Tax Tips Newsletter
Serving you since 1993
January 2007 - Vol 2, Issue 1
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Greetings!
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Well, the beginning of tax season is right around the corner. If you have not received your organizer, please contact my office and I will be glad to send another one.

I have received quite a few emails from some of you asking if the telephone tax refund is legitimate. Yes, it is. For individuals it is computed in one of two ways: a) you can add up all of the excise tax paid on long-distance or bundled services on your phone bills for the period from February 28, 2003 through August 1, 2006, or b) take a credit based on the number of exemptions on your return. The credit for one exemption is $30, for 2 exemptions it is $40, for 3 exemptions it is $50, over 3 it is capped at $60.

For more information, check the IRS website at http://www.irs.gov.

Finally, I would like to acknowledge my assistant, Sandi, who celebrated her 10th anniversary working for me last month. Sandi is an integral part of the success of my firm and is a great joy to work with everyday. I'm really fortunate to have such a great individual in my office. Congrats Sandi!

In one of its final acts before adjourning for 2006, Congress passed the Tax Relief and Health Care Act of 2006. President Bush signed the bill into law on December 20, 2006. The law retroactively reinstates a number of tax breaks that had expired at the end of 2005, making them effective for 2006 and 2007. Here’s a brief overview of what was extended.

The itemized deduction for state and local sales tax was reinstated for 2006 and 2007. This is a boon for taxpayers in states without a state income tax, but taxpayers who pay both state sales and income taxes can deduct whichever is higher.

Middle-income taxpayers can claim a deduction for up to $4,000 of qualifying higher education expenses for 2006 and 2007. This is an above-the-line deduction so you don’t need to itemize to claim it. However, income limits apply.

Teachers can claim a deduction for classroom supplies that they pay for out of their own pocket. This is also an above-the-line deduction, with a limit of $250

The law also extends a number of business tax credits and deductions, including the research credit, the work opportunity and welfare-to-work credits, and the 15-year recovery period for certain leasehold and restaurant improvements.

The Energy Tax Incentives Act of 2005 provided several tax credits and deductions intended to promote energy conservation. Though these tax breaks generally were not scheduled to expire until the end of 2007, the new law further extended certain ones through 2008.

The new law makes other miscellaneous changes to the tax code. For additional information and guidance in your tax planning, give me a call.
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There are several important tax deadlines coming up this month. Here are some of the major ones.

For Businesses:
January 31 - Employers must provide 2006 W-2 statements to employees.
January 31 - 1099 forms must be given to payees for such payments as interest, dividends, royalties, and commissions.
January 31 - Payroll tax returns are generally due. (Examples: Form 940 federal unemployment tax return for 2006 and Form 941 payroll tax return for fourth quarter 2006)

For Individuals:
January 16 - Fourth and final estimated tax payment for 2006 must be made unless you file your 2006 tax return and pay any taxes due by January 31.
January 31 - Deadline for receiving your 2006 W-2s, 1099s, and other tax information forms. If there are errors, contact the sender immediately and request a corrected copy.

For more information or help with any of your tax filings, contact my office.
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The Tax Tip of the Week this week explains the higher contribution amounts for 2007 to various retirement plans.
The Business Tip of the Month deals with how businesses can claim the telephone tax refund on their 2006 returns.

The Financial Tip of the Month deals with giving credit cards to college students.

The Fraud Alert for this month has tips on how to protect your identity in 2007.

Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979
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