9 Ways The IRS Can Help You Save On Taxes This Year
Taxes aren't that far off, and the IRS is here to help you give them less money, or take longer in giving it to them! Here's 9 ways they can make your tax life easier.
Postponement of Collection Actions:
IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.Added Flexibility for Missed Payments:
The IRS is allowing more flexibility for previously compliant individuals in existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Taxpayers in a difficult financial situation should contact the IRS.Additional Review for Offers in Compromise on Home Values:
An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay may not be accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new second review of the information to determine if accepting an offer is appropriate.Prevention of Offer in Compromise Defaults:
Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.Expedited Levy Releases:
The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases for levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.First-Time Homebuyer Credit: Those who bought a principal residence recently or are considering buying one should take note. This unique credit of up to $7,500 works much like a 15-year interest-free loan. IRS.gov has more details and answers to common questions.
The Recovery Rebate Credit:
This credit is figured like last year's Economic Stimulus Payment except that Recovery Rebate Credit amounts are based on tax year 2008 instead of 2007. Most people already received their full benefit in the form of the Economic Stimulus Payment. However, a taxpayer may qualify for the Recovery Rebate Credit, if, for example, he or she did not get an Economic Stimulus Payment, had a child in 2008 or had a change in income level. If you receive this credit, it will be included in your refund and will not be issued as a separate payment. See the Form 1040 Instructions, Fact Sheet 2009-3 or the information center on IRS.gov for details.Standard Deduction for Real Estate Taxes:
Taxpayers can claim an additional standard deduction, based on the state or local real estate taxes paid in 2008. The maximum deduction is $500, or $1,000 for joint filers.Mortgage Workouts and Foreclosures:
For most homeowners, these are now tax-free. Eligible homeowners can exclude debt forgiven on their principal residence if the balance of the loan was less than $2 million. The limit is $1 million for a married person filing a separate return. See Form 982 and its instructions for details.
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Comments:
I realize most folks here will use Turbo Tax or e-file on their own, but if you find the tax code daunting - look into the IRS Volunteer Income Tax Assistance program (VITA). There are sites in your area where a trained volunteer will help you prepare and file your return, and many sites offer speedy e-filing as well. No charge, but only taxpayers making under a certain threshold are eligible. Last year it was in the low 40's, IIRC. Check your local law school, you might find a tax law geek like myself who can prepare your return for free. Call 1-800-829-1040 or check here for more info.
i am quite pleased with the fact that half of the comments thus far are about tax cat. here's another: yay tax cat!
also, i think i may get the economic stimulus credit? i only made $2500 last year [lol, student!] but this year i made more than the $3k requirement to get the credit. i am hoping that's what that means, anyway.
@katieoh: I think so. I was a dependent in 2007 but not 2008 so according to Turbo Tax, I get my stimulus credit, an extra $600.
@t325: you'll want to check with a professional about this. as i understand the law, the economic stimulus from last year was a one-time shot. that's not to say that another one won't be coming, but it wasn't an every year kind of thing. if you didn't qualify last year but would this year, you're probably entitled to what's known as a "rebate recovery" credit, but it isn't an automatic thing, rather a credit to be taken against 2008 income when filing. take this for what it's worth ($0.000002), i haven't reviewed the 2009 stuff yet. go see an accountant or an IRS VITA volunteer once it's filing time.
@missdona: Seriously, I closed April 3rd...sonuvabitch. If I qualified for that, I think I'd probably just make a 1 time mortgage payment of $7500 and save on some interest!
@ganjablue: I makes sense. If more people do their taxes correctly, it leads to less work when they get flagged by the computer and someone has to pore over it by hand.
@dlynch: Thank you for the really cool information. This seems like a great service for most people I know. I checked on the yearly cut-off and it is $42K.
I qualify for the full credit. I wanted to put new windows in the home I bought, but though I have plenty of income and low debt, I couldn't get a loan with acceptable terms because I had no actual equity in my home. Would claiming this credit be a smart way to finance those windows? Thanks for any comments! Heidi
I'm loving that Recovery Rebate Credit. My wife and I got married in the middle of June last year, but until then we were full-time students and considered dependents, so no stimulus checks. However, since we're not 2008 dependents, we get the money now. Yay!
Oh yes, and hooray for the Tax Cat!
@theblackdog: Thank you! Us too. The middle class non-homeowner is the most screwed over individual in the entire tax code. It desperately needs changing. My rent is as much as a lot of people's mortgage payment but I get nothing except a tax bill.
Joy of joys.








Is there a list of tax breaks and benefits, especially some of the more unknown ones?