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Our newsletters have a brief overview of the new tax legislation and some perspective on how it could affect your personal and business tax planning.
 | January
2007 Van Vorst Newsletter |
| Highlights
of 2006 Tax Law Changes
FS-2007-2, January 2007 — Taxpayers will find new credits,
incentives for saving and special rules for charitable donations this
year. |
| Taxpayers
Have Until April 17 to File and Pay
IR-2007-15, Jan. 24, 2007 — This year, taxpayers will have extra
time beyond the traditional April 15 deadline to file their 2006
returns and pay any taxes due. |
| Telephone Tax Refund Set for 2007
IRS will stop collecting long-distance telephone tax; taxpayers can request refunds on next year's tax return. |
| Hybrid
Cars and Alternative Motor Vehicles
May 2006 — Information on hybrid cars, including the certified car
models and the amount of the tax credit or deduction for each.
Frequently updated. |
| Mistakes
Abound on Telephone-Tax Refund Requests; IRS Offers Tips for Getting a
Speedy Refund
IR-2007-21, Jan. 31, 2007 — Taxpayers can improve their chances of
correctly requesting and timely receiving the telephone tax refund by
noting mistakes made by others and following IRS recommendations. |
| IRS Strengthens Withholding Compliance
Program
The IRS has stepped up its withholding compliance program by making
more effective use of information reported on W-2 wage statements to
ensure that employees have enough federal income tax withheld from
their paychecks. At the same time, employers are no longer required to
submit potentially questionable Forms W-4 to the IRS. |
| Health Savings Accounts
The Medicare Prescription Drug, Improvement, and Modernization Act of
2003 created a new, tax-advantaged way for certain people to save for
health care expenses. You must be covered by a high-deductible health
plan to open and contribute to a Health Savings Account (HSA). IRS and
Treasury have provided guidance on how HSAs work. |
| IRS Issues
Home Sale Exclusion Rules |
| IRS Again Updates Web Item Debunking Frivolous Tax Arguments |
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Small Business Tax Changes
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Rate Reduction Credit/Advance Credit Payments
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Alternative Minimum Tax
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Child Tax Credit
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Tax Rates
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Spouses Must Check Name and Number Used on Tax
Returns
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Reports and
Disclosure by Political Organizations
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Social Security Administration Acts to Protect Benefits for Families of Troops Serving Under Fire |
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How to Have Federal Taxes
Withheld from Your Social Security Benefit |
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Cost
of Living Adjustment (COLA) |
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Phased-in Individual Income Tax Rate Cuts
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Tax Benefits Relating to Children
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Education Provisions
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Retirement Savings Provisions
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Death Tax Repeal
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Small Business Tax Changes
WASHINGTON – The Internal Revenue Service and Treasury Department will allow certain small businesses with gross receipts up $10 million or less to use the cash method of accounting for their income and expenses.
Rate Reduction Credit/Advance Credit Payments
As part of the new tax law, tax rates for
2006 were reduced. In order to provide taxpayers with the benefits of a 10% rate more quickly, Advance Credit Payments were made to taxpayers based on their
2005 tax returns.
Alternative Minimum Tax
Taxpayers who are able to take advantage of special deductions and credits to substantially reduce their taxes may have to pay an additional tax called the Alternative Minimum Tax.
The exemption amounts temporarily increase for 2001 returns. This means that more of your income is exempt as income for AMT purposes, decreasing the amount of additional tax you may owe.
You may have to pay the AMT if your taxable income for regular tax purposes, combined with certain adjustments and tax preferences items is more than:
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$62,550 if your filing status is Married Filing Jointly;
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$42,500 if your filing status is Single or Head of
Household
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Child Tax Credit
The Child Tax Credit increases to
$1000 per child through 2010
Tax Rates
New tax rates affect all taxpayers. The new
annual rates for tax year 2006 are 10, 15, 25, 28, 33 and 35 percent.
Standard deduction
amounts increased
For 2006 returns the standard deductions are:
| $5,150 for single filers or married couples
filing separately (up from $5,000 in 2005). |
| $7,550 for head of household filers (up from
$7,300 in 2005). |
| $10,300 for married couples filing jointly (up
from $10,000 in 2005). |
Married couples who've been
submitting joint returns for a while will notice their standard deduction
amount has jumped substantially in recent filing years. They can thank
inflation adjustments, as well as tax-law changes initiated in May 2003
and expanded this year, that are designed to help ease the marriage
penalty.
Personal Exemption
$3,300 for 2006
Spouses Must Check Name and Number Used on Tax
Returns
The IRS has announced (IR-2000-68) that it is sending letters to 2.4 million taxpayers who filed a joint
return on which the name and identification number for the second spouse listed did not match IRS records.
Those taxpayers, should compare the name and number used on the return with the information on an identification card issued by the Social Security
Administration or the IRS. Without correct names and identification numbers, taxpayers may not be able to claim a personal exemption or the earned income tax credit.
New Law Requires Reports and
Disclosure by Political Organizations
A new law requires section 527 political organizations to file with the IRS an initial notice of their existence, periodic reports on their contributors and expenditures, and an annual return, and requires the organization and the IRS to disclose these documents to the public.
Social Security Administration Acts to Protect Benefits for Families of Troops Serving Under Fire
Military families will not lose valuable government disability benefits because a member of the household has been sent into combat. Jo Anne Barnhart, Commissioner of Social Security, has clarified the Agency’s policies so that individuals receiving Supplemental Security Income
(SSI) disability payments, and Medicaid coverage, can continue to do so even if family income rises due to a mother, father or spouse receiving special combat-related supplements to their military pay.
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