The IRS is noticing that there is some confusion about the the Recovery Rebate Credit and whether or not you have to pay taxes on the stimulus check from last year.

“About 15 percent of the returns have errors involving that credit,” said Clay Sanford, a spokesman for the IRS in Dallas.

The Recovery Rebate Credit is a one-time benefit for people who did not receive a stimulus check in 2008 or who did not receive a full economic stimulus payment. These people may have seen their economic circumstances change, making them eligible for the credit.

You may qualify for a Recovery Rebate Credit if:

• Your financial situation changed dramatically from 2007 to 2008
• You did not file a 2007 tax return
• Your family gained an additional qualifying child in 2008
• You were claimed as a dependent on someone else’s return in 2007 but cannot be claimed as a dependent by someone else in 2008.

Under certain circumstances, individuals filing a return can receive a $600 credit, while married couples filing jointly can receive $1,200. People under age 17 may fetch a $300 credit.

LAST YEAR’S STIMULUS PAYMENT IS NOT TAXABLE. But taxpayers need to know how much their stimulus check was so their income tax returns can be properly processed.

The Stimulus checks received last year and the Recovery Rebate Credit available to some this year are completed different. But, they are related when filing tax returns.

People filing paper returns will need to include the size of their stimulus checks when completing a work sheet. For people using tax software, the stimulus payment amount will be needed as well, but the software will figure whether a Recovery Rebate Credit is due.

DO I HAVE TO TAXES ON MY STIMULUS CHECK FROM LAST YEAR? The answer is No, No, No!

For most taxpayers, the correct entry for the Recovery Rebate Credit will either be blank or zero. If there is any question as to the amount that should be reported for that credit, the taxpayer or preparer should enter a zero on the appropriate line. The IRS will determine from records whether a rebate credit is due and for how much.

If you have a specific question about your Federal Tax return you can call the IRS and receive Live Telephone Assistance. Here are the particulars:

Telephone Assistance for Individuals:
Toll-Free, 1-800-829-1040
Hours of Operation: Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

Telephone Assistance for Businesses:
Toll-Free, 1-800-829-4933
Hours of Operation: Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

source: irs.gov

Here we go again.  Another Barack Obama nominee, this time for Health and Human Services secretary, is being investigated for failing to pay back taxes.  Tom Daschle, the former South Dakota Senator waited nearly a month after being nominated before informing President Obama that he had not paid years of back taxes, according to the Washington Post.

Dashle paid  $140,000 in back taxes and interest on January 2, 2009 and a few days later informed the White House and Senate Finance Committee. 

Obama’s transition team discovered in December that $15,000 of the $276,000 in charitable contributions claimed by Daschle lacked proper documentation. But Daschle waited until after amended returns were filed before he mentioned the larger tax liability.

Daschle spokeswoman Jenny Backus said he had known since June 2008 that his luxury car and driver provided by wealthy Democratic donor, longtime friend and business associate Leo Hindery might be taxable, but never expected the amount to be such a “jaw-dropping” sum and “thought it was being taken care of” by his accountant.

Hindery founded InterMedia Partners, a private equity firm, in 1988. Daschle was paid $1 million annually for his consulting services, the Senate Finance Committee said.

Daschle had an unreported consulting income of $88,333, in 2007.

“Senator Daschle is embarrassed and disappointed by these errors,” Backus said. “He apologized for his part in these errors and expressed his deep regret that the committee had to devote time to them.”

The White House acknowledged Friday that Daschle had “some tax issues,” which, the administration said, have been resolved and should not bar his confirmation as secretary.

A statement issued by the White House affirmed that Daschle “is the right person to lead the fight for health care reform.”

“Senator Daschle brought these issues to the Finance Committee’s attention when he submitted his nomination forms and we are confident the committee is going to schedule a hearing for him very soon, and he will be confirmed,” it said.

Why is it that these high ranking politicians are trying to get away with paying taxes.  I mean $140,000 in taxes is by no means an oversight, how could it be?

And in Daschle’s case, he calculated his strategic moves in when to pay the back taxes and when to inform Obama and the Senate Finance Committee.  It is the same old political sleeze that we all hate.  This is very disturbing and brings up the point that maybe elected officials should be held accountable.

And Daschle’s sleezy moves won’t even affect his nomination.  This is a travesty - I don’t care how the constituents spin it.  If someone in the private sector owed $140,000 in federal taxes, do you think they would be treated the same? 

I see no excuse for this and Tom Daschle’s nomination should be voided.  Shame on you! Shame on government!

Something must be done!

Superbowl Sunday is perhaps the biggest one day celebration in all of America.  It’s that one day when everyone, from your office secretary to your betting buddies at the local pub, put down some bucks in Superbowl office pools or place bets legally and illegally.  Some are estimating that more than $10 billion will be bet this year on Superbowl Sunday on office pools, football final scores and even what team wins the coin flip. 

Regardless of the gambling venue, bettors are required to report winnings on income-tax returns. How seriously people take this responsibility is anyone’s guess.

It seems that most people don’t really know that they are supposed to report it on their federal income tax return.  According to one H&R Block survey, only one-third of those responding realized gambling winnings are taxable.

If you receive money, prizes or awards like a trip or new car from a lottery, a local raffle, a casino or sports betting, you are supposed to report the winnings as income on Schedule A of your federal-tax return. You could be subject to estimated tax payments on your winnings as well.

If you win an office pool, you technically are supposed to report it.

But the IRS is more concerned about Internet betting, which is easier to track through credit cards. And the most likely time a gambling situation could come to the IRS’ attention is during an audit.

Gambling losses are deductible, but only to the extent you use them to reduce winnings. In other words, you can’t deduct net losses. And if you are deducting losses, the IRS requires an accurate log of your betting.

“The larger gamblers do keep track,” said Taylor, adding that a lot of casinos furnish tracking cards on request.

Here are the Top 10 On the IRS Tax Evasion List:

1. Besides not paying taxes on gambling winnings
2. Not reporting all income from working, investments or unemployment benefits, it’s all income in the eyes of the IRS
3. Reporting children’s investment income is also a problem
4. Not paying the nanny tax
5. Not reporting annual gifts of more than $12,000 ($13,000 in 2009) to any single recipient
6. Claiming charitable deductions for more than the items are worth
7. Exaggerating expense deductions
8. Not filing a tax return
9. Filing an incomplete tax return
10. Claiming an economic-stimulus tax rebate for more than you’re qualified.

Here are three tips you should know about when filing your 2008 income tax. It’s important that you are aware of them now so that you can take action before the 2008 tax year closes (Dec 31, 2008).

Standard Deductions vs. Itemized Deductions
One thing you should know about filing taxes is that it makes sense to compare your standard deductions against your Itemized Deductions.

If your Itemized Deductions exceed the amount of your itemized deductions, you stand a good chance of saving money by itemizing. If your Itemized deductions are slightly lower, try to shift some of your itemized deductions for the following year to the current year. Here is an example:

Let’s say you have the option to pay real estate tax in 2 installations, consider making the payment in 2008 that would normally be paid in the early part of 2009.

Another tip is to do the opposite, if you don’t think you will be able to take advantage of itemizing in 2008, try to shift some of them for the next tax year, This would work if you plan on purchasing a home in 2009 or you could make your annual charitable contributions in January, 2009 instead of December, 2008.

Flexible Spending Accounts
Now is the time to check if you have money left in your Flexible Spending Account. If you do have extra, make some appointments to use it up. If you don’t, you lose the money.

Medical Deductions
You can claim unreimbursed medical expenses that you incur over the year. IRS rules allow you to deduct them only if they exceed 7.5% of your Adjusted Gross Income. If you are close to that level, consider having elective or necessary medical procedures before the end of the year. But make sure to check that it’s among the qualifying deductible expenses.

Adjusted Gross Income (AGI) is a tax payer’s gross income (before taxes) and subtracting allowable IRS deductions. Here are some of the deductions to use when calculating your AGI:

• Certain business expenses of reservists, performing artists, and fee-basis government officials
• Health savings account deductions
• Certain moving expenses
• One-half of self-employment tax
• Penalties on early withdrawal of saving
• Alimony paid
• Deduction for contribution to an Individual Retirement Account (IRA)
• Student Loan interest deduction

But don’t confuse AGI with Itemized Deductions, such as home mortgage interest expense, medical expenses, property taxes, charitable contributions, among others.

Here is a simple calculator to estimate your Adjusted Gross Income