Are you looking for ways to avoid the last-minute rush for doing your taxes? Here are some stress-relieving tips to help you.

1.     Don’t Procrastinate – Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.

2.     Visit the IRS Online – In 2008, there were more than 330 million visits to IRS.gov. Anyone with Internet access can find tax law information and answers to frequently asked tax questions.

3.     File Your Return Electronically – Nearly 90 million taxpayers filed their returns electronically in 2008. Aside from ease of filing, IRS e-file is the fastest and most accurate way to file a tax return. If you’re due a refund, the waiting time for e-filers is half that of paper filers.

4.     Don’t Panic if You Can’t Pay – If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You also should contact the IRS to discuss your payment options at 1-800-829-1040. The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise. More than 75 percent of taxpayers eligible for an Installment Agreement can apply using the Web-based Online Payment Agreement application available on IRS.gov.  To find out more about this simple and convenient process type “Online Payment Agreement” in the search box on the IRS.gov homepage.

5.     Request an Extension of Time to File – But Pay on Time If the clock runs out, you can get an automatic six month extension of time to file to October 15. However, this extension of time to file does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date. See IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return for a variety of easy ways to apply for an extension. Form 4868 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).  Taxpayers needing Form 4868 should act soon to be sure they have the item in time to meet the April deadline.

IRS has flexibility if you can’t make tax payments due to financial woes.  Call the phone numbers in the IRS correspondence you receive.

The IRS can:

• Postpone collection actions;
• Be flexible about missed or reduced installment-agreement payments;
• Re-value real estate by negotiating an Offer in Compromise (OIC);
• Offer ways to avoid default on an OIC;
• Speed up refunds, release levies, and take other actions to help taxpayers.

Check it out! You might be eligible for a tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable. That means you might receive a refund rather than owe any taxes.

Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families.  Income and family size determine the amount of the credit.  For more information, see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

5. Health Coverage Tax Credit Certain individuals, who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit when you file your 2008 tax return.

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).

Did you get your W-2? These documents are essential to filling out most individual tax returns. You should receive a Form W-2, Wage and Tax Statement, from each of your employers each year. Employers have until February 2, 2009 to provide or send you a 2008 W-2 earnings statement either electronically or in paper form. If you haven’t received your W-2, follow these steps:

1. Contact your employer. If you have not received your Form W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS. If you still do not receive your W-2 by February 17th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:

• Employer’s name, address, city, and state, including zip code;
• Your name, address, city and state, including zip code, and Social Security number; and
• An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return. You still must file your tax return on time even if you do not receive your Form W-2. If you have not received your Form W-2 by February 17th, and have completed steps 1 and 2 above, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

4. File a Form 1040X. On occasion, you may receive your missing documents at a later date and some may have conflicting information. You may receive a Form W-2 or W-2C (corrected form) after you filed your return using Form 4852, and the information differs from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

• Form 4852, Substitute for Form W-2, Wage and Tax Statement (PDF 29K)
• Form 1040X, Amended U.S. Individual Income Tax Return (PDF 123K)

Instructions for Form 1040X (PDF 43K)

Nearly 12,000 free tax preparation sites will be open nationwide this year as the Internal Revenue Service continues to expand its partnerships with nonprofit and community organizations performing vital tax preparation services for low-income and elderly taxpayers.

The IRS Volunteer Income Tax Assistance (VITA) Program offers free tax help to people who earn less than $42,000. The Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older.

Today, partners and local officials will be hosting news conferences or issuing news releases nationwide to highlight the Earned Income Tax Credit and their free tax preparation programs. The EITC is already the government’s largest cash assistance program targeted to low-income Americans. However, not all eligible taxpayers may be aware or claim the credit.

Taxpayers need to bring to the VITA/TCE sites the following items:

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1. Gather your records…now! It’s never too early to start getting together any documents or forms you’ll need when filing your taxes: receipts, canceled checks, and other documents that support an item of income or a deduction you’re taking on your return. Also, be on the lookout for W-2s and 1099s, coming soon from your employer.

2. Find your forms. Whether you file a 1040 or 1040-EZ, you can download all IRS forms and publications on our Web site, IRS.gov.

3. Do a little research. Check out Publication 17 on IRS.gov. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return. Review Pub 17 to ensure you’re taking all credits and deductions for which you’re eligible.

4. Think ahead to how you’ll file. Will you prepare your return yourself or go to a preparer? Do you qualify to file at no cost using Free File on IRS.gov? Are you eligible for free help at an IRS office or volunteer site? Will you purchase tax preparation software or file online? There are many things to consider. So, give yourself time to weigh them all and find the option that best suits your needs.

5. Take your time. Rushing to get your return filed increases the chance you will make a mistake and not catch it.

6. Double-check your return. Mistakes will slow down the processing of your return. In particular, make sure all the Social Security Numbers and math calculations are correct as these are the most common errors made by taxpayers.

7. Consider e-file. When you file electronically, the computer will handle the math calculations for you, and you will get your refund in about half the time it takes when you file a paper return.

8. Think about Direct Deposit. If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a check by mail.

9. Visit IRS.gov often. The official IRS Web site is a great place to find everything you’ll need to file your tax return: forms, tips, FAQs and updates on tax law changes.

10. Relax. There’s no need to panic. If you run into a problem, remember the IRS is there to help. Try IRS.gov or call the customer service number at 800-829-1040.

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Everyone who files a federal tax return must determine which filing status applies to them. It’s important you choose your correct filing status as it determines your standard deduction, the amount of tax you owe and ultimately, any refund owed to you.

There are two things to consider when determining your filing status:

First, your marital status on the last day of the year determines your filing status for the entire year. Secondly, if more than one filing status applies to you, choose the one that gives you the lowest tax obligation.

Here are the five filing status options:

1. Single. This will generally apply to anyone who is unmarried, divorced or legally separated according to your state law.

2. Married Filing Jointly. A married couple may file a joint return together. If your spouse died during the year, you may still file a joint return with that spouse for the year of death.

3. Married Filing Separately. A married couple may elect to file their returns separately.

4. Head of Household. This generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.

5. Qualifying Widow(er) with Dependent Child. You may be able to choose this filing status if your spouse died during 2006 or 2007, you have a dependent child and you meet certain other conditions.

There’s much more information about determining your filing status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Link – Publication 501, Exemptions, Standard Deduction, and Filing Information (PDF 196K)

1. Dependents may be required to file their own tax return. Even though you are a dependent on someone else’s tax return, you may still have to file your own tax return. Whether or not you must file a return depends on several factors, including: the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Credit payments you received.

2. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,500 on your 2008 tax return. Exemptions amounts are reduced for taxpayers whose adjusted gross income is above certain levels, which is determined by your filing status.

3. Dependents may not claim an exemption. If you claim someone as a dependent, such as your child, that dependent may not claim a personal exemption on their own tax return.

4. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return and were not the dependent of another taxpayer.

5. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children.

For more information on dependents and exemptions, including whether or not you or your dependent needs to file a tax return, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

Links:

IRS Publication 501, Exemptions, Standard Deduction, and Filing Information

You probably already keep records in your daily routine. This includes keeping receipts for purchases and recording information in your checkbook. Keeping these and other records will help you avoid headaches at tax time. Good recordkeeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.

Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents – such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property – should be kept longer.

In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:

• Bills
• Credit card and other receipts
• Invoices
• Mileage logs
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return

Good recordkeeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.

For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

People who are awaiting an economic stimulus payment or who have yet to file can avoid common errors that may delay their payment. They also can use the IRS Web site to answer most common questions.

The Internal Revenue Service, which is still issuing economic stimulus payments, has been studying trends and common issues in filing errors and questions posed by people calling its customer service telephone lines.

The most common question posed to the IRS is from people wondering when they will receive their stimulus payment. The question can be answered easily by going to IRS.gov and using the “Where’s My Economic Stimulus Payment?” Web tool.

Here’s how to avoid common mistakes:

• File only one tax return – People should file only one 2007 tax return. It takes the IRS up to 12 weeks to process paper returns and issue the stimulus payments. However, some people are filing more than one tax return in an effort to receive a stimulus payment, which could further delay their stimulus payment. The IRS is concerned there will be more multiple filings as the October 15 deadline approaches for filing a return in 2008.
• List qualifying income – Some people are listing their monthly income instead of annual income.  People must list their annual amount of qualifying income to be eligible for the minimum payment of $300 ($600 married filing jointly.) The qualifying income required by law is at least $3,000 in benefits from Social Security, Veterans Affairs and Railroad Retirement, earned income and/or combat pay.
• Review Your Tax Liability – Some people who have either small amounts of tax liability or no tax liability are getting smaller stimulus payments than they expected or none at all. Generally, the law provided for a maximum stimulus payment of $600 ($1,200 for married couples) or an amount equal to a taxpayer’s tax liability, whichever was less. Tax liability is the net amount of federal income taxes paid after deductions and credits. If people had no tax liability but had at least $3,000 of “qualifying income” from specific sources, they would be eligible for $300 ($600 for married couples.) There also is a $300 payment for each qualifying child.
• Amended return – Generally, people cannot file an amended return solely to get an economic stimulus payment unless they are a retiree, veteran or have other  “qualifying income.” While amended returns will be processed to correct the income, deductions and income tax as appropriate, the economic stimulus payment amount will not be adjusted based on an amended return. If people do not receive a payment this year, they can claim it when they file their tax return in 2009.
• Use Most Current Address – People must use their most current address in order to receive a timely payment. People who change addresses after filing should complete Form 8822 and a change of address card with the U.S. Postal Service. If the postal service is unable to deliver the payment, it is returned to the IRS.

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