Last Minute Tax Tips
 By Terry M. Blair

The countdown to tax day is well underway. But there are still actions you can take to get all of the money Uncle Sam is offering in refunds and deductions.

And you can even use this time to reduce the taxes you’ll pay next year. Take a look.

Tax Savings for 2006

Sales Tax Deduction
You may be able to deduct state and local sales taxes from on your 2006 personal federal income tax return. Here’s what you need to know to take the deduction.

• Get IRS Publication 600, State and Local General Sales Taxes, to look up the sales tax tables that will determine the amount of your deduction.

• Taxpayers claiming state and local sales tax should do so on line 5 of Schedule A (labeled state and local income taxes). Write the letters “ST” on the dotted line to the left of line 5. Go to the IRS Web site Schedule A -- Itemized Deductions to see exactly how to report your sales tax deduction.

Telephone Tax Refund
You may be eligible for a one-time tax refund. This refund of previously collected federal telephone excise taxes may be requested on your 2006 federal income tax return. Anyone who paid long-distance excise taxes on landline, cell phone, Voice over Internet Protocol (VoIP), or bundled service that was billed after Feb. 28, 2003, and before Aug. 1, 2006, is eligible for this refund

You can request a refund of the actual federal excise tax you paid based upon your telephone bills for this period.

Or you can request the standard refund amount ranging from $30 to $60 based upon the number of exemptions you claim on your individual income tax return. Using this option is the easiest way to get your refund and avoid gathering 41 months of old phone records. By choosing the standard amount you’ll only need to fill out one line on your tax return.

It’s not quite that easy for businesses to get the telephone excise tax refund. Businesses must use Form 8913, Credit for Federal Telephone Excise Tax Paid. You can report the actual amount of refundable phone taxes you paid for the 41-month billing period from March 2003 through July 2006. Or you can use a formula established to estimate the refund.

To learn more about the refund for individuals or businesses, go to this IRS Web page: Telephone Excise Tax Refund.

Tax Planning For 2007
It’s not too early to start your tax planning for 2007. Here are few tips you’ll need to know as you plan your deductions.

Mileage Rates
If you use the standard mileage rate to calculate the deductible costs of operating a vehicle in your business, there’s good news from the IRS. Beginning Jan. 1, 2007, the rate is 48.5 cents for each business mile driven. That’s up from 44.5 cents a mile in 2006.

Be sure to substantiate all of your deductible miles by keeping a mileage log. Record the date, the locations you drive to and from, the business purpose of the trip and the number of miles driven.

Inflation Adjustments
The IRS has announced inflation adjustments that will impact your 2007 personal federal income tax return (which you’ll file in 2008). These adjustments could save you some money:

• The 2007 standard deduction will be $10,700 for married couples filing a joint return (up $400); $5,350 for singles and married individuals filing separately (up $200); and $7,850 for heads of household (up $300).

• The value of each personal and dependency exemption for 2007 will be $3,400, up $100 from 2006.

New Rules For Giving
Starting in 2007, if you make charitable money donations of any amount, you’ll have to keep good records. The new guidelines state that records for proving donations can include canceled checks, bank statements and credit card statements that show the transaction posting date and the name of the charity. A written communication from a charity with the organization’s name, the date of the donation and the amount of the contribution is also an acceptable record.

If you contribute clothing, household items (such as furniture, furnishings, electronics, appliances, linens) or other goods to a charity, those items must be in good condition or better to get a tax deduction. Be prepared to prove good condition by use of photographs and a detailed description of the item contributed. A deduction may be allowed for an item of clothing or a household item not in good used condition or better if the amount claimed for the item is more than $500 and you include with your tax return a qualified appraisal of the property.




(Posted March 2007)

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