Friday, 30 March 2012

States where taxes are sky high..

1. Delaware
> Increase in personal income tax: none
> Expenditure per capita (2008): $6,800 (3rd highest)
> 2009 budget shortfall: 12.2% (18th highest)
> Home price decline from peak: 20.3% (16th largest)
In the past three years, the state of Delaware spent $6,800 per person in its annual budget, approximately two-and-a-half times as much as Nevada. The state’s government spent the 10th-most per person in the country on Medicare in 2009, and the 13th-most per person on pensions. In its fiscal year 2011 budget, the state was forced to address an 11.4% budget gap by cutting funds to education and the state workforce.
Despite these cuts, the recession has weighed heavily on the state’s budget. Delaware has experienced among the biggest declines in home values in the country over the past five years. The state raised tax revenues to help address the resulting budget gap. These hikes included at least 5% increases in corporate and cigarette taxes. The state also temporarily raised the cap on the corporate franchise tax from $165,000 to $180,000. As a result of these and other changes, state tax revenue increased by more than 9% between 2009 and 2011.
2. California
> Increase in personal income tax: more than 5%
> Expenditure per capita (2008): $4,196 (25th lowest)
> 2009 budget shortfall: 36.7% (2nd highest)
> Home price decline from peak: 46.7% (3rd largest)
Since 2009, few states have had more serious budget challenges than California. Spending growth has far outpaced economic growth since 1991, and the gap continues to widen today. For years, the state has been one of the biggest-spenders in the country. TANF (Temporary Assistance for Needy Residents)-eligible residents receive $537 per month for 42.4 months — the second largest amount in the country and the seventh-longest period. The state also spends a great deal on pension beneficiaries.
The recession has made California’s structural deficits larger. Median home values fell by 46.7% from their peak in 2006, and median household income barely increased since then, much less than the average state. In 2010, the state had a $45.5 billion budget shortfall, or 52.8% of its general fund — the largest in nominal terms and the second-worst in the country as a percentage of general fund. Enormous budget gaps have forced the state to cut funding to nearly every major program. The state also has raised taxes substantially, including increases of 5% or more in sales tax, personal income tax, and corporate income tax, which together contribute to an overall increase in revenue from taxes of over 9%.
3. Illinois
> Increase in personal income tax: more than 5%
> Expenditure per capita (2008): $3,772 (16th lowest)
> 2009 budget shortfall: 15.1% (11th highest)
> Home price decline from peak: 21.7% (13th largest)
Illinois consistently has had among the largest budget shortfalls in the country since 2009. It also was hit extremely hard by the recession. Since its prerecession peak, home values have declined by more than 20%, which is among the worst declines in the country. GDP grew a relatively modest 8.2% between 2006 and 2010, while the average state’s GDP grew at least 10%.
In 2011, the state’s continued financial problems led to a $13.5 billion budget gap, representing 40.2% of the state’s general fund. It was the second-worst budget gap in the country. The state was forced to make spending cuts in all five major categories, including $311 million in cuts to school education in 2011. The state also increased the corporate tax rate from 4.8% to 7% and increased personal income tax from 3% to 5% as part of the fiscal year 2012 budget agreement. The state estimates these measures will raise approximately $7 billion.
4. New York
> Increase in personal income tax: more than 5%
> Expenditure per capita (2008): $5,353 (12th highest)
> 2009 budget shortfall: 13.2% (16th highest)
> Home price decline from peak: 8.3% (16th smallest)
According to the Tax Foundation, New York has been spending approximately 144% more per person each year than it did in 1977, the first year with recorded data. In 2009, New York spent $18,126 per pupil, more than any other state. It also spent $9,056 per Medicare recipient, also more than any other state.
When creating the fiscal year 2012 budget, legislators confronted a $10 billion deficit, or 17.6% of the total available funds. For that budget, the state was forced to cut funding for the SUNY colleges by 7.6%. Yet, these cuts, and others like it, have not been enough to balance the budget. The state has raised tax revenues by at least 9% between 2009 and 2011, partially by increasing personal income and cigarettes taxes by 5% or more.
5. Rhode Island
> Increase in personal income tax: between 1% and 5%
> Expenditure per capita (2008): $6,093 (5th highest)
> 2009 budget shortfall: 26.6% (3rd highest)
> Home price decline from peak: 27.0% (7th largest)
Between 1977 and 2008, the state of Rhode Island has doubled its spending to $6,093 per person. The increase was driven by some of the biggest state programs in the country. In paying out unemployment benefits, the state covers 46.5% of weekly wages, the second-highest percentage of any state. Rhode Island is also among the top ten per capita spenders for education, Medicaid, and pensions.
According to Brookings, the state’s tax revenue has been declining for decades as a result of a loss of manufacturing jobs. The slowing economy rebounded briefly during the housing boom leading up to the recent recession. Unfortunately, the real estate market collapse has put the state in an even worse position than it was before. Rhode Island has been forced to make across-the-board cuts in spending as well as increase taxes. The state increased cigarette taxes by more than 5%, and it raised personal income tax between 1% and 5%.
6. West Virginia
> Increase in personal income tax: more than 5%
> Expenditure per capita (2008): $4,648 (18th highest)
> 2009 budget shortfall: N/A
> Home price decline from peak: 4.5% (9th smallest)
West Virginia is different from the other states that increased revenue from taxes. While budget gaps were among the worst for five of the six states, deficits have remained low in West Virginia. In 2010, the worst year for state deficits across the country, the state’s budget shortfall was only 8.2% of general funds, the seventh-smallest gap in the country.
This relatively modest deficit is likely the result of how well the state weathered the recession. In 2009, unemployment was only 7.7%, much lower than the national average. Similarly, home values fell just 4.5% from their peak, the ninth-lowest decline in the country. Meanwhile, GDP grew 16.8% from 2006 to 2010 and median household income increased 9% between 2006 and 2010, the eighth- and third-highest increases in the country, respectively.
While the state has done well, it elected to make increases to personal income and cigarette tax rates by more than 5% between 2009 and 2011. This decision, coupled with strong economic performance throughout the recession, helped the state increase revenues from taxes over 9%. According to a report from the Center for Budget Policy Priorities, the state made no spending cuts to the five major categories by its fiscal year 2011.
Michael B. Sauter and Ashley C. Allen

IRS Audit Rate Nears 30% for Those Making $10 Million and Up

The Internal Revenue Service in 2011 audited 29.93 percent of taxpayers who reported more than $10 million of income, according to statistics released today.
That’s up from an audit rate of 18.38 percent in 2010 and 10.60 percent in 2009 for a group that consists of 0.01 percent of taxpayers. Overall, the agency’s rate of audits for individual taxpayers stayed constant at 1.11 percent.
Joe Perry, partner-in-charge of tax services at the accounting firm Marcum LLP in New York, said he has seen a ten- fold increase in clients being audited, including at least five under the more intense scrutiny of a new IRS task force that is targeting high net-worth taxpayers.
"Those are very time consuming and costly¸" said Perry, who represents several clients with incomes exceeding $10 million. "It´s worse than a root canal."
The IRS statistics cover audits conducted in fiscal year 2011¸ which generally corresponds to returns filed during 2010.
For U.S. taxpayers with adjusted gross incomes between $5 million and $10 million, the audit rate rose to 20.75 percent from 11.55 percent. People making between $200,000 and $500,000 were audited at a 2.66 percent rate.

Quicker to Audit

The IRS is quicker to audit individual returns than in the past, sometimes contacting people within months of their return being filed, Perry said.
In some cases, the IRS requires taxpayers to produce and prove every item on their return including such things as their children’s Social Security numbers. Perry said the firm has also seen an increase in so-called correspondence audits, where the IRS will send a letter asking a taxpayer to verify a specific item on the return such as charitable deductions.
In 2009, the IRS created a special unit to examine the tax returns of high-wealth individuals.
"We will take a unified look at the entire web of business entities controlled by a high-wealth individual, which will enable us to better assess the risk such arrangements pose to tax compliance and the integrity of our tax system," IRS Commissioner Douglas Shulman said in a December 2009 speech. "We want to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise."
To contact the reporters on this story: Richard Rubin in Washington at; Margaret Collins in New York at
To contact the editor responsible for this story: Jodi Schneider at

Thursday, 29 March 2012

BRICS nations - pact for local currency facility

In an effort to reduce the transaction costs of intra-BRICS trade, the five-member emerging economies’ group on Thursday inked a pact to extend credit in the respective local currency.
The agreement, signed at the conclusion of the fourth BRICS Summit here, is intended to reduce the demand for fully convertible currencies for transactions between Brazil, Russia, India, China and South Africa (BRICS).
The Group also signed an agreement on Letter of Credit (LC) Confirmation Facility which envisages confirmation of LCs on receipt of a request from an exporter, exporter’s bank or importer’s bank.
India also called for easing the issuance of business visas between the BRICS nations and proposed setting up of a BRICS Development Bank.
Significantly, the BRICS countries called for reforming the International Monetary Fund and World Bank by increasing representation from developing countries.
They agreed to support a developing country candidate for the post of World Bank President.
Restore market confidence
Taking serious note of the impact of the Euro zone crisis on the world economy, the emerging economies’ grouping said: “The immediate priority is to restore market confidence and get global growth back on track.”
Referring to the risks of large and volatile cross-border capital flows being faced by emerging economies, they said, “We call for further international financial regulatory oversight and reform, strengthening policy coordination, financial regulation, supervision cooperation, and promoting the sound development of global financial markets and banking systems.”
The BRICS countries also called for closer cooperation to revive the stalled Doha Round talks for a deal on further liberalising global trade.

Sunday, 25 March 2012

How to know if an IRS audit is round the corner?

With ever improving improved detection systems and computerized checks, the IRS can more easily identify red flags that trigger audits.
Contact typically starts with a letter requesting more information and can lead to in-person meetings. It is usually triggered by a tax return that contains something unusual, such as an above-average deduction or change in income from previous years. As long as the taxpayer can defend his filings with the proper paperwork and logic, he has nothing to worry about--other than the time it takes to respond.
Here are a few of the signs you need to take note of:
1. Earning a lot less money last year.
The IRS looks out for any major changes in income, which can signify that a taxpayer is under-reporting his earnings. As the IRS tracks historic data, people who suddenly start reporting much less income can be flagged for an audit.
2. High incomes.
According to IRS 2010 enforcement results, your chance of being audited triples once your income crosses $200,000.
3. Over-sized medical expenses.
Medical expenses - You only can deduct these costs to the extent they're greater than 7.5 percent of your adjusted gross income, and it's important to have detailed records.
Any higher-than-average deduction in any category will send out a signal to the IRS that all is not right.
4. You work for yourself. 
It might not seem fair, but being self-employed can raise red flags for the IRS, especially if you claim your home office and other costs as business expenses but don't earn much income. The best advice is to keep careful track of all paperwork so you can defend any deductions and credits you take.
Home offices -  You can only take a home office deduction if you regularly and exclusively use part of your home as your principal place of business. If your office doubles as the kids' playroom, forget about it. For details, see IRS Publication 587.

5. You claim losses from a hobby. 
While writing off business expenses can be legitimate, it's illegal to pretend a hobby is a business and then write off the related expenses. For example, if you enjoy woodworking, you might practice the craft on the weekends for fun. Doing so does not enable you to write off the cost of wood and tools. (If you were selling those creations online, that would be a different story.) The difference between a small business and a hobby is that a business "must be entered into and conducted with the reasonable expectation of making a profit."
6. Deducing home office (or car) expenses. 
While plenty of people can legitimately claim home office expenses on their taxes, some people do so incorrectly. Merely checking email from home after work, for example, does not justify a home office deduction. In order to qualify, the home office must be used for work only. Likewise, claiming a car as a business expense can also raise red flags; taxpayers doing this need to keep careful track of how much they use the car for business versus personal use.
7. You included expensive meals and entertainment costs among your deductions.
The IRS often double-checks these types of claims to make sure they are legitimate business expenses, says Perry.
8. You were particularly generous this year. 
The IRS is on the lookout for people who inflate their charitable donations, and the agency takes a close look at taxpayers who say they donated $500 or just under, since anyone who donates more than that amount must file form 8283. (And if you do donate more than $500, be sure to file that form.)
Charitable deductions. - You'll need a canceled check or dated receipt for any cash contributions, and contributions of $250 or more require a written acknowledgement from the charity. If you made a noncash contribution valued at more than $5,000, you'll need an expert appraisal to back up your claim.
9. You maintain an overseas bank account. 
The IRS has added more reporting requirements this year for people with money in foreign accounts. Failing to report one could trigger an audit.
10. Your numbers don't match. 
If numbers on various forms don't match or add up correctly, the IRS is likely to notice and look into any disparities. So treat your taxes like a final exam in algebra and check over all the numbers before submitting.
As long as you know you filed your paperwork properly, you can sit back and enjoy any refunds coming your way.
For more on getting through an IRS audit, refer to our earlier blogpost

Failed to file FBAR for your offshore funds?

The failure to file a Foreign Bank Account Report TD F 90-22.1 (FBAR) for an offshore bank account has led to the seizure of an Alaska plastic surgeon's $4.6 million dollar account at a Seattle branch of Bank of America. According to the complaint filed in District Court Alaska plastic surgeon Michael Brandner was involved in a contested divorce proceeding with his wife, and decided to hide around $4.6 million from her by depositing the funds in a foreign bank account in Panama held in the name of a nominee offshore company. The complaint alleges that he drove the money from Alaska to Panama in the form of several cashier's checks. He was assisted in the transaction by an individual he met in Panama.

As luck would have it the person who Brandner sought assistance from got caught up in an investigation into a totally unrelated stock fraud scheme, and began cooperating with the government. Reading between the lines here it seems that the so-called cooperating witness spilled the beans on Brandner in order to try and get some leniency in whatever mess he was involved in. The cooperating witness told the government that he had advised Brandner of the obligation to file an FBAR reporting for the offshore Panamanian account on at least two occasions. 

The cooperating witness also advised Brandner that a new tax treaty with Panama might compromise the secrecy of his offshore account. Brandner then inquired if there was any other place he could hide the Panamanian funds. With the assistance of the cooperating witness created an offshore entity which then opened up an account at Bank of America held in the name of the foreign LLC. Homeland Security Investigations (HSI) then promptly seized the account in a civil in rem forfeiture action.

There are a number of lessons to be learned other than don't try and cheat your wife in a divorce action. Clients always ask our tax litigation attorneys variations of the question: "How is the IRS going to find out about my offshore bank account." The truth is that the IRS may not find out, but the consequences can be dire if they do. In Brandner's case he had the bad luck to trust someone who later came to have his own problems (which were not even tax problems) with the authorities. Always keep in mind that if two people know a secret it's not a secret. 

The government has attempted to use the civil forfeiture statute to seize 100% of the proceeds of offshore funds for failure to file an FBAR. It certainly significantly ups the stakes; especially since there is nothing to stop the IRS from criminally prosecuting Brandner for willfully failing to file an FBAR, or criminal tax fraud and that may be the next episode in this drama.

As a technical matter it is not clear to our tax litigation lawyers that the IRS has the right to seize the proceeds of an account simply because no FBAR was filed. 
If you have an undeclared offshore bank account it is past time for you to get solid advice from a tax litigation attorney about your options. 

Tuesday, 20 March 2012

Mandate - prior approval from IRDA before launching a product

Insurance companies are mandated to take prior approval from the Insurance Regulatory and Development Authority (IRDA) of the product before launching.
As per File and Use Guidelines, the insurance companies are required to launch products after allowing for 60 days for non-life and 30 days for life for clearance by the IRDA. Several times, however, the full details of the product, which are required in order to assess the product, are not furnished and consequently there is delay.
The time lag for this process depends on the complexity of the product, the price, features, benefits and terms and conditions of the product.
The shortest and longest time taken for product approval (from date of receipt to date of clearance) is in the ranges of 2 days to 1708 days, with an average time-lag of 109 days for the life insurance products, 103 days for the general insurance products excluding health insurance products and 176 days for health insurance products, as informed by IRDA.
Being a service industry, the popularity of insurance industry depends on the quality of service rendered by the company in terms of innovative products and speedy settlement of claims. The quality of service may be hampered if the products are not properly worded, under/excess priced and doesn’t meet the needs of the customer. IRDA has informed that need-based and reasonably priced insurance products by the insurance companies would increase the popularity of the industry.
This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in Rajya Sabha today.

Call Center to assist in e-filing queries

Income tax e-filing system has given a new call centre number to assessees. This number is to help in e-filing of income tax returns.

New e-filing call center has started working from 15th March 2012. For any query related to online filing of Income Tax Returns, please call 080-25186960 between 9am to 6 pm on all working days. Taxpayers are advised to make use of this facility. 

Sunday, 18 March 2012

Business Line : Features / Mentor : Where there is a will…

Business Line : Features / Mentor : Where there is a will…

A will has legal acceptance, even if it is written plainly on white paper with no formal style, with just two witnesses.
It was during the recent visit to USA, that I came across a shocking situation. A middle-aged couple from Gujarat, who were relatives of my client, had recently passed away in a tragic car crash.
They had moved from India and settled in USA almost a decade ago for a software job, and both of their children are natural US-born citizens. The grandparents hurried to USA and took care of all formalities, including the funeral and last rites.
When the time came to claim the children and arrange for them to return to India, they were in for a shock — the US Government had placed the kids in foster care already.
Further enquiries revealed that only a court of law could decide if the children remained in foster care or went with the grandparents, because the parents hadn't written a will designating a guardian for the children, in the event of something happening to both of them.
The fact that the children lost both their parents in a horrifying accident was tragic enough, but making the matter worse was the fact that the parents died intestate, and thus, the custody of the children became an issue for the courts to decide.
Yes, sadly enough, if a person dies intestate in USA, and has young children, and the remaining parent is also deceased or unavailable, the courts will determine who gets custody of the children.
What a tragic situation for the children to be in! Coping with losing both parents is bad enough, without the added trauma of settling into a foster home and adjusting to an alien culture until the court can make up its mind on where they should go, and who should care for them.


Undoubtedly, social systems differ from country to country. Foster care is a common procedure in USA, but alien to Indian culture. While we aren't judging the correctness of foreign social rules, one cannot help thinking that a simple thing like a will could have made a lot of difference to those kids. Eventually, the court did grant the grandparents' custody of those children, with the intervention of the Indian Embassy, but a will could have prevented a long wait, and astronomical legal expenses.
A will is a simple enough legal declaration, by which a person provides for the transfer of his/her property at death. Perhaps, because of its association with death, it is a document that most people postpone drawing up, especially in India.
Due to its association with death, it is considered inauspicious. However, not drawing up a will these days is more inauspicious. If someone dies intestate in India, something as simple as transfer of a phone line or an LPG connection requires that the nominee prove he/she is a legal heir of the deceased in addition to getting letters from the remaining legal heirs. People also desist from discussing this issue with their parents, in view of their sentiments and the inauspicious tag attached to a will.


Unless the older generation, for some reason, seeks professional advice and comes across a professional consultant who provides the right advice, they don't foresee such issues, and are, therefore, blissfully ignorant of them. In their belief that they are leaving assets for their children, and that they have provided for the prosperity of the family, they unknowingly leave behind many a legal tangle. A will has the legal acceptance, even if the Testator (who writes the will) writes on a white paper with no formal style, with two witnesses, and which is ambulatory & revocable during his lifetime to accommodate change of events such as birth, marriage, divorce, family chemistry, wealth variation etc.
‘Where there is a will there is a way' goes an old English adage. Someone made a witticism out of it and turned it around to state ‘Where there is a will… there are many worried relatives' To top it all, however, where there is no will… there are umpteen legal hassles.
(The author is a Coimbatore-based chartered accountant.)

Friday, 16 March 2012

Union Budget 2012-13 : Highlights

Union Budget 2012 - highlights:

Highlights of the Budget as it was presented.

The Finance Minister Mr. Pranab Mukherjee has outlined the country’s future with his Budget speech and presentation on March 16, 2012. What does the future hold for the nation? A lot of proposed reforms, not many investor-friendly moves, minor increase in IT exemption limit for personal income tax – here they are all.

®    Good news for investors -  New equity scheme aiming to reduce tax on short-term capital gains for new investors!
®    Use of PAN in both direct and indirect taxes as a preparation towards GST rollout. Will improve regulation.
®    Fund of around Rs. 15,800 crore set aside for capitalisation of PSU Banks. With bad loans lent to those like Kingfisher, much needed breather for banks, isn't it?
®    Boost to capital markets? Investment of Rs 50,000/- a year in equities with three year lock-in period will be exempt from tax.
®    Withholding tax on power, airlines, road and brides,ports and shipyard, fertilisers, dams and affordable houses lowered to 5% from 20% for 3 years.
®    Does the Finance Minister's speech indicate a probable proposal for FDI in Airlines? Hope hope hope :)
®    Direct import of aviation fuel allowed. Aviation fuel makes up about 40% of an airline's operating expenses plus the need to pay exorbitant sales tax (around 30%) makes import cheaper.
®    To fund the growing medium, small & micro enterprises industry in India, a Rs. 5,000 crore opportunity fund channeled through SIDBI. Will the MSME sector at last be considered a priority-lending area?
®    More respite for the likes of Vijay Mallya? External Commercial Borrowings (ECB) to the extent of $ 1 billion to be allowed for aviation sector for next year.
®    Existing 1% interest subvention scheme extended: 1 per cent on housing loans extended to housing loan up to Rs 15 lakh, where the cost of the house does not exceed Rs 25 lakh.
®    Rs 10,000 crore to NABARD for refinancing regional rural banks. Much needed capital subsidy and refinance.
®    Interest subsidy for women Self Help Groups up to Rs 3 lakh at 7 per cent; 3 percent more for those that repay promptly.
®    Credit Guarantee Fund for loans to students - In case there happens to be a default on the education loan, the respective bank can dip into this CGF pool instead of jus adding up to the Non-Performing Assets' stack..
®    Dedicated cell to track black money to be setup.
®    NO CHANGE in corporate tax rates
®    Change in personal income tax exemption limits
o       Income up to Rs 2 lakh - Nil
o       Rs 2-5 lakh - 10%;
o       Rs 5-10 lakh - 20%
o       Rs 10 lakh and above - 30%
®    Dividend repatriation for foreign companies extended by a year
®    Exemption on interest from savings bank accounts up to Rs 10,000
®    Securities Transaction Tax reduced to 0.15% - No significant dent to Government's coffers as already, on almost all transactions, short-term and long-term gains tax is imposed.
®    Service Tax rates go up by 2% from 10% to 12%. Education sector, however, is exempt.
®    Boost to retail stocks as FM assures maximum efforts to bring in multi-brand FDI
®    Venture capital funds to be allowed to invest across sectors
®    Customs duty on gold and platinum doubled to 4%, for jewellery doubled to 10%.  Negative impact - increase in customs duty will only adversely affect cost of manufactured jewelry.
®    Cascading effect of dividend distribution tax removed – to benefit Indian MNCs
®    Cars, bicycles, tobacco products to cost more.
®    Compulsory reporting requirement for companies with assets abroad.
®    Entertainment business gets service tax exemption on copyright and on recording
®    LNG exempted from import duty. With soaring crude oil and coal prices, shift to natural gas is inevitable, and concessions are welcome relief for consumers of various sectors.
®    Aircraft tyres exempted from basic Customs and excise duty.
®    12% general excise duty and service tax – means you pay more for household items
®    Tax exemption of up to Rs 5,000/- for health insurance for annual preventive health checkup.
®    Capital gains tax on residential property exempted if sale proceeds used for SMEs.
®    Corporates - IPO equity offer above Rs 10 crore will have to be made electronically in capital market reforms.

Wednesday, 14 March 2012

Not filed your 2008 tax return? Rush before April 17, 2012

Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.

The IRS estimates that half of these potential 2008 refunds are $637 or more.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2008 refund that their checks may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. 

The thresholds for 2008 were:
  • $38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
  • $33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
  • $12,880 ($15,880 if married filing jointly) for those with no qualifying children.
    For more information, visit the EITC Home Page on
Current and prior year tax forms and instructions are available on the Forms and Publications page of or by calling toll-free 800-TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2008, 2009 or 2010 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by ordering it on, filing Form 4506-T, or by calling 800-908-9946.

Individuals Who Did Not File a 2008 Return with a Potential Refund

Refunds ($000)*
District of Columbia
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Rhode Island
South Carolina
South Dakota
West Virginia
Grand Total
*Excluding the Earned Income Tax Credit and other credits.