With the tax filing season here, taxpayers can foresee a number of complications that may make their lives more difficult. Here are some tips on what to expect from this crazy year in the tax world and how you can make the most of it.
Don't miss your rebate
The stimulus package made it through Congress, and the final legislation approved rebate checks for many of us -- but only if you've filed your tax returns for 2007. So if you want your rebate quickly, getting your taxes done on time is essential.
On the other hand, if you file for an extension, you'll have to wait to get your check until you do file. It's rare for the IRS to give taxpayers such a strong incentive to file by April 15, but the prospect for rebates of up to $1,200 or more will probably give many taxpayers the push they need to get their taxes in.
Late filing required
If you've tried to e-file your return and received a rejection notice, or if you've already paper-filed and are wondering about your refund, you might be caught up in administrative never-never land. In late December, Congress decided to finally "patch" the alternative minimum tax (AMT), which caused the IRS a number of headaches relative to its computer system. Because of the AMT troubles, the IRS said it wouldn't be able to accept returns containing any one of these five forms for e-filing before Feb. 11:
- Schedule 2, Form 1040A, Child and Dependent Care Expenses.
- Form 5695, Residential Energy Credits.
- Form 8396, Mortgage Interest Credit.
- Form 8863, Education Credits.
- Form 8859, Washington DC First Time Homebuyer Credit.
So if you have any of these forms on your return and tried to e-file before Feb. 11, you might want to double-check to make sure your filing was accepted. And if you sent them in on paper, you might have to wait a few extra weeks for your refund.
AMT patch ... again?
Many taxpayers mistakenly think the AMT patch that Congress approved and the president signed in late December 2007 fixed the entire AMT matter for good. In truth, the fix was a temporary solution applicable only to the 2007 tax year and 2007 tax returns. We can only hope Congress will revisit this issue sometime before December, but if not, you can expect the dreaded AMT to hit millions more taxpayers in 2008 than it did in 2007. And one of those taxpayers could be you!
Will you be audited?
The IRS recently released its annual enforcement and service tables, along with the 2007 Enforcement Revenue and Individual Audits Chart. Interesting reading, especially if you play fast and loose with the tax code. The short version: Audits and enforcement are up -- in some cases substantially over previous years. I doubt that this trend will be reversed in the near future, given that the IRS has been trying to close the so-called "tax gap" -- the amount of uncollected taxes.
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This article originally ran on Feb. 1, 2008. It has been updated.
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When he's not dealing with tax issues, Fool contributor Roy Lewis is a motivational speaker who lives in a trailer down by the river. He understands that The Motley Fool is all about investors writing for investors. You can take a look at the stocks he owns, as long as you promise not to ask him which stock to buy. Roy will be glad to help you compute your gain or loss when you finally sell a stock, though.