRS Revenue Officer may file a SFR. When a SFR is filed, the agent lists all of the income reported to the IRS for that year, but only gives the taxpayer one exemption and only the standard deduction (i.e. nothing is itemized). Even if for the past 10 years the taxpayer has itemized, the IRS prepares the return in their favor. If the taxpayer has children the IRS tries to file the return based on the information from the previous years (i.e. married filing joint with 2 children), but IRS will only file this way if they have previous returns showing this information.

Waiting years to file a return will land you with late filing penalties and interest that have accumulated from the date the return was due. At that point, you will be find that you have dug a hole that only a tax professional can help correct.

Ironically, most of the delinquent returns that I prepare resulting from fear or neglect, result in refunds. Say for instance that you have not filed since 2000 and you need to file six years worth of returns. In 2000-2003 you would have received a refund and the remaining years you owe. Under IRS regulations, you can only receive your refund for the past three years (2004-2006). Hence, you have lost four years worth of refunds to the IRS. In most cases, they will also not let you apply what you would have received to what you now owe.

Trust me when I say that it is not worth the procrastination or the fear. Be proactive and no reactive, get the facts first and then decide what you want to do. You might find that things aren't quite as bad as you thought they would be.

S. Raines, Sr. Financial Advisor/Tax Preparer

"Disabled Veteran Payments Ruled Tax-Free"

IRS Newswire [irs-newswire@lists.qai.irs.gov]

Certain Payments to Disabled Veterans Ruled Tax-Free;
Some May Be Due Refunds

WASHINGTON — Payments under the Department of Veterans Affairs (VA) Compensated Work Therapy (CWT) program are no longer taxable and disabled veterans who paid tax on these benefits in the past three years can now claim refunds, the Internal Revenue Service said today.

Recipients of CWT payments will no longer receive a Form 1099 from the Department of Veterans Affairs. Disabled veterans who paid tax on these benefits in tax-years 2004, 2005 or 2006 can claim a refund by filing an amended return using IRS Form 1040X. According to the VA, more than 19,000 veterans received CWT in Fiscal Year 2007.

The IRS agreed with a U.S. Tax Court decision issued earlier this year, which held that CWT payments are tax-free veterans’ benefits. In so doing, the agency reversed a 1965 ruling which held that these payments were taxable and required the VA to issue 1099 forms to payment recipients.

According to the VA, the CWT program provides assistance to veterans unable to work and support themselves. Under the program, the VA contracts with private industry and the public sector for work by veterans, who learn new job skills, re-learn successful work habits and regain a sense of self-esteem and self-worth.

Related Item: Revenue Ruling 2007-69

Can We Find A Home For $110 Million?

On November 14, 2007, the IRS released, “IRS Has $110 Million In Refund Checks Looking For A Home”, which should make every taxpayer take notice.

The announcement stated that there were 115,478 taxpayers who are due refund checks worth about $110 million. Why? It’s simple, the checks have been returned as undeliverable.

The refund checks averaged about $953 each. Claiming these refunds is as easy as updating your address. The alarming statistic is that some taxpayers have more than one check waiting.

“Taxpayers should not miss out on getting their money back,” said Richard Morgante, commissioner of the IRS Wage and Investment Division. ”The IRS makes it as easy as possible for taxpayers to update their addresses and claim their refunds.”

The IRS.gov tool on their website called “ Where’s My Refund?” enables you to check the status of your refunds. You will be required to provide your social security number, filing status and amount of refund shown on your 2006 return. This tool will give the status of your refund and will provide instructions on how to resolve delivery problems. The telephone version of “Where’s My Refund?” requires calling 1-800-829-1954.

To date (2007), the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit. Undeliverable refunds account for less than one-tenth of one percent of all refunds, or about one in a thousand.

Normally a refund check is returned as undeliverable due to taxpayers moving and not updating their address with either the U.S. Postal Service or the IRS.

According to the IRS, the list of taxpayers due undeliverable refunds this year rose about 21 percent from 95,746 last year. The increase is due in part to the Telephone Excise Tax Refund. The refund was a one-time payment available on 2006 federal income tax returns. It was designed to return to individuals, businesses and tax-exempt organizations previously collected long-distance telephone taxes.

Refund checks are mailed to a taxpayer’s last known address. Checks are returned to the IRS if a taxpayer moves without notifying the IRS or the U.S. Postal Service. Updating your address is easy, just access the “ Where’s My Refund?” feature at www.irs.gov. Taxpayers checking on a refund will be asked to provide an updated address if there is an undelivered check outstanding within the last 12 months. Taxpayers checking on a refund over the phone will be given specific instructions on how to update addresses.

A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address (Download the form) or request it by calling 1-800-TAX-FORM (1-800-829-3676). Those who do not have access to the Internet and think they may be missing a refund should first check your returns or contact your tax preparer if the returns are not available, then call the IRS toll-free assistance line at 1-800-829-1040 to update your address.

Requesting Direct Deposit can put an end to undelivered refunds, as well as lost or stolen refund checks. Taxpayers can have refunds deposited directly into their personal checking or savings accounts. Direct Deposit is available for filers of both paper and electronic returns. For paper returns, just fill out the routing and account information on the bottom of Page 2 of the 1040 above the signatures spaces.

How often do you hear the government say that they owe you? Working with clients on a daily basis at Effectur, Inc., I find myself having to tell folks how much they owe. Now is the time for me to give the IRS a hand in letting millions know that they can claim what is rightfully theirs. Have you moved in the last year to two, if so, it’s definitely worth making that call or going online. Remember, every day that this money is not claimed is another day of interest that the IRS is making off of your money, and at $110 million, that’s a lot of interest.

Sharon Raines, Sr. Financial Advisor/Tax Preparer