Tax Tips Newsletter
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December 2006 - Vol 1, Issue 2
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Greetings!
Simon Santa

That's my elf, Simon, helping me in the office. Doesn't he look happy? I would like to let you know that my firm has just completed a peer review. This is a review done by another CPA of selected financial statements that I have prepared over the prior year. I am happy to announce that my peer review was accepted with no changes, which is the highest rating.

After losing several court challenges to charging an excise tax on long-distance telephone service, the IRS is no longer assessing the tax. In May of 2006, the IRS announced that it will refund the tax paid by individuals, businesses, and tax-exempt organizations during the 41 months from March 2003 through July 2006. Individuals can claim their refunds by calculating the actual tax they paid, or they can take a standard refund amount based on the number of personal exemptions they claim on their 2006 tax returns. The IRS just recently provided businesses and tax- exempt organizations with a formula to estimate the amount of refund to which they’re entitled if they don’t want the bother of going through 41 months of phone bills to calculate the exact taxes paid.

The formula compares the telephone bill from April 2006 (when the tax was still being levied) with a telephone bill from September 2006 (when the tax was no longer being charged). The amount of the refund is capped at 2% of total telephone expenses for companies with 250 or fewer employees and at 1% for those with more than 250 workers. Sole proprietors filing Schedule C have special rules. Businesses and tax-exempt organizations are to request their refunds by completing Form 8913 (Credit for Federal Telephone Excise Tax Paid) and attaching it to their regular 2006 income tax returns or, in the case of tax-exempts, to Form 990-T. If you need additional information or assistance, give me a call.
50s and 100s
Every year millions of dollars of tax refunds are returned to the IRS as undeliverable. The IRS just recently announced that it has 95,746 undeliverable refunds totaling $92.2 million. If you haven't received an expected refund, maybe the IRS does not have your current address. To check on a missing refund, you can go to the IRS Web site at www.irs.gov and type "Where's My Refund?" in the search box. To check on a refund by phone, call 1-800-829-1954. To keep any future refund from being undeliverable, inform the IRS when you move or have a change of address. File Form 8822 to give your new address to the IRS.

You can also avoid refund delivery problems by telling the IRS to directly deposit your tax refund to your bank account. And this year, for the first time, you can have the IRS deposit your income tax refund into as many as three different accounts. Examples of accounts you can choose include checking, savings, an individual retirement account (IRA), a health savings or Archer medical savings account, and a Coverdell education savings account. If you decide to split your refund into separate accounts, you'll have to fill out the new IRS Form 8888. Be sure to give correct bank account and bank routing numbers, and be sure the financial institution accepts direct deposits for the kind of account you designate. If you have questions or need assistance with any of your tax concerns, give me a call.
WSJ w gold
If you have not visited my website recently, please do. The tips that are on there are a fabulous resource of great tips and other information. The Tax Tip of the Week this week deals with donations of non-cash contributions. The Business Tip of the Month deals with offering employees low-cost benefits. A very important article for business owners, especially at this time of the year. The Financial Tip of the Month deals with giving children financial gifts for the holidays in the form of Roth IRAs, Section 529 education plans, and Coverdell savings accounts.

The Fraud Alert for this month deals with a new scam targeted towards seniors. The scammers send out an e-mail that has a subject of “Cost-of-Living for 2007 update.” Please read this article to prevent you or someone you know from being scammed.

Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979
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