Didn’t Get Your Economic Stimulus Payment? Maybe the IRS Has the Wrong Address!

The Internal Revenue Service owes nearly $4 million to South Florida residents alone, courtesy of unclaimed tax refunds and economic stimulus checks.  I don’t know what the nationwide number is, but it’s got to be huge.

I cannot for the life of me understand why someone who hasn’t gotten their payment yet isn’t jumping up and down screaming, and trying to find the reason.    For many of those people it’s a pretty stupid reason, too.

Bad mailing addresses.

Come on, people!  We’re talking hundreds, and in some cases thousands of dollars!  If you’ve moved in the past few years MAKE SURE THE IRS KNOWS YOUR ADDRESS!

Excuse me.  Stupidity makes me insane.

And if you’re one of these people, you have Just four days remain to correct an address with the IRS so that the agency can reissue the checks.  Taxpayers expecting an economic stimulus check must have their addresses updated with the IRS by Friday so that the checks can be reissued by Dec. 31. Taxpayers expecting regular refunds have more time to claim their refund but must contact the IRS to update their addresses.

There are ways for taxpayers to update mailing information:

1. Via the IRS Web site: www.irs.gov. Taxpayers without Internet access should call 1-800-234-2942.

2.  Visit your local IRS office.

3.  Check with the United Way in your area to see if they offer taxpayer assistance.

Please, go get your money folks!

Edited to add some helful links:

My Economic Stimulus Check Didn’t Arrive When Promised!

My Economic Stimulus Check Didn’t Include Money for My Kids!

Your Economic Stimulus Check Didn’t Include Money For Your Kids? You’re Getting Another Check!

Didn’t get the amount you were supposed to get for your kids? You may be getting another check! Click here for info!

When will your economic stimulus payment arrive?

Frequently Asked Questions: Received the Stimulus Payment?

Economic Stimulus Calculator – Or How Much to Expect

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The Accountant’s Daughter Says The IRS May See Your Business as a Hobby

When Husband began doing freelance design work we decided to give the business a more generalized name – X Consulting – so that if we decided to seek other business opportunities we could do it under the name of a single business.

Now that I’m going to be doing this new work I checked with my brother to see if it would be more advantageous tax-wise to have checks made payable to me or to X Consulting. He recommended I use X Consulting to further substantiate that it is, in fact, a business. He then shared with me this letter that my Dad’s office sends to clients about this very issue:

Like many of us, you’ve probably dreamed of turning a hobby or avocation into a regular business. You won’t have any unusual tax headaches if your new business is profitable. However, if the new enterprise consistently generates losses (deductions exceed income), the IRS may step in and say it’s a hobby-an activity not engaged in for profit-rather than a business. An activity is presumed to be engaged in for profit for a tax year if it shows a profit for any three or more out of five consecutive years ending in that tax year. Otherwise, it can be deemed a hobby.

What are the practical consequences? Under the so-called hobby loss rules, you’ll be able to claim those deductions that are available whether or not the enterprise is engaged in for profit (such as state and local property taxes). However, your deductions for business-type expenses (such as rent or advertising) will be limited to the excess of your gross income from the hobby over those expenses that are deductible whether or not the enterprise is engaged in for profit. Deductible hobby expenses are claimed on Schedule A of Form 1040 as miscellaneous itemized deductions subject to a 2%-of-AGI “floor.” By contrast, if the new enterprise isn’t affected by the hobby loss rules, all otherwise allowable expenses would be deductible on Schedule C, even if they exceeded income from the enterprise.

There are two ways to avoid the hobby loss rules. The first way is to show a profit in at least three out of five consecutive years (two out of seven years for breeding, training, showing, or racing horses). The second way is to run the venture in such a way as to show that you intend to turn it into a profit-maker, rather than operate it as a mere hobby. The IRS regs themselves say that the hobby loss rules won’t apply if the facts and circumstances show that you have a profit-making objective.

How can you prove that you have a profit-making objective? In general, you can do so by running the new venture in a businesslike manner. More specifically, IRS and the courts will look to the following factors: how you run the activity; your expertise in the area (and your advisers’ expertise); the time and effort you expend in the enterprise; whether there’s an expectation that the assets used in the activity will rise in value; your success in carrying on other similar or dissimilar activities; your history of income or loss in the activity; the amount of occasional profits (if any) that are earned; your financial status; and whether the activity involves elements of personal pleasure or recreation.

The classic “hobby loss” situation involves a successful businessperson or professional who starts something like a dog-breeding business, or a farm. But IRS’s long arm also can reach out to more prosaic situations, such as businesspeople who start what appears to be a bona-fide sideline business.

Please call our offices to get more details on whether a venture of yours may be affected by the hobby loss rules, and what you should do right now to avoid a tax challenge.

So, there you are. Something to think about courtesy of The Accountant’s Daughter.

~

As always, please remember that I am not an expert on finance, or an accountant. I’m just an accountant’s daughter. So, please, please, please contact your accountant for expert advice.

The IRS Increases Business, Moving and Medical Expense Mileage Rates

I may faint.

The IRS actually saw a need to provide some tax relief and it didn’t take an act of Congress to implement it.

Starting July 1st, the IRS is increasing the the allowable business deductible for business vehicles from 50.5 to 58.5 cents per mile.  The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The IRS is also going to raise the rate for calculating computing deductible medical or moving expenses from 19 cents to 27 cents a mile, also starting July 1st. The rate for charity services, requiring an act of law to change it, remains at 14 cents per mile.  Hey, nobody’s perfect.

Mileage Rate Changes

Purpose	Rates 1/1 through 6/30/08	Rates 7/1 through 12/31/08
Business	50.5	58.5
Medical/Moving	19	27
Charitable	14	14

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

For more information read the IRS press realease.

As always, please remember that I am not an expert on finance, or an accountant. I’m just an accountant’s daughter. So, please, please, please contact your accountant for expert advice.

Your Economic Stimulus Check Didn’t Include Money For Your Kids? You’re Getting Another Check!

The IRS has updated it’s FAQ’s to provide information for those whose Economic Stimulus Check didn’t include money for their kids, or sent the incorrect amount.  This is right from the IRS website:

Q. I received my stimulus payment and it didn’t include money for my kids. Does the IRS plan to send me an additional check?

A: Yes. The Internal Revenue Service will mail out approximately 350,000 additional economic stimulus payments starting in early July after discovering that some tax returns were improperly filed and did not capture the information needed to generate the $300 in qualifying child payments.

In some instances, taxpayers did not check the proper box to trigger the $300 child payment. In other instances, a few tax software products primarily used by tax professionals did not capture the proper information needed for issuing the child stimulus payment.

To fix the problem, the IRS is taking extra steps to identify the affected taxpayers and send them separate checks to cover their qualifying children. The IRS emphasized that the corrected checks will be mailed automatically, and taxpayers don’t need to call or take any additional steps.

The vast majority of tax returns with child payments were completed accurately by taxpayers, tax professionals and software providers. The IRS estimates that more than 99 percent of nearly 36 million returns eligible for child stimulus payments were filled out accurately by taxpayers, meaning that less than 1 percent will need the additional check mail-outs.

The additional payments involving qualifying children will be made starting in early July. These payments will be made by paper check, even if people received their regular tax refund or initial stimulus payment by direct deposit.

Taxpayers in this situation received — or will receive in the next few weeks — stimulus payments falling $300 short per eligible child.

The additional checks will be mailed as the regular weekly round of stimulus payments wrap up in early July. The regular stimulus payment timetable will not be affected by these additional checks.

The issue with the child payments involves the Child Tax Credit checkbox on line 6c, column (4) on Form 1040 and Form 1040A.

For the stimulus payments, IRS systems look for information in the checkbox area to generate the $300 qualifying child stimulus payment. In instances involving paper returns, taxpayers did not check this box when completing their return. In some instances, tax software may not have checked this box, meaning the $300 payment was not triggered.

The IRS has worked closely with the two affected software vendors on this. The IRS appreciates the willingness of these firms to help identify the problem. They have reported to the IRS that their software has been corrected.

The majority of the tax software issues involve commercial versions used by tax professionals and tax preparers. Included are Petz Enterprises’ professional and on-line software as well as ProSystems fx Tax software and on-line CompleteTax software from CCH.

Taxpayers with questions about whether they are affected can contact their tax preparer or software provider.

For taxpayers who haven’t filed a tax return yet, the IRS urges them to update their tax software before filing to ensure proper handling of their economic stimulus payment. Paper filers should make sure to review the eligibility requirements for qualifying children and check the box on line 6c, column (4) if appropriate.

I understand that kinks have to be worked out, and mistakes happen.  But mistakes cost money, both to the government (and, ultimately, you and me) as they correct them, and to the taxpayers who took the word of their government and counted on the money being there when their government said they would.

This is why I don’t count my chickens before they’re hatched.

My Economic Stimulus Check Didn’t Include Money for My Kids!

Many of you reading my article My Economic Stimulus Check Didn’t Arrive When Promised are saying that you did receive your Economic Stimulus check, but it didn’t include the $300 per child at all, or it didn’t give you $300 for every child you have.

The IRS has now acknowledged that this is in fact a “systemic” error, meaning it a problem with the way the affected returns were processed, and that it affects many taxpayers.

The IRS says the problem occurs when taxpayers complete their return incorrectly or a glitch in some tax software programs.

The IRS frequently asked questions page has been updated with this news:

Q. I received my stimulus payment and it didn’t include money for my kids. Does the IRS plan to send me an additional check?

A: Yes. The Internal Revenue Service will mail out approximately 350,000 additional economic stimulus payments starting in early July after discovering that some tax returns were improperly filed and did not capture the information needed to generate the $300 in qualifying child payments.

In some instances, taxpayers did not check the proper box to trigger the $300 child payment. In other instances, a few tax software products primarily used by tax professionals did not capture the proper information needed for issuing the child stimulus payment.

To fix the problem, the IRS is taking extra steps to identify the affected taxpayers and send them separate checks to cover their qualifying children. The IRS emphasized that the corrected checks will be mailed automatically, and taxpayers don’t need to call or take any additional steps.

The vast majority of tax returns with child payments were completed accurately by taxpayers, tax professionals and software providers. The IRS estimates that more than 99 percent of nearly 36 million returns eligible for child stimulus payments were filled out accurately by taxpayers, meaning that less than 1 percent will need the additional check mail-outs.

The additional payments involving qualifying children will be made starting in early July. These payments will be made by paper check, even if people received their regular tax refund or initial stimulus payment by direct deposit.

Taxpayers in this situation received — or will receive in the next few weeks — stimulus payments falling $300 short per eligible child.

The additional checks will be mailed as the regular weekly round of stimulus payments wrap up in early July. The regular stimulus payment timetable will not be affected by these additional checks.

The issue with the child payments involves the Child Tax Credit checkbox on line 6c, column (4) on Form 1040 and Form 1040A.

For the stimulus payments, IRS systems look for information in the checkbox area to generate the $300 qualifying child stimulus payment. In instances involving paper returns, taxpayers did not check this box when completing their return. In some instances, tax software may not have checked this box, meaning the $300 payment was not triggered.

The IRS has worked closely with the two affected software vendors on this. The IRS appreciates the willingness of these firms to help identify the problem. They have reported to the IRS that their software has been corrected.

The majority of the tax software issues involve commercial versions used by tax professionals and tax preparers. Included are Petz Enterprises’ professional and on-line software as well as ProSystems fx Tax software and on-line CompleteTax software from CCH.

Taxpayers with questions about whether they are affected can contact their tax preparer or software provider.

For taxpayers who haven’t filed a tax return yet, the IRS urges them to update their tax software before filing to ensure proper handling of their economic stimulus payment. Paper filers should make sure to review the eligibility requirements for qualifying children and check the box on line 6c, column (4) if appropriate.

So, there’s an answer for you. I hope your check arrives quickly!

And in other IRS snafu news, Apparently the IRS may have deposited your payment into someone else’s account. Sorry, but if you got someone else’s payment you do not get to keep it. You should contact the IRS immediately.

They make lots of other errors, too.

The IRS has gotten the vast, vast majority of checks to people when they’re supposed to get there. If you’re not one of that vast, vast majority, though, that’s no comfort, is it?

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Update 6.16.2008 – The IRS knows it messed up on the kids.  They’re sending out more checks.  Click here for more info!

My Economic Stimulus Check Didn’t Arrive When Promised!

Every morning this week I’ve turned on my computer and immediately went to my bank’s website to see if our Economic Stimulus check was deposited yet (Is that anal? My friend says it is. I don’t think so. Do you?). Every morning I’ve been disappointed. Well, except for Wednesday when our tax refund was deposited. I did a little happy dance that day.

Husband was irritated because we “should have been in the first wave,” but I reassured him that the published schedule promises our payment no later than May 2nd. There’s still time.

Yesterday morning I went through the same routine but could not connect to my bank’s website. Their server must have been temporarily down – all those people checking to see if their money arrived. I had to leave home to do the World’s Biggest De-cluttering Job to get my Dad’s house ready for it’s first official showing, so I wasn’t near a computer again until 8pm last night.

As expected, the first thing I did when I sat down at my computer was to check to see if our Economic Stimulus check was deposited yet.

It wasn’t.

Dadgummit!!! Where the heck is our money?

So I did a little research and found out:

If you file your taxes after April 15th yours will not go out until at least May 9th.

Well, I filed before the 15th.

If you had any fees taken out of your initial refund (like their processing fee like many people do), you’ll get a paper check.

Nope. No fees. It pays to be The Accountant’s Daughter.

Then I found this little tidbit on the Stimulus Payment Schedule:

“A small percentage of tax returns will require additional time to process and to compute a stimulus payment amount. For these returns, stimulus payments may not be issued in accordance with the schedule above, even if the tax return was processed by April 15.”

Aha! There’s an exception to every rule. Apparently I’m it.

(Why can’t I be the exception for something fun? For example, why can’t I be the one who can eat and eat and not gain weight? Why can’t I be the one who can wear really high heels and not have them kill my feet? Why can’t I be the one that enjoys cleaning? Noooooooooo. I get to be the one who doesn’t get my money when almost everyone else does. Lucky me.)

The delay is likely because even though I am a Stay at Home Mom I did do some work last year and earned about $2000. And I declared it as income to our freelance Sole Proprietorship, so my situation may not easily fit into one of their computation formulas.

It’s great to be special.

But wait!

I went to the IRS website again this morning because PaidTwice mentioned in a post that you can go there to find out when to expect your Economic Stimulus check.

I found on the IRS website, but in a different spot than the above info (and wouldn’t it be nice if all of the pertinent information was in the same location?):

In general, the payment schedule only applies if your return was received and the IRS finished processing your return before April 15. If you filed your return on time, but close to the April 15 deadline, the IRS may not have finished processing it before April 15.

Processing times for tax returns and stimulus payments vary. If you are getting a regular income-tax refund, the IRS will send you that refund first. Normally, your stimulus payment will follow one to two weeks later.

Ahhh. Well, I did file before April 15th. On the 13th, to be exact.

So it looks like my little morning ritual will have to last awhile longer. And I’ll lose out on a little interest income.

But I’m still special, right?

~

Edited to add some helful links:

Didn’t get the amount you were supposed to get for your kids? You may be getting another check! Click here for info!

When will your economic stimulus payment arrive?

Frequently Asked Questions: Received the Stimulus Payment?

Economic Stimulus Calculator – Or How Much to Expect

Great News on PMI from The Accountant’s Daughter

A friend of mine over at This Wasn’t In the Plan posted today about how she wants to pay down her mortgage so she can eliminate PMI (Private Mortgage Insurance) payments from her mortgage. A great idea that reminded me I’d heard a very quick blurb on the news about PMI and taxes that I hadn’t heard before, so I’m guessing many others haven’t either.

For those who don’t have it – or who have it and don’t understand it – PMI is extra insurance that lenders require from most home buyers who take out mortgage loans that are more than 80 percent of their new home’s value. It protects lenders against losing their shirts if a borrower defaults on a loan. The PMI company line is that they enable borrowers with less cash to have greater access to homeownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent – even 0% down payment.

While this means that people can buy a home sooner without waiting years to accumulate a large down payment, these low/no-money-down loans are part of the reason for the sub-prime mortgage crisis, as many people bought homes they just could not afford (and adjustable mortgages that were no good for them).

But I digress.

These loans are riskier for the lenders because people are more likely to default on a loan in which they have very little money invested. PMI doesn’t protect you – it supposedly protects the bank if you default. In foreclosures the bank must sell the house and then get reimbursed for the difference, if any, between the sale price and the loan balance by the PMI insurer. The PMI insurer can then come after you for what they had to pay the bank – which doesn’t seem fair at all, does it?

(I don’t have any idea if these PMI insurers are/have been paying off the lenders during this mortgage crisis or not, but it would be interesting to find out… )

The bottom line is that buyers with less than a 20 percent down payment are normally required to pay PMI. In recent years savvy mortgage brokers and buyers have turned to piggyback loans in an attempt to avoid the PMI requirement. Blended mortgages allow borrowers without a 20 percent down payment to take out a home equity line or a traditional second mortgage simultaneous with their first mortgage to provide the necessary down payment, avoiding PMI. It’s even more of a moneysaver because the interest on second mortgages and home equity lines is almost always tax deductible.

That cost the PMI industry to lose a lot of business. So they’ve pushed to make PMI premiums tax deductible, and it seems they’ve been successful.

Yes, PMI is now tax-deductible. So, while it sucks that you have to pay it, at least your tax bill this year could be smaller.

Let the festivities ensue!

As always, please remember that I am not an expert on finance, or an accountant. I’m just an accountant’s daughter. So, please, please, please contact your accountant for expert advice.

The Accountant’s Daughter’s 2007 Year End Tax Tips

The end of the year is one of the most important times in our financial year. Besides putting our money and time budgets to the test with all of the holiday gifts and parties and travel, tax planning should also be a money and time priority.

Being the daughter of an accountant, there’s a few things I’ve learned over the years. The first is to always hire a tax professional to get correct advice, and to minimize your tax liability. Now that my husband and I have a small business we’ve discovered the minefield that is deductible small business expenses , and we’ve gotten invaluable advice on how to use those deductions correctly (for example, we decided not to deduct our home office), minimizing the risk of an audit. Even if you do them yourself, I’d at least get the return reviewed before submitting it to the IRS. Often communities will offer free or low-cost tax preparation assistance, so check in your area.

Still, even as laymen, there are things we should know about, even if only to ask our accountant. Here are a few things I’ve been doing or considering as the calendar and tax year comes to a close. I hope they are of help to you.

The bottom line when it comes to taxes is that you want to delay paying taxes on your income as long as possible, and pay expenses as soon as possible. By deferring income you in effect get the use of that money for an additional year before having to pay income tax – a year when you could make that money work for you. And by paying expenses NOW you get to deduct that which is deductible now, reducing your tax liability.

Delaying Income

1. Defer your compensation – If possible, defer your last paycheck or any bonuses due you until after the first of the year. When it comes to income, it’s always better to put off until tomorrow what is due you today. Try to get your job-related expenses reimbursed before the end of the year instead of your regular paycheck, if possible. That way you can still get some cash, and it’s not taxed as income.

2. Make additional allocations to your 401k or IRA – Deductions to some retirement accounts are made with pre-tax dollars, reducing your taxable income. You can contribute up to $15,500 per individual to a 401k (plus an extra $5000 if you’re over 50) or up to $400o per individual to an IRA ($4500 if you’re 50 or over), so max these out of you can. Even if you can’t max it out, even an extra $100 helps you now and in the future. A nice bonus – IRA contributions for 2007 don’t need to be made until April 15, 2008. There are also ROTH IRAs to consider. Though not tax deductible they may be better for you in the long run. There are also SEPs and Keoughs which have various rules, so check with your accountant to see what would be best for you.

3. If you have a small business, wait until January to bill your clients – a few weeks delay on you having that money is the same as deferring salary for others.

Expenses to Pay Now

1. Pay your property taxes early – If you do not escrow for your taxes and are responsible for paying them yourself (along with homeowners insurance something I highly recommend – why should you pay them a year in advance through your mortgage payments?), you may get a discount by paying them early. I save about $200 by paying them in November instead of waiting until March. That’s a pretty good savings.

2. Make your January mortgage payment a few days early – This way you can take advantage of the additional mortgage interest in this tax year instead of next. Note: It must reach them by December 31st to qualify.

3. Consider selling losing stocks – You can use the loss to offset some of the capital gains from your better-performing investments. Note: There are some tax changes coming next year which may make this not the right choice for you – check with your accountant.

4. Make charitable contributions – Generosity is tax-deductible. Make your contributions now, but please keep in mind that they’ve really tightened the requirements for appraising the value of non-cash donations. Money is easy, but you’ll need an appraisal by an expert for any contribution over $5000 (so if you’d planned on donating to charity the car that died 5 years ago that’s been sitting up on blocks in your back yard, you’re probably going to be out of luck).

5. Now is a better time for pricey medical procedures – Well, really never is a good time for this, but if you have any procedures you need done in the near future try getting them done before the end of the year if the costs will exceed 7.5% of your adjusted gross income. Another tax deduction awaits. Then again, who wants to do this around the holidays?

6. If you have a small business pay any deductible subscriptions, dues, invoices now – Again, better to take the deduction this year and reduce the tax due in April.

7. Make that big purchase – in my state we get to deduct sales tax, but that deduction may end this year. So if you live in one of the states without a state income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming) now is a great time to buy a car, a $6000 Apple computer, or a huge screen plasma HDTV television (hello, Super Bowl!).

8. For any deductible purchases you make this month, use your credit card – this way you get the item/benefit this year, get the tax benefit this year, but don’t actually have to pay for it until next year. When you can use that income you deferred. Hey, every penny counts, people!

Which brings us to an excellent point. Every year brings changes to tax laws. This may be the last year for several deductions (like the $250 supply deduction for teachers and the college tuition deduction). Please take advantage of them now. Also, the new tax year will bring new rules, so in some cases you’re better off trying to have some things fall under the 2008 tax year. Again, your tax advisor can help you wade through the muck.

As always, please remember that I am not an expert on finance, or an accountant. This is nowhere near a complete list. I’m just an accountant’s daughter. So, please, please, please contact your accountant for expert advice.