Questions for the Tax Lady: August 17th, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: My fiancé and I are buying a house. The loan is in my name only but we are using her $30,000 inheritance. Will a gift tax apply?

It depends. Technically any transfer of property valued at over $12,000 (where full reimbursement is not received) will be subject to the gift tax. However, gifts between spouses are excluded. Therefore if you and your fiancé got married before the end of the calendar year then you might be exempt.

Taxpayers’ Fears of Errors and Oversights May Be Well Founded

Last week CCH published a new tax survey, which included a lot of interesting data about how much of the tax code Americans actually understand. According to their press release, some of the most shocking findings include:

• Less than one-fourth could identify that tax credits are generally more advantageous than deductions;
• Only about one-third identified the child-related tax break offering the greatest savings; and
• Less than one-half identified the education-related tax break offering the greatest savings.

You can read more details about the finding by checking out the CCH press release, or by downloading a PDF of the full study.

Confusion Over Recovery Rebate Tax Credit for 2008 Tax Returns

Although tax season just stated, the IRS is already reporting mistakes on tax returns, 15% of which are associated with the recovery rebate tax credit, writes MSNBC.com. You can find a portion of the article below, but the full article can be found here.

IRS staff say they have seen many errors on 2008 tax returns already. 15% of the mistakes are over the recovery rebate credit. The recovery rebate tax credit is an extension of last year's economic stimulus payment.

That money was spent in 2008, so the IRS is giving people whose situation changed more money. The IRS wants taxpayers to make sure they're eligible for the credit before they file their 2008 tax returns.

IRS representative Judy Monahan says most people won't receive additional money. She explains, " We paid out 119-million stimulus payments last year, so that's why most tax payers got all they were to get, but there could be certain circumstances where you could get more now."

Those circumstances include people who didn't file a 2007 tax return, had a kid in the last year, and were dependents last year, but can no longer be claimed.