Do you have to file a tax form to receive the federal tax rebate recently approved by the government?

Q: Do you have to file a tax form to receive the federal tax rebate recently approved by the government?

A: Well, in a way, yes. You need to file your 2007 federal tax return. The Internal Revenue Service will use information on your 2007 return to determine how much a taxpayer you're eligible to receive.

The IRS will begin sending payments in May. Taxpayers who file late or after filing an extension will receive payments later. No rebate checks will be issued after Dec. 31.

If you don't normally file a return, it's still important that you file this time. Recipients of Social Security, specified railroad retirements and certain veterans' benefits should report those amounts on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X.

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Changes to your last name

Maria from Tulsa, OK asks,
Q: Do I need to change my maiden name to my married name on my Social Security card for my husband and I to file jointly?

A: You can file under the ''Married Filing Jointly'' status without changing your name with the Social Security Administration. However, be sure to show your maiden name on the tax return instead of your married name.

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Tax deductible education expenses

Remy T. of Seattle, WA asks:

Q: What types of higher educational expenses are tax deductible?

A: Some deductible educational expenses include amounts spent for tuition, books, supplies, lab fees, and similar costs.

Deductions also include the cost of correspondence courses, as well as formal training and research done as part of an educational program.

Transportation and travel expenses to attend qualified educational activities also may be deductible.

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Tips for rental property taxes

Rental income is defined as any revenue you receive from the occupancy or use of residential property. Rent, obviously, is included in that revenue. Many owners are surprised to learn revenue also includes rent advancements, expenses paid by a tenant and any security deposits not returned to the tenant. In fact, revenue can also include amounts paid to cancel a lease, even if you had to sue the defendant to get it.

What Can I Deduct?

Tax deductions associated with rental properties are similar to those found in any business. Technically, you can deduct any expense reasonably necessary to "manage, conserve or maintain" the property. Obvious deductions include mortgage payments, cleaning expenses, insurance premiums, service payments such as landscape maintenance, repairs, maintenance, etc. Overlooked rental property deductions include:

1. Expenses incurred in finding tenants

2. Commissions paid to third parties that arrange for tenants

3. Paying your accountant and/or lawyer

4. Mileage for driving to and from the property

5. Depreciation of the property,

6. Depreciation of items in the property such as washing machines, furniture, etc.

Imaginary Rent Deduction

A few creative property owners have suggested that they should be able to deduct their customary and standard monthly rent if the property is empty. The argument goes, "If the property is empty, I am not making revenue and should be able to deduct the $1,500 that I am missing out on."

The IRS disagrees. Since you are not receiving revenues, your total revenues for the year will be reduced by the loss rent. You can’t double dip by deducting the $1,500 from the already reduced yearly revenues. The only things you can deduct are the expenses you incur during this period, and only for so long as you are actively trying to rent the place.

Rental properties are a great investment. Even more so if you stay on top of your taxes.

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Tax deduction for home equity loan

How the Mortgage Interest Deduction Works

A great feature of home equity loans is that borrowers may get a tax deduction on interest paid for the loan. You must understand that the tax deduction is not unlimited.

Deducting Mortgage Interest

Taxpayers can claim a deduction on interest paid on a loan secured by their first or second home. Most home equity loans fall into this category, but borrowers can get confused if they have multiple "second" homes or mortgages in excess of a home's value. For details on how a home might qualify, see IRS Publication 936 Section 1.

Advantages of Deducting Mortgage Interest

The advantage is that you save money.

For example, you may use a home equity loan as part of a debt consolidation program. Suddenly, the interest you pay becomes tax deductible – not just an expense. Of course, you still have to make the debt go away. If you run the numbers this can work out in your favor.

Limitations

The interest deduction from your home equity loan is not unlimited. You can generally deduct interest you pay on the first $100,000 of a home equity loan. After that, it depends. If the home equity loan was used to improve your first or second home – or to purchase a second home – you can probably take the deduction on an amount up to $1 million or the value of the home. IRS Publication 936 Section 2 contains more detail.

As far as the alternative minimum tax (AMT) goes, your home equity loan deductions will only help you if you used the money for home improvements.

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Questions about the application of the death tax

Kevin from Wisconsin asks,

Q: My father died in September of 2007 in Wisconsin and my parents had no will. Their net worth was $2.6 millon as of his death. Is there going to be any death tax to me when my mother dies since there was no will between them? What can be done to prevent a lot of taxes when my mother dies in the future? I've been hearing something about $675,000 in taxes owed if she passes that down before the 9 month period after death. That would save on the 44% tax. What's the deal with that?

A: The estate tax in the United States is a tax imposed on the transfer of the "taxable estate" of a deceased person, whether such property is transferred via a will or according to the state laws of intestacy. The estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, imposes a tax on transfers of property during a person's life; the gift tax prevents avoidance of the estate tax should a person want to give away his/her estate just before dying.

In addition to the federal government, many states also impose an estate tax, with the state version called either an estate tax or an inheritance tax. Since the 1990s, the term "death tax" has been widely used by those who want to eliminate the estate tax, because the terminology used in discussing a political issue affects popular opinion.

If an asset is left to a spouse or a charitable organization, the tax usually does not apply. The tax is imposed on other transfers of property made as an incident of the death of the owner, such as a transfer of property from an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries.

That being said, this tax was probably not applied to your mother.

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Lisa from Raleigh, North Carolina asks,

Q: If I am an independent contractor, ( I do senior companionship and caregiving) can you tell me what the limit is for the amount of money I can make before I have to file an IRS 1099 form? Also what do I have to provide my clients in the way of a social security number etc. and what to they have to provide me with before filing?

A: According to the IRS, the Form W-2 is used
by employers to report wages, tips and other compensation paid to an employee.
The form also reports the employee's income tax and Social Security taxes
withheld and any advanced earned income credit payments. The Form W-2 is provided
by the employer to the employee and the Social Security Administration. A
Form 1099-MISC is used to report payments made in the course of a trade or
business to another person or business who is not an employee. The form is
required among other things, when payments of $10 or more in gross royalties
or $600 or more in rents or compensation are paid. The form is provided by
the payor to the IRS and the person or business that received the payment.

How do you determine if a person is an employee or an independent contractor?

The determination is complex, but is essentially made by examining the right to control how, when, and where the person performs services. It is not based on how the person is paid, how often the person is paid, or whether the person works part-time or full-time. There are three basic areas which determine employment status:

- behavioral control

- financial control and

- relationship of the parties

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