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Year End Tax Tips from the IRS
Whether you are winterizing your home, buying a new car, or preparing for the holidays, the Internal Revenue Service offers tax tips for you to consider. Some tax breaks and a review of your current tax situation may result in a bigger refund or less taxes to be paid come tax time.
Telephone Excise Tax Refund - The Internal Revenue Service announces the standard amounts that most long-distance customers can use to figure their telephone tax refund. These amounts, which range from $30 to $60, will enable millions of individual taxpayers to request the telephone tax refund without having to dig through old phone bills. To get the standard amount, eligible taxpayers only need to fill out one additional line on their regular 2006 return. The IRS is creating a special short form (Form 1040EZ-T) for those who don't need to file a regular return. The standard amounts are based on the total number of exemptions claimed on the 2006 federal income tax return. The standard amounts are $30 for a person filing a return with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions. Those who paid the long-distance tax on service billed after Feb. 28, 2003 and before Aug. 1, 2006 are eligible for a refund.
Homeowners Energy Tax Credits - During 2006, individuals can make energy-conscious purchases that will provide tax benefits when filling out their tax returns next year. The new law provides tax credits for making your principal residence, which must be in the United States, more energy efficient and for buying certain energy efficient items.
"Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs and heating and cooling equipment in the home can receive a tax credit of up to $500," said Dianne Besunder, IRS New York spokeswoman.
For more information go to the IRS Web site,
www.irs.gov , or the U.S. Department of Energy Web site,
www.energy.gov , and use the term "Energy Policy Act Tax Credits" in the keyword search feature.
Hybrid Vehicles Generate Tax Credits - The tax credit for hybrid vehicles may be as much as $3,400 for those who purchase the most fuel-efficient passenger automobiles and light trucks. The tax credit for hybrid vehicles applies to vehicles purchased on or after Jan. 1, 2006. Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
For more information and a complete listing of all qualified hybrid vehicles as they become available, visit IRS.gov.
Recordkeeping - With the current tax year "winding down," the Internal Revenue Service is encouraging taxpayers to take the time now to gather and organize their tax records to reduce stress at tax time.
"You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year," said Besunder. "Good recordkeeping during the year saves you time and effort at tax time when organizing and completing your return."
In most cases the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return. Such items would include bills, receipts, invoices, mileage logs, canceled checks, or any other proof of payment, and any other records to support deductions or credits you claim on your tax return.
Generally, tax records should be kept for three years, but some documents, for example, records relating to a home purchase or sale, stock transactions, IRAs and business or rental property, should be kept longer. For more information on what types of records to keep, see IRS Publication 552, Recordkeeping for Individuals.
Choosing a Tax Preparer-It's not too early to start thinking about the tax season and whether you plan to prepare your own tax return or use the services of a tax professional. If you decide the latter, then the Internal Revenue Services offers some advice for choosing a tax preparer.
Now is a good time to start planning ahead and doing your homework in selecting a tax preparer. During the tax season about 66 percent of New York filers will use a paid tax professional to prepare their tax returns.
Some tips include:
*Ask about service fees. Avoid preparers who claim they can obtain larger refunds than other preparers, or those who guarantee results or base fees on a percentage of the amount of the refund.
*Plan Ahead. Choose a preparer you will be able to contact after the return is filed and one that will be responsive to your needs.
*Get References. Ask questions and get references from clients who have used the tax professional before. Were they satisfied with the service received?
* Research. Check to see if the preparer has any questionable history with the Better Business Bureau, the state's board of accountancy for CPAs or the state's bar association for attorneys. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.
*Determine if the preparer's credentials meet your needs. Are they an Enrolled Agent, Certified Public Accountant, Tax Attorney or Public Accountant? Only attorneys, CPAs, enrolled agents and Public Accountants can represent taxpayers before the IRS in all matters including audits, collection actions and appeals. Other return preparers may represent taxpayers only in audits regarding a return they signed as a preparer.
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