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IRS Has $1.3 Billion for People Who Have Not Filed a 2005 Tax Return
Don't let money slip through your hands! Call RWB Tax Services today, (770)222-6497. from irs.gov IRS Has $1.3 Billion for People Who Have Not Filed a 2005 Tax Return WASHINGTON — Unclaimed refunds totaling approximately $1.3 billion are awaiting over a million people who did not file a federal income tax return for 2005, the Internal Revenue Service announced today. However, to collect the money, a return for 2005 must be filed with the IRS no later than Tuesday, April 15, 2009. Especially in these tough economic times, people should not lose out on money that is rightfully theirs," said IRS Commissioner Doug Shulman. “People should check their records, especially if they had taxes withheld from their paychecks but were not required to file a tax return. They may be leaving money on the table, including valuable tax credits that can mean even more money in their pockets." The IRS estimates that half of those who could claim refunds for tax year 2005 would receive more than $581. Some individuals 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 2005 returns, the window closes on April 15, 2009. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund. The IRS reminds taxpayers seeking a 2005 refund that their checks will be held if they have not filed tax returns for 2006 or 2007. 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, individuals stand to lose more than refunds of taxes withheld or paid during 2005. Many low-income workers may not have claimed the Earned Income Tax Credit (EITC). Generally, unmarried individuals qualified for the EITC if in 2005 they earned less than $35,263 and had more than one qualifying child living with them, earned less than $31,030 with one qualifying child, or earned less than $11,750 and had no qualifying child. Limits are slightly higher for married individuals filing jointly. Current and prior year tax forms and instructions are available on the Forms and Publications web page of IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov. Taxpayers who need help also can call the toll-free IRS help line at 1-800-829-1040. Individuals Who Did Not File a 2005 Return with an Estimated Refund Total Median Estimated Estimated Refunds Individuals Refund* ($000)* Alabama 21,400 $585 $18,167 Alaska 6,100 $665 $6,925 Arizona 36,900 $487 $31,234 Arkansas 11,400 $547 $9,756 California 154,500 $537 $144,580 Colorado 23,700 $532 $20,676 Connecticut 16,000 $659 $18,234 Delaware 5,400 $592 $5,117 Dist of Columbia 5,300 $564 $5,518 Florida 99,300 $609 $108,162 Georgia 44,400 $538 $39,381 Hawaii 9,400 $639 $11,108 Idaho 5,300 $464 $4,113 Illinois 50,400 $640 $53,166 Indiana 26,600 $624 $24,041 Iowa 11,800 $587 $9,367 Kansas 12,900 $555 $10,804 Kentucky 14,600 $588 $12,506 Louisiana 24,900 $594 $24,388 Maine 4,900 $532 $3,928 Maryland 30,600 $584 $29,967 Massachusetts 29,600 $638 $31,942 Michigan 45,100 $609 $42,390 Minnesota 19,700 $531 $17,085 Mississippi 12,200 $533 $10,311 Missouri 26,000 $550 $21,237 Montana 3,700 $509 $3,125 Nebraska 5,900 $548 $5,091 Nevada 18,300 $551 $17,588 New Hampshire 5,500 $667 $5,759 New Jersey 41,100 $646 $43,761 New Mexico 9,400 $532 $7,724 New York 76,800 $639 $82,994 North Carolina 37,300 $515 $29,645 North Dakota 2,000 $553 $1,647 Ohio 44,600 $571 $37,290 Oklahoma 17,000 $546 $14,541 Oregon 21,000 $467 $16,138 Pennsylvania 47,800 $623 $43,958 Rhode Island 4,500 $610 $4,332 South Carolina 16,000 $506 $13,240 South Dakota 2,400 $602 $2,046 Tennessee 21,900 $586 $19,917 Texas 103,000 $624 $105,241 Utah 8,300 $496 $8,334 Vermont 2,300 $550 $1,730 Virginia 40,200 $576 $40,657 Washington 35,600 $624 $39,414 West Virginia 4,900 $627 $4,389 Wisconsin 16,900 $535 $13,825 Wyoming 2,800 $649 $2,785 Armed Forces 5,500 $800 $4,540 US Possessions/Territories 200 $754 $320 Total 1,343,000 $581 $1,284,133 *Excluding the Earned Income Credit and other taxes. ...read more
By RWB Tax Services - Hiram (Dallas, Douglasville, Lithia Springs, New Georgia, Paulding County, West Cobb) March 03, 2009
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
One of 2009's biggest concerns from taxpayers is, What happens to me when I lose my house through foreclosure?" Here is some helpful information straight from the IRS website regarding the Mortgage Forgiveness Debt Relief Act and Debt Cancellation legislation. from irs.gov If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.More information, including detailed examples can be found inPublication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news releaseIR-2008-17.The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:What is Cancellation of Debt?If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.Is Cancellation of Debt income always taxable?Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve: Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners. Bankruptcy: Debts discharged through bankruptcy are not considered taxable income. Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets. Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income. Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences. These exceptions are discussed in detail in Publication 4681.What is the Mortgage Forgiveness Debt Relief Act of 2007?The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.What does exclusion of income mean?Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filingseparately.Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.How long is this special relief in effect?It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.If the forgiven debt is excluded from income, do I have to report it on my tax return?Yes. The amount of debt forgiven must be reported onForm 982and this form must be attached to your tax return.Do I have to complete the entire Form 982?No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.Where can I get this form?If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.How do I know or find out how much debt was forgiven?Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982. Can I exclude debt forgiven on my second home, credit card or car loans?Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent. You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.I lost money on the foreclosure of my home. Can I claim a loss on my tax return?No. Losses from the sale or foreclosure of personal property are not deductible. If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case. An exclusion is also available for the cancellation of certain nonbusiness debts of a qualified individual as a result of a disaster in a Midwestern disaster area. See Form 982 for details.If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence? Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.Will I receive notification of cancellation of debt from my lender?Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.What if I disagree with the amount in box 2?Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.How do I report the forgiveness of debt that is excluded from gross income?(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2. Any remaining canceled debt must be included as income on your tax return.(2) File Form 982 with your tax return.My student loan was cancelled; will this result in taxable income?In some cases, yes. Your student loan cancellation will not result in taxable income if you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation.Are there other conditions I should know about to exclude the cancellation of student debt?Yes, your student loan must have been made by: (a) the federal government, or a state or local government or subdivision;(b) a tax-exempt public benefit corporation which has control of a state, county or municipal hospital where the employees are considered public employees; or(c) a school which has a program to encourage students to work in underserved occupations or areas, and has an agreement with one of the above to fund the program, under the direction of a governmental unit or a charitable or educational organization. Can I exclude cancellation of credit card debt? In some cases, yes. Nonbusiness credit card debt cancellation can be excluded from income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See the examples in Publication 4681. How do I know if I was insolvent? You are insolvent when your total debts exceed the total fair market value of all of your assets. Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts. How should I report the information and items needed to prove insolvency? Use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you were insolvent immediately before the cancellation. You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation. To claim this exclusion, you must attach Form 982 to your federal income tax return. Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately prior to the cancellation. You must also reduce your tax attributes in Part II of Form 982. My car was repossessed and I received a 1099-C; can I exclude this amount on my tax return? Only if the cancellation happened in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See Publication 4681 for examples. ...read more
By RWB Tax Services - Hiram (Dallas, Douglasville, Lithia Springs, New Georgia, Paulding County, West Cobb) February 27, 2009
Expanded Tax Break Available for 2009 First-Time Homebuyers
from irs.gov Expanded Tax Break Available for 2009 First-Time Homebuyers WASHINGTON — The Internal Revenue Service announced today that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately. “For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.” The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit. This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately. The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers. For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase. The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year. Call RWB Tax Services today to find out to take advantage of this great tax break! RWB Tax Services (770)222-6497 ...read more
By RWB Tax Services - Hiram (Dallas, Douglasville, Lithia Springs, New Georgia, Paulding County, West Cobb) February 27, 2009
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