Did you receive a $250 Economic Recovery Payment in 2009? You’ll need to know if you are claiming the Making Work Pay Tax Credit on your 2009 tax return.

Only individuals who received income from the Social Security Administration, Department of Veterans Affairs and Railroad Retirement Board received a $250 Economic Recovery Payment.

If you received benefits from one or more of these agencies, but you are unsure if you received the $250 Economic Recovery Payment, you can find out by using the “Did I Receive a 2009 Economic Recovery Payment?” feature online at IRS.gov or by calling 1-866-234-2942. These tools give you an easy way to verify if you received the one-time Economic Recovery Payment and which agency made the payment. These payments must be included when claiming the Making Work Pay Tax Credit on 2009 tax returns.

Here are six tips from the IRS that will help you determine if you received an Economic Recovery Payment:

1. If you had earned income in 2009 or are a government retiree and received an Economic Recovery Payment you need to report the payment and the amount when claiming the Making Work Pay and Government Retiree Credit on Schedule M, Making Work Pay Credit and Government Retiree Credits or as you complete your return using e-file software.
2. The Economic Recovery Payments are not taxable income; however, anyone who receives social security, veteran or railroad retirement benefits, as well as certain other government retirement benefits, must reduce the Making Work Pay Tax Credit they claim by the amount of any payment they received in 2009.
3. To verify whether you received the $250 payment, you can call 1-866-234-2942 and select Option 1 to access the “Did I Receive a 2009 Economic Recovery Payment?” telephone feature.   The online version for verifying your Economic Recovery Payment will be available on IRS.gov in mid-March.
4. When using the “Did I Receive a 2009 Economic Recovery Payment?” feature to determine if you received an Economic Recovery Payment, you must provide your Social Security number, date of birth and zip code from your last filed tax return.
5. You must make a separate inquiry for each person on the tax return when using the “Did I Receive a 2009 Economic Recovery Payment?”, even if you are filing a joint tax return.
6. Not claiming the Economic Recovery Payment on the Schedule M can delay the processing of your tax return. To avoid delays be sure to use the “Did I Receive a 2009 Economic Recovery Payment?” feature to find out if you received the payment. 

More information about the Economic Recovery Payment and the Making Work Pay Tax Credit can be found at IRS.gov/recovery. Schedule M and the related instructions can be obtained at IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

Nine Things You Should Know about Penalties

The tax filing deadline is approaching. If you don’t file your return and pay your tax by the due date you may have to pay a penalty. Here are nine things the IRS wants you to know about the two different penalties you may face if you do not pay or file on time.

1. If you do not file by the deadline, you might face a failure-to-file penalty.
2. If you do not pay by the due date, you could face a failure-to-pay penalty.
3. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
4. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
5. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
6. You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
7. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.
8. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
9. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Errors made on tax returns may delay the processing of your tax return, which in turn, may cause your refund to arrive later. Here are nine common errors the IRS wants you to avoid to help guarantee your refund arrives on time.

1. Incorrect or missing Social Security Numbers When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.
2. Incorrect or misspelling of dependent’s last name When entering a dependent’s last name on your tax return, ensure they are entered exactly as they appear on their Social Security card.
3. Filing status errors Make sure you choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction, and Filing Information to determine the filing status that best fits your needs.
4. Math errors When preparing paper returns, review all math for accuracy. Remember, when you file electronically, the software takes care of the math for you!
5. Computation errors Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits, and the Child and Dependent Care Credit.
6. Incorrect bank account numbers for Direct Deposit If you are due a refund and requested direct deposit, be sure to review the routing and account numbers for your financial institution.
7. Forgetting to sign and date the return An unsigned tax return is like an unsigned check – it is invalid.
8. Incorrect Adjusted Gross Income information Taxpayers filing electronically must sign the return electronically using a Personal Identification Number. To verify their identity, taxpayers will be prompted to enter their AGI from their originally filed 2008 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.
9. Claiming the Making Work Pay Tax Credit Taxpayers with earned income should claim the Making Work Pay Tax Credit by attaching a Schedule M, Making Work Pay and Government Retiree Credits to their 2009 Form 1040 or 1040 A. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit. The credit is worth up to $400 for individuals and $800 for married couples filing jointly. Many people who worked during 2009 are slowing down the processing of their tax return by not properly claiming this credit.

The IRS developed the “Did I Receive an Economic Recovery Payment?” look up tool which gives taxpayers an easy way to determine if they received the one-time ERP payment and which agency made the payment.

Beginning March 8, 2010, taxpayers can call 866-234-2942 to access the phone application.  The Web application will be available in late March on IRS.gov.

Taxpayers who had earned income in 2009 or are government retirees and received an Economic Recovery Payment need to report whether or not they received an ERP and the amount when they prepare their Schedule M, Making Work Pay and Government Retiree Credits.

The one time $250 ERP was paid to individuals in the following categories:

• Retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration,
• Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs, and
• Railroad Retirement beneficiaries.    

Using the IRS look up tool taxpayers will have to enter three pieces of information to determine if they received an ERP:

• SSN
• Date of birth
• Zip code from the last filed return 

A separate telephone call or Web inquiry must be made for each taxpayer, even if filing a joint tax return.