IRS Explains the "What If" Tax Implications Of An Economic Downturn

What if I lose my job? Is my unemployment check taxable? Can I afford to take money out of my retirement account? These are just a few of the "What If" questions people are dealing with these days.

The IRS recognizes that many people are going through difficult times financially. Often, there is a tax impact to events such as job loss, debt forgiveness or dipping into a retirement account. If your income has decreased, you may even be eligible for certain tax credits, such as the Earned Income Tax Credit, which can mean money in your pocket.

Most importantly, if you believe you may have trouble paying your tax bill, contact the IRS immediately. There are steps the IRS can take to help. To avoid additional penalties, you should always file your tax return on time even if you are unable pay your tax bill.

Here are some “What If” questions that are answered on the official IRS Web site. Simply go to IRS.gov and type the keywords "What If" in the Search box at the top of the page.

• Job Related
  What if I lose my job?
  What if my income declines?
  What if I withdraw money from my IRA?
  What if my 401(k) drops in value
• Debt Related
  What if I lose my home through foreclosure?
  What if I sell my home for a loss?
  What if my debt is forgiven?
• Tax Related
  What if I can’t pay my taxes?
  What if I can’t pay my installment agreement?
  What if I can’t resolve my tax problem with the IRS?
  What if I need legal representation to help with my tax problem but can’t afford it?

Remember: to access the genuine IRS Web site be sure to use .gov. Don't be confused by Internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

'Tis the Season for Sales Tax Holidays

So, North Carolina isn't the only state to issue some sort of break in taxes for qualifying purchases. Take a look at this chart, courtesy of Don't Mess With Taxes...

Fall Sales Tax Holidays
Click on the state name to go to the official tax holiday Web page.

State	Dates	Tax-exempt Items
District of Columbia	Nov. 21 - Dec. 7	Second round of savings on School supplies, clothing, accessory items and shoes ($100 or less)
Georgia	October 2-5	Energy- and water-efficient products (tax officials say that as the event nears, details will be posted Georgia Department of Revenue Web site)
North Carolina	November 7-9	Energy-efficient clothes washers, freezers, refrigerators, central air conditioners, room air conditioners, air-source heat pumps, geothermal heat pumps, ceiling fans, dehumidifiers, and programmable thermostats (see page 2 of this PDF document)
South Carolina	November 28-29	Handguns, rifles and shotguns
Virginia	October 10-13	Energy efficient products priced at $2,500 or less
West Virginia	September 1-7	Energy Star residential appliances costing $2,500 or less

Little Known Ways to Deduct Moving Expenses

Commuting situation changed recently? Your new expenses may be tax deductible. From the desk of the IRS:

"How far you moved and the amount of time you spend on the job will have a major impact on whether you qualify for the tax break. Moves that are only short hops and jobs that are short-term or part-time generally do not qualify. However, if you can satisfy the distance and time tests then job-related moving expenses that you incur may be tax deductible."

So what move qualifies?

-Your new workplace is at least 50 miles further from your former home than your previous workplace was from that home.

Translated into normal English, this means...

a. If you do not move homes but your job moves to an office buildings at least 50 more miles away, you can deduct the expense.

b. If you move and your new job is 5o additional miles away from your old home, you can deduct the expense. (i.e. If your old job was 5 miles from your former home, your new job must be at least 55 miles from that home.)

-You are a W-2 employee and you worked full-time for at least 39 weeks during the 12 months immediately after your move.

Translated into normal English, this means...

If in the 12 months immediately following your move you worked full-time for at least 39 weeks, then you can deduct the expense.

-You are self-employed and you worked full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after your move.

Translated into normal English, this means...

During the 12 months following your move you worked full-time for at least 39 weeks AND a total of 78 weeks the 24 months following your move.

**You can deduct your moving expenses on your tax return even though you have not met the time test by the date your return is due if you expect to meet the 39-week or the 78-week test as required.**

-Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.


What Can I Deduct?

Reasonable moving expenses.

-The cost of moving your household goods and personal effects to your new home.

-The expenses of traveling to your new home, including lodging costs.

What Can I NOT Deduct?

1. Meals eaten while in transit between your old and new homes.

2. No part of the purchase price of your new home.

3. Moving expense for expenses covered by reimbursements excluded from income. (i.e Moving expenses that are already paid for by someone else, like your new company.)

For additional information on moving expenses, including an extensive list of deductible and non-deductible expenses, download Publication 521.

Going Green Could Pay Off...Literally

We have finally reached the point where being environmentally friendly is trendy. Well, there is now another reason to jump on the bandwagon and go green: money. It would appear that being environmentally minded could save you a couple hundred or a few thousand dollars come tax time.

If you've made energy-saving improvements to your life in the past year, you may get some tax credits on your federal and/or state income taxes.

Let’s start with automobiles. The federal government is now giving you credit off your income tax when you purchase a fuel-efficient hybrid. The specific amount you earn will actually depend on the hybrid you bought. You can reference this IRS chart to find your vehicle. And to think that you bought that hybrid simply to save gas and pollute less. Well, now there’s a tax break in it for you as well.

And the tax break doesn’t stop at the federal level. There are some states that give you a tax break for buying a hybrid car as well. If you have questions regarding what incentives your state might provide, the Department of Energy keeps a database of state incentives and laws related to alternative-fuel vehicles.

The other big area where you might be able to take advantage of a tax break is home energy. Making your house more efficient saves money on your utility bills in the long run, and now can earn you some cash during tax season.

If you upgraded your home's insulation, windows, doors, metal roof, water heater, or heating or cooling system in 2007, you may get a credit of up to $500 off your taxes. The new items have to meet energy-efficiency codes -- this Energy Star chart shows what qualifies.

If you decided to go solar and install solar panels and/or solar water heaters in your home, you are looking at a bigger tax break that could earn you a credit of up to $2,000 off your taxes from the federal government. As far as the state income tax return, many states now offer an array of tax deductions for adding solar energy to your home. The Database of State Incentives for Renewable Energy lists tons of credits, rebates, grants, and more ways to cut the cost of green power.

There are 101 reasons to go green and save our planet. Why shouldn’t money be one of them?

Cheers!
-Taxus

Free Money in '08?

Well, nothings really free. There's no free lunch remember? But although it comes from somewhere, the important point is that it comes to your wallet.

The specifics

In order to stimulate a waning economy, the government is proposing a tax rebate. The rebate is being issued in hopes that people will spend the money and breathe some life into the economy. Whether this happens or not or whether an actual plan is decided on remains to be seen. But let's get to what the rebate means to you.


Senate Version

$500 per Individual
$1,000 per Joint return
$300 per Child
And there is no limit on income


Congress Version

$600 per Individual
$1,200 per Joint return
$300 per Child
Limitations: Filers must have more than $300 in Adjusted Gross Income and there will be a 5 cent deduction in the rebate per $1 over an AGI of 75K for individuals and $150K for joint filers.


**And if you have tax debt, don't get excited. That rebate money goes to the government!**


But It's January!

If you're worried the Senate and House won't get their act together until it's too late, don't worry. In 2001 when this was done Bush signed the dotted line and 4 months later the checks was given out--this would mean if the bill is signed during February, the money would come out in June. Not that bad...



Additional Resources...

Is a Tax Rebate Coming Your Way??

Bush Calls For 'Direct and Rapid Stimulus'

Tax Rebates: Where's Your Check?