Horizon, Host: Ted Simons

April 3, 2008

Host: Ted Simons

Tax Issues

  • April 15 is just around the corner. Bill Brunson of the IRS and Dan Zemke of the Arizona Department of Revenue will talk about the latest changes to tax laws, electronic filing and the Bush stimulus package.
  • Bill Brunson - Spokesman, Internal Revenue Service
  • Dan Zemke - Spokesman, Arizona Department of Revenue
Category: Business/Economy

View Transcript
Ted Simons:
Every year, new tax laws are implemented, and more and more people file electronically. This year, the big news related to taxes is the economic stimulus plan. I'll talk to a representative from the I.R.S. And the state department of revenue, but first, here's more on the stimulus plan and some tax filing numbers.

Mike Sauceda:
If you are still filing your taxes the old-fashioned way you are now in the minority. In Arizona over half of those filing will do so by computer. Nationwide that figure is 60\%. Just about 134 million individual tax returns filed. Arizona's expecting nearly 3 million returns this year. Over 60\% are expected to include refunds. Part of that is due to a 5\% reductions in state income taxes last year, part of a two-year, 10\% reductions approved by the legislature. Of course the big news this year is the economic stimulus package. More than 130 million individuals who file taxes will be getting checks starting in may with checks continuing to be dispersed through the summer. According to the I.R.S. Website they will use the 2007 tax return to determine eligibility and calculate the basic amount of the payment.

Mike Sauceda:
In most cases the payment will equal the amount of taxes owed on the return with a maximum amount of $600 for individuals or $1,200 for taxpayers who file a joint return and a minimum of $300 for individuals or $600 for tax payers who file a joint return. Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child. Those who receive social security benefits, railroad retirement benefits and certain veterans benefits may have to file additional forms to receive the payment. Most taxpayers will receive two notifications before receiving the payment.

Ted Simons:
Here now to tell us about tax law changes and the economic stimulus package is Bill Brunson, spokesman for the I.R.S. And Dan Zemke, spokesman for the Arizona department of revenue. Thank you both for joining us on Horizon.

Dan Zemke:
Thanks for letting us be here.

Ted Simons:
You bet. Bill, before we get to some of the wherefores and whatnots some change we need to know?

Bill Brunson:
Probably the biggest one is you're going to foreclosure. What used to be is you had to add the indebtedness that was forgiven if you were not solvent and that had to be added back in the income. The law changed so if you're going through foreclosure you don't need to add the amount the mortgage lender is paying you. Another issue that's been around for awhile but the good thing is the I.R.A. Ability to still contribute to a 2007 I.R.A. As long as you do this before April 15th of this year you can contribute to last year's I.R.A. And still contribute to this year's I.R.A., an individual retirement agreement, the form of a pension fund. Then there's the ability for you to claim on your schedule a if you can itemize if you are paying premiums on mortgage interest that was after January 1st, 2006 through 2009, and this would have been something that mortgage lender would have required you to take out an insurance policy and that you're paying these premiums. That's something that most folks may not know that they can take as a deduction if -- deduction if they are itemizing on their return.

Ted Simons:
I know pensions have been altered a little bit. It sounds like medical deductions as long as you itemize?

Dan Zemke:
As long as you itemize you can take 100\% on your state return. The big thing they'll notice is the 5\% across the board cut so the highest tax rate is now 4.54\% for the state of Arizona. Also new this year, military -- excuse me, national guard pay and military reserve pay is not taxable by the state of Arizona at all. Just like ordinary military pay is not taxable.

Ted Simons:
All right. A lot of folks are interested in the stimulus package. And when they're going to get their checks and how much they're going to get their checks and look at you and go, how much are you going to tax me for my checks? Bill, help us.

Bill Brunson:
Basically all an individual has to do is file their 2007 tax return in order to get the stimulus payment. Payments will be directly deposited starting may 2nd for the next three weeks and continue on. That's the first round. If your going to receive a paper check you should start receiving that stimulus payment. Also known as the rebate starting may 16th. It's based on your marital status primarily. So if you're a married couple filing jointly, $1,200 single payment. Single head of house hold $700. A phase out starts at 75,000 for head of household, 150,000 for married couples filing jointly. Let's say you earn 76,000 as a single individual. You're over that threshold by 1,000. The reductions is 0.5. Instead of getting a $600 stimulus payment you'll get $550. Then there's also a group of individual that don't normally have a filing requirement that receive social security benefits, railroad retirement tier one. And there are some individuals that just don't make a lot of money but haven't been a filing threshold. As long as they have 3,000 or more of income in this area, then they will also be eligible for a stimulus payment. But they have to file that 2007 return and that stimulus payment for that other group, $300 for the normal Joe could be $600 if it's a married couple filing jointly.

Ted Simons:
And Dan, this stimulus package money now is not taxable, correct?

Dan Zemke:
That's correct. State of Arizona will not tax that stimulus money.

Ted Simons:
And I understand both of you guys now if you're looking for this, first of all you got to get your return in. And secondly, like maybe the back end of your social security money plays a factor here?

Bill Brunson:
Exactly right. The last two digits of your social security number will determine the order of distribution. If you electronically file have, a refund coming and that item is directly deposited in your checking or savings account the rebate will follow throughout and with those last two digits starting may 2nd for the last three weeks. If you file and have that return processed on or before April 15th and you have a deposit with a refund may 2nd or thereabouts for the next few weeks you should start receiving it. May 16th for those receiving a paper check. How does this affect your 2008 return? It doesn't. It's not an inclusion in the income. You don't add it in. Nor is it going to reduce any sort of credit or refund that you might be getting. Now, you do have to report on an amount that you'll receive. But all you're doing is reporting that dollar amount and that's it.

Ted Simons: okay.
Electronic filing. More folks are doing it. How important is it to go this particular route?

Dan Zemke:
Electronic file something very important for both the taxpayer's point of view and the government's point of view. It saves the government money in that it's all electronic. We don't have to open that envelope, pull out that return, do all those manual things that had to be done with the paper return. And from the taxpayer's point of view, if you're getting a refund you have the opportunity to have it directly deposited and get it in about five days -- as little as five days for the state and I believe it's 10 days for the federal refund. And it's safe, secure and fast.

Ted Simons:
Bill, rumors fly everywhere that especially when it comes to taxes. And some folks seem to think that if you file electronically you might have a red flag going as far as an audit. I take it that's not true?

Bill Brunson:
It's just the exact opposite. Because of the accuracy of the electronically filed tax return you're looking at an error rate of less than .5\%. Paper returns have about 13 to 15\%. So if you're going to get a corespond end audit it's going to be for a paper return more so than an electronically filed tax return. What Dan was saying earlier about the cost to the government themselves, it costs about 29 cents to enz file to process an electronically filed tax return, 2.65 for paper return. So by filing electronically you're saving the federal government money which in turn saves your tax dollars.

Ted Simons:
Real quickly 10 seconds. If you ask for an extension is that a red flag for an audit?

Bill Brunson:
No. And it's going to be an automatic extension through October 15th. Don't wait until the last minute to file a tax extension if you want a rebate check. After January 1st we cannot cut a check.

Ted Simons:
Gentlemen thank you so much, great information.

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