Filing too early could be hazardous to your refund

WASHINGTON (1/14/08)--The Internal Revenue Service (IRS) has put us on notice: Filing any of five specific forms for tax year 2007 could result in a delayed refund if you don't pay attention this year (The Washington Post Dec. 28).

The reason behind the warning actually is good news for the estimated 20 million families who would have faced the notorious Alternative Minimum Tax (AMT) and an extra $2,000 tax hit on average. Congress applied a patch to the AMT late last year, allowing those potentially affected to claim credits they otherwise would have been denied.

That's the good news. The bad news is that early filers need to sit tight until around mid-February because the timing of the AMT patch came too late for the IRS to amend some tax forms. That means the booklets you receive in the mail in the next few weeks were printed before Congress made the change.

It's recommended you wait until Feb. 11 to send in your tax return--to give the IRS time to finish reprogramming its computers--if you plan to file any of the following forms which weren't updated in time:

• Form 8863: Education Credits;
• Form 5695: Residential Energy Credits;
• Schedule 2, Form 1040A: Child and Dependent Care Expenses for Form 1040A Filers;
• Form 8396: Mortgage Interest Credit; and
• Form 8859: District of Columbia First-Time Homebuyer Credit.

In addition, consider these tips when filing your 2007 tax return:

• If the child- and dependent-care credit is the only one of the five credits you'll claim, avoid the wait by filing the longer IRS Form 1040. The AMT changes affect this credit only when it's claimed on Form 1040A (USA Today Jan. 7).
• For e-filers who try to file before Feb. 11, if your return contains one of the five credits, the IRS will reject it. Most major preparers, though, will allow you to prepare your return in advance and then the company will e-file it when the IRS starts accepting returns.
• If you're sending in a paper return and you're eligible for one of the five credits, download updated forms at irs.gov, or call the IRS at 800-829-3676.
• The fastest--and safest--way to receive your refund is to file electronically and have the refund direct-deposited. Electronic filers can expect to receive refunds in 10 to 14 days (Dailypress.com Dec. 28). Even if you have to wait until Feb. 11 to file, you should get your refund by the end of February. But if you use snail mail, expect to receive your refund in closer to six weeks.
• Taxpayers with adjusted gross income of $54,000 or less can take advantage of the IRS Free File program, available Jan. 11. Make sure you connect to a software provider through the IRS website at irs.gov.

For anyone who counts on a fat refund check each year, now is a good time to re-evaluate your withholding. Stop giving Uncle Sam an interest-free loan. Adjust your withholding so less money is withheld from your paycheck. There are several withholding calculators on the Web, including Kiplinger.com/tools/withholding and irs.gov.

For more information, read "Stay Up-to-Date to Claim Deductions, Credits for College Costs" in Home & Family Finance Resource Center.

courtesy of cuna.org