Tax Tips 2007 Q&A - Tax Preparation & Tax Forms
Tax Tips Q&A
Read Kevin McCormally's answers to tax questions submitted
by NBR's viewers.
Click on a tax topic to explore related questions and answers.
This feature is intended to provide general information and education and should not be considered as investment or tax advice. Each individual should consult his or her own tax, financial, or investment advisor.
Tax Preparation & Tax Forms
QUESTION: WILL FILING AN EXTENSION DELAY TAX REBATE?
If I file an extension with my 2007 tax return, what will happen to my stimulus bonus, will that be delayed also? I believe the amount is based on my adjusted gross income, so the govt won't know how much to send me, if any, till I file, correct?
--nancy, white lake, MI
ANSWER
Yes, if you file an extension, your stimulus payment (rebate) will be delayed. The IRS can't process the payment until it processes your 2007 return.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: TAKING TAX REBATE NEXT YEAR
Hi: I did not qualify for the tax rebate on my 2007 tax return (single-over 100,000), but you say I can take a tax credit in 2008 (est income $60,000). Will there be a line on 1040 form under credits? I do not itemize.
--JFT, St. Paul, MN
ANSWER
Not sure how the IRS will handle it. Probably a line for a credit and it won't matter if you don't itemize. There will be lots of news media attention to this issue once next year's forms are produced.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: DOES BLOOD DONATION INCOME COUNT AS BUSINESS INCOME?
Hi Kevin, I work for Choletech corporation ( manufactures cholesterol strips to measure cholesterol from blood). I have donated ( supplied) my blood for testing purpose. I got a 1099-MISC ( Item- 7 Nonemployee compensation) from Cholestech. Question is : 1. Should this be reported as business income ( schedule C or EZ)? If this is a business income, do I need to pay small business tax? 2. Is there anyway not to report this as business income? note: I am not a professional blood supplier. Thank you very much,
--Angela, San Jose, CA
ANSWER
Although there have been cases where professional blood donors treated such income as business income, I think a casual donor should report it as other income on the face of the 1040 and not mess with a Schedule C nor a Schedule SE to pay self-employment tax.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: CORPORATE TAX CONCERNS
Dear Kevin:
Many thanks for your useful tax tips.
1- I would like to know if your Capital Gain(s) could be reduced through the losses from sch. "C" or sch. "E" or any other schedules. Another words, how the capital gain (from sell of a rental property)could be reduced. Does the amount of losses of sch. "C" + "E" has any effect on it?
2- How do we treat the Goodwill paid for the purchase of a business could be deducted. e.g. depreciating it.
3- When the same business is sold how do we treat the paid Goodwill and the equipments that was depreciated on the first year. Keep in mind the business got sold on the 2nd. year.
Best regards,
--AL AFROUZIAN, Bakersfield, CA
ANSWER
I turned to my good friend Peter Blank, editor of the Kiplinger Tax Letter, for help on this one. Here's his response.
Schedule C or E losses reduce income from capital gains, but don't affect the 15% max tax on the gains. This is true also for any suspended passive losses that are freed up when a rental home is sold.
Acquired goodwill is amortized over 15 years, straight line.
When the business is sold, the remaining unamortized goodwill is deducted. You also have to report gain or loss on the sale of other depreciable assets, based on the allocation made in your sales contract.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: AMENDED RETURN RULES
How far back can we go for filing ammended tax return by April 15 - 2004 or 2005? I would like to make a change the way I have taken education credit. Do I have to file the complete return including all the schedules? How do I show which part has changed? Thanks.
--Rob Parker, Fremont, CA
ANSWER
You can amend a return for three years after the due date. 2004 returns were due April 15, 2005, so the three year period ends on April 15, 2008. Earlier returns are already closed to amendment.
You use the Form 1040X to amend your return and, NO, you don't have to refile the whole return. You simple note what change you're making and, if an extra form is required for the change, you file that form with your 1040X. And if you revision prompts a refund, the IRS has to pay YOU interest on the money, back to the due date of the return.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: ROLLOVERS IN TURBO-TAX
I rolled over from my former employer 401k to a current employer 401K and I received a 1099-R from my former employer. It was a 100% direct Rollover. The column 7 has "G" entry in the 1099R. However, when I enter the 1099R information into Turbotaxonline (software i use to do my taxes), it increases my Total Modified adjustabe Gross income by the 1099-R amount? Why is it doing so when it is a direct rollover. This is what turbotax is doing, For example, Lets say My w2 income is 50K and 1099R shows 20K with "G" in column 7, When I complete all the enteries, it is showing my Gross income as 70 K (50K + 20K). This is causing my 2007 IRA contributions to be nontax deductible for 2007. Please help.
--Pankaj, Houston, Texas
ANSWER
I tried entering a rollover with code G into TurboTax (I used the desktop version) and it worked fine, reporting the distribution on lien 16a but nothing on 16b and nothing included in AGI. I suggest trying again. Be sure not to include anything in the box for the taxable portion of the distribution. If it was a direct rollover, it is tax free. Good luck.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: MAKING CHANGES TO RETURN AFTER IT IS FILED
I received a corrected 1099-Div. from e-trade after I submitted my turbotax electronicaly. (e-file)turbotax told me I cannot make changes after I filed. What do I do? I will probably be audited.
--George King, Livonia, MI
ANSWER
Sure you can make changes...just not on the original return. You need to file and amended return using Form 1040 X. TurboTax can handle that form. On the 1040X, you report the extra income and figure and report any extra tax owed. Since the tax tables jump in $50 increments, sometimes no extra tax is due, though, if the amount of added income is small. Lots of taxpayers find themselves in the same boat because there are more and more corrected 1099-DIVs each year.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: RECORDING ORDINARY VS QUALIFIED DIVIDENDS
Dear Kevin,
I have watched Nightly Business Report for > 20 years -- and listened to your sage tax suggestions many times.
My question is simple. I use TAXCUT and always prepare my own report. But somehow I have gotten confused on entering ORDINARY DIVIDENDS and QUALIFIED DIVIDENDS. I trade equities frequently -- thus have a long list of dividends. Schwab gives me a very adequate detailed Form 1099.TAXCUT provides a separate WorkSheet for each company.
NON-QUALIFIED DIVIDENDS I have only one in this category: Schwab Money Mkt Fund. That one MMF (only) I believe I should list on a separate worksheet in box 1a. (and not enter that amount in box 1b.)
QUALIFIED DIVIDENDS I have 48 companies that have paid me Qualified Dividends. Therefore, I enter them in box 1b. My question is simply this: should the dividend from each of those companies ALSO be listed in box 1a ??
THANK YOU for your years of help -- and your contribution to dependable NIGHTLY BUSINESS REPORT.
--Wes Greer, Alturas, CA
ANSWER
I'm not sure how TaxCut works (we provide tax-saving advice for TurboTax), but the amount in box 1a should be the total of ordinary dividends, INCLUDING the qualified dividends that are broken out in box 1b. So, yes, I believe when the program asks your for the amount in box 1a, use the amount shown on your 1099; then, for all but the MMF (for which dividends are NOT qualified), enter the figure in box 1b.
And, by the way, thanks for your kind words. I appreciate them.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: REPORTING THE TELEPHONE TAX REFUND
Dear Mr McCormally,
I took advantage of the "Credit for Telephone Excise Tax Paid" on my 2006 tax return. I itemized my calls on Form 8913 and requested a credit of $90 (in column D) and interest of $15 (in column E). I received a Form 1099 for the $15 from the Department of the Treasury - IRS, but none for the $90.
Where must the $15 be reported - Line 10 of Schedule 1040 or Line 1 of Schedule B? Should the $90 also be reported? If so, where? Thank you,
--E.R., Freehold, NJ
ANSWER
The refund itself is tax free. Part of the interest is taxable and should be reported on Schedule A. For folks who took the standard refund, the interest portion of the payment was tax free. So, to true things up, the IRS says you can treat part of the interest you received as tax-free, too, according to the table below. If you are single, for example, the tax free part is $4.39. If you are married and had two children, and thus deserved the maximum standard refund, a whopping $8.77 is tax free.
Do I have to report this interest on my tax return?
The tax impact of a telephone tax refund was incorporated in the
calculation of the standard amount. Therefore, if you request the standard
amount, you do not need to report on your income tax return 1) the excise
taxes refunded or 2) the interest included in the standard amount. The
imputed interest in the standard amounts is:
Standard Amount |
Federal Telephone Excise Tax |
Interest |
$30 |
$25.61 |
$4.39 |
$40 |
$34.15 |
$5.85 |
$50 |
$42.69 |
$7.31 |
$60 |
$51.23 |
$8.77 |
Taxpayers who request the standard amount may exclude the appropriate interest amount above.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: ESTIMATED TAX PAYMENTS
This question concerns rules for estimated tax payments due for tax year 2007: I paid into the IRS $2000.00 just before the 1/15/08 deadline for total estimated taxes in addition to my withheld fed taxes of $6888 from my pension. Using Turbotax software my remaining tax liability worked out to be a mere $69 which included a penalty of some 30+ dollars. Why to I suffer a penalty with this little of an under payment. What is the basis for this computation by the Turbotax software. Am I being ripped by this free service?
--E Muller, Southfield, MI
ANSWER
Estimated payments are due quarterly, as the income is received, so a January '08 payment can't necessarily wipe out an underpayment penalty. In the perfect world, that $2,000 you paid in January was due in four $500 increments during 2007 (assuming your income was received evenly thorough the year).
I can't say, however, that the $30 penalty is appropriate without knowing more. To doublecheck the penally figured by the program, you can use form 2210 http://www.irs.gov/pub/irs-pdf/f2210.pdf
Or, you can simply delete the penalty from the form, pay the $39 you owe without it and wait to see if the IRS thinks a penalty is due. If so, the agency will send you a bill. If you go this route, you could use the 2210 at that time to see if you qualify for any exceptions to the penalty.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: CAPITAL GAINS FOR MARRIED COUPLES
In this years 1040 instructions its says the 5% capital gains tax rate will be reduced to zero for the 2008 tax year. How low of an income for a married filing jointly couple is needed to meet this criteria and could one of the couple use a 403b to reduce our income to this level?
--George, Pembine, WI
ANSWER
The 15% bracket for married filing jointly returns ends at $65,100 of taxable income for 2008...and the 0% capital gains rule applies to taxpayers otherwise in the 10% or 15% bracket. So, if your taxable income is less than $65,100, you'll get some 0% gain. But note this: to the extent the gain pushes you out of the 15% bracket (that is, pushes your taxable income over $65,100) that portion of the gain will be hit by the 5% cap gains rate.
And, yes, if you use a 401(b) contribution to reduce your 2008 taxable income, you can capture 0% gains until your taxable income passes $65,100. Hope this answers your question.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: DETERMINING ROTH IRA FUNDING LIMITS
I am being told limits are $114,000 for individuals and $166,000 for married couples (Using a modified AGI number) My question is what line is this (Modified Number) determined from on the 1040 Tax Return? Before (Page one last line) or After All deductions? (Page#2) Thank you.
--David Kraft, Pittsburgh, PA
ANSWER
Great question. For purposes of contributing to a Roth, the income phase-out is based on "modified adjusted gross income" which is before deductions and exemptions are subtracted. To find your modified AGI for this test, start with adjusted gross income on line 37 of the 1040. Then you add:
* Any deduction you claimed for a regular contribution to a traditional IRA.
* Any deduction you claim for student loan interest or qualified tuition and related expenses.
*Any income you excluded because of the foreign earned income exclusion.
*Any exclusion or deduction you claimed for foreign housing.
*Any interest income from series EE bonds that you were able to exclude because you paid qualified higher education expenses.
*Any employer-paid adoption expense you excluded.
*Any amount claimed as domestic production activities deduction.
Then you subtract any amount in AGI due to a Roth conversion.
That gives you your modified AGI to determine if you can contribute to a Roth.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: FILING FOR A QUALIFIED JOINT VENTURE
If we file as a qualified joint venture (Sch C) using the 2007 rules, where to I identify that fact? Also do I need a copy of forms with supporting figures,such as form 4562, showing the percent of income for each person? Thank you! Thank you!
--GC, Cleveland OH
ANSWER
Here's how the IRS says you make the election: http://www.irs.gov/businesses/small/article/0,,id=177376,00.html
How to make the election to be treated as a qualified joint venture
Spouses make the election on a jointly filed Form 1040 by dividing all items of income, gain, loss, deduction, and credit between them in accordance with each spouse's respective interest in the joint venture, and each spouse filing with the Form 1040 a separate Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) or Schedule F (Form 1040), Profit of Loss From Farming, and, if otherwise required, a separate Schedule SE (Form 1040), Self-Employment Tax. For example, to make the election for 2007, jointly file your 2007 Form 1040, with the required schedules (see below). The partnership terminates at the end of the taxable year immediately preceding the year the election takes effect. For information on how to report the business for the taxable year before the election is made, see Publication 541 on Partnerships and terminations.
I think that also answers your question about the depreciation form (4562). You need to file two, splitting the write-off according to each spouse's portion of the business.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: TAXES DUE ON CLASS ACTION SUIT
I received a check for a few hundred dollars from worldcom victim trust and from worldcom Settlement fund in 2007 for stock that was sold for a loss in 2002 & 2003. no 1099's question: how do I report this on 1040?
--Jon F, Las Vegas, Nevada
ANSWER
You report the income on Schedule D as a long-term capital gain and note that it is a settlement relating to a loss claimed on an earlier year's return. Rather than noting 100 Shares ABC stock in the description of property section, simply note: "settlement proceeds."
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: SOFTWARE RECOMMENDATIONS TO DO OWN TAXES
What software do you recommend I use to do my taxes at home. I have to do 2006 and 2007. The only semi-complicated thing I have is "carry-over" stock losses from 2001 that I have been deducting at $3000 per year. I have my returns for 2005 and previous so I can refer to them. I'm pretty sure I will get a refund for 2006 because I didn't earn that much. I'm good with math but I've never done them before and I don't want to miss out on any deductions. I also don't want to pay my tax guy $350 per hour when I really should start doing them myself. thank you in advance for any help.
--Adam, Glendale, CA
ANSWER
First, some full disclosure. Kiplinger works with Intuit, the publishers of TurboTax. We provide advice for some of the in-program help and a great deal of editorial content -- tax tips, money saving advice, etc., on www.turbotax.com. So, I can proudly say that TurboTax is my favorite tax program.
My first suggestion is that you go to turbotax.com and try the company's free software. It will allow you to prepare your '07 return for free and file it electornically for free to the feds. Or, you can go to irs.gov and see if you qualify for one of the free programs under the government's free file program. http://www.irs.gov/efile/article/0,,id=118986,00.html
I'm afraid that I don't know of any free software for '06 taxes. You can buy a program for that year at turbotax.com or at competing sites. If you want to do your 06 return on paper, you can find the forms and instructions you need at irs.gov. http://www.irs.gov/formspubs/article/0,,id=169996,00.html
Good luck.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: REQUIREMENTS FOR REBATE
Re: Economic Stimulus Act Watching your "Tax Tips" on "Nightly Business Reports" in Boynton Beach Fl last week you indicated that if you don't qualify based on your 2007 income you could reapply based on your 2008 income. Please clarify. Thanks.
--Bernard Eisenberg, Boynton Beach FL
ANSWER
The rebate is really a prepayment of a 2008 tax credit. And, the rebate is based on information on your 2007 return. So, if your 2007 income is too high qualify for the rebate, but your 2008 income is not, you will be allowed to claim the credit on your 2008 return. Also, if you had no tax liability in 2007 and no otherwise qualifying income from the rebate, but have such income or liability in 2008, you'll qualify for the credit.
I hope this answers your questions.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: DIRECT DEPOSIT OF REBATE
If I include my account & routing information on my tax return on which I owe & include my check for tax due, will I receive my rebate as a deposit rather than a check in the mail from the government?
--Linda, Denver, CO
ANSWER
No. You must have your refund electronically deposited in order to get your rebate direct deposited. If you don't have a refund coming, there's no way to get direct deposit of the rebate. Sorry.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: WHAT FORM SHOULD 9-YEAR-OLD FILE?
My son-in-law's son, age 9, (my grandson), received dividend income in 2007 of $937 ($895 qualified dividends). He is now required to file an income tax return. If he files Form 1040 EZ, does he receive a standard deduction? Or,is the whole $937 taxable income?
--Samuel Nakagawa, Evanston, IL
ANSWER
The basic 2007 standard deduction for someone who can be claimed as a dependent on someone else's return (like a child claimed on his parents' return) is $850. That will protect most of your grandson's income. The remainder will be taxed at his low rate, because the kiddie tax (taxing a child's investment income at his or her parents' rate) doesn't kick in until investment income passes $1,700.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: HOW TO FILL OUT 1099-Q
I have 1099-Q for my daughter's U. FUND COLLEGE INVESTING PLAN. I am a recipient. I have used this money for her college tution fees. Earning in box-2 of 1099-Q goes where? Do I have to this as a gain? I would appreciate your advice. thank you.
--Mohan Patel, Waltham, MA
ANSWER
The tax system has trained us -- like Pavlov's dog -- to see a 1099 form and instinctively think that it is reporting income. That's not so with Form 1099-Q. Its purpose is merely to remind you -- and alert the IRS -- that you made a withdrawal from a 529 college savings plan, state prepaid tuition program, or Coverdell education savings account. The distribution that is reported in box 1 of the 1099-Q is tax-free if you used the money to pay tuition and related fees, books, and room and board. Most payouts are used for these expenses and, if so, are not reported to the IRS.
Now, if you had used the funds for other purposes, then the earnings portion of the distribution would have been taxable. That amount is listed in box 2 of the 1099-Q and would be reported as "other income" on line 21 of the 1040 form filed for the year of the distribution. The taxable portion also is subject to a 10 percent penalty tax that is calculated on Form 5329. Since you used the withdrawal to pay qualifying bills, you can ignore the 1099.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: REPORTING S-CORP TAXES ON PERSONAL RETURN
I liquidated my S-corp in Dec 2006. However I had to pay a large amount of taxes for that S-corp in 2007 (CA taxes that had been omitted). Now the S-corp is no longer an entity how do I report these expenses on my 2007 personal return? Thanks for your help.
--Ludovic Legrand, San Carlos, CA
ANSWER
I'm assuming you're referring to state income taxes paid with your individual return in 2007. If so, you deduct the state taxes paid on your Schedule A of your 2007 return, along with other state taxes paid during the year.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: HIGH INCOME, GET PARTIAL REBATE?
On Monday, March 10th broadcast - you mentioned that people would get the rebate next year if this year's income is too high. What if as a single-filer, my tax return for 07'shows AGI around $80k, will I get a partial rebate this year, then next year (I will be married filing joint with no kids)assume combined family income is under $120k- will I automatically collect the balance of the max rebate? Will I have to file other ppwk than a tax return? Thanks!
--SP, Portland, Oregon
ANSWER
Yes, you'll get the remainder when you file for 2008. The way it worked in 2001,the last time Congress ordered rebates, was that the IRS included a worksheet in the instructions. Basically, you figured your maximum credit, subtracted the rebate amount received in 2001 and got credit for any remaining credit on 2002 returns. We're assuming it will work the same way this year, but the IRS hasn't announced the details.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: DIDN'T FILE LAST YEAR BUT ENTITLED TO REFUND
I didn't file a tax return last year. Can I still file for last year and get the money the government owes me?
--jozef, san mateo, ca
ANSWER
Yes...you have three years after the due date of a return to file and claim your refund. That means the door for 2006 returns, due in 2007, closes April 15, 2010. But file as soon as possible to get your money back. Be sure you use the 2006 forms and tax rates. They change every year.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: IS TAX REBATE TAXABLE?
I saw your tip on the rebate but you did not say if this is taxable. Is it?
--John Van Dyke, San Mateo, CA
ANSWER
Sorry....but more good news. The rebate is tax free!
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: REBATE FOR RECIPIENTS OF SOCIAL SECURITY
Do individuals receiving monthly social security payments qualify for the new tax benefit?
--Daniel
ANSWER
Yes. In general, the rebate is based on the tax bill you owe for 2007; but if you owe no tax and otherwise wouldn't need to file -- but have at least $3,000 of Social Security benefits and/or earned income from a job -- then you qualify for a $300 rebate. The IRS will send special information packet to 21 million seniors next week explaining how to claim the rebate.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: ESTIMATED PAYMENTS OR ONE LUMP SUM
2007's Fed Tx bill was appx $15000.00. Rather than pay 1/4 of that per quarter in 2008 for estimates,can I pay a lesser amount if I assume my income may be considerably less for 2008? I am retired, on Social Security, married,not working, filing jointly. My wife does not work and is not eligible for SS. I believe a former CPA of mine told me a few years ago that if I paid 100% of the current years tax by a date(?) in November, I would not have to pay a penalty.
--Fritz, Carmel, IN
ANSWER
The income tax is on a pay-as-you-earn system. Worker have money withheld from every check. Folks not subject to withholding -- like you -- are expected to make quarterly estimated tax payments using Form 1040-ES
http://www.irs.gov/pub/irs-pdf/f1040es.pdf
Those payments are based on your income each quarter. So, if your 2008 income will be far less than it was in 2007, then your payments each quarter would be substantially less than 25% of your 2007 tax bill.
You can't make one payment at the end of the year to cover your bill, though. The IRS wants its cut as you earn your money.
One exception is if you have any income from which withholding is made -- such as an IRA distribution. Withholding is considered to be paid in evenly over the year, even if only a single payment is made in December. Some taxpayers have a big chunk of a December IRA payout withheld to cover their tax bill for the year.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: REBATE WITHOUT SOCIAL SECURITY NUMBER?
I am a legal immigrant currently on H1B VISA. I currently have a Social Security Number and my wife does not have a Social Security Number (She has an ITIN). This is because she is in H4 VISA and the SSA office does not issue SSN for aliens who do not work. IRS requires that both me and my wife should have a social security number(SSN) to get the stimulus package. I can file separately but my tax liability will go up significantly as most of the income is mine. As we also have filed for permanent residency (Green Card),she now qualifies for an EAD card now and I am planning to apply for one. Once she gets an EAD card she is qualified to work and I can apply for a Social Security Number. This however takes upto 3 months to get. I am now planning to file for extension using my Social Security Number and my Wife's ITIN and then file my tax returns using both our Social Security Number.
Please let me know whether this is a good strategy or whether there is a better strategy.
--Prabhu Sivakumar, Pittsburgh
ANSWER
I can't think of a better strategy to get your rebate this year. Congress was very specific about no Social Security number, no rebate. The only alternative to your plan of getting an extension and not filing until you have the necessary Social Security numbers is to file now and plan to collect your rebate next year...assuming you'll have valid SS numbers when you file for 2008. As I noted in my commentary last night, this is really prepayment of a 2008 credit; so if you qualify for the credit in '08, you'll get it when you file next year.
In making your decision, you need to weigh whether delaying filing would delay your receipt of a tax refund for 2008...and how large that refund might be.
Good luck.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: REBATE FOR HEAD-OF-HOUSEHOLD FILER
with the tax rebates coming in May Ive newer heard what a person who files head of household would receive, since married couples with get 1200 + its not fair a single parent would get less.
--NBR viewer
ANSWER
Heads of household, singles and married-filing separately taxpayers all get a $600 rebate, plus $300 for each child under age 17. Only joint filers get the $1,200.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: REBATE FOR RETIREE
I am a retired person & I do not file an income tax return. Am I entitled to the rebate &, if so, is there a form to be filled out?
--Tom Anderson, Independence, MO
ANSWER
If you had at least $3,000 of Social Security benefits during 2007, you can qualify for a $300 rebate.You'll see all the details, including a like to a sample 1040A form for folks who otherwise don't need to file, here: http://www.irs.gov/pub/irs-pdf/fw7.pdf
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: INCOME TOO LOW FOR REBATE
I didn't make enough money in 07 to get the $300 rebate, if I make enough money in 08 will I get the rebate for 08? I think I understand that it rollsover in 08 if you don't qualify in 07.
--m. garrett, houston, tx
ANSWER
That's right. If your income is too low to get the full prepayment of the credit in based on your 2007 return (the rebate), but your income is higher in 2008, you'll get the remainder when you file your 2008 return next spring. There will be a special worksheet in the instructions to help you get all you deserve.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: CAN DEPENDENTS RECEIVE TAX REBATE
My daughter and her two sons were all students in 2007. She did not file and I claimed them as my dependents. Are she and her boys eligible for the stimulus payment? If not will I get the extra $300 for them? If she is how does she apply?
-- Cliff Brittingham, Cincinnati,OH
ANSWER:
The law specifically forbids anyone who is claimed as a dependent from getting a stimulus payment, so neither your daughter nor her sons will qualify.
If the boys were under age 17 at the end of 2007 and you claim the child credit for them on your return, you will also get the $300 bonus rebate for each of them. The extra rebate should be paid automatically, based on the information on your 2007 return. If you have any refund directly deposited to your bank account, the rebate will be directly deposited, too, speeding up your receipt of the cash.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: CAN STUDENT CLAIM HIMSELF
A 20 year old college student with an AGI of $35,000 would like to claim himself instead of his parents. He does live at home except when when at school. He used in income to pay his tution and living expenses. His parents' AGI is over the limit to claim Hope or tution credit. Can this college student claim himself?--Mary Ann, Louisville, KY
ANSWER
Taxpayers don't get to choose who claims a dependency exemption. If the parents qualify to claim their son as a dependent, the son may not claim the exemption. Now, if the parents' income is too high to claim the Hope or Lifetime Learning credit, they can waive their right to claim the dependency exemption, which would allow the son to claim that credit...but not the exemption.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
QUESTION: TAX REBATES FOR DEPENDENTS
Will full time adult students who made approx. $5000 in income, fill out income tax forms for 07 but are dependents of their parents get the tax incentive? If parents are in the 10% tax backet, would it be best for children to declare independent in order to receive the tax incentive?
--Glo Huert, Rodeo, CA
ANSWER
The law specifically forbids anyone who can be claimed as a dependent from receiving the rebate. So, even if you decided not to claim the exemption, your child would still be out of luck...if he or she qualified to be taken as a dependent.
--Kevin McCormally
Editorial Director
Kiplinger Washington Editors
