Do you qualify for the new Making Work Pay tax credit?

The American Recovery and Reinvestment Act of 2009 created a new, refundable personal tax credit for 2009 and 2010. This credit is known as the "Making Work Pay" tax credit. For those who qualify, the credit equals 6.2% or earned income, up to $400 for individuals and $800 for married couples who file jointly.

Most working Americans will qualify for the credit, but nonresident aliens and taxpayers who can be claimed as dependents by someone else do not qualify. A taxpayer must include a valid social security number on your tax return. Couples filing jointly need only to have one valid social security number to qualify.

The other issue to qualify for this credit is your Modified Adjusted Gross Income. If your MAGI is less than $75,000 for individuals or $150,000 for couples filing jointly you qualify for the full amount ofthe credit. If you MAGI falls between $75,000 and $95,000 for individuals, $150,000 and $190,000 for joint filers, your credit will be reduced on a sliding scale. If your MAGI exceeds the top level, you won't qualify for the credit at all.

Also, some people will receive the $250 payments provided by the Act. These individuals, recipients of social security railroad retirement benefits, or veteran benefits, will have their credits reduced by that amount.

The IRS has issued new withholding tables to account for this credit, so you don't have to do anything. When your employer begins using these new withholding tables in the beginning of April, you should see an increase in your take home pay which will continue through the rest of the year.

If, however, you are self-employed and pay estimated taxes through the year, you can either wait until the end of the year to take the credit or reduce your estimated payments to reflect the amount of the credit to which you are entitled.

More information is available on the IRS web site, www.irs.gov.

Flexible Spending Arrangements (FSA)

I posted an article on eHow about Flexible Spending Arrangements (FSA)(aka Flexible spending accounts). The article explains the basic requirements for an FSA, the risks and benefits, the amount of money you can put into the FSA, and the tax treatment of contributions and withdrawals. You can find the article at http://www.ehow.com/how_4821716_arrangement-fsa-maximum-tax-savings.html

UNFILED 2005 RETURNS OWED $1.3 BILLION

The IRS issued a press release on March 2nd calling attention to the fact that people who have not yet filed their 2005 tax returns may be owed as much as $1.3 billion in tax refunds. These unfiled returns must be filed by April 15, 2009, or the possible refunds will be lost forever.

If you are one of these individuals, please take action immediately. If you have lost your W-2s or other tax information, there are ways of getting this information directly from the IRS. Don't let this stand in the way of your getting a refund.

For more information, see the following IRS press release.

Tax Workshop in Cincinnati on 2/26/09

I will be doing a workshop on tax issues for people with disabilities this Thursday, February 26, 2009, from 6:30 pm until 8:00 pm at the Pleasant Ridge Community Center, 5915 Ridge Road.  For more information, or to register, please call or e-mail Sue Schindler at sue@archamilton.org or 513-821-2113 x 112.

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How to respond to nasty letters from the IRS

A three-part "series" I posted on eHow may help you, if you ever get into a fix with the IRS:

Part 1 -   http://www.ehow.com/how_4792037_respond-nasty-letters-irs-part.html

Part 2 -  http://www.ehow.com/how_4792091_nasty-letters-irs-part-ii.html

Part 3 -  http://www.ehow.com/how_4792148_nasty-letters-irs-part-iii.html

I hope you never need these, but here they are, if you do.

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IRS lists some benefits for disabled taxpayers

Tax Benefits for Disabled Taxpayers

There are several tax credits and benefits available to qualifying taxpayers with disabilities as well as to the parents of disabled children. Listed below are several tax credits and other benefits available if you or someone else listed on your federal tax return is disabled.

The Earned Income Tax Credit The EITC is available to disabled taxpayers as well as to the parents of a child with a disability. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability, who have no qualifying children, but are older than 25 and younger than 65 do, in fact, qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

The Credit for the Elderly or Disabled
This credit may be available to taxpayers who are age 65 or older, or who are younger than 65 and are retired on permanent and total disability.

Child or Dependent Care Credit
Taxpayers who pay someone to come to their home and care for their dependent or spouse may be entitled to claim this credit. There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

Impairment-Related Work Expenses
Employees who have a physical or mental disability limiting their employment, may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.

Impact on the Standard Deduction
Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

Gross Income
Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income may be excluded from a taxpayer’s gross income.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities, or Publication 907, Tax Highlights for Persons with Disabilities, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

• Publication 3966, Living and Working with Disabilities
• Publication 907, Tax Highlights for Persons with Disabilities

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Do people who receive SSI have to pay taxes?

Q My son with autism turned 18 this summer and started receiving SSI in August. Does he file a tax return? Do you know what forms he would use? Does SS send out a w-2 of some kind? So far, we haven’t received anything.

A. If your son's only income is SSI, he would not file a tax return. SSI is not considered income for tax purposes. The Social Security Administration does send out tax notices, Form SSA-1099, to people who need to report this on their tax returns. Your son should not receive the SSA-1099, and you don't need to be concerned about filing a tax return. By the same token, recipients of SSI are not eligible for the 2008 tax stimulus payment, nor the 2009 credit for any unreceived stimulus payment.