Perfect Storm: New Tax Laws, Unstable Economy Highlight Need to Ensure Fair Share Come Tax Time
To help taxpayers navigate the changes, H&R Block's (NYSE: HRB) 110,000 tax professionals will hit the streets Jan. 15, for National Tax Advice Day, educating taxpayers on a range of topics, including the recovery rebate credit, first-time homebuyer credit, foreclosures, stock market losses and the tax implications of losing -- and looking for -- a job.
Additionally, through Jan. 31, taxpayers can get help with their most difficult tax questions for free through our 'Ask a Tax Advisor' feature on www.hrblock.com and/or www.digits.hrblock.com. With 'Ask a Tax Advisor,' taxpayers can experience one session with an H&R Block tax professional from the comfort of their own home, covering one tax topic, with no time limitations. Ask a Tax Advisor is a $19.95 value.
Amy McAnarney, executive director of The Tax Institute at H&R Block, indicated last year saw major tax law changes that directly impact people's tax returns.
"2008 was the perfect storm of historic economic downturn and associated tax relief," McAnarney said. "More than ever, taxpayers need guidance on how to claim every tax credit and deduction they can."
From the Emergency Economic Stabilization Act to the Housing and Economic Recovery Act, this past year saw major tax law changes and extensions.
So, with the start of tax season, what should taxpayers look for as they prepare to file their 2008 taxes? McAnarney points out five major issues:
-- Recovery Rebate Credit - While 130 million taxpayers received a
stimulus payment last year according to the Internal Revenue
Service, those were actually an advance payment for the recovery
rebate credit to be claimed on their 2008 returns. For many
taxpayers who didn't receive the payment or who may be due a higher
payment, there's still time to get their rebate. Many taxpayers'
circumstances may have changed since they filed their 2007 returns,
which is what was used to calculate the stimulus payment made
in 2008.
For instance, some taxpayers earned too much in 2007 to qualify for
the payment in 2008. But, with unemployment on the rise, some of
those individuals may have taken pay cuts or been laid off from
their jobs. Thus, they now are at an income level to qualify for
the recovery rebate credit. Or the change could be as simple as
having a child in 2008, which could impact the rebate amount.
In addition, the IRS is reporting that millions of taxpayers who
do not normally file a tax return may still be eligible for the
recovery rebate credit in 2008. If taxpayers have qualifying income
such as wages, Social Security benefits, or VA disability benefits
of at least $3,000 they are eligible for a credit worth $300 ($600
for joint filers). For taxpayers with a filing requirement, the
credit can be worth up to $600 for a single filer -- $1,200 on
joint returns -- or more depending on income, taxes, and number
of dependents.
"If you missed the economic stimulus check in 2008, or you are
eligible for a higher payment based on changes you incurred in 2008,
you may be eligible for a recovery rebate credit when you file your
tax return," McAnarney said.
-- Debt Relief - With foreclosures also increasing, H&R Block tax
professionals can explain a tax relief opportunity available to
homeowners who have had home mortgage debt forgiven. The Mortgage
Forgiveness Debt Relief Act of 2007, and extensions placed in
subsequent bills this past year, is designed to protect eligible
taxpayers from paying federal income tax on as much as $2 million
of debt forgiven on a principal residence. But taxpayers will have
to know how to claim the tax benefit.
-- First-time Homebuyer Credit - Taxpayers who bought a home after
April 8, 2008, and had not owned a home in the previous three years
may be eligible for this refundable credit worth up to $7,500. The
credit, which is the lower of 10 percent of a home's purchase price
or $7,500, was included in the Housing and Economic Recovery Act of
2008 passed last July.
"The first-time homebuyer credit is like an interest-free loan,"
McAnarney said. "But remember, starting in 2010, it will have to be
paid back."
-- Refundable Child Tax Credit - Taxpayers with earned income of at
least $8,500 (down from last year's figure of $11,750) may qualify
for a refundable credit of up to $1,000 for each qualifying child
under 17. Even if their income was not high enough to claim this
credit last year, they may be able to claim it this year. A
refundable credit means that the taxpayer gets a check even if their
tax liability is $0 for the year.
-- Disaster Relief - 2008 had the second highest number of federal
disasters since the 1950s. Hurricanes Gustav and Ike, Midwest
flooding and tornadoes, and wildfires in California dominated the
headlines and resulted in special tax relief for victims.
Congress passed special tax relief laws for victims of the numerous
disasters in America last year. Affected taxpayers include those
living in the disaster areas, those outside the disaster areas whose
tax records are located in the areas, businesses located in the
disaster areas and relief workers.
Recent disaster relief provisions allow taxpayers who suffered a
personal casualty loss because of the disaster in a federally
declared disaster area to claim the loss as part of the standard
deduction. This will be welcome news to taxpayers who do not
itemize. Finally, taxpayers impacted by the Midwest flooding should
contact their tax professional for more information about special
relief provisions.
"This year's tax season is shaping up to be dynamic and confusing," McAnarney said. "But there is assistance out there. Our tax professionals are trained to understand the latest tax changes and to assist taxpayers in getting all the deductions and credits they deserve. And in today's unstable economic environment, this is not a time to scrimp on tax preparation."
Visit www.hrblock.com/presscenter and www.digits.hrblock.com or call 1-800-HRBLOCK for more information about National Tax Advice Day, this year's key tax benefits and H&R Block's products and services.
The Tax Institute is a national leader in providing unbiased research, analysis and interpretation of federal and state tax laws. Staffed by Enrolled Agents, CPAs, and Attorneys, The Tax Institute provides industry expertise for matters related to taxes and the professional tax preparation industry.
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For Further Information:
Gene King
816-854-4287
SOURCE: H & R Block