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IRS Will Send Stimulus Payments Automatically Starting in May 2008 Economic Stimulus Act Provides Tax Benefits to Businesses IRS Is Now Successfully Processing Tax Forms Affected by AMT Legislation Farmers And Fishermen Have Until March 10 to E-File Revised Form 4136 IRS Announces Energy Bond Allocations Credit for Honda Hybrids Begins to Phase-Out Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form
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Eligible Taxpayers Must File a 2007 Tax Return to Receive Rebate Taxpayers, in most cases, will not have to do anything extra this year to get the economic stimulus payments beginning in May. “If you are eligible for a payment, all you have to do is file a 2007 tax return and the IRS will do the rest,” said Acting IRS Commissioner Linda Stiff. The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payments. The IRS will begin sending taxpayers their payments in early May after the current tax season concludes. Payments to more than 130 million taxpayers will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future. Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments. However, taxpayers who use Refund Anticipation Loans (RALs) or enter into any other loan or financial agreement with their tax professional cannot receive their stimulus payments by direct deposit and instead will get a paper check. Most taxpayers just need to file a 2007 tax return as usual. No other action, extra form or call is necessary. In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return). The law also allows for payments for select taxpayers who have no tax liability, such as low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income. Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. While these people may not be normally required to file a tax return because they do not meet the filing requirement, the IRS emphasizes they must file a 2007 return in order to receive a payment. Recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X. The IRS is working with the Social Security Administration and Department of Veterans Affairs to ensure that recipients are aware of this issue. “Some people receiving Social Security and veterans’ benefits may not realize they will need to file a tax return to get the stimulus payment,” Stiff said. “To reach these people, the IRS and Treasury will work closely with the Department of Veterans Affairs, the Social Security Administration and key beneficiary groups on outreach efforts.” For recipients of Social Security and certain veterans’ benefits and low-income workers who don’t normally need to file, the IRS also released a special version of a Form 1040A that highlights the simple, specific sections of the return that can be filled out by people in these categories to qualify for a stimulus payment. Payments to higher income taxpayers will be reduced by 5 percent of the amount of adjusted gross income above $75,000 for individuals and $150,000 for those filing jointly.
Taxpayers must have valid Social Security Numbers to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. And, children must have valid Social Security Numbers to be eligible as qualifying children. Taxpayers who file their tax returns using an Individual Taxpayer Identification Number issued by the IRS or any number issued by the IRS are ineligible. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS. To accommodate taxpayers who file tax returns later in the year, the IRS will continue sending payments until December 31, 2008. The IRS also cautions taxpayers that if they file their 2007 tax return and then move their residence that they should file a change of address card with the U.S. Postal Service. The IRS will mail two informational notices to taxpayers advising them of the stimulus payments. However, taxpayers should be alert for tax rebate scams such as telephone calls or e-mails claiming to be from the IRS and asking for sensitive financial information. The IRS will not call or e-mail taxpayers about these payments nor will it ask for financial information. IRS.gov, the official IRS web site, has created a Frequently Asked Questions section which includes an extensive set of information for all taxpayers with questions about the stimulus payments, commonly referred to as rebates. The questions and answers include important information for low-income workers and certain recipients of Social Security, Railroad Retirement benefits and veterans’ benefits. The special IRS.gov section also features extensive examples of how much taxpayers can expect to receive in stimulus payments. The page includes more than two-dozen payment scenarios affecting different types of taxpayers. `-The only way to receive a stimulus payment in 2008 is to file a 2007 tax return. The vast majority of taxpayers must take no extra steps to receive their stimulus payment beyond the routine filing of their tax return. No other action, extra form or call is necessary.
IRS Is Now Successfully Processing Tax Forms Affected by AMT Legislation The Internal Revenue Service is now processing five tax forms affected by legislation involving the Alternative Minimum Tax (AMT). In late December, the IRS announced it would delay processing of several tax forms. For the vast majority of taxpayers, the filing season this year began on time. But for any taxpayer whose return included any of the five affected forms, filing opened on Feb. 11. Taxpayers who use the five forms can now file their tax returns as normal. The affected forms are:
Approximately 13.5 million taxpayers will use these forms this year. Altogether, the IRS expects to receive nearly 140 million individual tax return submissions this year. The IRS has worked closely with the software industry and tax practitioners during the reprogramming process to minimize disruptions for taxpayers and the tax community.
Agricultural industry taxpayers, farmers and fishermen, who electronically file Form 1040 returns with Form 4136, Credit for Federal Tax Paid on Fuels, must wait until March 3 to e-file the newly-revised Form 4136. Normally, 1040 filers who are farmers or fishermen are not required to make an estimated tax payment if they file their return and pay all taxes due by March 1. But this year, because March 1 falls on a Saturday, the date extends to Monday, March 3. For eligible farmers and fishermen who attach Form 4136 to their Form 1040, the return will be considered timely filed with all tax paid if the return is e-filed and accepted on or before March 10 and all tax due is paid on or before March 10. This delay does not affect farmers and fishermen who are not attaching Form 4136. Likewise, paper filers, whether or not they are attaching Form 4136, are also not eligible for the extra time. Form 4136 has been updated to reflect changes relating to the Leaking Underground Storage Tank tax, which was part of the Tax Technical Corrections Act of 2007, enacted Dec. 29. The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 4136. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 4136 by March 3. The paper Form 4136 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds. IRS estimates this delay affects approximately 77,000 farmers and fishermen who electronically file Form 1040 with Form 4136 in the early weeks of the filing season. Publication 505, Tax Withholding and Estimated Tax, has more information on the special estimated tax rules for farmers and fishermen.
IRS Announces Energy Bond Allocations The U.S. Treasury Secretary is authorized to distribute volume cap allocations of tax-credit bonds through the CREB program, which was created by the Energy Tax Incentives Act of 2005 and the Tax Relief and Health Care Act of 2006. In November 2006, the IRS announced the first round of volume cap allocations, which allocated $800 million of volume cap (some of which was subsequently relinquished) to 610 projects. (The announcement was in IR-2006-181 available on the IRS website.) State and local governments as well as electrical cooperatives are able to issue tax-credit bonds under the program. Internal Revenue Code Section 54 authorizes the allocation of $1.2 billion of tax-credit bond volume cap to fund projects that can generate clean renewable energy. State and local government borrowers are limited to no more than $750 million of the volume cap with the rest going to qualified mutual or cooperative electric companies. CREB volume cap allocations are awarded on a “smallest-to-largest” project basis. IRS Notices 2007-26 and 2005-98 further explain the program and can also be found on the IRS website. The IRS has completed the review of applications for $897 million of CREB financing submitted pursuant to Notice 2007-26 and has notified applicants of the results. The second round included 342 applications from 33 states, pertaining to 395 projects. Approximately $477 million of CREB volume cap was available for allocation to qualified issuers. The deadline for making an application was July 13, 2007. There were 156 proposed Governmental borrowers submitted applications totaling $728 million to finance 367 projects with an average project size of about $2 million. Governmental borrowers in 28 states will receive $263 million of volume cap allocations ranging from $15,000 to $2.95 million. Approved projects of governmental borrowers include: 138 solar facilities, 88 wind facilities, 41 landfill gas facilities, 12 hydropower facilities, three closed-loop biomass facilities, three trash combustion facilities and one open-loop biomass facility. Cooperative borrowers submitted applications totaling about $170 million to finance 28 projects with an average project size of about $6.1 million. Cooperative borrowers will receive about $143 million of volume cap allocations for projects in 13 states ranging from $300,000 to $30 million. Approved cooperative projects include: 14 wind facilities, four landfill gas facilities, six hydropower facilities, one solar facility and one open-loop biomass facility. Disclosure restrictions prohibit releasing taxpayer-specific information without written consent. Notice 2007-26 included a Consent to Public Disclosure Statement. The 310 projects whose applicants signed the consent form can be viewed online at IRS.gov
Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return. Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on IRS.gov. “The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.” The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds. The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b). The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.
The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home (Box 7).
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Taxsoftware.com News
IRS Will Send Stimulus Payments Automatically Starting in May 
Eligible taxpayers who qualify for a payment will receive an additional $300 for each child who qualifies for the child tax credit. 
projects in California, 57 in Minnesota, 23 in New Jersey, 17 in Washington, 13 in Nebraska, 12 in Montana, 11 in Illinois and 10 in Wisconsin. Applications ranged in size from $15,000 to $38.5 million. 
Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.