Experts: Some tax laws have changed for 2008

With tax deadlines approaching, experts are reminding filers of important tips and changes for 2008.

Michael Devine, spokesman for the Internal Revenue Service, said filers should take note of the most widely misunderstood new tax break, the recovery tax credit, which came in the form of economic stimulus payments in 2008.

The IRS is reporting early filers are making mistakes on the section dealing with the economic stimulus payment. Devine said many taxpayers — who numbered 119 million — will not qualify for the recovery rebate credit because most received a payment last year.

Eligible taxpayers include those whose financial situations changed dramatically from 2007 to 2008, taxpayers who were claimed as dependents for 2007 but not for 2008, parents who had an additional qualifying child in 2008 and people who did not file a 2007 tax return.

"There has been some confusion over the stimulus payments," said David W. Gantt, area manager of Jackson Hewitt Tax Service in Cape Girardeau and Jackson. "You have to report it on your taxes, but it's not taxable. Basically the IRS is just wanting to know if you have received it."

Other noteworthy changes include:

• First-time homebuyer credit: The law authorizes a refundable credit of 10 percent of the purchase price of a house, up to $7,500, for qualified first-time homebuyers who have not owned a house within the past three years. This credit is good for a home purchased and closed on a home on or after April 9 and before July 1. If the home is purchased on or after Jan. 1, it can be taken advantage on the 2009 tax return.

Homebuyers filing as single or head-of-household taxpayers can claim the full credit if their adjusted gross income is less than $75,000. For married couples filing jointly, the income limit doubles. Since the tax credit is essentially an interest-free loan, it must be repaid over a 15-year period.

• Tax relief for Midwestern disaster areas: Temporary tax relief was enacted as a result of last year's floods, tornadoes and storms in certain area of the Midwest, including Southeast Missouri. The Heartland Disaster Tax Relief Act of 2008 allows residents in affected areas to take 100 percent deductions on losses from the disasters. Receipts certifying the deductions are disaster-related must be on hand.
• Earned Income Tax Credit: Congress originally approved the tax credit legislation in 1975 in part to offset the burden of Social Security taxes and to provide an incentive to work. When the Earned Income Tax Credit exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit, Devine said.

Gantt added that a single person or married couple earning less than $12,500 with no dependents may receive up to $438, those earning less than $34,000 with one dependent are eligible to receive up to $2,917 and those earning less than $38,650 with two dependent could receive up to $4,824. Filers must also be between 25 and 65 years of age.

"This is a credit for people who have earned income in lower income levels," Gantt said. "It's a boost to help you better yourself."

Devine said the IRS will assist filers who believe they are experiencing financial problems.

"If they can't pay their taxes they need to contact the IRS as soon as they have trouble," he said. "Under certain circumstances they may be able to delay payment. We want to help those who have paid their taxes in the past but aren't able to because of their financial problems."

bblackwell@semissourian.com

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