If you have a friend who's working overseas, let her know to watch out for this:

I'd like to tip you about a scam going around Japan right now, and possibly Asia (I live and work in Japan), and maybe other places. It's a fax from being sent to foreigners, and in my case to schools. I've received it once and many of my friends have too.

The form is attached [pdf], claiming to be from "Internal Revenue Service IRS.gov", and prompts the recipient to complete form W-8BEN, which is a tax withholding form. Sure, sounds legit at first, but scroll to the 2nd page (page 1 of the fax) which has a W-8BEN "Substitute Form" that asks for personal info including your bank account number, SSN, and a copy of your passport among other things.

Then it asks the person to fax the form back to +1-206-888-1766 within one week to get a ficticious w-9095. Please inform your readers that this is a scam! I (nor my boss) don't know how this person got the fax numbers, and one of my friends recieved this even though she's from England so perhaps they are trying random numbers.

If you receive one of these faxes, report it to the Treasury Inspector General for Tax Administration at ustreas.gov/tigta.

"I don't think that any bank that goes to the extent that UBS has gone through to avoid doing what their agreements with the United States require them to do, should be allowed to continue to do business unless they clean up their act," Levin said.

The Senator also revealed a list of "sneaky tricks" that the bank was using to skirt U.S. laws and provide services that it was not licensed to offer. Here's the list:

Tax Haven Bank Secrecy Tricks

• Code Names for Clients
• Pay Phones, not Business Phones
• Foreign Area Codes
• Undeclared Accounts
• Encrypted Computers
• Transfer Companies to Cover Tracks
• Foreign Shell Companies
• Fake Charitable Trusts
• Straw Man Settlors
• Captive Trustees
• Anonymous Wire Transfers
• Disguised Business Trips
• Counter-Surveillance Training
• Foreign Credit Cards
• Hold Mail
• Shred Files

Prepared by the U.S. Senate Permanent Subcommittee on Investigations, July 2008.

One UBS banker has already plead guilty and admitted to (among other things) smuggling diamonds purchased using a US client's Swiss bank account into the country by hiding them inside tubes of toothpaste. Classy!

Sen. Levin: Shut Down Giant Swiss Bank UBS
Investigation Reveals Secrecy Tricks Allegedly Used by Swiss Bankers [ABC News]

From ABCNews:

In court documents, federal prosecutors say UBS bankers helped set up many of the secret accounts in Liechtenstein and, overall, hid as much $20 billion belonging to US citizens.

"Sums are enormous and UBS appears to have been particularly aggressive in the way they marketed their activities in the US and elsewhere," said Christensen. "So UBS is extremely vulnerable to losing their license in the US."

One UBS banker, Bradley Birkenfield, pleaded guilty last month and admitted to smuggling cash and diamonds for Americans trying to hide their wealth from the IRS.

In federal court documents obtained by ABC News, federal prosecutors allege that Birkenfield's bank trained bankers traveling to the US in "techniques to avoid detection" by law enforcement authorities, "including training bankers to falsely state on customs forms that they were traveling into the United States for pleasure and not business".

There will be Senate committee hearing tomorrow and ABC says that "among those called to testify are foreign bank account holders, including one of the wealthiest men in Los Angeles," and that the tax dodgers could face criminal prosecution.

Hundreds of Super Rich Under Investigation [ABCNews]

Kieber reportedly sold three CD's full of names and data to tax authorities to 12 countries including Germany, Great Britain, France, Italy and the United States.

Tax authorities in Italy published the full list of names.

In Germany, the disclosures led to the arrests of several prominent CEO's on charges that had evaded millions of dollars in taxes.

A former UBS private banker, Bradley Birkenfeld, has agreed to a plea deal and is reported to be cooperating with US authorities in bring charges against American citizens on tax evasion charges.

The Liechtenstein bank, LGT, is owned by the tiny country's ruling family led by Prince Hans-Adam II.

Kieber's Washington lawyer, Jack Blum, says Kieber should be considered a whistleblower and a hero, not a thief, for revealing how the super rich hid billions of dollars using the Liechtenstein bank.

Whatever you think of thieves (we're not fond), you have to admit that it takes serious balls to be comfortable pissing off a fairly large percentage of the world's super-rich and powerful tax evaders.

Day of Reckoning? Super Rich Tax Cheats Outed by Bank Clerk [ABC News]

IRS Increases Mileage Rates through Dec. 31, 2008 [Press Release]

(Photo: beebo wallace)

Elijah writes:

During the Tax year 2007 I got married, and also moved to a new state. This added a few extra levels to my tax returns, so I decided to buy a copy of TurboTax to speed the process.

I entered all of the data for myself and my wife, and on the last step the software ran through a process to see if I was in danger of an audit. After checking all my stuff it gave me a "Green" rating, meaning that I was at very low risk of an audit. It also told me that my wife and I would get approx $4,000 as a return. I was pretty stoked.

Before I eFiled I printed off the return to check it over manually and boy, was I glad I did. When you get to the "Moving Expenses" page within TurboTax you have 3 boxes to enter individual expenses. We had a freight company, which cost $1,635 and hotel stays which were $335. What I hade done without noticing was miss the TAB between boxes, so my tax return showed a moving expense of $1,635,335. I can not, for the life of me, figure out why the software wouldn't have some sort of upper limit for deductions that would catch something like this, or why it seemed to think a 7 figure deduction wouldn't get me audited. After correcting the error my return was calculated to be about $2000.

Between that and all the last minute online filing fees I think I will take my tax preparations to a reputable accountant next year, rather then trusting lackluster software.

Whatever you choose to do, remember, tax prep fees are tax deductible.

(Photo: Getty)

JK Harris wasn't just misrepresenting its services. It also made it very difficult for customers to resolve any questions or complaints:

According to Cooper's complaint, JK Harris regularly advertised it had more than 450 offices nationwide. However, the complaint contends that only the main office in Charleston handled consumers' files.

If a consumer wanted to meet with a JK Harris representative about their file they had to physically travel to Charleston.

The other offices were staffed only by sales representatives who could not help consumers with their tax problems.

JK Harris also claimed consumers' cases would be handled by "tax experts" or "ex-IRS agents" when in fact the people handling the cases did not fit those descriptions and did not have tax expertise.

JK Harris case managers changed frequently, and consumers complained they often had to provide the same information to the company several times.

Under the terms of the agreement, JK Harris now has to:

• pay refunds to customers if it can't help them with their tax debts, or if the IRS doesn't accept the OIC;
• provide accurate information on when a customer can qualify for an OIC and how frequently the IRS accepts such claims;
• stop lying with its advertising and sales practices;
• never offer or perform credit repair services.

If you know someone who lives in one of the following states, they should contact their attorney general's office for more information on how to qualify for a refund from JK Harris (we have the number for NC because that's where the article was published):

If you owe back taxes and aren't sure what to do about them, the best thing to do is pay a visit to an experienced and knowledgeable accountant for help. He or she should be able to help you figure out how much you owe (in some cases you may have actually overpaid, and simply filing the appropriate forms for the missing years will solve your problem) and help you set up a repayment plan that fits within your budget.

"'Pennies On The Dollar' Tax Relief Company Ordered To Pay Refunds" [Digtriad]
(Photo of sneaky snake: Getty)

"Where's my freakin' money?!" is what some people are wondering about their stimulus payment. Here's some bad news, you're getting your money later than you thought if you:

* Used a tax prep service, like TurboTax, to file your taxes
* AND had filing fees deducted from the refund, took out a Refund Anticipation Loan, or entered into any other loans
* AND had refund direct-deposited

When will you get your money?

In this case, you will get your payment on the paper check payment schedule. Why? Because the IRS is paying your tax prep service, and then the tax prep service pays you. Guess how the IRS is paying the tax prep service? With a paper check. (You still get yours direct-deposited, though.)

Here's the paper check payment schedule based on the last 2 digits of your social, and the relevant part of the IRS FAQ...

00 - 09 —-> May 16
10 - 18 —-> May 23
19 - 25 —-> May 30
26 - 38 —-> June 6
39 - 51 —-> June 13
52 - 63 —-> June 20
64 - 75 —-> June 27
76 - 87 —-> July 4
88 - 99 —-> July 11

Q. I chose direct deposit for my 2007 tax refund but also requested a refund anticipation loan (RAL) from my preparer. How does that affect my stimulus payment?

A. Taxpayers who use Refund Anticipation Loans (RALs) or enter into any other loans or financial agreements with a tax professional, such as agreeing to have return preparation fees deducted from their refunds, cannot receive their stimulus payments by direct deposit and instead will get paper checks based on the paper check distribution schedule.

Looks like it's Skippy and Sanka for you for a little while longer, boyo!

(Photo: Chad Beckerman)

One local taxpayer, who asked not to be identified, reported that he had discovered an unexpected deposit of $1,800 in his bank account. He said a review of his bank records revealed that it was a deposit from the IRS bearing another taxpayer's Social Security number. He said he contacted the IRS and was told by an agent that the deposit was one of 15,000 misrouted checks sent out incorrectly as a result of a computer programming glitch.

[Internal Revenue Service spokesman Kevin McKeon] said he could not confirm that figure or that a computer problem was responsible.

The government will want its cash back, so don't giddily spend any unexpected stimulus money. Paper checks can be mailed back to the IRS, while those with direct deposit should report the error to their bank.

IRS: Some stimulus checks sent to wrong accounts [Newsday]
(Photo: Joe Shlabotnik)

Here's another common question...

Q. I have moved since filing my 2007 tax return. How will my payment reach me?

A. You should file a Form 8822 with the IRS and a change of address notice with the U.S. Postal Service. This will ensure your check is sent to your new address. Without your current address, the check could be returned to the IRS as undeliverable.

Economic Stimulus Payments: Most Frequently Asked Questions [IRS]

Where's My Stimulus Payment? [IRS] (Thanks to Josh!)
(Photo: Getty)

I have a question about the Stimulus Checks that we will all be receiving. If we owe money to the IRS from our 2007 tax year, will it be deducted from the stimulus check and the remainder passed on to me? In a normal situation, I would say yes. Considering that the IRS wants you to spend it all to boost the economy and not pay off debt with it, it also makes sense to give it all to me. Do you know what the correct answer is? Thank you for your time.

Well, Adam, the answer is "maybe you will get it and maybe you won't." The IRS has the right to withhold payments if you have certain kinds of debts. Student loans in default or unpaid child support, in addition to unpaid tax obligations, are cause for the IRS to confiscate your money and they are generally not too shy about doing so. Whether they are set up to withhold this special payment is anyone's guess. The IRS initially addressed this issue on their stimulus payment FAQ, but that question has been mysteriously deleted.

Phoung Cat Le at the Seattle Post-Intelligencer has a great tax rebate FAQ, for those of you who have more questions.

Answers to tax rebate questions [Seattle P-I]

So what do you do? The Tax Cat has taken a break from his vacation to let us know that those of you who were unaware that sending your tax refund to your IRA would send your stimulus check to the same account can withdraw the rebate without incurring any penalties:

To qualify for this relief, funds must be taken out by April 15, 2009, in most cases. Without this relief, taxes, penalties and other special rules would apply to amounts removed from these accounts. Regular refunds are not eligible for this relief.

Eligible tax-favored accounts include traditional and Roth IRAs, health savings accounts (HSAs), Archer MSAs, Coverdell education savings accounts (ESAs) and qualified tuition programs, also known as QTPs or 529 plans. Thus, for example, a taxpayer whose $1,200 stimulus payment is directly deposited into his or her IRA can take out anywhere up to $1,200 from the IRA, tax-free and penalty-free.

In general, the deadline for these withdrawals is the due date or extended due date for filing a 2008 return. This means April 15, 2009, for most taxpayers, or Oct. 15, 2009, for those who obtain tax-filing extensions.

Information on how to claim this relief will be included in your 2008 tax instructions.

Relief for Stimulus Payments Withdrawn from IRAs and Tax-Favored Accounts
[IRS]
Tax Cat [Facebook]

• Kill the [credit] card debt
• Add to it by getting a retailer bonus
• Buy an item that's good for the environment
• Save it in a retirement account
• Sock it away for college expenses
• Have needed medical work
• Take a vacation
• Give it away

CNN Money has similar advice:

• Spend it on environmentally-friendly items
• Get a retailer bonus
• Pay off debts
• Invest it in career development

As does Smart Money:

• Don't get a refund-anticipation loan
• Save it for your emergency fund
• Contribute to an IRA
• Pay off debt
• Save it for college expenses

MSN Money takes a different course and suggests you invest your rebate. But with all this advice, what will people do? As of this writing, an MSN Money poll of almost 150,000 people listed the following as what respondents planned to do with their rebates:

• Pay bills, mortgage, or rent — 24%
• Save it — 22%
• Pay down debt — 20%
• Spend it on food, gas or other essentials — 13%
• Spend it on non-essentials — 11%

That said, responses to the issue are very widely varied.

In the end, the prudent choice seems to be to pay down debt or save the money. The fun thing would be to blow it on a big screen TV or some other sort of purchase. There are certainly lots of choices — but what do you plan to do with your rebate?

— FREE MONEY FINANCE

Tax rebates to start arriving Monday [CNN Money] (Thanks to Caren!)
(Photo: MBru)

5. Myth: The tax rebate is taxable income and I'll have to pay taxes on it next year.

Fact: The rebate is a rebate. It is not taxable income. You will not have to pay taxes on this money.

4. Myth: People who aren't normally required to file a tax return can't get the rebate.

Fact: If you have at least $3,000 in certain types of income, you may be eligible for the economic stimulus payment. People who qualify include Social Security Recipients, Veterans Affairs Recipients, Railroad Retirement Recipients, and Low-Wage Workers.

3. Myth: The IRS will call or email you about your rebate check, and they can help you get it faster if you give them your bank account information.

Fact: The IRS is not going to contact you about speeding up this rebate check, and they never contact anyone via email. Ever. At all. Filers who used direct deposit will see their money more quickly, but no one can help you get it "faster." You will receive your money based on the last two digits of your social security number. You can check out the schedule by clicking here. Don't give out your banking info to scammers!

2. Myth: I don't qualify for the rebate because I'm a stay-at-home mom and don't make $3,000.

Fact: If you're married, filing a joint return, and have $3,000 in taxable income between you — you qualify for the rebate.

1. Myth: This is just an advance on next year's tax return! I'll get less next year!

Fact: This is incorrect. Marketplace's Tess Vigeland figured out where this silly little rumor was coming from: "the last time the federal government issued checks, back in 2001,the stimulus was indeed an advance, of sorts, on the Bush administration's tax cuts. The bottom line went from 15 percent 10 percent. So, maybe folks are assuming that it is the same this time. It is not. This is not an advance on next year's refund."

We know you're all sad that tax season is over, but you can always snuggle up to Tax Cat on Facebook.

(Photos:Chad Beckerman)

From the P-I:

Earlier this week, one of my colleagues sat down at her computer to file her income tax return electronically using TurboTax. Twice, her return was rejected. The message she got back was startling: the IRS already had a tax return filed under her Social Security number.

How could this be? She hadn't filed yet.

Panicked, she called the Social Security Administration to make sure her name matched her Social Security number. It did. Then she called the IRS. A representative pulled up the tax return filed under her name and Social Security number, and asked to verify the address. It wasn't hers.

A thief had filed a fraudulent tax return under her name, and would likely get her $1,000 refund, not to mention her $600 economic stimulus payment. Thus began her tedious task of clearing her name: filing a police report, filing a complaint with the Federal Trade Commission, putting a fraud alert on her credit report and mailing in her tax return with copies of her driver's license, police report and other documents to prove her identity.

From the AP:

Douglas Shulman, who took over as IRS commissioner three weeks ago, said that by this fall the tax agency will have specially trained people on call to help victims of identity theft. He pledged that people with a problem will get through to a person who can help them.

"We understand the personal devastation that an individual feels when their identity has been stolen," he said.

When a thief steals your tax refund [Seattle P-I]
(Photo:BenPopken)

Don't worry, it's not the end of the world. It will, however, affect you in the following ways:

1. It may delay your stimulus rebate.
2. It will not delay the deadline for paying taxes if you owe them.
3. It will make you grouchy and stressed out until October 15, the new deadline.

As you can see, you should really just file your taxes on time. If you can't, allow us to introduce you to your new best friend — IRS Form 4868 (PDF). Enjoy!

IRS Urges Taxpayers To e-file Extension Requests by April 15 Filing Deadline [IRS]

According to a new secret shopper study being reported by the National Consumer Law Center, there is evidence that consumers are being systematically mislead into signing up for Refund Anticipation Loans and that other, more consumer friendly options are not being disclosed.

Secret shoppers who visited tax preparers (including Liberty Tax, H&R Block and Jackson Hewitt) in Philadelphia and North Carolina were given inaccurate information about their refund options and were not told that a "RAL" was actually a loan. Several of the tax preparers also made serious errors processing the returns.

"Two testers were required to file amended returns to fix errors and one tester withdrew after the preparer advised him not to include investment income on a return, essentially recommending tax fraud," the report says.

The stories told by the secret shoppers are troubling. Preparers used misleading language to try to hide the free e-file option, or, in some cases, simply refused to disclose it. In one case, the option that looked like "free e-file" turned out to be something called a "Refund Anticipation Check":

Another tester reported: [KH] was asked to fill out a two-sided form with her personal information. On the back of the form were three options she could choose for receiving her tax refund, described as: (1) RAL (24-48 hours), (2) Direct Deposit (10-14 days) and, (3) Check by Mail (6-8 weeks). The fees for the various options were not disclosed, so [KH] asked the tax preparer if she had a fee schedule. The preparer told her that a fee schedule was not available, but all of the fees would be broken down for her once the return had been prepared. The "Direct Deposit" option turned out to be a RAC, not the free e-file, direct deposit option. Later on, after the preparer finished completing the return, she again reviewed the options for receiving the refund proceeds, but this time omitted the free "Check by Mail" option.

You can read the entire report (PDF) here.

Mystery Shopping Test on RALs; IRS Comments [CL&P Blog]

Here's what to do when you owe the IRS and don't have any money:

Taxpayers should file their return on time, pay as much as they can with their return and use IRS.gov if they need to request a payment agreement.

Interest and penalties add up for people who don't file and pay on time. But taxpayers can limit these charges by filing on time and paying sooner.

Though interest, currently at the rate of 6 percent per year and late payment penalties, normally 0.5 percent (1/2 of 1 percent) per month, apply to any tax paid after the April 15 deadline, taxpayers can limit these charges by paying sooner. In addition, by filing on time, a taxpayer avoids the much larger 5-percent-per-month late-filing penalty. For example, a taxpayer who files on May 1, owing $1,000 in tax, would be charged interest plus a $50 penalty.

So remember, if you owe money and can't pay it—file your taxes on time anyway and use the IRS's online payment agreement calculator. By entering some basic information about your tax situation, eligible taxpayers can set up either a short-term payment extension or a monthly payment plan.

A short-term extension gives a taxpayer up to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply.

If you owe less than $25,000 and would like to know whether or not you qualify for a payment agreement, click here

Online Payment Agreement (OPA) Application [IRS]

(Photo:Chad Beckerman)

Your email was sent to me and I wanted to respond to you personally. We do not refuse to prepare tax returns for gay and lesbian couples. Unfortunately, we are a public target of some pretty nasty allegations that are not true. I believe the media and other like to sensationalize issues. Here is what is really going on...

The federal government does not recognize same-sex civil unions for the preparation of federal income taxes. However, Connecticut has recognized these civil unions for state taxes. In our online tax program, TaxCut, the federal tax return programmatically feeds the tax return information into the state tax return. Since the federal return can not be filed as a same-sex civil union (like a joint return) the correct information is not flowing to the state portion of the tax return to file a same-sex civil union state return. In this instance, like any other area that may not be handled well with the online program, we provide some guidance that our H&R Block tax offices will be able to assist you with your return. In general when we have complicated tax return situations, we feel that the best outcome is to have one of our tax professionals assist the consumer.

We are accused of is discriminating against same-sex civil unions because we presented the option of visiting one of our offices. Our competitors recommend that three returns be prepared (two individual returns for the federal return, and then a "proforma" return where the information is combined for the federal return that will feed into the state return. The customer is instructed to print the "proforma" return and mail in the state return). We have the same workaround available in our online and software products. Additionally, we have offered to refund the price of the "proforma" return so that the couple is treated financially on parity with a married filing jointly couple. Our competition does not offer the refund or parity pricing with a married filing jointly couple.

I want to assure you that we do not discriminate against any individuals and value all our customers. We do not refuse to prepare tax returns for gay and lesbian couples that live in US states where their marriage is recognized. We are in fast offering a better solution than the competition for those customers.

Please feel free to email me directly with any other questions.

Warm regards

Paula Drum
Vice President, Marketing
H&R Block

PREVIOUSLY: H&R Block Doesn't "Support" Gay Civil Unions

(Photo: Ben Popken)

• Keep your papers neat, include all necessary attachments, and sign where you're supposed to. If your papers are sloppy, it's a trigger to IRS personnel that your numbers might be sloppy too.
• Give exact values on your non-cash contributions
• Deducting big losses from what you say is a business but what the IRS says is a hobby is a red flag.
• Make sure the income you're reporting matches the income reported on the income forms the IRS is getting independent of your return.
• Deductions high above the national average are a red flag. For someone earning $50-$100k, that's $5,812 in deductible taxes, $2,703 in charitable gifts, and $8,946 in interest.
• You must report all interest, dividends and misc. income. Everyone who sends you a 1099 is also sending one to the IRS.
• Round numbers are a dead giveaway, as are "stupid" numbers. For example, the maker of "Girls Gone Wild" got in trouble for reporting $333,333.33 in false expenses.
• Claim only legitimate deductions, unlike (true story) one "Chesty Morgan" a stripper who attracted tried to claim breast implants as a medical expense.

• You have large amounts of itemized deductions on your tax return that exceed IRS targets.
• You claim tax shelter investment losses on your tax return.
• You have complex investment or business expenses on your tax return.
• You own or work in a business which receives cash and/or tips in the ordinary course of business.
• Your business expenses are large in relation to your income on your tax return.
• You have rental expenses on your tax return.
• A prior IRS audit resulted in a tax deficiency.
• You have complex tax transactions without explanations on your tax return.
• You are a shareholder or partner in an audited partnership or corporation.
• You claim large cash contributions to charities in relation to your income on your tax return.
• An informant has given information to the IRS.

(Photo: chasingfun)

Good news: You can have a six-month extension. Bad news: You still have to pay your taxes by April 15.

File Form 4868 (download a copy from irs.gov or your tax prep program will provide one), and use last year's return to estimate what you owe or let your tax software do it for you. It's better to overestimate and get a refund later; if you're under by more than 10%, you'll owe interest of 7% on the amount you underpaid by, plus a penalty of up to 25% of the underpayment.

Yeah, it's not the best solution, but it's a decent alternative if you simply can't file. Seven percent of taxpayers go for the extra time, so apparently many people have issues that make filing by April 15 difficult to impossible.

And for those of you who haven't done your taxes yet but plan to, CNN also offers six top tax savers, a listing of various last-minute tax moves that could save you a bit here and there. See you at the post office near midnight on April 15. ;-)

Six top tax savers [CNN Money]

— FREE MONEY FINANCE

(Photo: chadwbecks)

PREVIOUSLY: IRS Reminds You To File Your Tax Return In Order To Receive Stimulus Payment
$600 Rebates Are A Tax Credit Advance

The IRS says:

Stimulus payments will be sent out in the order of the last two digits of the Social Security number used on the tax return.

Because the IRS will use the Social Security number to determine when checks are mailed, taxpayers may receive their checks at different times than their neighbors or other family members. On a jointly filed return, the first Social Security number listed will determine the mail-out time.

The IRS expects to make about 34 million payments within the first three weeks after the payment schedule begins May 2. With more than 130 million households expected to receive stimulus payments, more than 25 percent of the payments will be made in the first three weeks.

Taxpayers who choose direct deposit on their federal income tax returns can expect to receive their economic stimulus payments between May 2 and May 16 provided their returns were received and processed by April 15, 2008. For taxpayers who did not choose direct deposit on their tax return but whose returns were processed by April 15, the paper checks will be in the mail starting May 16, with the initial mailings completed by around July 11.

Economic Stimulus Payment Calculator [IRS]

IRS Announces Economic Stimulus Payment Schedules, Provides Online Payment Calculator [IRS]

TurboTax
Tax$imple
Online Taxes - OLT
FileYourTaxes
average1040

(Photo:chadwbecks)

I went to the IRS.gov website to file my free tax form since I made under $54,000 this year.

The IRS.gov website referred me http://free-tax-return.com, I spent a good 6 hours filling out the information and when my return was calculated I was happy to see I would receiving a refund for my federal taxes.

When I choose to submit my forms, It said that I would have to pay an extra $13.50 to electronically submit my state taxes.

Being a poor college graduate slowly paying off a $70,000 loan, I decided I would copy the information generated from the free-tax-return.com state forms and mail it myself.

To my surprise once I told them I wouldn't be paying $13.50, my state forms were erased from my account. Now I need to re calculate everything again for the state tax forms.

(Thanks to Benjamin!)

"These special letters remind people that they won't need to do anything more than file a 2007 tax return in order to put the stimulus payment process in motion," Acting IRS Commissioner Linda Stiff said.

"To receive a payment in 2008, individuals who qualify will not have to do anything more than file a 2007 tax return. The IRS will determine eligibility, figure the amount and send the payment," the notice states. "This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds for 2007 will be made separately from this one-time payment."

Watch out for scammers telling a different story.

Special Economic Stimulus Letters Reach Mailboxes in March [IRS]

The evaluation criteria were ease of use, the amount of tax information and assistance provided, the cost for filing a state return, and accuracy. FiLife ended up choosing eight services as their "top picks"—"[they] guided us through life events from the past year and helped us figure out which forms we needed to file. They asked us questions that we didn't even know we needed to answer. Best of all, they used language that we understood. And we never had a technical snafu."

Notably, all but two of the services charge for filing a state return, and the fees can range from $7.95 to $29.95. Below, we've bolded the only two services that offer free state returns if that's something you need.

FiLife's top eight picks:

• CompleteTax
• efiletaxreturns.net
• eSmartTax by Liberty Tax Service
• ezTaxReturn
• Free TaxACT
• H&R Block
• TaxSlayer Free Returns.com
• Turbo Tax

Just as important, here are the ones FiLife categorizes as "Avoid if You Can": "These software programs caused us frustration and pain due to technology issues, confusing tax forms, and late admissions that our tax forms could not be supported."

• 1040NOW.NET
• 123Easytaxfiling
• average1040.com
• FileYourTaxes.com
• Free Tax Return
• Free1040 Tax Return
• Tax$imple Deluxe Version

Not every person can qualify for every service, so if you decide to check one of these out, we suggest you go to the IRS' Free File page, find out which services you qualify for, then cross-reference them against the FiLife chart to pick the one you like best.

FiLife has another helpful bit of advice if you really want to save money:

If the software of your choice doesn't provide your state's tax forms or charges a lot for it, you can still use its service as a sort of trial run. For instance, we like H&R Block's site a lot. But its $29.95 fee for filing a state-tax return is absurd.

So here's the workaround: Use H&R Block's software to get familiar with the terms and figures you'll need to input and the forms you'll need to use. But don't use Block to file either your state or federal return. Instead, once you've used its software as a worksheet, in effect, use a site that offers a better deal to actually file your returns. Take it from someone who prepared her taxes six times this year: It gets easier and faster the more you do it.

"Free File: Winnowing Out the Best Free Sites for Filing Your Tax Returns" [FiLife]

RELATED
Free File [IRS]

Tax laws consider forgiven debt as income, which can leave those of you with foreclosed homes with some unexpected tax bills this year. Let's say I loan you a million bazillion dollars. Now I go, "Oh, wait. Never mind. You can keep it." The IRS considers that income. You would have to pay the taxes on your million bazillion dollars.

The tricky part comes in when I'm not just loaning you a million bazillion dollars. I'm loaning you money to buy an overpriced home that you can't afford and I can't sell for as much as you owe me once I take it back from you.

Enter the Mortgage Forgiveness Debt Relief Act of 2007. Bankrate sums it up for us:

Under the Mortgage Debt Forgiveness Act of 2007, some homeowners granted forgiveness of mortgage debt won't have to pay taxes on that amount. But there are some restrictions:

1. There is a limit on the forgiven debt: up to $2 million or $1 million for a married person filing a separate return.
2. The tax break also has a time limit. It only applies to mortgage debt discharged by a lender in 2007, 2008 or 2009.
3. The loan also must have been taken out to buy or build a primary residence, not a second or vacation home. If debt is forgiven on those additional properties, the owner will owe cancellation of debt income as usual.

10 Tax Laws You Just Gotta Know [Bankrate]
IRS Form 982 (PDF) [IRS]
March 3: The latest tax-filing deadline [Don't Mess With Taxes]
(Photo:Chad Beckerman)

You've had a lot of press about the stimulus plan that's about to send some cash my way. There's been coverage all over the place, and everyone misses the most important part. What, EXACTLY, do I have to do to get this credit? I know I qualify. Do I have to send in an extra form? Is there a box I check? Am I supposed to expect the gov't to actually do something right and take care of it themselves?

(Photo: Getty)

The Skinny on the Stimulus Plan [WSJ]
PREVIOUSLY: $600 Rebates Are A Tax Credit Advance
(Photo: Getty)