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That “taxing” time of year …

In the years that I have been in financial planning and investments, I do not recall the Internal Revenue Service coming out with statements and letters such as these. The IRS is being proactive in trying to help taxpayers who may be in trouble financially. For full details, visit their Web site at I am not a tax expert, nor do I claim to be one. Make sure to see your tax preparer, certified public accountant or other professional, and find out if these pertain to your situation.Taxpayers are encouraged to take advantage of several new tax credits and deductions this filing season. Further, the IRS announced an enhancement to the Free File program that will allow nearly all taxpayers to e-file for free and accelerate their refunds.With many people facing additional financial difficulties, the IRS is taking several additional steps to help people who owe back taxes. In a wide range of situations, IRS employees have flexibility to work with struggling taxpayers to assist them with their situation. Depending on the circumstances, taxpayers in hardship situations may be able to adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action. The IRS reminds taxpayers who are behind on tax payments and need assistance to contact the phone numbers listed on their IRS correspondence. There could be additional help available for these taxpayers facing unusual hardship situations.Among the areas where the IRS can provide assistance:Postponement of collection actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.Added flexibility for missed payments: The IRS is allowing more flexibility for previously compliant individuals in existing installment agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the installment agreement. Taxpayers in a difficult financial situation should contact the IRS.Maximizing refunds and speeding refund delivery: This filing season, there are several steps taxpayers can take to maximize their refunds and speed the delivery of money from the IRS.Taxpayers should look into tax breaks available and take every credit, deduction and exclusion for which they qualify. People who had less income in 2008 could find they qualify for credits for which they previously did not qualify. And there are several new benefits this year:

  • First-Time Homebuyer Credit: Those who bought a principal residence recently or are considering buying one should take note. This unique credit of up to $7,500 works much like a 15-year interest-free loan.
  • The Recovery Rebate Credit: This credit is figured like last year’s Economic Stimulus Payment except that Recovery Rebate Credit amounts are based on tax year 2008 instead of 2007. A taxpayer may qualify for the Recovery Rebate Credit, if, for example, he or she did not get an economic stimulus payment, had a child in 2008 or had a change in income level. If you receive this credit, it will be included in your refund and will not be issued as a separate payment.
  • Standard deduction for real estate taxes: Taxpayers can claim an additional standard deduction, based on the state or local real estate taxes paid in 2008. The maximum deduction is $500 or $1,000 for joint filers.
  • Mortgage workouts and foreclosures: For most homeowners, these are now tax-free. Eligible homeowners can exclude debt forgiven on their principal residence if the balance of the loan was less than $2 million. The limit is $1 million for a married person filing a separate return. See Form 982 and its instructions for details.
For additional educational articles on taxes, visit my Web site at: Alex Donnell and Colorado Comprehensive Wealth ManagementAs a nationally published author, Alex Donnell has written articles on estate planning, financial planning and investments. Donnell is the founder and president of Colorado Comprehensive Wealth Management in Colorado Springs and an independent investment advisor representative for Heartland Financial Consultants. He has been a part of the financial services industry for over 16 years.

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