IRS wants paper for tax credit

IRS wants paper for tax credit

By Bill O'Driscoll

With the electronic tax filing season under way, the Internal Revenue Service is touting faster service at a lower cost if taxpayers take the online route.

But first-time homebuyers must file paper forms, after Congress required documentation to claim the $8,000 tax credit.

The IRS said first-time buyers can use the electronic forms available from its Web site or consumer sites such as TurboTax but must print them and attach proof of residency, a copy of a signed mortgage statement and a copy of a driver's license before mailing the forms.

The IRS found people were claiming the credits but not purchasing new homes.

"Within three years, we'll be able to take those documents electronically," said David R. Williams, IRS director of electronic tax administration and refundable credits.

Under the program extended to June 30, those who have owned and occupied a residence for at least five of the past eight years can claim a $6,500 tax credit if they close on a purchase.

There is some good news for those who received unemployment benefits in 2009: Under the American Recovery and Reinvestment Act, the first $2,400 of unemployment benefits received in 2009 are tax free.

That credit is available to e-filers.

By e-filing, Williams said taxpayers stand a better chance of not missing available credits.

A year ago, 71 percent of 1.2 million Nevadans filed their tax returns electronically, according to the IRS, with 29 percent sending paper documents via the mail.

"There's no charge for e-filing," Williams said. "And it's safe."

He said an electronically filed return costs the IRS about 20 cents to process compared with about $2.50 for a paper return.

E-filing is popular with younger taxpayers comfortable doing business online while older Americans are a "growth opportunity," he said.

"We're trying to increase awareness," Williams said. "Many older Americans tend to use tax preparers. Our message to them is, you may not want to, but we suggest that your (tax preparer) e-file your return.

"Your tax professional most likely is using a computer. Ask and make sure they are filing your return electronically."

Williams said the IRS is offering Free File software programs available online, including in Spanish, to taxpayers regardless of income.

"We're encouraging people to use Free File. It reduces mistakes and the risk of taxpayers leaving money on the table," Williams said. "The software is designed to help people get the tax breaks they're entitled to."

He said the online systems have been updated with security measures.

"Anyone who files electronically can do so comfortably and securely," he said.

He said users of Free File, operated by a third party company, will be asked whether they want to be a part of future marketing by the company.

"Say no, and that's the end of it," he said. "It gives taxpayers more control."

Employers are required to send out W-2 forms to employees by the end of January, and the recession is likely to spur a rush to get tax returns in earlier this year than usual, according to Williams.

"There's a good chance taxpayers expecting refunds will try to get theirs as early as possible," he said.
Additional Facts
Income tax dates

Key dates:
Jan. 31: Deadline for sending W-2 forms
April 15: Deadline for filing returns
More information: www.irs.gov
Jobless benefits
Under the American Recovery and Reinvestment Act, the first $2,400 of unemployment benefits received in 2009 are tax free. The credit is available to e-filers.