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(We received the following article from a friend, Michael Balars II, the senior tax accountant at 8-CAP, a non-profit organization in Western Michigan. He coordinates five sites in two counties to help low-income & challenged people get their taxes done. He is also a liaison to the IRS from 8-CAP's group, Montcalm Ionia Financial Awareness Alliances. He teaches basic tax courses from the IRS for internal volunteer use and fundamental skills for challenged people. Michael has some good advice for all of our US-taxpaying readers.)
If you did not get the stimulus check last year or moved in to your dream home, don't give up hope. The IRS re-vamped the 1040 to include some major enhancements for the tax-payers this year. Some of them include factoring out taxes from Schedule A, itemized deductions, and putting them directly on the 1040. So that means if you do not qualify for the itemized deductions, you may take the taxes you paid off of your AGI, adjusted gross income. The two main points are the real-estate tax and the amount, if any, from a catastrophe.
Also, the Internal Revenue Service provides new credits on the form 1040, which comprises the first time home-buyers credit and the recovery rebate credit. Both are very beneficial to the tax payer.
Real estate tax is the big thing when it comes to easing the burden off of the taxpayers' shoulders. If your mortgage payments include your real estate taxes, you can deduct the amount in 2008 entirely off the 1040 form.  Include taxes you paid on real estate you own that was not used for business on line 40 on the 1040 form. A lot of the taxpayers do not know about this new line on the 1040. They are pleased to have this on their side when it comes to the bottom-line of the tax form.
Amounts of loss when it comes to a disaster can be claimed on the same line. Casualties and thefts can be used in this area too. Don't forget to fill out form 4684.  Insurance is the most common way to be reimbursed for a casualty or theft loss, but if a federal disaster loan is forgiven, the part you do not have to pay back is considered a reimbursement or you accept repairs provided by a third party that is considered a reimbursement. All-in-all, if you were in an area that was hit by a catastrophe like a flood or a hurricane, you may deduct what you spent on the 1040.
In 2008, the first time home buyers' are in a good place for a credit on the taxes. I like this credit; it boosts the anticipated refund out of the ballpark. It is a good way to save a little money for getting your refund back. Even if you are not a first timer, you could claim the credit. A first-time homebuyer is any individual who had no present ownership interest in a qualifying principal residence during the 3-year period ending on the date of purchase.  So if you did buy a house and it was not in the time frame that the Internal Revenue Service set down, the 3-year period, you may be able to get a good bit of money back on your next home.
Let's say you closed on your dream home on November 11, 2008. Furthermore, the purchase price of your home was $105,000 and your adjusted gross income was $47,250 (these are realistic numbers for today's market). You could get back $7,500 more then what you may think. Just don't bet it all on Casino War at The Bally's in Vegas. Before you leave Vegas, save a little for the Fat Elvis Show at Bills Gamblin' Hall & Saloon (well worth it!). 🙂
The recovery rebate credit is a benefit for people who didn't receive the full economic stimulus payment, if at all.  $300 to $1,200 (or more) could be waiting for you on line 70 on the 1040, if the tax payer did not collect the check last year. The biggest reason for not getting the stimulus payment was a person who could be claimed as a dependent on someone else's tax return in 2007, but who cannot be claimed as a dependent on another return in 2008. This is $300 to $600 per taxpayer, or $600 to $1,200 if you are married.
The principal question I am asked is if the stimulus payment last year is reportable as income this year. I am happy to announce that it is not. The questions I am asking if my clients are qualified for the recovery rebate credit are: the circumstances for the taxes and life changed considerably from 2007 to 2008; they did not file a 2007 tax return or they added a child in 2008. Also take heart, if you did not receive the full amount of the economic stimulus payment, you may be able to get the difference on the 1040 this year.
You need to know the amount of your 2008 check to tell if you are qualified for the recovery rebate credit. The worksheet for the credit is very easy and simple to follow. Just remember to trust ether the IRS worksheet or the software you are using to calculate the rebate. I cannot tell you how many people that come to me that are confused about that very item. Use the force, do not go over to the dark side, and you will be all right. All you need is the amount of your stimulus check to finalize the recovery rebate credit worksheet.
If you got a notice that your stimulus check was lowered to comply with other debts, you still need to enter the full amount of the check on the worksheet. If you got more than one stimulus check and/or more then one notice, you must enter the total of all the checks you received. The rebate credit will be incorporated in your tax refund.
Remember you are qualified if you had more then 3,000 in income. This includes, railroad retirement benefits and social security benefits as well. However the supplemental security income is different then social security benefits and you are not eligible if you received SSI.
People with an Individual Taxpayer Identification Number (ITIN) are not qualified to receive the recovery rebate credit. If married, both people must have social security numbers to qualify for this credit. There is a caveat though in a new law passed in 2008. The HEART Act (Heroes Earnings Assistance and Relief Tax Act of 2008), made an exception to the social security numbers requirement for married members of the military, including couples with children.  Married members of the military may receive the recovery rebate credit even if their spouses or children don't have social security numbers.
If you want to know all the juicy bits and pieces that the Internal Revenue Service has in store for you in the coming year, please go to http://www.irs.gov and all will be answered. From reporting phishing to meeting the Commissioner of Internal Revenue. There is a vast wealth of information on this website and the United States Department of Treasury is really very nice. If you have questions about this article, please feel free to contact me at email@example.com or firstname.lastname@example.org. Remember: if you feel that you have more coming back from your refund – make an appointment with a Tax Professional.
- IRS – 2008 Instructions for Schedules A & B (Form 1040) (2008)
- IRS – Instructions for Form 4684 (2008)
- Tax Topics – Topic 611 First-time Homebuyer Credit – 27 Feb 09 http://www.irs.gov/taxtopics/tc611.html
- IRS – Recovery Rebate Credit Information Center – 23 Feb 09 Recovery Rebate Credit Information Center
- Internal Revenue Bulletin: 2008-50 2008 Cumulative List of Changes in Plan Qualification Requirements
Senior Tax Accountant/Program Manager
Montcalm Ionia Financial Awareness Alliances of Western Michigan
Eight CAP, INC. – Community Services
904 Oak Drive, Greenville, MI 48838