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Our newsletters have a b
rief overview of the new tax legislation and some perspective on how it could affect your personal and business tax planning. 

 
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January 2007 Van Vorst Newsletter 

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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.

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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.

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Telephone Tax Refund Set for 2007
IRS will stop collecting long-distance telephone tax; taxpayers can request refunds on next year's tax return.

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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.

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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.

bulletIRS 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.
bulletHealth 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.
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IRS Issues Home Sale Exclusion Rules

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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

 

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

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:
bullet$5,150 for single filers or married couples filing separately (up from $5,000 in 2005).
bullet$7,550 for head of household filers (up from $7,300 in 2005).
bullet$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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