Here’s a video from the Brookings Institution about the economic crisis.  I can’t say I agree with everything and I find the Cato videos to be more informative (call it bias).  I still thought it was worth watching.  Barry Bosworth is fiscal policy expert and worked in the Carter administration (his CV is available here).

 

I’ve been getting a lot of angry comments on my earlier post (”Where’s My Refund“) regarding the payout of the economic stimulus package. Many people are upset they haven’t received their payment even though they filed on time and with direct deposit.

While there are a number of factors that could slow your payment down (the IRS was delayed in processing your return, there was an error on your return, or the IRS just doesn’t like you) there is a new one I found out about yesterday: TurboTax.

Apparently, if you used TurboTax to file your taxes, you may get a paper check in the mail - regardless of whether or not you chose to get your income tax refund by direct deposit.

From the TurboTax support site:

Under certain circumstances, however, the IRS has decided that taxpayers can only get their rebates by mail, even if they get their refunds by direct deposit. At TurboTax, this will happen if you use a “refund transfer” when filing your 2007 return. This service lets you pay for your tax preparation and/or e-filing from your refund proceeds, for an additional fee, under an agreement with Santa Barbara Bank & Trust .

What does this mean for you and me? Well, if you used TurboTax’s “refund transfer” option you’ve actually made two mistakes.

1. You actually paid money for a “refund processing fee” which for everyone else was absolutely free. Since the government did the “processing” of the economic stimulus payment based on your 2007 return (for free)… you just got scammed by TurboTax.

2. You also paid $30 to Santa Barbara Bank & Trust to “loan” you the money for your TurboTax preparation fees. When your refund comes, it goes to Santa Barbara Bank to satisfy your “debt” before you get what’s left over. This is where you got, um… screwed. Since your banking information was used only for the transaction between Santa Barbara Bank and you, it wasn’t passed on to the IRS.

As a result, the IRS can’t direct deposit your stimulus payment even if it wanted to… because it doesn’t have your banking information.

Now that the tax season is officially over, a few of you have no doubt figured out that you’ve made a mistake on your tax return. In fact, with the constant addition of new tax laws and regulations, thousands of Americans are submitting their 1040s with errors. But have no fear - it’s not the end of the world. That is, of course, assuming it was an accident.

Some people end up omitting deductions they later found applied to them. But most realize they neglected to include some form of income - small business income, interest income, etc. For whatever reason, people fear that these types of mistakes will bring the IRS knocking at their door. However, there’s no evidence that amended returns are a “red flag” for IRS auditors. After all, it’s what’s on your return that counts.

The IRS even encourages individuals to file amended returns for deductions or credits they failed to take. For example, many people last year overlooked the one-time telephone-tax refund that was available on 2006 returns.

So, if you’ve made a mistake on this year’s return, what can you do? As mentioned above, simply file an amended return on Form 1040X (PDF Link). Don’t try and fix your mistakes on your current year return. The timing of your income and deductions can effect what you are able to do in future years.

Luckily, the statute of limitations states that you can amend your return within three years from the later of the filing deadline or the date you filed your return. But don’t file an amended return if you just correcting math errors. The IRS checks the math on your return and will send you a letter informing you of the changes they made to your return.

There is one downside to filing an amended return: you’ll have to do it on paper. You can’t file an amended return electronically yet.

If you’ve been anxiously checking the mailbox every afternoon for your tax refund, there’s a better way.

The IRS has created an online tool appropriately called “Where’s My Refund?”

“Where’s My Refund?” is fast, easy, safe and convenient… why wouldn’t you use it? Nearly 9.7 million taxpayers have already checked the status of their 2007 federal income tax refunds online, up about 18 percent over the same time period last year.

To get to your refund status, be prepared to enter your:

• Social Security Number (or Taxpayer Identification Number)
• Filing status (Single, Married Filing Joint Return, etc.)
• Exact refund amount shown on their tax returns

You can check on the status of their refund seven days after e-filing a return. But if you filed a paper return (why would you torture yourself like that?), check four to six weeks after mailing your return.

“Where’s My Refund?” also includes links to customized information based on a your specific situation. For example if “Where’s My Refund?” shows that the IRS was unable to deliver a refund, you can change your address online. You can avoid undelivered refund checks by having your refund directly deposited into a personal checking or savings account. And you can even initiate a trace if the IRS says it mailed a refund check but you haven’t received it after 28 days.

So what are you waiting for? Where’s My Refund?

In numbers that are in no way surprising, more Americans are realizing the many benefits of filing online.

In fact, the IRS announced that e-filing is off to a fast start in 2008 with more than 38 million tax returns filed electronically so far. This figure is up 5 percent from the 36 million returns filed for the same period last year, with double digit growth coming from taxpayers filing from their home computers. More than 12.3 million returns were filed from home, an increase of almost 14 percent from the same time last year.

As for the total amount of all refunds, $106.7 billion has been issued so far in 2008 with the average refund amount of $2,708, up two percent from the same time last year. So far this year, the IRS has directly deposited 33 million refunds out of the total of 39 million refunds. The direct deposit refunds were valued at just over $96 billion with the average amount of a direct deposit refund of $2,900.

However, while many people are getting fat tax refunds, it just causes me to worry that too many people are giving the government an interest-free loan with their refunds instead of allowing that money to work for them! (see my post on how many W-4 deductions to take for more information).

The IRS is also reminding those who have not filed their 2007 returns yet that direct deposit is the fastest way to get both regular refunds and economic stimulus payments. These stimulus payments will be direct deposited for those eligible filers who select that option when filing their 2007 tax returns.