With less than a month before the end of the tax year, you may want to set aside a moment during the busy holiday season to consider some quick IRS tips that may give you the gift of time and money saved next year.
1. Gather Your Records
With the current tax year winding down, taxpayers should begin to gather and organize their tax records now to reduce stress at tax time. Start organizing records such as those relating to a home purchase or sale, stock transactions, IRAs and business or rental property. Also, go back and gather records confirming any donations made to charitable organization. To deduct a charitable donation, a taxpayer must have a bank record or a written communication from the qualifying charity showing the name of the charity and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements.
2. Estimate your 2008 tax bill
Go to IRS.gov for the IRS Withholding Calculator. This online application will help taxpayers ensure that they don't have too much or too little income tax withheld from their paychecks.
3. Find out if you're eligible for First-time Homebuyer Credit
This new tax credit applies to home purchases after April 8, 2008, and before July 1, 2009. It reduces a taxpayer's tax bill or increases their refund. It is also fully refundable, which means the credit will be paid out to eligible taxpayers even if they owe no tax or the credit is more than the taxes owed. Operating much like a credit-free loan, the credit must be repaid over a 15-year period.
4. If you didn't receive a Stimulus Payment, plan on claiming the Rebate Recovery Credit
Individuals who were eligible, but did not receive a stimulus payment in 2008, may claim their stimulus payment when they file their 2008 federal income tax return. Taxpayers who missed the 2008 deadline for filing an income tax return for a economic stimulus payment can receive their payment in 2009 by filing an income tax return beginning in January and claiming the Rebate Recovery Credit.
5. Receive your missing refund
If you're missing a tax refund, take a few minutes to go to "Where's my Refund?" on IRS.gov or call the toll-free refund Hotline at 1-800-829-1954. All a taxpayer has to do is update their address and the IRS will send out all checks due.
6. Find out if you're eligible for the Earned Income Tax Credit
The Earned Income Tax Credit is available to low and moderate income workers. The EITC Assistant on IRS.gov helps determine eligibility for the credit. Taxpayers who earn less than $42,000 in 2008 may be eligible for a refundable tax credit of up to approximately $4,800.
About one-quarter of all taxpayers eligible for this credit fail to properly claim it. Make sure you don't miss out on this valuable credit.
7. Plan to file your return electronically
If you've never filed your tax return electronically, you should definitely consider trying it in 2009. E-file is a safe and accurate while offering more payments options. Choose Direct Deposit for your refund and you can have it right in your bank account in as little as 10 days.
8. Find out more information about Unemployment Compensation
If you are receiving Unemployment compensation, see Topic 418 on IRS.gov. Unemployment compensation is taxable and you have the option to have federal income tax withheld using Form W-4V
9. Gather important tax information about home foreclosures
Normally you would have to pay taxes on the amount of debt that was forgiven in a foreclosure. However, under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers can generally exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief. With certain exceptions, this provision applies to debt forgiven in 2007, 2008 or 2009.
10. Get the most out of your retirement accounts
Are you maximizing your contributions to your retirement accounts? This year, you can contribute up to $5,000 in an IRA, as well as another $15,500 to a 401(k) employer plan. If you're 50 or older, those numbers go up to $6,000 and $20,500, respectively. The Saver's credit for low- and moderate-income workers helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs.
And one last tip ... visit IRS.gov and come back often
IRS.gov is the one and only official source for IRS information. You can download forms, publications, tax tips and FAQs about dozens of tax issues. It's available 24 hours a day, seven days a week and best of all -- you can visit at home.