Some individuals who did not get the economic stimulus payment, and a smaller number of those who did, may be eligible for the recovery rebate credit. However, most taxpayers who received the economic stimulus payment last year will not qualify for the recovery rebate credit on their 2008 federal income tax return.

An early sampling of tax returns shows about 15 percent have errors involving the recovery rebate credit. Some tax returns erroneously claim the credit, do not claim the proper amount of recovery rebate credit or mistakenly enter the amount of the stimulus payment they received on the recovery rebate credit line.

To avoid delays in tax refunds, it is critical that taxpayers know the correct amount of the stimulus payment they received last year, if any, to help determine whether they qualify for the recovery rebate credit now.

The amount of the stimulus payment will not be entered directly on the tax return. For people using a paper tax return, the stimulus payment amount will be required when completing a related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.

How to Get the Recovery Rebate Credit Right
The IRS sent taxpayers nearly 119 million stimulus payments last year. There are three ways individuals can find out how much they received:

• Check the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment.
• Go to the How Much Was My Stimulus Payment? tool that is available on the IRS Web site, IRS.gov. This can provide the correct amount in a matter of a few seconds.
• Individuals can call the IRS at 1-866-234-2942. After a brief recorded announcement they can select option one to find out the amount of their economic stimulus payment. They will need to provide their filing status, Social Security Number and number of exemptions.

With the amount of last year’s economic stimulus payment in hand, the taxpayer can then enter the figure on the recovery rebate credit worksheet or in the appropriate location when tax preparation software requests it.

If the taxpayer or preparer is using tax software, the amount of the rebate recovery credit will automatically be calculated and reported properly. If the taxpayer is using the paper method, the rebate recovery credit, as determined through the worksheet, should be reported on Line 70 of Form 1040, Line 42 of Form 1040A or Line 9 of Form 1040EZ.

For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero.

If there is any question at all as to the amount that should be reported for the recovery rebate credit, the taxpayer or preparer should enter a zero on the appropriate line above, and the IRS will determine whether a recovery rebate credit is due, and, if so, how much.

Some of the major factors that could qualify you for the recovery rebate credit include:

• Your financial situation changed dramatically from 2007 to 2008.
• You did not file a 2007 tax return.
• Your family gained an additional qualifying child in 2008.
• You were claimed as a dependent on someone else’s return in 2007 but cannot be claimed as dependent by someone else in 2008.

Stimulus Payments Not Taxable; Reports of Extensive Refund Delays False
The IRS has received a number of recurring questions involving stimulus payments and the recovery rebate credit. Here are some important tips to keep in mind:

Taxability. The economic stimulus payment is not taxable and it should not be reported as income on the 2008 Form 1040, 1040A or 1040EZ.

Refund delays. IRS personnel are aware of reports that errors in claiming the recovery rebate credit could delay tax refunds for as much as eight to 12 weeks. These reports are false. As the IRS detects and corrects return errors concerning the recovery rebate credit, refund delays are currently no longer than about one week.

One payment. In addition, the IRS notes taxpayers will receive a single refund that includes any recovery rebate credit to which they are entitled. The IRS will not be issuing separate recovery rebate credit payments.

Refund amounts. The IRS reminds taxpayers they should not use their regular refund from last year in calculating the recovery rebate credit. Some taxpayers may be confusing their regular tax refunds with the economic stimulus payment they received when completing their 2008 tax return.

Direct Deposit Requests. Taxpayers who request a direct deposit will receive the refund in the form of a direct deposit even if errors are detected.

For more information, visit the Recovery Rebate Credit Information Center as well as the rebate questions and answers at www.irs.gov.

Here are six tips for finding how much you received and correctly claiming the credit on your return:

1. Get your notice. Check the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment.
2. Visit IRS.gov to find the amount. If you don’t have your Notice 1378, go to the “How Much Was My 2008 Stimulus Payment?” tool that is available on the IRS Web site, www.IRS.gov. This tool can provide the correct amount in a matter of a few seconds.
3. Call the IRS at 1-866-234-2942. If you don’t have Internet access, call the IRS.  After a brief recorded announcement, select option one to find out the amount of your economic stimulus payment. You will need to provide your 2007 filing status, Social Security Number and the number of exemptions claimed on the tax return.
4. Keep the amount handy. With the amount of last year’s economic stimulus payment in hand, you will be able to enter the figure on the recovery rebate credit worksheet or in the appropriate location when your tax preparation software requests it. This number will not appear on your actual tax return but is vital to ensure the accurate determination of the recovery rebate credit amount.
5. Trust the software or the worksheet to get it right.   Tax preparation software will automatically and correctly calculate the amount of the rebate recovery credit for you. The software will also properly report the credit on your tax return. If you are filing a paper return, the worksheet will guide you in calculating the proper amount of the credit.  The recovery rebate credit should be reported on Line 70 of Form 1040, Line 42 of Form 1040A or Line 9 of Form 1040EZ.  In order to avoid an error, use extra care when responding to the software questions or when completing the worksheet.  Do not enter the stimulus payment directly on your return.
6. Most taxpayers won’t qualify for more.  For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero because they have already received the money as a stimulus payment.  If you complete the worksheet, and there is any question about the amount that should be reported for the recovery rebate credit, you or your preparer should enter a zero on the appropriate line above.  For most people this will be the correct amount, and for the others the IRS will determine whether a recovery rebate credit is due and, if so, how much. If the IRS calculates a different credit amount than is reflected on your return, you will receive a notice that alerts you to the change.

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 www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

The Hope Credit

• The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.
• It can be worth up to $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student, per year.
• You’re allowed a credit of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area).
• Each student must be enrolled at least half-time for at least one academic period which began during the year.
•  The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.

The Lifetime Learning Credit

• The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
• If you qualify, your credit equals 20% (40% if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.

You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim either credit if you claim a tuition and fees deduction for the same student in the same year. To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The parent or the student may claim the credit, but not both. Students who are claimed as a dependent cannot claim the credit.

These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).

WASHINGTON – The Internal Revenue Service is offering a daily series of Tax Tips for the 2009 federal tax filing season that began this month.

Tax Tips offer concise, useful information on topics affecting millions of taxpayers.  More than 70 tips on federal taxes will be available with a new one for each business day until the April 15 tax-filing deadline.

Tips are available as easy-to-understand text as well as several audio files for podcast.

Sample text-based Tax Tip topics include:

    * Choosing a tax preparer

    * Where you can get free tax help

    * How e-file can make filing easier and getting you your refund faster

    * How to file for an extension or to amend your return

    * What tax records to keep

    * First-Time Homebuyer Credit

Taxpayers can receive new text-based Tax Tips via email when they are published by subscribing through the e-News Subscriptions page on IRS.gov.  When subscribing, the taxpayer will receive a confirmation message by e-mail that he or she must respond to confirm the subscription.   Other list serves available on IRS.gov include Guidewire, which distributes IRS guidance, and Newswire, which distributes IRS press releases.

• File your tax return electronically. This will be much quicker than using the paper forms and mailing them to the IRS.
• Include all of the required Social Security numbers for each person listed on your tax return. This includes yourself, your spouse, your children or dependents and anyone listed in order to claim the Child and Dependent Care Credit or Earned Income Tax Credit.
• Go through and double-check all of the numbers and figures on your return. Don’t just fill it out and assume it’s correct. Mistakes are easy to make, especially when you are facing a filing deadline.
• If you are using a paper tax form, make sure you sign it where required. And if you are filing with a spouse, make sure your spouse also signs the return where required. If you paid someone to prepare the return for you, that person must also sign the return.
• Don’t forget to attach all required schedules/payments to your return. If you are sending a payment with your return, make the check out to “United States Treasury” and enclose it with the tax return or Form 1040-V, Payment Voucher. Include on your check, the taxpayer’s Social Security number, daytime phone number, the tax year and the type of form filed.
• Send your return or your request for an extension by the April 15^th deadline. Just remember, if you are filing for an extension, that is an extension to file your return and not an extension to pay what you owe.

For more helpful information, you can visit the IRS website at www.irs.gov.

Whether you are filing an individual or business return, you can use EFTPS to make payments on the Internet or by phone. You can make your 1040 quarterly Estimated Tax Payments or even corporate, excise and employment taxes using EFTPS.

You can even schedule these payments up to 365 days in advance for individuals and 120 days for businesses. What this means is that you can avoid missing important deadlines which could result in costly penalties. These scheduled payments can also be canceled up to two business days before the scheduled payment due date.

And this service is available 24 hours a day, seven days a week.

To enroll in EFTPS, simply go to www.eftps.gov. After you enroll, you will receive confirmation by mail. You will also receive an EFTPS Personal Identification Number with instructions for activating your enrollment.

For more information, visit www.eftps.gov or call EFTPS Customer Service at 1-800-555-4477.

Whether the IRS can tax gifts depends on whether you are giving or receiving the gift. If you give any one person a gift or gifts that are valued at more than $12,000, you are required to report this to the IRS, and you may have to pay taxes on it. However, if you have received the gift, you do not have to report it or pay gift or income taxes on it.

These gifts can include anything from money to property. And be careful when selling something. If you sell it for less than its actual value, it may be considered a gift.

There are some gifts that are not taxable, such as the following:

• Tuition or medical expenses you pay directly to an educational or medical institution on someone’s behalf.
• Gifts to your spouse.
• Gifts to a political organization.
• Gifts to charities.

Married couples have slightly different rules. Both you and your spouse can give separate gifts up to the annual limit of $12,000 to the same person without it being taxable. And, with your spouse’s consent, you can make a single gift up to $24,000 to the same person without it being taxable.

For more information on Gift Taxes, you can visit www.irs.gov.

If you receive alimony payments from your ex-spouse, that money is taxable to you in the year you receive the payments. And since no taxes are withheld from alimony payments, you may need to make estimated tax payments throughout the year or increase the amount you have withheld from your paycheck.

On the other hand, if you are making alimony payments under a divorce or separation instrument, you can deduct the payments if certain requirements are met. Payments that are not required by a decree or agreement do not qualify as being deductible.

Child support is different, however. Child support payments are not deductible, and child support payments received are not taxable.

Now, if you paid or received alimony, you must use Form 1040, not 1040A or 1040EZ. And, if you received alimony payments, you must give the person who paid the alimony your Social Security number or you may be subject to a $50 penalty.

For more information about alimony payments and how they affect your tax return, you can go to www.irs.gov or call 1-800-TAX-FORM (1-800-829-3676).