It's time to stop dreaming about that rebate and file

Spring is here again. And for taxpayers, that means the tax filing deadline is bearing down.

Unlike the past two years when weekends and holidays pushed the filing deadline forward, it is once again April 15. That means taxpayers have little more than a week to complete their 2007 tax returns.

With that in mind, some filers are rushing to get the necessary paperwork done to meet the deadline. While it may be difficult to get an appointment with an accountant now, tax-preparation chains can often squeeze in latecomers. And lots of people still do the work on their own.

In any event, there's room for last-minute moves to help you prepare your filing, an opportunity to delay things, and time for some to dream about a bonus rebate that may come your way.

Drawing attention this year from traditional filing are the onetime economic stimulus payments scheduled to start going out in May.

The payments will range from $300 to $600 for individuals and up to $1,200 for couples, plus up to $300 for each dependent younger than 17 - separate from the normal tax refund most taxpayers get.

How much you get depends on various factors. The good news is that the Internal Revenue Service will automatically calculate the rebate, notify you that it's coming, and mail you a check or make a deposit to your bank account.

But some people will be partly or completely shut out. Among them are couples with 2007 adjusted gross income over $150,000 and singles with over $75,000 of income. In a technical twist, these people may get a second shot when they file tax returns next year if they reduce their 2008 adjusted gross income to below the current requirements for the payments, which is likely to be an emerging tax strategy.

The key requirement for most people is to properly file a 2007 tax return, says IRS spokesman Eric Smith. "The IRS will use information on that return to figure and prepare your rebate," he explains.

That means a new chore for people who qualify for a stimulus payment but are not required to pay tax or file a return - among others, seniors who primarily receive untaxed Social Security benefits and workers with minimal income.

To qualify for a stimulus payment this year, they must have received at least $3,000 in pay or Social Security benefits for 2007 and must file a 2007 return no later than Oct. 15. The form can be a 1040A with just a few pertinent lines filled in and "Stimulus Payment" written across the top.

The IRS website irs.gov has further guidance.

Extensions on return
If you can't make the filing deadline, six-month extensions are easy to get. But you are required to at least estimate your final tax liability, and any tax not paid by the initial due date is subject to interest and a possible penalty. Still, an extension can avoid a failure-to-file penalty.

Use form 4868 for a federal extension. Or you can do it online with tax software, or by phone if you're paying outstanding tax with a credit card.

If you're due a refund, there's no penalty for filing late without an extension, but that can backfire if it turns out you do owe money.

State extensions can be requested on form M-4868, but in some cases must be submitted online or by phone. If you owe no additional tax, an extension request is not needed. Check mass.gov/dor for details.

Last-minute scramble
People eligible for a deductible idividual retirement account have until April 15 to make a deposit that generates a deduction for 2006, as much as $10,000 in some cases for a married couple. The self-employed have even longer to make deductible contributions to their retirement plans.

Don't rush through familiar provisions; they can change because of indexing for inflation.

The standard deduction, for example, has increased for 2007. A couple 65 or older gets $500 more, to $12,800; a younger couple gets $400 more, to $10,700; and a single gets $200 more, to $5,350.

Also higher are exemptions for dependents, up $100 to $3,400; the mileage deduction is increasing for business driving to 48.5 cents per mile from 44.5 cents; and various income ceilings that limit tax benefits, itemized deductions, for example, begin to phase out on 2007 returns after $156,400 of gross income, up from $150,500.

Three deductions that were near death in 2006 are still alive for 2007 after congressional resuscitation. Included is a deduction of up to $4,000 for college tuition as an alternative to the Hope and Lifetime Learning credits, an option for itemizers to deduct sales tax instead of state income tax, and a deduction of up to $250 for spending by schoolteachers on classroom supplies.

Loose ends
Checking the crannies can uncover savings. People who worked for more than one employer last year may have had too much combined Social Security tax withheld.

The maximum overall wages subject to the tax last year was $97,500 and the most that should have been withheld is $6,045, which is separate from the unlimited Medicare tax. You can claim a credit on your tax return for any excess.

It also may pay to review your filing status. If you're divorced or otherwise unmarried you may qualify as a head of household if you provide a home for your child. That can mean less tax than filing as a single.

Additionally, the 2007 return is the last chance to claim special expiring tax credits of up to $500 for fixing up windows, doors, a furnace, and other parts of your home to be more energy efficient. That break, unless reinstated by Congress, doesn't apply to spending after last year.

The state's take
Watch out when doing your Massachusetts return. "Not all federal breaks carry over to the state return," cautions Department of Revenue spokesman Bob Bliss.

A new federal rule that can prevent forgiven mortgage debt from being counted as taxable income, for example, won't apply to state returns without a change in the law, notes Bliss.

And a federal deduction that now allows mortgage insurance premiums to be included with home interest is moot since Massachusetts doesn't allow home mortgage deductions, he adds.

Rush to open an IRA? "That might save federal tax but it won't generate a state deduction," advises Woburn certified public accountant Cindy Brandt.

On the plus side: While Social Security benefits may be taxed by the feds depending on your income, they're fully tax-exempt on the state return.