By Ryan Schuster

Mar. 24, 2008 (McClatchy-Tribune Regional News delivered by Newstex) --
It's that time of year again.

If you're like most of us, you put off doing your taxes until the last minute.

But with the April 15 deadline looming, you may want to dust off your W2s and start preparing to complete your tax return or make an appointment to see a tax preparer.

Vince Brekken, tax manager at Brady Martz & Associates in Grand Forks, said typically many people wait until right before the deadline to file.

But he said his office has been extremely busy since early February and urged tax filers not to delay too long.

"Get in early," he said. "The complexity has gone up. It is a more time-consuming process each year."

The public will have an added incentive to file tax returns this year -- the $150 billion economic stimulus package approved by Congress that will be doled out to some 130 million U.S. households starting in May. The stimulus package, meant to jump-start the struggling economy, will give as much as $600 to individuals and $1,200 to couples filing jointly, with an additional $300 for each eligible child.

UND economist David Flynn estimated that the stimulus plan could have an economic impact of as much as $351 million for North Dakota and as much as $32.5 million in Grand Forks County.

But residents, including those who usually are not required to file tax returns, will need to file a 2007 return in order to receive the stimulus funding. Earlier this month the Internal Revenue Service sent mailings to recipients of Social Security and Veterans Affairs benefits, who do not normally file tax returns, advising them that they will need to file returns this year to get the stimulus payments.

Brekken recently took some time out of his busy schedule to answer some questions about the economic stimulus package and other tax-related questions. The following are excerpts from his responses:

Q. How does the economic stimulus package work?

A. "It's based on a person's 2007 individual filing. For a single individual, as long as they paid it is the greater of two things: The income tax paid in 2007 with a maximum of $600 for a single or $1,200 for a married couple, the second portion of that is $300 for an individual, $600 for a married couple. Low-income taxpayers will have to have at least $1 (of income tax liability) in order to generate that.

"Some of our clients, who normally may not have to file like people on Social Security, will have to file in order to get the rebate. Taxpayers also receive a rebate if they have eligible children. They will get an additional $300 per child. The children have to be under age 17 at the end of the year to qualify for that."

Q. Where is the money coming from?

A. "It is coming from the U.S. Treasury. It is going to be administered by the Internal Revenue Service. The last I heard from them they were going to try to get the checks out in May and June."

Q. What exactly is the stimulus package? Is this partially an advance on next year's tax return?

A. "The rebate is just a flat rebate. It's a cash amount. The last time they did it, if you didn't get the full amount of the rebate, you'd have a second pass on it when you filed a return. But it's just a flat cash rebate they are giving out."

Q. Who is eligible for it?

A. "All individuals who have paid income tax in 2007 or had at least one dollar of tax liability, or people on Social Security if they had at least $3,000 of qualified income, including Social Security benefits, they would be eligible."

Q. What is the earned income tax credit and who qualifies?

A. "If your income is on the low side, the individual has qualifying children and their income is below a certain threshold, they will qualify for earned income credit. That can be up to around $4,700. That is partially based on how many children you have."

Q. How does North Dakota's new property owners' tax credit work?

A. "There are two components to that. One is the residential and agricultural property. The second component is commercial property.

"On the first component, they file a form with their tax return. On that form they list the parcel numbers of all the residential and agricultural property they own. Your credit is 10 percent of the consolidated amount of the tax up to a maximum credit of $1,000 on a joint individual return and $500 for a single individual return. If you have farmland that is owned by a partnership or an S Corporation, it is not eligible for the credit. You can take the credit against your North Dakota income tax liability. If it is more than that, you can either apply the excess to next year's tax return or you can ask the state to issue you a certificate. You can take that certificate to the county courthouse and they can either issue you a refund check for that amount or they will apply it against your next year's property taxes.

"On the commercial side, that is 10 percent of the consolidated tax from your 2006 property tax statement. On the commercial side if you have property owned by partnerships or S Corporations, those will qualify for the credit. That again is capped at $1,000."

Q. How do you take advantage of that credit?

A. "Virtually everybody who owns a home is going to qualify. They just need to bring in a copy of their 2006 property tax statements to the tax preparer. Some counties you can even use the 2007 property tax statements, which people would just be handling now. For example, in Grand Fork County they have the prior year amounts listed on the 2007 statement. It is based on the 2006 consolidated tax."

Q. Are there any other changes to tax law that people should be aware of?

A. "For small business owners, part of the economic stimulus package was the increased allowance for expensing equipment. That has increased from $125,000 to $250,000 for 2008. They get to expense it on their tax return. Normally they would depreciate it over five to seven years or whatever the life of the asset is. At the option of the taxpayer, in 2008 they will be able to expense up to $250,000 this way. That will affect the 2008 tax year. That will probably affect a fair number of small business clients and farm-related entities.

"Also they are bringing back bonus depreciation for tax years beginning in 2008, which will also affect a fair number of small businesses clients. That is going to be very similar to prior bonus depreciation we had back in 2001, 2002 and 2003."

TAX TIPS

Taxes

Individual tax filing deadline: April 15 (a Tuesday).

What to bring:

- Previous year's tax return.

- W2 forms.

- 1099 forms.

- Bank statements with annual interest total.

- Stock statements.

- Social security statements.

Fast fact: The total number of federal income tax returns filed in 2007 (tax year 2006) was about 136,767,900 (nationally).

Business deductions

AMT exemption increase: For tax year 2007, the alternative minimum tax exemption reached $66,250 for a married couple filing a joint return, up from $62,550 in 2006. The exemption rises to $33,125 for a married person filing separately, up from $31,275, and rises to $44,350 for singles and heads of households, up from $42,500. Some small-business experts say the AMT can be a hassle for small firms because many small-business people are taxed on their personal income as self-employed workers. If an entrepreneur's income requires use of the AMT calculation, some business deductions aren't allowed.

Standard mileage rate: The rate for business use of a car, van, pickup or panel truck rose 4 cents, to 48.5 cents per mile. Darrel Shinn, president of SSB Tax Professionals in Virginia, said business miles can be deducted, but don't confuse them with miles driven for charity and medical purposes. The Internal Revenue Service treats those miles differently. Shinn said record-keeping is essential. "If you keep the records, you get the deduction," he said.

Self-employment tax: The maximum amount of net earnings subject to the FICA portion of the self-employment tax for tax years beginning in 2007 has increased to $97,500. All net earnings of at least $400 are subject to the Medicare part of the tax.

Hire a youth: The wages of workers younger than 18 are not subject to FICA if they amount to less than $5,350 annually. The money is fully deductible. "Maybe they can answer the phone, clean the office or help with outgoing correspondence," said Hall, who employs his daughter.

- The self-employed can deduct 50 percent of self-employment tax and health insurance premiums.

- Self-employed taxpayers with children may qualify for the employer child care contribution credit if they have no employees.

- Charitable contributions sometimes can be written off as advertising.

- Some travel bills can be deducted if you spent part of a business trip on vacation.

- Life insurance, retirement plan benefits, transportation perks and other fringe benefits can be deductible if you hired your spouse.

Medical expenses

- Contact lenses, glasses, hearing aides, laboratory work and some hospital servies.

- Doctor-prescribed weight-loss programs and stop-smoking classes.

- Prescription contraceptives, a vasectomy or, in the event either failed, childbirth classes.

Real estate

- Certain mortgage insurance premiums.

- Commissions and closing costs from the sale of a property.

- Mortgage prepayment penalties and late fees.

- Real estate taxes resulting from the sale or purchase of a property.

For more info

Web: www.irs.gov.

Toll-free helpline: (800) 829-1040.

Newstex ID: KRTB-0074-23989250