Deadline Nears For Tax Refunds

More than $2 billion in unclaimed 1996 tax refunds is sitting in government accounts, but it’s still not too late for almost 1.6 million taxpayers to get what they’re owed.

The Internal Revenue Service warned this week that these tardy taxpayers have until April 15 of this year to file their late returns and still get a refund.

After that date, they still have to file a tax return but they won’t get their refund.

“The law generally provides for refunds only if taxpayers file returns within three years,” said IRS Commissioner Charles Rossotti. “We want people to get the refunds they deserve, but they have to file tax returns in order to claim them.”

There are some catches: The IRS would hold any 1996 refund if taxpayers also haven’t filed returns for 1997 and 1998, and the amount could be reduced for any amount of tax still owed for those years. There is no penalty for filing a late tax return in which a refund is owed, since penalties are based on unpaid taxes.

Taxpayers who are owed a 1996 refund also must ensure the return is received by the IRS by April 15, not just postmarked by that date.

IRS tones down audit letters

The IRS is taking a less confrontational approach when it sends letters to taxpayers to notify them that employers, banks and friends could be contacted as part of a tax audit.

The notices were required as “fair warning” by the 1998 IRS overhaul passed by Congress, but the original versions drew immediate criticism last year for heavy-handed wording. IRS Commissioner Charles Rossotti acknowledged that the original letters “needlessly alarmed taxpayers.”

Among other things, the notices were unnecessarily sent to all taxpayers who were audited and not just those from whom the IRS had tried and failed to get the needed information. Rossotti promised last year that a rewrite was in the works.

The new notices being announced today will reflect long-standing IRS policy of resorting to these “third-party” contacts only when all else fails. The form of the new letters was first reported by USA Today.

The IRS will begin using 15 notices designed for specific tax situations and will clearly spell out that the information will first be sought from the taxpayer before the agency contacts a bank, employer or friend. Some notices will include a blank space for the agency to detail exactly what information is being sought.

About 8 million taxpayers will likely receive a notice at some point this year, Rossotti said.

Long-distance plans simplified

AT&T and Sprint now include in-state telephone calls in their long-distance calling plans, a move that has won the praise of Washington’s top utility regulator.

Marilyn Showalter, chairwoman of the Utilities and Transportation Committee, said restructuring the plans will eliminate some of the confusion among consumers shopping for the best long-distance rates.

“Customers will know the cheaper rates apply to calls made across the Cascade Mountains or to other states,” she said earlier this week.

Consumers must pay a $3 monthly fee to get the lower in-state rates.

Showalter had asked the long-distance carriers in a letter last fall to charge the same rates for in-state and interstate calls, or at least clarify the difference.

The commission offers a fact sheet, “How to select a long-distance provider,” that can be obtained by calling 1-800-562-6150 or using the Web site at www.wutc.wa.gov/consumer.

HUD hikes reverse mortgage limits

The U.S. Department of Housing and Urban Development has increased the Maximum Claim Amount senior citizens who own their homes can use when they take out an FHA-insured reverse mortgage.

The minimum was increased to $121,296, the maximum to $219,849.

Reverse mortgages allow seniors to take advantage of their home equity in several ways.

They can take the money in a lump sum, as monthly income, or hold it in reserve as a line of credit.

How much they receive depends on their age, value of the home and current interest rate.

No repayment is required until the home is sold or the homeowners permanently leave.

The income is considered tax free, and there are no income or credit requirements.