IRS Announces New Mileage Rates Effective 7/1/08

Read all the skinny in the IRS newsroom, here.

The short and sweet? Mileage rates for business or moving/medical are each going up $0.08/mile, effective July 1st.

Charities?

Well, I'm thinking it's obvious the government doesn't give a fig about how people are giving less money in lean times and more time. And gee, wouldn't it be nice to reward those people giving their time and using their own liquid gold gasoline to do it? Apparently not.

New business mileage rate is $0.585/mile; medical-moving will be $0.27/mile; charity, well, it's still a chinchy $0.14/mile.

Smart Tips for Spending Your Economic Stimulus Check

Even people getting paper checks are starting to see stimulus funds by now, and those with direct deposit have had theirs for a while.

Now, what do you do with it? Me, well, I stimulated the local economy by installing a new water heater since I discovered mine leaking a few days before the check came in. I think the water heater guy enjoyed it more than I did, but at least having the stimulus check (which, yes, I know full well I'll be paying for next year!) made the unexpected home improvement sting a little less.

For those of you without a pressing need for home repairs, here's a round up of articles on smart ways to spend--or not spend--your 2008 income tax refund advance ;-)

CPAs offer advice on how to spend tax refund at accountingweb.

Freemoneyfinance.com has a top ten list of tips here.

MySuperChargedLife's awesome economic stimulus round-up can be found here.

Thinking about saving or investing your check instead? Check out the math in this post at My Two Dollars comparing your options.

Here are suggestions on HOW to invest it from Lazy Man & Money.

Then, of course, there are the inevitable scams related to the stimulus checks that you have to watch out for.

New York Wants More!

I first read about New York's "Amazon Tax" in April, when it was still waiting to become law. Now that it has, the online retail giant is fighting back.

Check out the first article at Gizmodo. It's old enough now that it has TONS of interesting reader comments, too.

Then check out the update at Ars Technica.

This is a bad, bad thing. As a service professional providing intangible intellectual property (writing and editing) most of what I do is not subject to Texas sales tax. If I have to worry about New York (or any other state) wanting me to collect taxes on their behalf, well, it'd be bad. Numbers are already not my forte and you're going to make me keep track of MORE?!?

*sigh*

Just to satisfy my inner conspiracy theorist, does anyone know if there are any major small business accounting software firms based in New York? I am sure widespread adoption of this type of law would be a boon to them!

PS -

Did everyone else out there that you are supposed to report online purchases to the IRS on your taxes? Dude! Turbo Tax so does not have that in their taxes-for-the-befuddled questionnaire!

Tax Realities in Virtual Worlds

Okay, I confess. A lot of this goes beyond my ability to understand since while I am a virtual assistant, I don't interact in any of the big virtual worlds.

I tried Second Life and, well, it was slow and kinda boring--if I want a virtual life that can be as tedious as the real thing I'll play the Sims ;-) I don't play any MMORPGs, and, even during the brief period when I did, I would never dream of spending real money on virtual stuff, beyond the monthly game fee.

Instead, I refer you to this spiffy physorg.com article about taxing profits made in virtual worlds. From what I can see, it is mostly aimed at Second Life, since most of the money in the MMORPGs goes to offshore "gold farmers", but what do I know?

As long as they stick to gaming, we're good. I am a little leery of the implications of taxing virtual activity since, well, I both work and get paid virtually. I pay income tax and self-employment tax, if they add another tax, well, that would be bad.

Why do they make it so hard?

Really.

It seems like last Spring all I did was post endless rounds of updates and Q&As for the stupid telephone tax deduction.

Now it's the "economic stimulus payment". Wonder what new stupid thing the IRS will throw at Americans next year?

If you are one of the many people confused by the economic stimulus payment, there's a great article at accountingweb.com that helps clear things up.

For those of you who just want the gist, here it is:

• Everyone with a social security number if eligible for the stimulus payments, whether they normally file a tax return or not.
  
• For those who normally do not file a tax return, the IRS has created an expedited method to get them in the system so they can receive their payments.

• This is not a rebate or refund. It is Advanced Payment of a taxpayer's estimated 2008 refund.
  
• This means that when you file your 2008 taxes in 2009, if the rebate amount is, say, $2000 and your economic stimulus payment was $1200, the actual rebate you will get next year will only be $800, or the difference between your rebate and the advanced rebate you already received.
  
• On the other side, if your 2008 taxes show that you owe money, or your refund is less than the amount of the payment you receive this year, you don't have to pay back the difference.
• This is not taxable income. You will not have to claim it as such, though I am sure there will be extra hoops to jump through next year because of it.
• If you haven't filed your taxes, you can't get a stimulus payment.
• If you had your 2007 tax refund direct deposited in more than one account, you will have to wait for a check, which will be issued after the direct deposits, beginning in mid-May.
  

Those are the high points. More details are available at accountingweb, and at the IRS page I listed last week.

Honestly, what a pain!

I don't the "Fair Tax" is a workable solution, but I loved the Flat Tax notion and wish someone would revive it. If only so I don't have to post about the IRS so much every Spring! ;-)

Where's my Pre-Bate?

Well, the IRS says it will be on its way beginning May 2nd--that's when the first of the 'economic stimulus' (can you tell what I think of this idea?) payments are scheduled to go out the taxpaying public.

For more details on pre-bate schedules and amounts, check out the fast & dirty version on accountingweb. For that level of excruciating detail only the government can achieve, check out the IRS page on the 2008 economic stimulus payments.

If you just want to know when to expect your check, you can find the IRS online calculator here.

Where's the Money Coming From?

The IRS spent $42 million mailing out letters telling people about this year's economic stimulus payments (the so-called "pre-bates") they'll be sending out later this year.

So, in addition to sending out all kinds of bank later this year that this country doesn't have and with the government operating so far in the red that they can't remember what black ink on the books looked like, they spent 42 million EXTRA dollars to mail people letters that are basically just to remind them to file taxes.

And that doesn't even touch on the cost of the next big packet mailing. Or the cost of actually mailing physical checks to taxpayers throughout the nation. More details about how I'm the only one outraged at how the IRS wastes money here.

In all fairness to the IRS, my husband, who knows all about the primary problems in Florida and Michigan, had no idea that the IRS was giving away money later this year until I mentioned it last night. But then, he doesn't work for Candy... lol.

US SBA Advocacy Office Announces 2008 Big Ten

The US Small Business Administration's Office of Advocacy has announced their top ten issues to work on for 2008, as part of r3 initiative. The r3 initiative takes nominations from small businesses and puts together a top ten list of issues to act on during the year to help small businesses. r3 stands for Regulatory Review and Reform.

The SBA forwards the list to the agencies in charge of each issue, posts the list on their website, and posts updates to the issues twice a year.

This is not the same as the IRS initiative we mentioned back in August. For more details, check out the accoutingweb article, or go straight to the list on the SBA website.

The one most interesting to OffAssist is the request for a standardized home office deduction. I know that I don't claim the home office deduction because the rules are draconian and the tax complications if we ever sell our house make it more trouble than it is worth. A simpler system would be great!

Get It Fast!

Tax help, that is. The IRS has invested some time and money in keeping people off their backs so they can deal with their form* problems by updating and upgrading their online resources for tax payers.

Read more here. Or, check out IRSe Publication 17 for yourself.

Like accountingweb, we here at OffAssist want to remind you that the only place for legit IRS info on the web is their website, IRS.GOV. Sites that look similar but end in anything else (.com, .net, .info, et cetera) are scams, so make sure the .gov is there before you ask questions and remember the real IRS will never ask for personal information over the web or via email unless they have already been in touch with you regarding a specific issue.

*Yes, karma came for me after I spouted about how I would not be affected by the tax form problems/delay this year. Apparently, if you or a spouse went to college at all last year and are taking advantage of the lifetime learning credit, well those forms were among those affected.

Don't Waste My Time!

That's what the IRS is telling tax payers. The IRS has a number of things they consider "frivolous" when it comes to tax returns. Taxpayers filing "frivolous" returns are fined $5,000--raised from $500 by Congress in 2006.

The newest additions to the list of things you can put on your tax return if you want to pay a hefty fee include "misinterpretation of the 9th Amendment regarding objections to military spending" as well as certain specific invalid deductions related to meals.

Accounting web has the details here. Embedded in the story are links to PDFs of the other things the IRS has ruled "frivolous" in the past. I have to say, honestly, a number of them LOOK on the surface like legit reasons not to pay taxes, things like the fact the IRS Tax Code is not an actual law, etc. Both my practical and cynical sides know that these arguments are fruitless, Big Brother will win.

I am curious, though, as to the answers to these objections. I could see something like "I don't have to pay taxes because I'm a brunette--If blondes have more fun then we brunettes ought to have less taxes," being ruled a frivolous reason to not pay taxes, but the objections based on quasi-legal stances, those I'd like to see answered. I would also like to know why the IRS gets to decide what is a frivolous reason. That seems a slippery slope...

What if somewhere down the line they make a frivolous ruling--who will be able to stop them? For example, say the IRS decides to rule that since most people lie on their taxes they are going to rule all Americans liars and automatically add 10% to the tax amount shown on the return?

How do you argue with someone who gets to both make the rules and enforce them?

*sigh* I'm waxing political. But, just in case, better go make sure none of your favorite deductions are on any of the frivolous lists.

Alternative Minimum Fuss

Like many, I've heard of the AMT - the Alternative Minimum Tax - but since it did not affect me I haven't paid much attention to it. Apparently this particular tax was made into law in the late 60's as a way to target a particular group of ultra-wealthy people who were using deductions to avoid to pay any income tax at all. The tax has not been adjusted over time and has gone from affecting the intended target to an ever-growing percentage of the American public at large.

Congress intended to take action on this issue this year, but was apparently delayed. A short term fix was created, a one year freeze on the growth of the AMT, but the forms for people who pay this tax were printed in November. Orginal reports indicated that updated versions of the 5 affected forms would not be available to taxpayers until February 11, 2008, putting a damper on some people's desire to file early. As in January early.

The AMT affected about 13.5 million American taxpayers when filing their 2006 taxes. Of those, an estimated 3-4 million are traditional early filers, the people who will be affected by the delay.

For more details on the changes and a list of affected forms, check out the AP article here and the IRS's information page here.

The IRS did recommend electronic filing as a way to increase the speed of refund processing for those affected.

New Form 990 for 2008

Form 990 is the tax return that charities and tax-exempt organizations are required to file each year.

The IRS drafted a tentative new form in 2007 and accepted public input from the non-profit sector to make the form both more functional and easier to use.

For all the pertinent details, check out the information page about the new form on the IRS website, here.

When tax exempt organizations file their taxes in 2008, for the 2007 tax year, they will be using the old form. The new form will be used in 2009 when filing 2008 taxes.

Money for Miles

The IRS has updated standard mileage rates for 2008. The new rates, effective for mileage incurred on or after January 1, 2008 are:

(1) Business 50.5 cents per mile
(2) Charitable contribution 14 cents per mile
(3) Medical and moving 19 cents per mile

That's on page 2 of the excruciatingly long and grossly detailed IRS document on the subject--found HERE. You have to skim to the end, page 29 (of 30) to find the effective date. Look at all the reading time I just saved you!

Uncle Sam Doesn't Want You...

...to give him your opinion in exchange for a credit on your tax account. This is apparently the latest phishing scam using the IRS name & logo to try to defraud people, according to accoutingweb.

So, for the record:

A) The IRS does not ever send taxpayers unsolicited emails. That means they will never contact you via email as a first contact--they will only email you after you have been dealing with some matter and authorized them to contact you via email regarding it.

B) If you're not sure your IRS email is legit, check out their official page on e-mail scams that use their name, found here.

C) If you do get an unsolicited email from the IRS offering you a refund on your credit card as a result of their internal records audit (um, yea, riiight..) and choose not to check it out on the IRS page above, if it is like the one I got this morning, that told me to click on the below address, it is probably not legit.

"w3.tehran.agri-jahad.ir:84/IRS..."

The words in red ought to send up a red flag, even if they are spelled wrong.

(yes, the end of the link has been cut off and no, it is not clickable, just in case someone cruises by who hasn't had their coffee yet this morning)

Fighting Taxes - One Dollar at a Time

Really, I just don't know what to say.

Check out the article for yourself, about Cary Malchow of Muncie, Indiana. In a gesture of protest at rising property taxes, he paid his tax bill, all $12K + of it, in person. In coins and one-dollar bills.

There's another article here, detailing how his protest cost his county because employees were kept late counting the cash (overtime) while under guard by sheriff's deputies (security costs) and could not make the nightly deposit (an estimated $1100 lost in interest-for that ONE day!).

Okay, so I can think of lots of things TO say, but I think I'll hold my tongue. I own a home in one of the most expensive (property tax-wise) places to do so. And I pay those taxes happily in lieu of a state income tax.

It is tempting to start saving change for the IRS, though. Have you SEEN the self-employment tax rate?

Lucky Catch?

Maybe not.

The 21-year-old college student who caught Barry Bonds record-breaking home run ball may be in for a world of trouble with the IRS.

Tax lawyers fall squarely around the issue, some going with the common sense approach that, although the ball is estimated to be worth over $500,000 at auction, the ball is not income until it is sold.

Others claim the ball is taxable immediately, the same way treasure found diving in U.S. coastal waters is.

Still others claim that it is both immediately taxable (for approximately $210,000 in taxes based on estimated worth of $600,000) and subject to long-term capital gain taxes if the young fan waits more than a year to sell his prize.

Then there's the question of how to determine the initial investment value of a ball the man caught for free...

For more on this silly (yet scary, and the IRS is refusing to comment thus far) tax question, check out the articles below:

WSJ Law Blog: Barry Bonds' Ball

WSJ Journal Online: The Big Catch Could Have a Big Catch

TheStar.com: Mets fan could face big tax bill for snagging Bonds' ball

KITV Honolulu: Fan Might Not Sell Bonds' Historic Ball

Tell Me Your Tax Problems

That's what the IRS is saying according to this article from accountingweb.

The gist of it that the IRS is asking businesses to report frequently disputed or controversial tax issues to their Industry Issue Resolution (IIR) Program.

The important fact is that the deadline for submitting an issue for the fall reviews is August 31, 2007. More information can be found on the IRS website. The program has been in use since 2000 and has resulted in 25 determinations - decisions helping clarify how tricky tax situations should be handled.

IIR Submission Procedures


Overview of the IIR Program

IRS Seeks In-Depth Info

The IRS is proposing changes to how corporations and partnerships report their taxes. As I understand it, they are basically asking for more in-depth ownership information from these types of business entities.

As I understood it, the gist is that the government wants to know the names and numbers of anyone who owns more than 10% of the stock in a corporation and more than 10% interest in a partnership. They also want to know from the corporations and partners what businesses or assets they (they being the corporate or partnership entity) own more than 10% of.

To my non-tax person's eyes this looks like a way to clean up dodgy tax reporting and offshore tax shelters since the new forms will require reporting of both foreign and domestic ownership.

The good news is that these new forms appear to only apply to large, complex entities. There are income thresholds involved, both for those who would have to use the new forms, and a new minimum that will (slightly) decrease the amount of tax paperwork smaller businesses have to file.

After a bit of digging around on the IRS website I was unable to find the original press release. I'm sure there was one because the two articles I read on the subject, at accountingweb and at smbiz.com, read identically, nearly word-for-word.

Both the above linked articles have links to the proposed forms on the IRS website. If adopted, these forms would kick in for tax years ending on or after 12/31/08. The IRS is accepting public input and commentary on the new forms until 9/14/07.

IRS Tax Info for Partnerships Page

IRS Tax Info for Corporations Page

Both of the above have links to the new forms, too.

Behind the Times

Okay, confession time.

I get all my news from other people.

It's true. I am a writer, not a journalist, and a bit liberal, so the news has mostly depressed or annoyed me for the last, oh, 10 years, so I just stopped watching/listening/reading.


What this translates to is that I get ALL my news from other people, usually via listservs and occasionally via email links. Occasionally this leads to my "hot topics" being woefully out of date.

In this case, I posted on July 24th about the IRS using private tax collectors, here. Turns out, the article I used to source that post came out on June 29th. On July 18th - six days BEFORE I posted about the House's failed efforts to eliminate private tax collection, it was overturned.

For the real, current scoop, check out this article from CNNMoney.com. And remember, always check the dates on information BEFORE you pass it on. And if you happen to be my mother, always check snopes.com before forwarding me urgent news about how microwaving food in plastic containers will give me cancer.

Debt Unto Uncle Sam

I had an anonymous source at the IRS who told me years ago that if my refund was less than 10K I was pretty safe from an audit. Since we've never had to PAY more than that, either, I figured it was a general cut-off number for the IRS.

Apparently not. In 2006 the IRS began using private collection agencies to hunt down tax debtors who owe, for the most part, in the 5-10K range. Since 2006 these private agencies have collected about $20 million in unpaid taxes.

Last year, the same year the program went into effect, the House voted to reduce the IRS budget for outside collections to $1 million, which, according to the IRS, would kill the program. The Senate sat on it until it died and the private collection companies are still being used to collect public debts.

So, let me get this straight. They have to spend MORE than 1/20 of what they collect in order to collect. How much more? The accountingweb article I read didn't say, but I may have to look into it.

And, of course, that is completely separate from the issue of Uncle Sam handing out our tax records (well, okay, those of delinquent tax-non-payers) to private companies. Yea, NOT cool.

To Avoid Tax Headaches, Stick Close to Home

If you cross a state line to go to work each day, are you paying the right taxes to the right people?

A recent article in the Annapolis, Maryland paper "The Capital" highlights the growing tax headache many commuters face, particularly in the areas around the nation's capital and major metropolitan areas near state lines, like New York City and Kansas City. Issues like different tax rates between the work and home states, different ways of determining tax brackets, and just generally determining how much to pay and to whom make this a potentially sticky tax situation.

If you commute for work, it may be time to talk to a tax pro, before it becomes a problem with your state's income tax enforcers*.

*I'm sorry, I live in one of the seven states that doesn't have a state personal income tax, and have lived here all my working life so I have no clue what such an entity would be called, though I've no doubt they're out there, like the boogeyman... lol.

Deductible Dog?

Are you sick of tax talk yet?

Well, maybe this one will bring a smile to your face. Did you know that sometimes, just sometimes, you can deduct your dog?

Of course it has to be a trained "professional" dog (i.e. I don't think I can write off my Lab just because she guards my home office while living in the house...lol.) .

For more info on cutting your taxes with your canine, check out the accoutningweb article on the topic here.

Last Minute Filers Beware!

If you remember, I recently posted (4/20) some outside reviews of tax software for folks who filed an extension for 2007.

Looks like you guys are the lucky ones.

Apparently lots of last-minute filers, who didn't file an extension, got caught up in an Intuit uh-oh. The full NYT article is here. The gist of it is, despite--they thought--overestimating the servers they would need to handle e-filing, Intuit's servers slowed to a crawl on April 17th, resulting in late filing for tons of people and a special arrangement with the IRS to let Intuit customers who were e-filing have a couple more days.

If I understand the article properly, a large part of the slowdown was tax professionals using Intuit's products for pros who were bulk filing lots of returns at the last minute.

Competitor H&R Block swooped in to offer people money to switch, and pointed out that they did NOT have any server problems on tax day.

If you did file an extension, you might want to think about getting to work on your taxes before October 15th--just in case.

Refund Deadlines

I didn't even know there was such a thing as a refund deadline. Did you?

Apparently the IRS gets to cap how long you have to request a refund, then the money becomes theirs. Nice, eh?

The various rules seem to work against large companies and trusts, and in favor of the little guy who makes informal requests, provided they document them properly.

I think. I am ~so~ not a numbers & taxes person. If I've piqued your curiosity, check out the original article on accoutingweb for details.

Extension Assistance...?

If you filed an extension for your 2006 income taxes, you've earned yourself another six months and now have a bit of leisure to decide HOW to prepare them.

Paper is good, but complicated for your average individual taxpayer. Software is good, and getting better, but still best-suited to relatively uncomplicated tax situations.

For complex taxes, especially for the self-employed or anyone who has experienced a major (taxable) life change like a death or lay-off, a tax pro is your best bet, with doing it yourself and having a tax pro review it running a close second.

For do-it-yourself types, USA Today test drove the two biggest tax software programs in the country. Here's what they thought of Turbo Tax and Tax Cut. AccountingWeb.com had a few words on the subject, too.

It's a Rap!

Okay, not so serious, but fun.

Head over to YouTube and enter "turbo tax" in the search bar (or click here for a list). My favorite is "Yo Momma, Taxes, Death".

Intuit sponsored a contest called "Tax Rap" asking people to submit homemade rap videos about taxes, and some of them are a riot. I know it's not serious news, but with the filing deadline less than a week away, who needs serious?

Excise Tax Abuse

I'll apologize in advance because the IRS press release I'm citing is a couple months out of date, but, since April 15th is only two weeks away it's still pretty relevant for those who have yet to file their taxes.

The IRS, in February, issued search warrants and sent special criminal investigators to seven tax preparation businesses they suspected of inflating their clients' excise tax refund amounts, including a couple here in Texas.

Truthfully, the telephone excise tax refund is, to me, at this point, almost more trouble than it is worth. How much is this IRS investigation costing taxpayers, particularly honest taxpayers who had no desire to cheat the system? Probably a lot more than we want to know, what with criminal investigators being flown to locations, seizing property, and the usual government mound of paperwork entailed. How many times have I posted about this refund in the last few months?

Really - don't they have other things to do, like, oh, ~simplifying~ the tax code? I'll take that over a little one time refund any day!

Sole Proprietors in the Crosshairs

It looks like the IRS will be looking a lot harder at Schedule C filers (sole proprietors) than in years past.

There is an estimated $300+ billion tax gap - a gap between what Americans should be paying in income tax and the amount they are paying - according to the US Treasury Department. The IRS recently reported to Congress that they thought they could recover over $100 billion of this money by taking a hard look at small business taxes, especially those of Schedule C and S-corporation filers.

~~~

I spent quite a bit of time tracking down the source info on this article, since it was a clip of a clip of a clip I got a few weeks ago, but, finally, I've got the scoop.

For a good idea of what the IRS thinks is wrong, check out the September 2006 Treasury report "A Comprehensive Strategy for Reducing the Tax Gap".

For small businesses and sole proprietors, some of the most relevant quotes about the tax gap and plans to fix it are found on pg 5:

There are three key characteristics of the tax gap:

• Over 70 percent of the gross tax gap is attributable to the individual income tax,
which is the largest single source of Federal receipts.

• Over 80 percent of the gross tax gap is caused by underreporting of tax (i.e., by
underreporting income or overstating deductions and credits), with roughly half this
amount (including self-employment tax) attributable to underreporting of net business
income by individuals. Eighteen percent of the gross tax gap is attributable to
underpayments of taxes or failure to file tax returns.

• Noncompliance is highest among taxpayers whose income is not subject to third party
information reporting or withholding requirements.

***

Wow. I feel targeted. A couple of groups working to make sure the IRS looks hard at everyone, not just small businesses and sole proprietors, are the National Federation of Independent Businesses and U.S. Chamber of Commerce. If you are a member of either group you might want to check with your issues and policy contact to see what you can do.

IRS Per Diem Ruling

The ruling is not new, it became official last November, but it may have been missed by smaller companies who don't keep a close eye on such things. The text of the IRS ruling can be found here. A brief overview can be found at accountingweb.com, but if your company is one affected by the ruling, make sure you read the original from the IRS.

***

I'm trying to boil this down, but it had a lot of tax-numbers-HUH? speak and I had to read it a couple times to make sure I understood what they were saying.

Basically, if a company pays its employees MORE per diem than the Federal standard, they better be able to provide documentation of how they arrived at the figure they use and make sure they keep track of it. Additionally, employees who receive these larger per diems are going to have to document their actual expenses and, if they spend less than their per diem, either return the difference or pay income tax on it.

The IRS, in November, gave companies until 1/1/07 to become compliant with the new ruling, and will only pursue cases of obvious abuse retroactively.

***
Truthfully, though it may pinch a bit for a lot of people, I understand the ruling. I used to see a LOT of per diem employees when I was in hotels, and many of them were obsessive about finding ways to save money while they were traveling (packing coolers, eating fast food rather than at the in-house restaurant, sharing cabs, etc.) so they could pocket the difference on their per diems. I am not saying all, or even most, employees who travel on per diem are like that, but I have personally seen many who were.

That Darn Telephone Tax Refund...

...is apparently giving the country fits. The IRS found enough errors in early returns filed in January that they've put out an updated Q&A for taxpayers AND businesses.

Have you filed your taxes yet? If you still have questions about this sticky little one-time tax credit, check out the link above and/or contact a tax professional.

FYI - Good News

I thought everyone deserved some kind of good news on Valentine's Day, so here goes.

The deadline for filing and paying Federal income taxes has been extended two days this year to Tuesday, April 17, 2007 due to the 15th being a Sunday and the 16th being Emancipation Day, a Federal holiday in the District of Columbia.

Hey, I never said it was ~really~ good news.

Oops! Didn't need that deduction, did you?

Several tax deductions that expired in 2005 were renewed by Congress late last year.

AFTER the IRS sent the 2006 form 1040s to press. Which means all these forms are incorrect and missing areas to claim these deductions. For more info on just what is missing and how to work around it (this is mostly a personal taxes issue, from what I can see), check out this article from accountingweb.com.

What I am most curious about is how this will affect do-it-yourselfers like me, who use tax software and e-file and never see those lovely, erroneous 1040s. For the state sales tax deduction, a big one for us since we're in Texas, one of the few remaining states that uses a state sales tax rather than a state income tax to raise funds, the IRS has put out Publication 600 to help figure it all out.

For an excellent layperson-friendly description of how to handle the other tax deductions that were reinstated, check out this page at About.com.

Government Gets Excess Excise from Businesses

Keep in mind the source is a utility activism firm/site and is more than a little anti-tax and anti-utility. Having said that, the Utility Audit Company (UAC) has some pretty valid points about how the IRS is allowing businesses to compute their excise tax refund for 2006.

Check out their argument here.

The gist of it is that the IRS method is unfair since it only represents one months of the 41 months covered by the refund and business phone use often varies wildly from month to month, considerably more so than personal phone use. The only way to get a truly accurate refund is to time and manpower to researching past phone records to compute the actual refund amount owed to the business.

Now, I'm not a tax person, but even to me this method seems to favor the government, particularly for smaller businesses. What happens to that unclaimed refund money rightfully belonging to American businesses? Uncle Sam gets to keep it. Am I the only one who thinks the agency that most benefits from businesses not getting accurate refunds should NOT be the one allowed to decide how that refund should be calculated?

Unexpected Increases

Nope, not in my income, or my tax bracket :-(

2006 tax returns will likely bring an unexpected increase in taxes for parents setting aside money for minor children. Details of the law changes, focusing on how it affects college savings, can be found here.

The gist of it is that investment income over $1700 for children 14-18 is now taxable at the parent's tax rate rather than the child's lower rate, and the change in the law, made in May 2006, is retroactive to the beginning of the 2006, so parents who sold stock for their minor children may be facing additional unexpected taxes this Spring as they prepare to file.

If you think this might affect your taxes, you might want to consult a tax pro.

One Week Left... Sorta

One week for what?

Candy could tell ya, but she's a bit busy putting it into practice right now, so I'll remind everyone that your W2s and 1099s must be postmarked - or handed to the recipients - NO LATER THAN 01/31/2007.

Since this is a lesser known tax deadline I'm pretty sure the USPS won't be open late next Wednesday to postmark stuff for you; a quick scan of the USPS website was inconclusive, so you have a week to check with your local post office and find out.  Of course, we hope everyone will be done in time and not need to worry about it.

Your W2s and W3s can be printed on plain (perforated) paper. 1099s and 1096s must be printed on the "red" form which is available through the IRS and, (I think) local office supply houses.

W2s and the W3 cover page must be postmarked to the Social Security Administration and the IRS by 2/28/2007.  The same applies to 1099s with the 1096 cover page.

***NEWS FLASH*** Federal Office Closures Do Not Extend Tax Deadline!

Federal tax payments that are due on January 2, 2007 are still due that day despite federal office closures as part of the National Day of Mourning for former president Gerald Ford.

See what the IRS is saying at: https://www.eftps.com/eftps/

Excess Tax Excised

Yea, it was a weak headline, but amusing. To me, at least.

Seriously, I got the email from my mom about the personal telephone excise tax refund a few weeks ago. If it came from my mom I know it has run the rounds of the Web at least once, maybe twice.

The personal stuff is pretty straightforward - flat deduction amounts based on the number of land lines in your home unless you have vast quantities of paper to show what you've actually been charged over the years, then you can claim that amount.


In November the IRS announced a formula for businesses and nonprofits to compute their excise tax refund. You can find out more in the IRS press release about it. For details about the personal version, check out the FAQ.

For those of you who avoid the news (like me) and have no idea what I'm talking about (I didn't til my mom emailed me, I live under a rock, what can I say?) here's the scoop.

The telephone tax refund is a one-time payment available on your 2006 federal income tax return that is designed to refund federal excise taxes on long distance telephone service. This is an old tax that was assessed on your toll (long distance) calls until August of 2006. It was based on how long the distance was for the call being placed and how long you were on the call. When phone companies began to offer flat fee phone services, several court challenges to the tax cropped up. They pointed out that flat fee/rate phone service had nothing to do with the distance or length of the phone call and that the excise tax should no longer be assessed.

The courts agreed with the challengers and phone companies were given notice to stop assessing the federal excise tax as of Aug 30, 2006.

There... Now, it's December 8th, better start digging up those old phone bills!

Simplification is a Good Thing

The primary tax form used by millions of Americans, the 1040, will be getting a new look, according to a recent USA Today article. The form undergoes minor changes every tax year, but has not seen a major revision in almost 30 years.

The new 1040 is supposed to be shorter than the current 77-line version with less used lines and worksheets moved to the new Schedule O. The IRS hopes to have the new form in use by 2009, but indicated there may be a possible delay due to budget issues within the agency.

Truly, though, the IRS wants the American people not to know about the 1040 change - they are encouraging online tax filing, a method that does not require paper forms and in which most people never see the actual tax form filed on their behalf (via tax software or tax preparers).

Paying More for Payment Plans with Uncle Sam

The IRS, beginning January 1, 2007, is increasing the fees it assesses to taxpayers who ask for payment or installment plans, some of them more than doubling. This is the first increase in installment plan fees since the IRS began charging a fee for installment plans in 1995.

Current fees can be found here.

After quite a bit of digging I was unable to locate information on the fee change or new fees anywhere on the IRS website, so you'll just have to check it out the same place I did -