The Internal Revenue Service is getting reports that some tax preparers are telling customers that their stimulus checks are taxable.

But the IRS has clarified that the stimulus payments will not reduce your 2007 or 2008 refund, nor will they increase the amount you owe when you file your 2008 return.

The confusion apparently has surfaced with various income tax software packages.  It asks filers to report the amount of their check to determine if they are eligible for the new recovery rebate credit.  So if you use tax software, be certain to check that the program is not calculating tax on stimulus payments.

Taxpayers who did not receive a stimulus payment may be eligible for a recovery rebate credit.

Because of the complexity of IRS tax laws, owing taxes on mutual funds happens more than one would think.  It occurs when a fund manager sells a stock, or other asset, that is held within the fund, for a gain.  The taxable capital gains are passed on to the owner of the fund. 

Let’s say you own ABC Fund and the manager bought shares of Google @ $200/share and six months later sold it for $300/share.  Initially this looks great.  The manager made money for the fund.  But mutual funds are made of many different stocks and if the value of the other shares “in the basket” cause the price of the fund to decline - then you sell it at a loss - you would be required to pay capital gains on the capital gains of the google sale.

Although this is a simple example, it is important to understand if you own a mutual fund.  If you are concerned or want to know more about mutual fund tax implications, contact your financial adviser or tax accountant.

Do you have questions about the economic stimulus payments?  Did you miss the Oct 15 deadline to file?  Can you still file anyway? Here are the top five questions currently being asked about the stimulus payments.

Address Change
1. I have moved since filing my 2007 tax return. How will my payment reach me?

A. Filing Form 8822, Change of Address, with the IRS and a change of address notice with the U.S. Postal Service will help ensure that any mail from the IRS, including your stimulus payment check, is sent to your new address. If the check has already been mailed and you did not provide the IRS with an updated address, the check will most likely be returned to the IRS. You may call the IRS at 1-866-234-2942 to provide your new address so that steps can be taken to have the check reissued.

Payment Timing
2) When will I get my stimulus payment?

A. It will generally take 8-12 weeks after you file your return to get your stimulus payment.

The IRS has already issued stimulus payments, both direct deposits and paper checks, for most returns filed by April 15. The IRS will continue to issue payments through 2008 for returns filed after April 15. Please allow 8-12 weeks after filing your tax return before checking on the status of your stimulus payment. To check on the status of your stimulus payment, you may visit Where’s My Stimulus Payment?or call the toll-free Rebate Hotline at 1-866-234-2942.

3) It has been more than eight weeks since I filed my return and my payment has not arrived. Can the IRS trace my payment to find out what happened to it?

A. Yes. If it has been more than eight weeks since you filed your return and your payment has not arrived, please visit an IRS Taxpayer Assistance Center or call the toll-free Rebate Hotline at 1-866-234-2942. A list of all Taxpayer Assistance Centers in your state is available at Contact My Local Office.

4) I heard that the IRS has finished sending the stimulus payments. Is it too late to for me to claim mine?

A. If you missed the Oct. 15 deadline for filing an income tax return for a economic stimulus payment, don’t worry. You can receive a payment in 2009 by filing an income tax return when the filing season opens in January. The IRS will have more information shortly.

5) I filed after April 15 and the payment date for my Social Security number has passed. How long will it take for me to get my stimulus payment?

A. It will generally take 8-12 weeks after you file your return to get your stimulus payment.

truetaxfacts.com will continue to provide updates on important information regarding the IRS and the economic stimulus payments. 

source: irs.gov

People are getting fed up with the increase of taxes. Take Frank Alford, a Floyd County, Indiana man.

Frank, who owns several single-family rental homes, showed up at the city-county building in New Albany to pay his property taxes with more than $21,000 in coins.  His reason?   To protest higher taxes.

Last year, Frank showed up to pay his taxes with dollar bills!

Alford loaded a garbage can with $21,333 in Susan B. Anthony dollar coins, and he carried a sign that read, “Property taxes gone wild.”

“I’m letting them know I’m a very unhappy taxpayer,” he said.

According to Mr. Alford, his property taxes have gone up 48 percent since 2006, and tax relief recently passed by the Indiana Legislature has done nothing for people who own rental property.

“The owner who lives in their property got all kinds of tax breaks. They don’t give you no homestead exemption, no mortgage exemption, nothing,” he said. “You’re paying double what you’re paying than owning your own home.”

Alford, a retiree with two hip replacements, loaded what he estimated was 400 pounds of coins and then headed inside to the treasurer’s office to settle up.
Deputy Clerk Bette Buechler did a quick tally of Alford’s property taxes.

When asked if the office has to accept the Susan B. Anthony coins, Buechler said, “I think I’m understanding if it comes in pennies, we don’t have to.”

A Floyd County deputy sheriff was asked to lend a hand getting the money to a nearby bank to be counted. As for Alford, this may not be his last protest.

“If we don’t get some relief, it may be in quarters, dimes, or pennies next year,” he said. “I’m angry at them.”