User Feedback: Tax Crunch

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(KSL News) Unemployment rates are up, the real estate market is stagnant and the stock market is still volatile- all reasons tax payers are looking to squeeze as much as possible out of their 2008 tax returns. We took your tax questions and presented them to the IRS and Utah State Tax Commission to get some answers.

What happens if I do not receive a W2 from my employer? I do not know how to contact him. - Aubree M., Holladay

Bill Brunson, Internal Revenue Service: You can contact the IRS on or after Tuesday, Feb. 17th and request a W-2 complaint packet be sent to you. It will be helpful if you have a pay stub(s) showing wages paid and tax withheld. Call the IRS at 1-800-829-1040, Monday through Friday, 7 a.m. to 10 p.m., local time. Be sure to read the instructions in the packet sent to you. The packet will include a substitute W-2 form that you fill-in and sign. This will allow you to file on time (Wednesday, April 15th).

4. What happened to the deduction for disabilities? Did it go away this year? Is there something else they gave us for caring for a person with a disability? -Keith, Farr West Charlie Roberts, Utah State Tax Commission: The disability deduction was repealed in the 2008 Legislative session *Brunson: Please refer to the Tax Benefits for Disabled Taxpayers document.

How does the employee car usage work? My husband has had a vehicle from work for several years but just this year they added a car usage as a wage and then we paid taxes on that wage. Can we claim any of that as work expense? -Janna M., Payson

Brunson: No. The use of the car has a taxable value. You did not have any out of pocket expense with the car. Just the reverse, you had a taxable non-cash fringe benefit provide to you by the employer. So no, it would not be a work expense. Please reference Publication 525, Taxable and Nontaxable Income, employer-provided vehicles. A question to pose to the employer might be what sort of accounting plan they have in place regarding fringe benefits. This may give you more clarity as to the taxability.

(A) Even if I don't have and taxable income, can I still claim child tax credit and earned income credit?

Brunson: Yes, but you will need to meet all of the qualifications. You can go to IRS.gov for this or call the IRS toll free or stop by one of our offices to see if you qualify for the credit. Keep in mind, one needs to have earned income to qualify for the Earned Income Tax Credit (EITC). Taxable income is not a requirement to qualify for EITC. The requirement for the Child Tax Credit are different than the requirements for EITC. May I suggest calling the IRS toll free number and they can guide you through both items. That number is 1-800-829-1040, Monday through Friday, 7 a.m. to 10 p.m., local time.(B) What is the Earned Income Credit for a head of household with one dependent child in 2008? -Nick, LoganBrunson: The maximum credit for this status is $33,995 for the 2008 tax return. Reference IRS Publication 596, Earned Income Credit, on-line at IRS.gov for more information.

My husband is a member of the search and rescue, he bought a 4-wheeler for his searches and training. Can we write the bike off on our taxes? -Splendor S., St. George

Brunson: Based on the information in your statement - no, you cannot write off the cost of the 4-wheeler / bike. As stated, this would be use of a personal, not a business asset and would not have a tax benefit. If the search and rescue organization is a recognized charity under code section 501 (c) 3, then the possibility exits for you to claim a charitable mileage expense on Schedule A, Form 1040. This is contingent upon your ability to itemize allowable deductions as opposed to taking the standard deduction for your marital status.

I recently purchased a home. The garage had a dirt floor so I had a concrete floor put in. Is it tax deductable? -Tyson, SLC

Brunson: No, it is not a tax deduction. This is a basis adjustment. You referenced home not a rental. The value of your home will be increased by this expense. Until you sell the home, no taxable event will occur. And even then, you may not have to recognize any gain.

I was under the impression when the Stimulus last year was announced that it would not affect our taxes this year. Was it an advance on any return we would get this year? Not knowing that threw a wrench in my plans to replace an ailing car. -Joe H., Logan

Brunson: The Economic Stimulus Payment cannot be included in income nor does it reduce a tax refund. If a person did not receive the economic stimulus payment in full or part, they can still claim this on the 2008 tax return as a recovery rebate credit. There is worksheet one can go through to determine how much, if any is due them. For most taxpayers who filed the 2007 tax return and received the economic stimulus payment, they have received the full amount due them.

Is it worth taking the $7500 tax credit for new home buyers especially if you have to pay it back? I read a recent article stating that they may change it that you will not be required to pay it back. -Connie, Layton

Brunson: The First-Time Homebuyer credit is optional. Naturally, you must all the requirements. You can claim it or not claim it. It is your choice. It is in essence a interest free loan. If you receive the credit, you will need to begin repayment two years receiving it. This is a refundable credit, so it will reduce tax liability, cause or increase a refund. You might ask yourself - do you need the money this year and will you be financially strapped by repaying it back? More information regarding the First-Time Homebuyer Credit is available on IRS.gov.

If I'm subject to a refund, is there ever an advantage for me to defer some of the tax refund to the next year (line 74 on 1040)? -Doug M., Cottonwood Heights

Brunson: It might make it easier for you or simpler for you by leaving the money in the system if you have a first quarter estimated tax payment requirement, but I am not aware of any advantage. Keep in mind, this election to defer, all or part, to your 2009 estimated tax cannot be changed later.
Roberts: You can apply it to next year as a prepayment if you think that you may owe taxes in the next year.

I heard something about how paying for college is a tax write off. Is that true? -Julia C., Kaysville

Brunson: Short answer - perhaps. Longer answer, please reference Publication 970, Tax Benefits for Education. This covers credits and benefits on post secondary education. You will need to apply your facts and circumstances to the allowable items. You can always call the IRS, toll-free, 1-800-829-1040 on this to get answers to specific tax questions.

Can I deduct interest paid on my RV loan for a trailer? I itemize my deductions. The trailer has sleeping, toilet, and kitchen facilities. The loan is not attached to my home in any way, just an RV loan. -Heather, American Fork

Brunson: Generally speaking, if this RV can be considered to be your secondary home and you are responsible for the loan and you are paying the loan, then yes. More information is available on this in Publication 936, Home Mortgage Interest Deduction and Publication 530, Tax Information for First Time Home Owners or call the IRS toll free number.

My daughter was 17 at the end of the 08' tax year. Is she eligible for the tax credit (a qualifying child)? -Weston, Spanish ForkBrunson: The tax law in this area states your child must be under age 17 at the end of the year. Based on the age given, you would not be eligible to claim the Child Tax Credit.
If I am a co-signer on a 2nd mortgage loan and made 1/2 of the payments in 2008, am I able to claim the interest paid on my return? -Terry, South Jordan

Brunson: Generally speaking you must be able to itemize, must be legally liable for the loan, there is a true debtor-creditor relationship between you and the lender and you must have an ownership interest in the home. Based on your initial statement, yes. I would reference Publication 936, Home Mortgage Interest Deduction, for additional information.

I happened to refinance my old house last summer, and then ended up buying a new house last fall. Is there anything special that I need to do with my taxes to get a better return from these transactions. I was planning on using TurboTax, do you know if this program addresses this type of situation? -McKay, Plain CityBrunson: It is not clear what you did with your old house. In any event, refinancing is covered in Publication 936, Home Mortgage Interest Deduction and Publication 550, Investment Income and Expenses. Both publications are available on line at IRS.gov or you can order them for free by calling the IRS toll free number, 1-800-820-3676 (tax-form). As to software, I cannot endorse any specific product, but I can say that tax software, in general, will greatly assist you in filing a correct and error-free tax return. An electronically filed tax return is fast, accurate and secure. It also saves the federal government money in processing costs. It costs the federal government 33 cents to process an electronically filed tax return as opposed to $2.87 to process a paper filed return.
I am pretty inexperienced. I am afraid that I am going to not get back what I can because I only know the basics. Where can we be educated more about taxes without paying a bundle? Are the online tax programs really good at helping us or do they only skim through the surface? -Mallorie N., Orem

*Brunson: Let's go with the second question, first. On-line tax programs are really good. They will lead you by the hand, per say. Consider going to IRS.gov, clicking on the Free File icon and using assisted free file if you AGI, that's adjusted gross income, is not more than $56,000 or trying out the new 'Fillable Forms' segment of Free File, that has no income restrictions. All Utahns can use Free File. Regarding the education issue on taxes, you can start by going to IRS.gov and seeing what information is available. The IRS also offers recorded tax messages on it's Tele-Tax system, anytime of the day, by calling 1-800-829-1040. Or, better still, consider becoming a community tax volunteer with either the Volunteer Individual Income Tax program or AARP's Tax Aide program. You will receive tax law training for free. The trade off is you will be asked, not mandated, but asked to volunteer a few hours each week during the filing season - most likely, Feb. 1 thru April 15. More information on these programs and becoming a tax volunteer can be obtained by calling the IRS or AARP. Roberts: Check our on-line information at tax.utah.gov.**

User Feedback: Tax Crunch

By | Posted - Feb. 6, 2009 at 4:30 p.m.

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