IRS launches 2007 filing season with news blitz on law changes
The IRS has released information highlighting some of the most widespread changes in the tax laws for the 2007 filing season.
The IRS is working overtime to alert taxpayers about three temporary tax breaks: the state and local general sales tax deduction, the higher education tuition deduction and the teacher's classroom expense deduction. The Tax Relief and Health Care Act of 2006 extended them after the IRS printed millions of paper 2006 tax forms and instructions. There are special steps that you must take to claim these deductions:
On the dotted line to the left of line 5 on Schedule A (Form 1040), you must write "ST" to indicate that you are claiming the state and local sales tax deduction instead of the state and local income tax deduction.
- In the blank space to the left of line 35 on Form 1040 (domestic production activities deduction), you must write "T" to indicate that you are claiming the higher education tuition deduction. Should you claim the higher education tuition deduction and the domestic production activities deduction, you should write "B" and attach a breakdown showing the amount of each deduction.
- On the dotted line to the left of line 23 on Form 1040 (Archer Medical Savings Accounts), you must write "E" to indicate you are claiming the teacher's classroom expense deduction. If you want to claim the teacher's classroom expense deduction and the Archer Medical Savings Account deduction write "B" and attach a breakdown showing the amount of each deduction.
If you are using IRS e-file or Free File, the IRS announced that the tax software will be updated to include the three provisions.
Telephone tax refunds
The IRS is also gearing up for refund and credit claims of the long-distance portion of the federal telephone excise tax. Refunds or credits are available for tax paid on long-distance service billed after February 28, 2003 and before August 1, 2006. All taxpayers may request refunds of the actual tax paid. Alternatively, individuals may claim standard amounts ranging from $30 to $60 based on the number of exemptions they claim. Businesses, non-profits and other entities may use a special formula to estimate their refunds or credits.
Charitable Contributions
Effective August 17, 2006, clothing and household items you donate to charity must be in good used condition or better to be deductible. However, you can claim a deduction of $500 or more for any single item, regardless of condition, if you include a qualified appraisal of the item with the return.
Tough new rules for monetary contributions for most individuals kicked-in at the start of 2007. To deduct any monetary donation made in tax years beginning after August 17, 2006 (which for most individuals is 2007), the IRS is reminding taxpayers that you must have a bank record or a written acknowledgement from the charity showing the charity's name, date and amount of the contribution. As was the case in the past, donations of $250 or more also require a contemporaneous written acknowledgement of the gift from the charity.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.