Newsletter Volume 8, Number 5. May, 2008

The Economic Stimulus Package Checks are Coming!!

The IRS has announced that the economic stimulus payments will be issued according to the last two-digits of the main filer's Social Security number. For joint filers, the payments will go out based on the person listed first on the return. Payments will be made by either direct deposit or paper check, consistent with how people filed their 2007 tax return. 

If you used direct deposit, you will be among the first to receive the payments starting April 28. Direct deposits will be made daily and completed by the date listed below:

If you opted for a paper check, your payment will also be based on your Social Security number. For Social Security numbers ending in 00 through 09, the paper checks will be mailed starting May 9 and will continue through May 16. A similar process will be repeated in the following weeks.

For those who filed a return after April 15 will receive their economic stimulus payment, but probably about two weeks later than the schedule shows. A return must be filed by October 15 in order to receive a stimulus payment this year.

A small percentage of tax returns will require additional time to process and to compute a stimulus payment amount. For these returns, stimulus payments may not be issued in accordance with the schedule above, even if the tax return was processed by April 15.  Please contact us to determine what your exact amount is likely to be.

For more information about when you should expect your rebate checks, please give us a call and we will be happy to help you!

Dealing with Income from Abroad

We have been advising many United States (U.S.) citizens and resident aliens about the tax implications of receiving income from foreign sources. There have been recent reports about the interest of the Internal Revenue Service (IRS) in taxpayers with accounts in Liechtenstein. The interest of the IRS, however, extends beyond accounts in Liechtenstein to accounts anywhere in the world. Consequently, the IRS reminds you to report your worldwide income on your U.S. tax return.

If you are a U.S. citizen or resident alien, you must report income from all sources within and outside of the U.S. This is true whether or not you receive a Form W-2 Wage and Tax Statement,  a Form 1099 (Information Return) or the foreign equivalents.     Please contact us for more information on this topic.

Additionally, if you are a U.S. citizen or resident alien, the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether you are living in the U.S. or abroad.

Hiding Income Offshore

Not reporting income from foreign sources may be a crime.  The IRS and its international partners are pursuing those who hide income or assets offshore to evade taxes. Specially trained IRS examiners focus on aggressive international tax planning, including the abusive use of entities and structures established in foreign jurisdictions.  The goal is to ensure U.S. citizens and residents are accurately reporting their income and paying the correct tax. 

Foreign Financial Accounts

In addition to reporting your worldwide income, you must also report on your U.S. tax return whether you have any foreign bank or investment accounts.  The Bank Secrecy Act requires you to file the Report of Foreign Bank and Financial Accounts (FBAR), if:

• You have financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
• The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Please contact us for more information on foreign financial account reporting requirements and how we can help you in these matters.

Stimulus Package for Retirees and Disabled Vets 

Even though April 15 has passed, the Internal Revenue Service today reminded retirees, disabled veterans and others who normally do not file a tax return that there is still time to submit a 2007 form to receive an economic stimulus payment.

People who have no tax filing requirement but have at least $3,000 in qualifying income should file a simple Form 1040A. Qualifying income includes any combination of earned income, nontaxable combat pay as well as certain payments from Social Security, Veterans Affairs and Railroad Retirement.  People must file a return by October 15 to receive an economic stimulus payment this year.

For taxpayers who are required to file an income tax return, the IRS will use the 2007 tax return to determine eligibility for economic stimulus payments of up to $600 ($1,200 for married couples). There also is a payment of $300 for each qualifying child younger than 17.

Those not required to file a return because their income is too low or nontaxable must file a tax return to obtain their economic stimulus payment.  The Economic Stimulus Act of 2008 provides a minimum payment of $300 ($600 for married couples) plus the $300 payment per eligible child, if the person (or married couple) has at least $3,000 in qualifying income.

The types of Social Security benefits that are considered qualifying income include retirement, disability and survivor payments. Supplemental Security Income (SSI) is not qualifying income. The types of Veterans Affairs benefits that are considered qualifying income include disability compensation, disability pension and survivor payments. Qualifying Railroad Retirement payments include the social security equivalent portion of Tier 1 benefits.

Even if you have not filed a tax return or that you believe do not  need to file a tax return, you may be eligible for the stimulus payment. Please contact us and we will be happy to analyze your exact situation and explore how we may be able to help you.