IRS Efile Tax Information

Taxpayers who e-file can have their charitable donations matched

2005-01-10T17:56:00.000-08:00

Easy-Efile, LLC has announced a partnership with EFILE4CHARITY.COM which will allow users who e-file their federal taxes through the Efile4Charity.Com web site to specify an amount of the fee that that would like to donate to a charity of their choice. Easy-Efile, LLC will match the amount of the donation. For example, the normal fee for the tax efile service is $12.95. If a user chooses to donate $3 to the United Way, the user will be charged $15.95, and Easy-Efile, LLC will make a $6 donation to the United Way. Users of Efile4Charity.Com will use the fast, easy, and secure Easy-Efile.Com web site to submit their federal income taxes. This new program offers a choice of five charities: American Red Cross, United Way, March of Dimes, American Heart Association, and American Cancer Society.

Are you a teacher?

2004-12-18T13:55:00.000-08:00

Congress has extended the credit that K-12 teachers can take for purchasing supplies for their classes. If you are a K-12 teacher, you can get up to a $250 credit just for saving your receipts. There are no extra forms to fill out -- just one question on the easy Easy-Efile.Com interview.

Just be sure you save your receipts.

Easy-Efile announces discount coupon code for first time tax filers

2004-11-30T16:08:00.000-08:00

Are you a first time income tax filer? If so, Easy-Efile.Com has announced a special coupon code to encourage you to efile.

enter the coupon code FIRST and receive your efile service for just $9.95

Of course, Easy-Efile, LLC, respects your privacy and offers a 100% satisfaction guarantee.

$73 Million in Refund Checks Go Undelivered

2004-11-22T14:52:00.000-08:00

WASHINGTON — The Internal Revenue Service is looking for 87,485 taxpayers whose income tax refund checks could not be delivered. Checks totaling more than $73 million can be reissued as soon as taxpayers correct or update their addresses with the IRS.

"If we owe you money, we'd like to get it to you," said IRS Commissioner Mark W. Everson. "All you have to do is tell us where you are. Our Web site makes it easy for taxpayers to track their undelivered refund checks."

"Where's My Refund?" on IRS.gov provides information about refunds and is available from the IRS home page. To use it, taxpayers enter information that includes their Social Security number, filing status (such as single or married filing jointly) and the refund amount shown on their 2003 tax return. When the information is submitted online, taxpayers see Web pages that show the status of their refund and, in some cases, instructions to resolve potential account issues.

“Where’s My Refund?” was developed through the IRS Business Systems Modernization program and delivered in the summer of 2002. Taxpayers used the online tool nearly 24 million times to track their refunds in 2004.

The number of undeliverable checks decreased this year by 5,325, but the average refund, $836, increased compared with last year’s average of $722.

Taxpayers can avoid undelivered refund checks by having their refunds directly deposited into a personal checking or savings account. Direct deposit also guards against theft or lost refund checks. The option is available for both paper and electronically filed returns. More than 49 million taxpayers chose to direct deposit almost $120 billion in refunds this year. The number of direct deposit refunds was up 10.8 percent from last year.

Refund checks go astray for reasons that can vary with each taxpayer. Often, it’s because a life change causes an address change. If taxpayers move or change their address and fail to notify the IRS or the U.S. Postal Service, a check sent to their last known address is returned to the IRS.

Taxpayers who have moved since filing their last tax return can ensure the IRS has their correct address by filing Form 8822, Change of Address, with the IRS. Download the form or request it by calling 1-800-TAX-FORM (1-800-829-3676).

Those without access to the Internet, who think they may be missing a refund, should first check their records or contact their tax preparer before calling the IRS toll-free assistance line at 1-800-829-1040 to update their address.

Taxpayers who use online services like Easy-Efile.Com are less likely to have missing refunds because most tax returns are direct deposited right into checking/savings accounts - and taxpayers know exactly when to expect their refunds. Normally just 9-14 days after they submit their returns.

Would It Help You To Itemize Deductions on Form 1040?

2004-11-16T18:44:00.000-08:00

Would It Help You To Itemize Deductions on Form 1040?
The Easy-Efile tax software files the 1040A tax form. This form is a great alternative for taxpayers who want more credits than the 1040EZ form offers, but don't have taxes complicated enough for the 1040 "long form"

The most common reason to file the "long form" is if you want to itemize your deductions. Itemized deductions include amounts you paid forstate and local income taxes, real estate taxes, personal property taxes, and mortgage interest. You may also include gifts to charity and part of
the amount you paid for medical and dental expenses.

You would usually benefit by itemizing if your itemized deductions are more than the values below —

Single
•Under 65 •$4,850
•65 or older or blind •6,050
•65 or older and blind •7,250

Married filing jointly
•Under 65 (both spouses) •$9,700
•65 or older or blind (one spouse) •10,650
•65 or older or blind (both spouses) •11,600
•65 or older and blind (one spouse) •11,600
•65 or older or blind (one spouse) and
65 or older and blind (other spouse) •12,550
•65 or older and blind (both spouses) •13,500

Married filing separately*
•Your spouse itemizes deductions • $0
•Under 65 •4,850
•65 or older or blind •5,800
•65 or older and blind •6,750

Head of household
•Under 65 •$7,150
•65 or older or blind •8,350
•65 or older and blind •9,550

Qualifying widow(er) with dependent child
•Under 65 •$9,700
•65 or older or blind •10,650
•65 or older and blind •11,600

Easy-Efile Recommends BankRate as All Around Source of Tax Information

2004-11-01T14:57:00.000-08:00

After searching a number of non-IRS web sites for the best tax information, Easy-Efile, LLC has recommended BankRate.Com as the place US Taxpayers should go first for general tax information. Of course, the IRS Web Site is the ultimate source of information, however, BankRate does an excellent job of condensing and summarizing information.

12 tax-filing tips for college students

2004-11-01T14:52:00.000-08:00

From BankRate.Com

A dozen tax tips for college students

If you're in college, doing your taxes feels like one more final exam. But there's one big difference. This grade is measured in cash.

With a little research and time, you can ace this test and maybe even earn a nice check in the process. Here are 12 tips to help you over the rough spots and make this tax exam a little easier.

1. File
Sure, you might make too little money to file, but if you've had money withheld from paychecks, you've got a refund coming. "The most common error is that people don't realize 'it could make a lot of sense for me to file even if I don't have to,'" says Mark Oleson, director of the Financial Counseling Clinic at Iowa State University.

2. Start early
Even if you haven't received your W-2s, your final pay stub will have the pertinent tax information, such as your income and how much was withheld. You also can go online and download state and federal forms you'll need. Taking an advance look at your tax situation will help you know which issues might apply to your return.

Think you might need a little help? It's probably closer than you think and possibly free. Most college accounting departments have students offering free tax help so they can get some practice with real-life returns. If you haven't seen ads around campus, contact the accounting or business department and find out how you can get some advice. The Internal Revenue Service also offers in many communities Volunteer Income Tax Assistance sites where you can go to get help from IRS volunteers, says Oleson.

Remember, though, the closer you get to April 15, the longer the wait for help. Jace Sanders, a financial advisor for Albuquerque-based Essential Financial Planning Inc., still regrets waiting until the last minute the first time he sought on-campus help in college. He stood in line for two hours. But it was worth the time, he says. "They advised me of the Hope Credit."

"The sooner you start, the better off you'll be," advises Oleson. "If you have a tight spring schedule and can't talk to someone for three weeks, saying that on Feb. 1 is a lot different than saying that in April."

Remember: You can start early using an online service like Easy-Efile.Com and finish your return any time you want!

3. Give yourself a weekend
No, filling out your forms won't take that long. But if you allow a weekend, you'll have time to take a few breaks when you get tired and still be able to double check the numbers before you mail that return.

Sanders says his first college return took the better part of a weekend. "I got off work Friday, and Monday I was still finishing it up," he says. Even so, he neglected his earned income credit. "And the IRS isn't going to say, 'Here's some extra money you want to take.'"

Oleson recommends you take a leisurely weekend to do your returns. Then take the next week to seek any outside help and ask more questions. Next weekend, check your numbers again and send it.

HINT: Onloine services like Easy-Efile.Com do all of the math for you, and you can generally finish in less than 30 minutes!

4. Practice on paper
Even if you're filing electronically, many students find it's more efficient to fill out the paper forms and work out the bugs before they go online to file, says Oleson.

Our experience at Easy-Efile.Com is that this step is not necessary!

5. Take extra credit
These days, college students (or parents paying college tuition) are getting a little help from the government in the form of credits and deductions. While there are three major ones, students (or their parents) get to select only one per student. And whoever claims the student as a dependent is the one who is eligible for the credit. Pick the one that best suits your family and situation:

Hope Scholarship Credit -- Gives you a tax credit for up to 100 percent of your first $1,000 in tuition and fees and up to 50 percent for the second $1,000. The maximum credit is $1,500 and it applies to the first two years of college only.
Lifetime Learning Credit -- Gives you a tax credit equal to 20 percent of your tuition, room, board and expenses up to $10,000. The credit maximum is $2,000.
Higher education expenses deduction -- This deduction is for up to $3,000 this tax year, is available to families with adjusted gross income up to $130,000, and you don't have to itemize to claim it. The downside: Deductions usually give you less bang for your buck than credits. You get to subtract a credit amount from the actual tax you owe, whereas a deduction reduces the income you pay tax on. So in this case, even if you have $3,000 in expenses you can claim on your tax return (at the bottom of page 1 of your Form 1040), in reality this deduction would at most produce a $750 reduction in your tax bill if you're in the 25 percent tax bracket.

6. Understand your family's financial situation
Talking to mom and dad about money is almost as difficult as talking to them about sex (and just about as much fun). But you need to know a little about their financial picture to plan who should claim you as a dependent and possibly use your education credit or deduction.

If your parents are paying more than 50 percent of your expenses, they are entitled to list you as a dependent on their taxes.

Also keep in mind that the available education tax credits will wipe out taxes that you owe, but they won't generate a refund. If you're not making a lot of money and don't owe any taxes, these credits can't help you. And the value of a deduction (for example, the higher education expenses deduction) increases with your tax load, making it much more valuable to someone in the 35 percent bracket (your folks) than someone in the 15 percent bracket (you). So unless you expect to owe a bundle, chances are your parents will get more out of a credit or deduction than you will.

Sanders recalls one family's innovative solution. The parents wanted to claim their daughter as a dependent and were fully qualified to do so, but she was dead set against it. She had her eye on a $200 refund, while the parents were looking at saving thousands through a dependent exemption and education tax credit. It all worked out when the parents took the dependency claim and tax credit and agreed to make a couple of car payments for the daughter.

"It's not huge dollars, but it's very complicated," says Doug Stives, CPA and partner in The Curchin Group. "Do what you're going to do, but understand you want to coordinate with Mom and Dad."

7. Don't automatically take the EZ route
File a 1040EZ and the form automatically assumes you will claim yourself as a dependent, says Stives. But if your parents make the same claim, both of you will get letters from the IRS. If you've already filed when you learn your parents plan to claim both you and your education credits, file a corrected return.

That's exactly why 1040-A software like Easy-Efile.Com is perfect for college students!

8. Determine where you live
Sounds obvious, right? Not when it comes to taxes. If you're going to college in one state and spending summers at home in another, you could have two states vying for your tax dollars.

The qualifications for residency "depend on the state," says CPA Barry Picker, author of "Barry Picker's Guide to Retirement Distribution Planning." But in some situations, you could be considered a full-time resident in two places and be required to pay both, he says.

Check out state taxes roundup for additional information, as well as forms you can download.

9. Nail down your tuition money's origin
It could make a difference in your taxes. For instance, if any of your tuition bill was paid with money from a 529 account or Coverdell education savings account, you can't count those expenses in your total education debt when you try to recoup an education credit or deduction. Since Coverdell and 529 money accumulates tax-free, the government has already given you a tax break on those funds.

"Usually, people don't have enough in a Coverdell or 529 to pay the whole thing, so that's not an issue," says Picker.

If your tuition is coming from unsubsidized loans, you can deduct up to $2,500 in interest, says Oleson.

And while most financial planners will tell you that grant and loan money is tax-free, there are always exceptions. "A grant that includes room and board is technically taxable," says Stives. Read the fine print carefully for any money you take so you're prepared come tax time.

10. Watch your income
If you rely on need-based grants or loans, keep an eye on your income throughout the year. It's smart to leverage your funds so that you can qualify for every tax advantage. But you don't want to outfox yourself and lose tuition money, either. Best bet: Check with your financial aid office before you do anything, such as taking a summer job or putting stocks in your name, that might affect your scholarship standing, says Oleson.

Also be wary of claiming yourself as a dependent if you want to stay on your parents' insurance, says Stives. While the two things seem unrelated, an insurance company could use your independent status as justification to deny your health claims, he says.

11. Be careful with work-study arrangements
These programs are taxable. Many colleges and universities issue students checks and take the proper withholdings. If you're not getting a check, make sure that you're putting some money aside for April 15. And if your school simply gives you a break on tuition in exchange for your work, your "income" is taxable. Talk to the director of the program for details.

Don't panic if the IRS sends you a letter

2004-10-20T13:47:00.000-07:00

From MSN Money

By Jeff Schnepper

Let's pretend that you've just received a letter from the Internal Revenue Service.

Relax. Most letters from the IRS involve minor issues. It's possible that you made an arithmetic error on your return and the IRS actually owes you money. Alternatively, if the error was made in your favor, you might owe the IRS some money and interest. The current interest rate is 4% on an annualized basis. So if you owe $100 for one month, the interest is only 33 cents ($100 times 0.04, divided by 12). If you owed $1,000, the total interest would only be $3.30.

The biggest reason that people receive letters from the IRS is human error. Each year, more than 1 million letters are sent to people because they failed to sign their returns. Or maybe they made a mathematical error. Or even better: The IRS made the mistake. For example, in 1998, the IRS sent out apologies to 20,000 taxpayers for mistakes it made in handling their accounts.

Math errors rarely result in audits
Sometimes, the IRS errors are ridiculous. A few years ago, Kenneth Steen of Chattanooga, Tenn., expected a refund of $513. Instead, he received a letter from the IRS demanding payment of more than $300 million. An IRS official later confirmed that about 3,000 people around the nation got similar erroneous notices.

According to the General Accounting Office, about half of the 10 million notices the IRS issues each year are because the information is "incorrect, unresponsive or incomplete."

If it's a math mistake, these errors rarely lead to a full audit. Check the numbers. Sometimes, the IRS misreads one of your numbers or the number is keyed incorrectly into the IRS computer. If it's wrong, send a letter with a printout of your calculations.

Mismatched interest and dividend reporting is the No. 2 cause for a letter from the IRS. Payers of interest and dividends are required to report those payments both to you and to the IRS on a Form 1099. If the amounts reported don't match the amounts on your return, you will get another letter from the IRS.

There are lots of errors here. Sometimes, the IRS will enter the Form 1099 information into its computer and erroneously keystroke the income amount or the Social Security number of the recipient. If the income isn't yours, you should get a letter from the bank or other payer and forward that letter to the IRS. If the amount is incorrect, send a copy of the Form 1099 mailed to you by the payer.

Sometimes, you may get a letter saying the income isn't reported even when it really is. I have a client who got a letter from the IRS demanding additional taxes for nine items of income that allegedly were not reported. In fact, seven were correctly reported on Schedule B on the return and the other two were accounts in the names of my client's children. I sent a copy of the Schedule B, with the items numbered and circled, and the issue was resolved.

Never represent yourself
What if it's the big one, the tax audit? An audit is merely a process where the IRS asks you to substantiate the numbers on your tax return. For example, if you claimed a charitable deduction of $750, the IRS would want to see canceled checks and receipts totaling $750. If you show up with $800 in substantiation, you get a refund; if your substantiation is less than $750, you owe money.

Once you know what the IRS wants, call your tax professional. Never represent yourself at your own audit. You may know what to say, but you don't know what not to say. If the audit is simple -- to prove your charity and interest deductions, for example -- you can do it yourself by mailing in copies of your substantiation. Otherwise, for all in-person audits, I strongly suggest professional representation. In either case, if you have the records, you needn't worry.

Actually, if you are audited one year with a refund or no change, it decreases your odds of being audited in subsequent years. In fact, if you are audited on the same items two years in a row with no additional taxes due, the IRS manual specifically recommends that they not audit you on the same items for the third year.

Almost all of the letters received from the IRS are computer-generated. This means that if an input error was made, it's now your problem. But in almost all cases, a well-drafted letter with appropriate substantiation will win the day.

Note that using the IRS efile program can reduce the odds of receiving an audit or letter from the IRS because most math errors are caught before your tax return is accepted by the IRS.

The tax man and the debt collector team up

2004-10-20T13:44:00.000-07:00

Do you owe the IRS money? If so, you may be interested in an article from MSN Money:

The federal government could pay for the entire war in Iraq -- and have more than $100 billion to spare -- if only the IRS could collect all the back taxes that are currently owed.

But the agency doesn’t currently have the staff to fully pursue the debt that’s considered collectible, which the IRS estimates constitutes up to $112 billion of the total $280 billion owed.

So Congress, at President Bush’s urging, has given the IRS the ability to hire private debt collectors as part of the American Jobs Creation Act of 2004. The collectors will get to keep up to 25% of any tax debt they manage to reap.

If all this doesn’t give you the chills, then perhaps you don’t know enough about the state of the debt collection industry today.

Industry rife with problems
It’s a Wild West kind of world, with some law-abiding companies and a whole host of cowboys that don’t care what laws are broken as long as they get their money. Make that idea pay.
Win $25,000
and change the world.

And it’s not just deadbeats who get victimized. Collectors increasingly are targeting innocent consumers, trying to browbeat them into paying debts they don’t owe. (See "Sleazy new debt-collection tactics” for more details.)

The Federal Trade Commission last year received more complaints about debt collectors -- 34,543 -- than about any other industry, according to an agency report to Congress. The FTC believes those who complain are just a fraction of the total number of consumers who encounter deceptive, abusive and illegal collection practices, such as:
Calling at all hours of the day and night.

Calling the borrower at work.

Using obscene or abusive language.

Threatening jail time or other actions the collector can’t legally take.

Revealing the alleged debt to third parties, including employers, parents, children, friends and neighbors.
“Collecting taxes is such a fundamental function of the government. Do you really want to turn that over to (private) companies, some of which don’t have the best track record?” asked Chi Chi Wu, a staff attorney for the National Consumer Law Center. “And if the debt collector engages in abuse, what does that do to the taxpayer’s trust in the government?”

The collection industry insists that there won’t be abuses. The companies that get the contracts will be carefully screened and tightly controlled by the IRS, said Rozanne Andersen, general counsel for ACA International, which represents collectors.

Andersen said consumer rights may even be better protected when dealing with private collectors. Unlike the IRS, private debt collectors must abide by numerous state and federal laws regulating collections, including the Fair Debt Collection Practices Act.

The industry points to other government agencies that use private collections as an example of how well the new system could work. The Department of Education has long used private companies to help collect overdue student loan debt, and many states employ collectors for their back taxes.

Therein, however, lie the problems.

Dirty tricks and tactics
“The experience in the student loan context is not the shining success many claim it to be,” consumer advocate Deanne Loonin told Congress last year, “but a legacy of many borrowers being harassed, deprived of their lawful rights and options, and misled.”

Among other tactics, private student loan collectors have charged excessively high collection fees, coerced consumers into payment plans they couldn’t afford, threatened to seize disability payments and other assets protected by law, and lied by pretending to be Department of Education employees, said Loonin, another staff attorney for the National Consumer Law Center.

Collection laws are complicated, as are the rights and remedies available to student borrowers who fall behind on their payments. A major problem is that many collectors have such high turnover that their employees are never properly trained in these intricacies.

“Do you think the tax context is going to be any simpler?” Wu asked. If collectors aren’t properly trained, “they won’t be able to provide the taxpayer with all their rights.”

Privacy at risk
There’s another issue: privacy. The collection industry’s Andersen said the IRS will reveal only limited information to debt collectors, rather than the taxpayers’ entire file.

But collectors aren’t always careful with the private information they receive. Earlier this year, a television station in Columbus, Ohio, WBNS, discovered an unlocked dumpster full of unshredded documents containing private financial information on 449 people outside a collection agency charged with pursuing student loan and state tax debt.

The company, GC Services, claimed it had been set up by a disgruntled former employee. But the station found other employees who insisted that confidential documents were regularly discarded, rather than shredded. The station reported that the Ohio Attorney General severed GC Service’s contract with the state after the incident -- and that the dumpster behind the collection office is now locked.

It may not be worth it
Finally, there’s efficacy -- will the risks involved be justified by the reward?

The collection industry makes the argument that getting deadbeats to pay what they owe will ease the burden on the rest of us law-abiding, taxpaying citizens.

The problem is that actually collecting this money is going to be pretty tough.

Government debts that are turned over to private collectors often aren’t the easiest to collect. After all, tax agencies tend to have some powerful weapons, like refund and wage garnishment, that allow them to easily pursue the lowest-hanging fruit. The debtors that are turned over to collectors are often far more elusive.

California, for example, has referred more than $2 billion in bad tax debt to private companies in the past 17 years -- of which about $50 million, or less than 3%, was actually recovered. The state paid collectors commissions of over $5.5 million, said California Franchise Tax Board spokeswoman Denise Azimi, and incurred an unknown amount of additional staffing costs to support the private collection program.

At best, the new IRS program would bring $1.4 billion into the Treasury’s coffers over the next decade, according to congressional estimates. That’s barely a drop in the federal tax bucket. Given the potential for abuse and violations of privacy, you have to wonder if it’s really worth the effort.

Are you looking for tax forms?

2004-10-20T13:14:00.000-07:00

Easy-Efile.Com has made a list of US individual income tax forms and tax form instructions available on their web site. The list includes current year tax forms, as well as links to the IRS web site for previous tax years.
The list is available at http://tax-forms.easy-efile.com/static/forms.html.

Earned Income Tax Credit (EITC) - Should I Apply?

2004-10-19T12:31:00.000-07:00

From IRS Web Site

Find out if you are eligible for the Earned Income Tax Credit (EITC) by answering a few simple questions and providing basic income information. The IRS Wizard will also assist you in determining your correct filing status, determining whether your child(ren) meets the tests for a qualifying child, and, coming in January, estimate the amount of credit that you may receive. If you need more information regarding the EITC, additional resources are available.

Click Here to visit the application on the IRS web site.

Should I e-file or paper file?

2004-10-18T16:28:00.000-07:00

From About.Com

You should e-file. E-filing allows you to receive your refund more quickly, and also cuts down on the number of data entry errors.
If you e-file, you can receive your refund via direct deposit in 10-14 days. If you paper file, it takes 5 -7 weeks to receive the same refund via direct deposit.

When you file a paper return, an IRS employee sits down in front of a computer and enters the information. When you e-file, the return is transmitted directly to the IRS. The less people typing in data, the lower the likelihood of clerical errors.

The only exception would be if you have attachments or forms that are not allowed to be filed electronically. For example, if you are sending in an estimated W2 because your employer went out of business, you have to file manually.

Also, if you are filing taxes for prior years, you cannot file electronically. The tax returns for any year before 2004 have to be mailed to the IRS.

E-filing is included in the fee at most tax preparation services. If you do your own taxes, you might have to pay an additional fee to e-file.

What if you discover an error AFTER you file your taxes?

2004-10-18T14:14:00.000-07:00

From IRS Web Site

Oops! You’ve discovered an error after your tax return has been filed. What should you do? You may need to amend your return.

The IRS usually corrects math errors or requests missing forms (such as W-2s) or schedules. In these instances, do not amend your return. However, do file an amended return if any of the following were reported incorrectly:

Your filing status
Your total income
Your deductions or credits
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A, 1040EZ or electronically-filed return. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, use a separate 1040X for each one and mail each in a separate envelope to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.

The Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. There is an area on the back of the form where you explain the specific changes being made on the return and the reason for each change.

If the changes involve another schedule or form, attach it to the 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Form 1040 Schedule EIC to show the qualifying person's name, year of birth and Social Security number

If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax, you should file Form 1040X and pay the tax by April 15, to avoid any penalty and interest.

Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.

You may download Form 1040X from the IRS Web site or order it by calling toll free 1-800-TAX-FORM (1-800-829-3676).

You can also use 1040X.COM for help with the 1040X.

Educators Should Save Receipts for Reinstated Deduction

2004-10-18T14:12:00.000-07:00

From IRS Web Site

WASHINGTON — The Internal Revenue Service today advised teachers and other educators to save their receipts for books and other classroom supplies. They will be able to deduct up to $250 of such expenses again this year, following recently-enacted legislation.

The Working Families Tax Relief Act of 2004 reinstated the educator expense deduction, which had expired at the end of last year, for both 2004 and 2005. Expenses incurred any time this year may qualify for the deduction, not just those since the Act was signed on October 4.

The deduction is available to eligible educators in public or private elementary or secondary schools. To be eligible, a person must work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide.

An educator may subtract up to $250 of qualified out-of-pocket expenses when figuring adjusted gross income (AGI). This deduction is available whether or not the taxpayer itemizes deductions on Schedule A.

The IRS suggests that educators keep records of qualifying expenses in a folder or envelope with a label such as “Educator Expense Deduction,” noting the date, amount and purpose of each purchase. This will help prevent a missed deduction at tax time.

For more information, call the IRS Tele-Tax system toll-free at 1-800-829-4477 and select Topic 458

1040A and 1040EZ now support income up to $100,000

2004-10-18T14:02:00.000-07:00

Great news for taxpayers who do not want to file the 1040 "long form." The IRS has now extended the capability of the 1040EZ and 1040A forms to cover taxpayers with incomes up to $100,000 per year. Previously, the limit was $50,0000. Now, even more taxpayers can use easy online web sites to efile their taxes in less than half an hour and get their tax refunds as quickly as 9 days.

Recent Changes May Lower Your 2004 Taxes

2004-10-18T13:18:00.000-07:00

From IRS Web Site

Some recent tax law changes are effective for the 2004 Tax Year. If these items affect you, be sure to get the details when you prepare your tax return early next year.

Educators’ deduction — this had expired at the end of 2003, but was restored for two more years. IR-2004-124 has more information.

Clean fuel vehicle deduction — the maximum amount of this deduction was scheduled to drop this year and next, but has been retained at the $2,000 level through 2005. IR-2004-125 has information on this deduction and the newest vehicle to qualify for it.

Child Tax Credit — Taxpayers with a credit amount more than their tax could get a refund of the difference, up to 10% of the amount by which their 2004 taxable earned income exceeds $10,750. This percentage was raised to 15% for 2004, meaning a larger refund for many of these taxpayers.

Combat Pay — Some military personnel receiving combat pay get larger tax credits because of two law changes. The new law counts excludable combat pay as income when figuring the Child Tax Credit and gives the taxpayer the option of counting or ignoring combat pay as income when figuring the Earned Income Tax Credit. Counting combat pay as income when calculating these credits does not change the exclusion of combat pay from taxable income.

For more about the effect of excludable income on the EITC, see Q&A-37 in Miscellaneous Provisions - Combat Zone Service.

For more details on combat pay, see Military Pay Exclusion – Combat Zone Service.

Information on Filing Your State Income Taxes

2004-10-16T14:19:00.000-07:00

Many taxpayers are confused when it comes to state income taxes. Federal taxes can be complicated enough. Add to that 50 different states - each with different tax laws and tax forms, and even the best and brightest can get confused.
Fortunately, there are several online sources that can help you with your state taxes. Most states offer free online tax filing directly through their Department of Revenue.
Two excellent sites are:
http://www.taxadmin.org/fta/link/forms.html
http://moneycentral.msn.com/taxes/taxinfo/statepub.asp

Cautions Related to the Free Efile Alliance

2004-10-15T08:36:00.000-07:00

Many people are tempted to efile their income tax return using the free efile alliance. While this can be a good option for many, please be careful - nothing is ever truly free! A good "paid" service (like Easy-Efile.Com) can actually end up costing you less that a service that reports being free. Plus, consider the value of your time. Easy-Efile has the fastest online tax software available... and they prove it.

From the National Business Association

Concern about refund loans remains
When it was announced, consumer advocates worried that free filing would simply be used as bait by participating companies to sell other financial products to unsuspecting, inexperienced and in particular low-income taxpayers.

"I would have liked the Free File companies to be as concerned about taxpayer privacy last year when we objected to marketing tactics, such as telling [filers] that they're going to have to pay extra to do state returns after they've already used the program," says Jean Ann Fox, Consumer Federation of America's director of consumer protection.

When the Alliance concept was officially launched last year, Fox specifically expressed concern that "taxpayers who use these so-called 'free services' will be a captive audience for commercial tax preparers to sell outrageously expensive refund anticipation loans."

After the program had been in place for two months, the Consumer Federation of America, National Consumer Law Center, U.S. Public Interest Research Group, Electronic Privacy Information Center and Consumers Union sent a joint letter to the Treasury Department charging that such tactics were indeed in use. The consumer groups contended that tax giant H&R Block, a participant in the e-filing program, required users of its free-filing service to agree to receive information on other company offerings.

Fox and her colleagues want Treasury officials to prohibit Free File Alliance companies from promoting their other commercial products. They also urge the federal government to close a loophole in its regulations that permits tax preparers to use confidential tax information for cross-marketing efforts.

H&R Block, however, says the charges are wrong. In a statement issued following the consumer complaint last spring, the company said that its online offer, contrary to consumer group claims, does not require clients to "waive IRS privacy protections." Rather, the statement continues, taxpayers are given two chances to accept or refuse non-tax materials and no one is prohibited from using the company's service based on whether they consent to or refuse receipt of other marketing messages.

In announcing the 2004 Free File Alliance, the IRS's Lutes reiterated the program's rules regarding refund loans: "Our regulations are that folks don't represent refund advance loans as as refunds. There is nothing illegal in banking laws about using refunds as collateral. These are commercial products.

"Some companies have decided to change policies here," Lutes continued. "Taxpayers need to take a look at the offering. It is a consumer choice."

"No one is required in any way to buy any product from an alliance member to use free file," added Cavanagh. "There are a range of different options in the marketplace."

Varied eligibility rules
For now, it appears that the possibility of being further targeted by tax preparation services doesn't seem to worry some filers. Although the initial foray into government sanctioned free e-filing fell far short of the estimated 78 million taxpayers the IRS predicted would be able to use the service (less than 3 million taxpayers used the option), the agency says the program "surpassed expectations."

Part of the program's success can be traced to broader eligibility rules. In past tax-filing seasons, the tapping of the e-filing market was solely at the discretion of individual tax preparation and software companies, some of which offered free services to limited taxpayer segments. In creating the Free File Alliance, the IRS asked the companies to examine ways to expand their free-filing customer base.

It appears to have worked. A look at the criteria of the participating companies indicates free help is available to a broader range of taxpayers. Although the majority of the free e-filing services target lower income taxpayers, companies also offer a variety of eligibility guidelines.

Others still pay
Through June 2004, the IRS reports that almost 57 million taxpayers have filed by computer, with most of them paying for the service.

Why? The complexity of and continual changes to the tax code have pushed many previously reticent e-filers toward software and online tax solutions.

"Most taxpayers use assistance to do their taxes," said Lutes. "Seventy percent do so with personal or software help and that number is growing 16 percent a year absent this agreement.

"But when people try [e-filing], they tend not to go back to paper. E-filers give the agency a 20 point higher customer rating than taxpayers who interact in traditional ways."

And the IRS added that the ultimate goal of the Free File Alliance isn't to put paid services out of business.

"We will have on the [IRS Web] site listings for both free and paid products," said Chris Smith, a senior adviser at the U.S. Treasury Department. "People can make informed choices.

"We'll have the best and brightest on this page in the hopes it will expand the number of people who can file for free. But people can still pay -- go to a CPA, buy software in a store -- if they want. This is just another choice."

Tax tip: Earned income credit is a money-back break for some low-income taxpayer

2004-10-13T17:23:00.000-07:00

Tax tip: Earned income credit is a money-back break for some low-income taxpayer

Which tax form should I use?

2004-10-13T13:34:00.000-07:00

From Bankrate.com

People hate filling out tax forms almost as much as they hate forking over dough to Uncle Sam.

That's why you should use the simplest tax return you can.

The EZ is the shortest and simplest form, the 1040A is a bit more complex and the long 1040 is the most detailed and potentially difficult. But even though your tax life is simple and straightforward, it might be worth your while to investigate the other two forms. Why? The longer the form, generally the more opportunities for tax breaks.

How the EZ could cost you

Take the case of Joe P. Taxpayer. Joe finished college last year and got his first full-time job making $30,000. He's single, renting and has no investment income. A perfect 1040EZ filer, right? Sure, if you're Uncle Sam, since Joe will overpay his taxes by using the short form.

Why? The 1040EZ doesn't offer Joe some valuable tax breaks found on the other two returns.

Joe has a student loan. By filing the 1040A he can subtract from his income the $2,500 interest he paid on that debt. He can't do that with the shortest form. Joe also started planning for his retirement by putting $3,000 into a traditional IRA. Since his new employer doesn't offer a company retirement plan, Joe's deductible IRA contribution can reduce his taxable income further -- but only if he files the longer form.

By choosing the 1040A over the 1040EZ, suddenly Joe owes taxes on just $24,500 instead of his full $30,000 salary. And he's dropped into a lower tax bracket -- the 15 percent range instead of the 25 percent rate -- even before he takes the standard deduction every taxpayer is allowed.

Here are the basic guidelines for the three individual tax returns.

Form 1040EZ

The simplest IRS form is the Form 1040EZ. You can use this return if:

Your filing status is single or married filing jointly.

You're younger than 65; your spouse also must meet the age requirements if you file a joint return.

You have no dependents.

Your interest income is less than $1,500.

Your income, or combined incomes for joint filers, is less than $100,000.

The ease of this one-page form is appealing. But it restricts filers to claiming only the earned income tax credit, and if you've received any of that credit in advance through your employer, you can't use the 1040EZ. To take advantage of additional tax credits, you'll need to look at the other two individual tax returns.

Form 1040A

The 1040A form is the next step up the tax-form ladder. 1040A taxpayers can file using any of the five available filing statuses and can claim several other tax credits -- for example, the child, additional child, education, dependent care, retirement savings and adoption credits -- that are not available with the EZ. You also should file Form 1040A if:

Your taxable income (or combined incomes) is below $50,000.
You have capital gain distributions (as long as they don't include any qualified five-year gains), but no other capital gains or losses.

The only adjustments to your income are from deductible IRA contributions, school-related expenses you paid as an educator, student loan interest payments or higher education tuition and fees.

You do not itemize deductions.

Form 1040

Finally, choose Form 1040 if you itemize deductions or have more complex investments and other income to report. This usually means added schedules need to be filed, too.

However, the 1040 does offer more than 10 deductions you can claim right on the form itself (vs. four on the 1040A). They include, among other things, breaks for alimony payments you made, self-employment taxes you paid or moving expenses you incurred. These deductions are all on the front page of the 1040, meaning you don't have to hassle with Schedule A and its itemizing limits.

You should file Form 1040 if:

Your income or combined incomes for joint filers totals more than $100,000.

You itemize deductions.

You have self-employment income.

You received income from the sale of property.

Note that many online income tax services (like Easy-Efile.Com) specialize in the 1040A tax form -- maximizing tax credits while minimizing the work involved in the 1040 "long form". 1040A is not for everyone, but if you normally file 1040EZ, 1040A, or if you file 1040 just because that's the form your accountant likes to use, these easier 1040A services may be perfect for you.

Looking for a fast and easy online tax experience?

2004-10-13T13:27:00.000-07:00

Easy-Efile.Com has posted information on their web site (http://www.easy-efile.com/static/speed.html) demonstrating that their online tax software is, in fact, the fastest and easiest software available. 91 percent of tax year 2003 Easy-Efile.Com users completed their online tax return in less than one hour, and 34% completed in less than 20 minutes. Easy-Efile is proud to be able to offer American taxpayers these data to show that their software really is fast and easy to use.

How long does it take to drive to HR Block or Jackson Hewitt? Wait in line? Have them prepare your return? Do your taxes online with Easy-Efile.Com and be done in less than 30 minutes (60 percent of customers complete return in less than 30 minutes)

Welcome!

2004-10-12T16:37:00.000-07:00

Welcome to the IRS-EFILE Blog created and maintained by Easy-Efile, LLC. In addition to this Blog service, a full set of Press Releases and tax news is available at http://www.easy-efile.com/news (also available as RSS feed at http://www.easy-efile.com/news.rss)