The Internal Revenue Service owes taxpayers more than $1 billion dollars in tax refund money. They actually owe taxpayers way more than that. This $1 billion is the estimated tax refunds for taxpayers who haven’t filed their 2008 income tax return. This is a situation that occurs every tax year.

Taxpayers who haven’t filed a 2008 tax return can do so without penalty, but your time is drawing short. IRS tax law requires that the tax return be properly addressed, mailed and postmarked by April 17, 2012. Taxpayers will be happy to note that the IRS does not levy a tax, penalty or any additional fee for filing a late return qualifying for a refund.

The Internal Revenue generally offers a three year grace period. After that, a giant vacuum is used to suck your money back for use by the government. That money is gone forever and you can never get it back.

The IRS estimates that half of the tax refund amounts are over $600.00.

California leads all states with 122,500 individuals who haven’t filed their 2008 tax return that are due over $122 million. At the other end of the spectrum is the state of Vermont with 1,700 individuals due of $1.4 million.

Why have so many Americans failed to file their 2008 income tax return? The Internal Revenue Service theorizes that some taxpayers didn’t file because they didn’t enough money to require filing a tax return, even though they may have had taxes withheld from their wages.

Here’s an warning to taxpayers who expect a tax return for the 2008 tax year but haven’t filed their tax return in subsequent years. So, even if you are due a tax refund, and you file before April 17, 2012, your check may be held by the IRS. If you have any outstanding debt with the IRS, the amount due will be deducted from the amount you receive. The same goes for any debt you owe for child support and student loans.

There is something very important you need to know if you feel you qualify for a 2008 income tax refund. You stand to lose more than just your tax refund. Your tax refund amount could signficantly increase if your qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:

$38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
$33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
$12,880 ($15,880 if married filing jointly) for those with no qualifying children.
For more information, visit the EITC Home Page on IRS.gov.

If you have any questions about how to file your 2008 federal income tax return, visit the IRS website or call 1-800-829-1040 Monday to Friday 7:00 a.m. to 7:00 p.m your local time.

source: irs.gov

Middle-class taxpayers will be happy to know that President Obama and Congress have agreed to extend the payroll tax cut until the end of 2012.

The payroll tax cut actually reduces the amount of tax that taxpayers pay toward social security. Instead of paying the normal 6.2% tax rate, taxpayers will get a 2% cut and pay only 4.2% of their earnings toward social security.

The Internal Revenue Service today released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.

On February 23, the Internal Revenue Service issues a press release that states, “Under the Middle Class Tax Relief and Job Creation Act of 2012, enacted yesterday, workers will continue to receive larger paychecks for the rest of this year based on a lower social security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate in effect prior to 2011. This reduced rate, originally in effect for all of 2011, was extended through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011, enacted Dec. 23.”

Are you self-employed and feeling left out? Don’t worry there’s good news for you too. According to the same IRS news release “Self-employed individuals will also benefit from a comparable rate reduction in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.”

The Middle Class Tax Relief and Job Creation Act, also appeals the two-percent recapture tax that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut.

The IRS will continue to provide updates to the newly-extended payroll tax cut through press releases on the IRS website.

The payroll tax cut extension means more money for middle-class taxpayers.

Being selected for an IRS audit can be the most stressful experience. The key to reduce your anxiety is to get professional help in the form of a tax attorney. Having professional representation will help relieve the questions and what-if scenarios that go through your brain.

In my previous post about IRS Audit Facts, I discussed how the IRS will contact you, what happens when you file an amended tax return while you’re being audited, and the reasons why your tax return was selected for audit.

In IRS Audit Facts: Part II we will expand on the IRS audit facts. We will discuss how long you should keep your tax returns, what happens when the tax audit is concluded, how far can the IRS go to audit your return, and what to do if you’re not ready for your audit appointment.

The IRS can audit tax returns filed within the last three years. If substantial errors are discovered, the IRS has the discretion to go back further. In almost all cases, the IRS will never go back more than six years. This answers the next question you might ask, how long should you keep copies of your tax returns? Optimally, you should keep copies forever. At the very minimum, six years of tax return copies will suffice.

When the IRS has been completed by the examining auditor it will be reviewed by the case manager. It is IRS policy that all audits are reviewed by managers. If errors are found during the review, the auditor will contact you and advise you what the correction is and what the implications of the error are.

What happens if you’re not ready for your scheduled appointment? First and foremost, don’t panic. Contact your IRS auditor at the number provided on the IRS notification letter. Explain the situation, and let them know what information, if any, is currently not available. In some cases it may be possible for the IRS to proceed. In any case, the IRS auditor will try to work with you to set up another audit appointment.

If there were only one audit fact that I could stress, it would be to hire a tax attorney or other tax professional to represent you. That’s a fact!

source: irs.gov