Lafayette Online » First-time homebuyer

IRS Free File now available to almost all taxpayers

Carolyn Shelby — Fri, 15 Jan 2010 18:03:21 +0000

WASHINGTON, DC — The Internal Revenue Service and its private-sector partners are making Free File available starting today. Most taxpayers can have free use of helpful tax preparation software and free electronic filing of the federal tax returns.

There are many new tax breaks this filing season and Free File software can make it easier for people to find all the credits and deductions they are due. Taxpayers must go through www.IRS.gov homepage or www.IRS.gov/freefile to access the free options.

“If cost is a barrier or if you’re wondering about free options, check out IRS.gov for Free File options. There’s something there for almost everybody,” said David R. Williams, director, Electronic Tax Administration and Refundable Credits. “Free File is a great choice for either the novice taxpayers who need some assistance or the experienced taxpayers who prefer to do the work themselves. It’s fast; it’s safe; it’s free.”

The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service (IRS) and the Free File Alliance LLC, a group of approximately 20 private sector tax software companies.

Free File comes in two formats: Traditional Free File, which is available to taxpayers who meet specific criteria and Free File Fillable Forms, which is available to almost all taxpayers.

Approximately 70 percent of the nation’s taxpayers, some 98 million people who meet the $57,000 income limit, are eligible for the user-friendly Traditional Free File. Traditional Free File provides step-by-step software help that asks simple questions and puts the answers on the correct tax forms.

Traditional Free File can help taxpayers identify new tax credits or deductions under the American Recovery and Reinvestment Act for which they may be eligible. There are many new and expanded benefits for energy conservation, new car purchases, college tuition and first-time homebuyers.

Taxpayers must go through IRS.gov to access Free File. Each company sets its own eligibility criteria. For example, generally, eligibility criteria are based on state residency, age, income or military service. However, an individual or family with income of $57,000 will find tax preparation software they can use.

Taxpayers either can read over the company offers by clicking “I Will Choose a Company” or get a little help in making the selection by clicking “Help Me Find a Company.” With a little information, the tool will display those company offers for which taxpayers may be eligible.

Several companies offer their software in Spanish. Several also offer state tax preparation, although fees may apply. Taxpayers are under no obligation to make any purchases from the software companies.

For taxpayers who are comfortable preparing their own tax returns, there’s Free File Fillable Forms. Almost everyone is eligible for this service. There are no income limits and almost all tax forms are available.

This service provides electronic versions of IRS paper forms. Taxpayers can complete the tax forms online and file electronically. The fillable forms perform simple math functions, but do not use the question-and-answer software format. Free File Fillable Forms does not support state forms or state electronic filing.

Both Free File versions are highly popular among users. According to a recent survey, 98 percent of Traditional Free File users and 96 percent of Free File Fillable Forms users polled said they would recommend the Free File products to family and friends.

Taxpayers who use Traditional Free File or Free File Fillable Forms can enjoy all the benefits of IRS e-file – also for free.

By using the free e-file option, taxpayers also get the benefits of a fast refund, reduced error rate and a quick acknowledgement. By using e-file and direct deposit, taxpayers can get a refund in as few as 10 days. If people owe taxes, they also can control their payments and set a date such as April 15 for electronic payment. The error rate for an e-filed return is 1 percent, compared to 20 percent for a paper return. Unlike paper filers, e-filing taxpayers also will receive an acknowledgement that the IRS has received and accepted or rejected their returns.

Taxpayers who are eligible for the $8,000 or the $6,500 first-time homebuyer credit will not be able to e-file because they must attach proof of purchase to their tax return. However, these taxpayers still can use Free File to prepare their tax forms and then print and mail the returns to the IRS.

Free File is available 24-hours a day through April 15. For taxpayers who request an extension to file their federal returns, Free File will be available through October 15.

People who are interested in reviewing more information about Free File can visit www.freefile.IRS.gov. Videos on these topics also are available at www.youtube.com/irsvideos.

IRS reminds taxpayers to take advantage of Recovery Act Benefits

Carolyn Shelby — Mon, 20 Jul 2009 18:17:41 +0000

WASHINGTON, DC — With 2009 now half over, the Internal Revenue Service reminds taxpayers to take advantage of the numerous tax breaks made available earlier this year in the American Recovery and Reinvestment Act (ARRA).

The recovery law provides tax incentives for first-time homebuyers, people purchasing new cars, those interested in making their homes more energy efficient and parents and students paying for college. But all of these incentives have expiration dates so taxpayers should take advantage of them while they can.

First-Time Homebuyer Credit

The Recovery Act extended and expanded the first-time homebuyer tax credit for 2009.

Taxpayers who didn’t own a principal residence during the past three years and purchase a home this year before Dec. 1 can receive a credit of up to $8,000 on either an original or amended 2008 tax return, or a 2009 return. But the purchase must close before Dec. 1, 2009, and an eligible taxpayer cannot claim the credit until after the closing date. This credit phases out at higher income levels, and different rules apply to home purchases made in 2008.

New Vehicle Purchase Incentive

ARRA also provides a tax break to taxpayers who make qualified new vehicle purchases after Feb. 16, 2009, and before Jan. 1, 2010.

Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. There is no limit on the number of vehicles that may be purchased, and you may claim the deduction for taxes paid on multiple purchases. But the deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle and phases out for taxpayers at higher income levels. This deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A.

Energy-Efficient Home Improvements

The Recovery Act also encourages homeowners to make their homes more energy efficient. The credit for nonbusiness energy property is increased for homeowners who make qualified energy-efficient improvements to existing homes. The law increases the rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to a total of $1,500 for improvements placed in service in 2009 and 2010.

Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

Tax Credit for First Four Years of College

The American opportunity credit is designed to help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. Tuition, related fees, books and other required course materials generally qualify. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

Certain Computer Technology Purchases Allowed for 529 Plans

ARRA adds computer technology to the list of college expenses (tuition, books, etc.) that can be paid for by a qualified tuition program (QTP), commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services to be used by the designated beneficiary of the QTP while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature.

Making Work Pay and Withholding

The Making Work Pay Credit lowered tax withholding rates this year for 120 million American households. However, particular taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is withheld, including multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers and pensioners. Failure to adjust your withholding could result in potentially smaller refunds or in limited instances may cause you to owe tax rather than receive a refund next year. So far in 2009, the average refund amount is $2,675, and 79 percent of all returns received a refund.

First-time homebuyers have several options to maximize tax credit

Carolyn Shelby — Thu, 19 Mar 2009 01:28:39 +0000

WASHINGTON, DC — As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

File an extension — Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
File now, amend later — Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.
Amend the 2008 tax return — Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
Claim the credit in 2009 rather than 2008 — For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.

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