• Disaster Assistance

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• Ayuda de desastre

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WASHINGTON — With the 2009 hurricane season now underway, the Internal Revenue Service encourages individuals and businesses to safeguard themselves by taking a few simple steps.

Create a Backup Set of Records Electronically
Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set.

Keeping a backup set of records –– including, for example, bank statements, tax returns, insurance policies home, etc. –– is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD.

Document Valuables

Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.

A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Check on Fiduciary Bonds

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

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WASHINGTON — Plug-in electric vehicles using certain types of batteries may qualify for a new tax credit if purchased this year, the Internal Revenue Service said today.

The Emergency Economic Stabilization Act of 2008 (EESA) and the American Recovery and Reinvestment Act of 2009 (ARRA) created two new tax credits for various types of electric vehicles, which may include what are commonly referred to as neighborhood electric vehicles.

ARRA creates a tax credit for low-speed or two- or three-wheel electric vehicles, such as motor scooters, purchased after Feb. 17, 2009, and before Jan. 1, 2012. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500. To qualify, a vehicle must be either a low-speed vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 4 kilowatt hours or be a two- or three-wheeled vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 2.5 kilowatt hours.

EESA created a tax credit for vehicles that have at least four wheels and draw propulsion using a rechargeable traction battery with at least four kilowatt hours of capacity. For 2009, the minimum credit is $2,500 and the credit tops out at $7,500 to $15,000, depending on the weight of the vehicle and the capacity of the battery.

During 2009, low-speed, four-wheeled vehicles manufactured primarily for use on public streets, roads and highways (neighborhood electric vehicles) may qualify both for the EESA credit and, if purchased after February 17, 2009, for the ARRA credit for low-speed electric vehicles. A taxpayer may not claim both credits for the same vehicle. Vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify for either credit.

The Internal Revenue Service is working on guidance regarding certification procedures for both of these credits.

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Taxpayers who buy a new car or several other types of motor vehicles this year may be entitled to a special tax deduction when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009.

Here are seven things you should know about this new deduction:

1. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.

2. Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.

3. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.

4. This is an above-the-line deduction and can be taken regardless of whether or not you itemize other deductions on your tax return.

5. Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.

6. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

7. The deduction may not be taken on 2008 tax returns.
Consumers who are considering buying a new car may find that this tax incentive means there has never have been a better time to buy.

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WASHINGTON — The tax credit for hybrid passenger automobiles and light trucks manufactured by Ford Motor Company has begun to phase out for purchases made after March 31, 2009.

Taxpayers may claim the full amount of the credit only on purchases made before April 1, 2009, because the total number of vehicles sold reached the 60,000 vehicle threshold in the last quarter of 2008. The cumulative sales of qualified Ford hybrid vehicles sold from the period of Jan. 1, 2006, to Dec. 31, 2008 is 66,157.

For vehicles purchased for use or lease on or after April 1, 2009, and on or before Sept. 30, 2009, the credit is 50 percent of the full amount. For vehicles purchased for use or lease on or after Oct. 1, 2009, and on or before March 31, 2010, the credit is 25 percent of the full amount. For vehicles purchased for use or lease on or after April 1, 2010, no credit is allowable.

The full credit amount for vehicle purchases made prior to April 1, 2009 is:
• 2005, 2006, 2007 Ford Escape 2WD, $2,600;
• 2008, 2009 Ford Escape 2WD, $3,000;
• 2005, 2006, 2007, 2009 Ford Escape 4WD, $1,950;
• 2008 Ford Escape 4WD, $2,200;
• 2010 Ford Fusion, $3,400;
• 2008, 2009 Mercury Mariner 2WD, $3,000;
• 2006, 2007, 2009 Mercury Mariner 4WD, $1,950;
• 2008 Mercury Mariner 4WD, $2,200;
• 2010 Mercury Milan, $3,400

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It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

• Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
• Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Be sure to keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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WASHINGTON — Credit or debit card convenience fees charged for paying federal individual income taxes electronically are deductible for some taxpayers who itemize, the Internal Revenue Service announced today.

Federal law bars the IRS from paying any fees associated with these credit or debit transactions. Card processors normally charge taxpayers for convenience fees when they use their credit or debit card to pay taxes. Fees vary but average about 2.5 percent of the tax payment.

In reassessing a previous position, the IRS decided that the convenience fees associated with the payment of federal tax, including payment of estimated tax, can be included as a miscellaneous itemized deduction. However, only those miscellaneous expenses that exceeded 2 percent of the taxpayer’s adjusted gross income can be deducted.

Not everyone who pays the fees will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.

For details on claiming miscellaneous deductions and figuring the 2 percent limit, see Publication 529.The fees are deductible in the tax year they occur. For example, fees charged to payments made during 2009 can be claimed on the 2009 return filed next year.

Most individuals still pay their federal tax obligations by check, but last year more than 4 million taxpayers electronically paid their taxes.

There are free options available. Taxpayers can have funds electronically withdrawn from their bank accounts or use the Electronic Federal Tax Payment System (EFTPS). Payments can be made either on-line or by phone, 24 hours a day, 7 days a week. Further details on these options are in the instructions for Form 1040 and under Electronic Payment Options for Individuals on IRS.gov.

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If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:

• Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. The IRS is sometimes able to allow a brief additional amount of time to pay in order to facilitate tax debt repayment. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 30 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.

• Installment Agreement You can apply for an IRS installment agreement using our Web-based OPA application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing.

• Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card the service providers charge a flat fee of $3.95, do not add the convenience fee or flat fee to your tax payment.

• Link2Gov Corporation:
  -To pay by debit or credit card: 888-PAY-1040 (888-729-1040), www.pay1040.com
• Official Payments Corporation:
  -To pay by credit card: 800-2PAY-TAX (800-272-9829), www.officialpayments.com
  -To pay by debit card: 800-866-4PAY-TAX (866-472-9829), www.officialpayment.com/debit

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Are you expecting a refund from the IRS this year? Here are the top ten things you should know about your refund.
1. Refund Options You have two options for receiving your individual federal income tax refund: a paper check or a direct deposit.
2. Separate Accounts You may use Form 8888, Direct Deposit of Refund to More Than One Account, to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts.
3. Paper Return Processing Time If you file a complete and accurate paper tax return, your refund will usually be issued within six weeks from the received date.
4. Returns Filed Electronically If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.
5. Check the Status Online The fastest and easiest way to find out about your current year refund is to go to the IRS.gov Web site and click on the “Where’s My Refund?” link available from the home page. You will need your Social Security number, filing status and the exact whole dollar amount of your refund to check the status online.
6. Check the Status By Phone Call the IRS Refund Hotline at 800-829–1954. When you call, you will need to provide your Social Security number, your filing status, and the exact whole dollar amount of the refund shown on your return.
7. Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 on IRS.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.
8. Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.
9. Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check, and, if it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.
10. Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check. For more information, visit IRS.gov or call 800-829-1040.

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If you’re experiencing problems with the Internal Revenue Service, you may be able to get help from the Taxpayer Advocate Service.  Here’s what every taxpayer should know about this independent organization within the IRS.

1.     The Taxpayer Advocate Service is your voice at the IRS.

2.     You may be eligible for TAS help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you think an IRS procedure just isn’t working as it should.

3.     TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation.

4.     TAS employees know the IRS and how to navigate it.

5.     TAS will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.

6.     TAS has at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico.

7.     To contact TAS you can call your local advocate, whose number is in your phone book, or call the toll-free case intake line at 1-877-ASK-TAS1.  You can also visit TAS online at www.IRS.gov/advocate.

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Errors made on tax returns may delay the processing of your return and the arrival of your refund. Avoiding the common errors below will help ensure your refund arrives on time:

1. Recovery Rebate Credit - Many returns filed in 2009 have errors involving the Recovery Rebate Credit, a credit for people who did not receive a stimulus payment in 2008 or who did not receive the maximum amount. To avoid delays in tax refunds, it is critical that taxpayers know whether they received a payment in 2008 and the correct amount of that stimulus payment. For people using a paper tax return, the stimulus payment amount will be required when completing the related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.

2. Incorrect or missing social security numbers – When entering SSNs for anyone listed on your tax return, be sure they are entered exactly as they appear on the social security cards. Incorrect or transposed numbers will cause delays in the processing of your return.

3. Incorrect or misspelling of dependent’s last name – When entering dependent’s last name on your tax return, ensure they are entered exactly as they appear on the social security cards. Incorrect or misspelling of dependent’s last name will cause delays in processing of your return.

4. Filing status errors – Make sure you choose the correct filing status for your situation.

5. Math errors – When preparing paper returns you should review all addition and subtraction to ensure it is correct. Remember, when you file electronically, the software takes care of the math for you!

6. Computation errors – Take your time. Many taxpayers are making mistakes when figuring the taxable income, withholding and estimated tax payments, Earned Income Credit, Standard Deduction for age 65 or over or blind, the taxable amount of social security benefits, and child and dependent care credit.

7. Incorrect bank account numbers for Direct Deposit – If you are due a refund and requested direct deposit did you check your financial institution routing and account numbers?

8. Forgetting to sign and date the return – An unsigned tax return is like an unsigned check – it is invalid.

9. 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 2007 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.

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