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

The New Year is upon us once again. That means the income tax season has begun and important tax documents should be arriving in the mail. Even though your tax return isn’t due until April 2011, why not begin the year off right and start filing your tax return early. Here are the top tax tips for 2011.

1. Gather all your tax related documents Pull together the documents and forms you’ll need when filing your taxes. You’ll need W-2 forms, 1098 forms to document the interest you pay on your mortgage, receipts for your charitable donations, documentation of property taxes you pay, trade information to calculate taxes due on capital gains and dividends, canceled checks, and other documents related to income or deductions you’re claiming on your return. Organizing your tax paperwork is definitely the top tax tip for 2011.
2. Keep an eye on the mail W-2s and 1099s will be coming soon; you must have these to file your tax return. Another great tax tip is to know that your tax documents come from different sources: employers provide W-2s, financial institutions send tax documents related to interest, dividends, broker transactions and retirement plans, lenders provide the tax data for mortgage interest and real estate transactions, and taxing authorities cover property tax and income-tax refunds.
3. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at http://www.irs.gov. There is an option to prepare your tax return and e-file it for free for tax season 2011.
4. Try IRS e-file IRS e-file is the most common way to file a tax return. Starting in the 2011 tax year, many tax preparers will be required to use e-file and will explain your filing options to you. Combine e-file with direct deposit and you can get your tax refund in as few as 10 days.
5. Consider other tax filing options You can prepare it yourself or have a tax preparer file your tax return. You may even be eligible for free face-to-face help with an IRS office or tax volunteer. If you have outstanding tax issues or owe back taxes, consider visiting a tax attorney before preparing your tax return.
6. Direct Deposit Get your tax refund deposited directly into you bank account. It’s faster and safer than waiting for a check from your postman.
7. Double check your return Believe it or not, the most common tax return errors are the Social Security Number and math calculations. Take your time and double check everything. Mistakes will slow down the processing of your tax return and may even increase your chance of being audited.

Following these top tax tips will make your 2011 tax season the smoothest ever.

source: irs.gov

Be careful of tax  preparers who claim they can get their customers “instant” federal income tax refunds.  They may not be giving their clients all the money they’re owed.

Some accountants offer “refund anticipation loans” as a “rapid” way to give customers tax refunds, but according to the New York City Department of Consumer Affairs, such loans are a fast way to lose money.

“Between the fees and interest rates that are charged for these refund loans, we’ve seen costs as high as a 500-percent rate when you take a look at what’s being borrowed,” says  NYC Consumer Affairs Commissioner Jonathan Mintz.

The loans are advertised as “fast” or “instant” refunds, but they’re really high-interest loans that lure people who do not want to wait the standard eight days to receive their refund from the Internal Revenue Service.

On Tuesday, DCA officials denounced such loans while announcing the results of a month-long citywide crackdown on over 800 income tax preparers.

“Three out of 10 preparers were misleading their customers about their rights and in most cases were telling them that a refund loan was somehow just a ‘rapid’ refund or a ‘same day’ refund, and that kind of advertising is deceptive and illegal,” says Mintz.

The Bronx is the borough with the most offenders, with a 50-percent non-compliance rate.

“We issued over 2,000 violations to preparers across this sweep. Those violations which could total up to a million dollars in fines,” says Mintz.

However, the number of compliant tax preparers has increased from last year.

To protect yourself when purchasing tax preparation services, the DCA offers the following tips:

• Avoid “instant,” “rapid,” “same day” or “fast cash” refunds. They’re actually loans with extremely high interest rates.

• Know your rights. Tax preparers must post their qualifications, fees and charges and must give a consumer bill of rights. They must sign every tax return and provide you with a copy of your return and a receipt.

• Protect yourself. Tax preparers may not charge you fees based on the amount of taxes you owe.

• Never sign a return that is blank, incomplete or filled out in pencil.

• Do not pay cash.

Protect yourself and your federal income tax refund by choosing a reputable tax preparer.  If you’re having trouble finding a good tax preparer, ask a family member or a friend.  Advice from a trusted source should put your worries at ease.

source:  ny1.com