How to snag a new $400 tax credit

Did you know that you can pocket some extra cold, hard cash this tax season thanks to the Making Work Pay tax credit? In 2010, a single taxpayer is eligible for up to $400 while married couples qualify for a maximum of $800.

In most situations, the credit is built into the withholding tables resulting in less tax taken out of your pay. To account for Making Work Pay credit this tax season, the IRS is asking individuals to file the Schedule M form with the 1040 and 1040A tax claims. For those who use the simplest return, 1040EZ, there's a work sheet on the back to compensate for the credit.

If you're not eligible for Making Work Pay credit, expect a change with the return amount from 2010. In fact, some taxpayers who normally get a small refund may owe this year because they didn't qualify for the credit.

Here's a list of those who should pay special attention to their withholding, according to IRS.gov:

• Pensioners
• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work
• Workers without valid Social Security numbers
  

Not sure if you qualify for the $400 credit? Schedule M will help taxpayers sort out those issues. Also, filing through an online service like TurboTax will help clarify the Make Work Pay tax credit and save you from many errors that might not have been caught on paper.

As previously reported, the IRS unveiled a new iPhone application called IRS2Go that lets anxious consumers check on the status of their tax refund and enter their e-mail address to receive daily advice directly from the IRS.

IRS launches new tax refund smartphone app

Listen up smart phone users. The Internal Revenue Service (IRS) unveiled a new iPhone application called IRS2Go that lets anxious consumers check on the status of their tax refund. Also, taxpayers can enter their e-mail address to receive daily advice directly from the IRS.

"This new smart phone app reflects our commitment to modernizing the agency and engaging taxpayers where they want when they want it," says IRS Commissioner Doug Shulman. "As technology evolves and younger taxpayers get their information in new ways, we will keep innovating to make it easy for all taxpayers to access helpful information."

Apple users can download the free IRS2Go application at the Apple App Store; Android users can go to the Android Marketplace.

"This phone app is a first step for us," Shulman adds. "We will look for additional ways to expand and refine our use of smart phones and other new technologies to help meet the needs of taxpayers."

The mobile app, among a handful in the federal government, offers a number of safe and secure ways to help taxpayers. Features include real-time updates on their refund status, which will work within about 72 hours after filing electronically, compared to four weeks using snail mail. Also, the IRS will send out daily tax tips through the app and offer additional news via their Twitter feed at @IRSnews.

Click here for the lowdown.

Treasury offering refunds via prepaid debit cards

Looking for a viable alternative to “refund anticipation loans” from tax preparers like H&R Block and Jackson Hewlitt?

The U.S. Department of the Treasury plans to test a new prepaid debit solution called MyAccountCard for the 2010 tax season. The cards will be available to a select group of about 600,000 taxpayers. And, according to a release, the pilot will be a convenient and low-cost financial account for the electronic delivery of their federal tax refunds.

“This pilot program will provide low- and moderate-income Americans with a low-cost option for faster delivery of their federal tax refund,” says Deputy Secretary of the Treasury Neal Wolin. “This innovative card can be used for everyday financial transactions, such as receiving wages by direct deposit, withdrawing cash, making purchases, paying bills and building savings safely and conveniently, giving users more control over their financial futures.”

The caveat? There will be a monthly fee for having the card, ranging from free to $4.95. As previously reported, the additional costs can nickel and dime consumers with larger-than-usual ATM withdrawal and customer service fees as well as penalties for exceeding the prepaid balance.

Click here for the lowdown.

Didn't file your taxes? You're not alone

Missed the April 15 tax deadline? Don't panic.

More than 9.2 million taxpayer accounts were recorded as delinquent for the 2009 tax year, according to an article by the Richmond Times-Dispatch. If you're late, what are your next steps? Long story short, just do it.

Here's what late filers should expect:

Expect penalties

If you're delinquent with your taxes, you should anticipate penalties. There's a fine for not filing by April 15, and there's one for not paying by the deadline. Want to make it stop? Pay as soon as possible.

Enclose a Form 9465 Installment Agreement Request

You've decided to file, so you should enclose a Form 9465 Installment Agreement Request. This is a request for a payment plan. On the form, you can write in how much you are willing to pay each month, and the time of the month that is best for you. You can get the form online, or by calling (800) 829-3676 and asking for one. The setup fee is $105, $52, or $43 depending on your income level and payment method. The form is for filers owing up to $25,000.

Better now than never

You're filing late and didn't pay. Don't fret. When you get the money, pay your taxes. Don't put it off any longer than you have to. Don't wait until you receive a tax bill from the IRS... that's just asking for trouble.

Try to get an offer in compromise

By getting an offer in compromise, the IRS will settle for less. Try to make a compromise when you know you will never be able to pay your taxes. The form is Form 656, "Offer in Compromise." There is an application fee of $150, but it's worth it if your taxes could be significantly less.

Contact your local tax advocate to solve IRS conflicts

Are you in a disagreement with the IRS? If no resolution can be reached, call (877) 777-4778 to talk to your local tax advocate. He (she) may be able to help you out considerably.

Borrow from a financial institution

It makes sense to borrow from a financial institution if you can't pay your taxes. Why? The interest and fees are lower than the IRS's, and it's cheaper than paying the penalties to the IRS.