By Danielle Komis
Just when you thought you finally had your taxes conquered after long hours with your new tax computer software last year, think again.
Each year, ever-changing tax laws mess with our routine-loving minds, mocking us with their technical mumbo jumbo, driving us to want to throw down our forms and admit defeat.
Fortunately, this year’s changes aren’t extreme and can easily be conquered — if you’ve got the knowledge, experts said.
So to help out those who still feel overwhelmed, two tax experts — Linda Hemingway, an Athens State University accounting professor who volunteers with the Volunteer Income Tax Assistance program, and Calhoun Community College tax instructor Rita Mintz — give the heads-up on changes for filing in 2007.
Armed with their knowledge, you can hope not to miss out on tax savings or make a mistake that will force you to refund some money to the government at the most inopportune time, like next Christmas (when you have to break the bad news to the kids that they won’t receive the new video game console they haven’t stopped talking about).
The taxman wants to pay you!
Thankfully, one of the big changes this year is the refund of a long-distance telephone tax, which was established in 1898 as a luxury tax on wealthy Americans who owned telephones.
Early last year, the U.S. Treasury Department conceded the tax was no longer useful, and now taxpayers are entitled to a $30 to $60 standard refund, depending on your exemptions.
Or, if you think you’re entitled to more than that, you can dig through receipts and figure out the actual amount of tax paid. But don’t forget to request the refund this year, because this is a one-time thing, Mintz warned.
Another tax shelter bites the dust
Using your children’s accounts as tax shelters was once a nice way to stick it to the man, but the IRS grew savvy to that plot this year. Now, you may end up with higher-than-expected tax bills due to a change in the “kiddie tax.”
Before, only children under 14 with investment income were subject to the kiddie tax — the nickname for the part of the child’s tax that must be figured at the parent’s top rate instead of the child’s rate, which is usually lower. Now, the kiddie tax is extended to children under 18, and the change is retroactive to January 2006.
“This was to prevent parents from shifting an investment into a child’s name and later paying lower dividends,” Mintz said.
These tax deductions are expired ... uh, never mind
Many tax deductions that were supposed to meet the ax last year were revived in December, including educators’ classroom expenses, college tuition and state and local general sales tax deductions.
These deductions don’t appear on tax packages mailed to taxpayers who filed on paper in the past because the IRS had already sent 2006 tax forms to the printer before the deductions were renewed.
Check out www.irs.gov to find out how to wedge them into your tax return (and you thought you’d have a dull weekend).
Despite what IRS forms might say, April 17 — not April 16 — is the last day to file and pay your taxes this year.
This year the filing date is not the typical April 15 because it falls on a Sunday and April 16 falls on Emancipation Day, a legal holiday in the District of Columbia. Paper forms were printed before the IRS was aware the holiday would affect taxpayers nationwide.
No longer can you just throw some old socks into a bag and drop them off at your local thrift store and write it off. Now, if you donate items to charity, you must be able to prove that those items were in good used condition or better to claim a deduction for them.
Also, while people are used to being able to deduct cash contributions to charity, receipts now are required. No longer will she be so quick to throw cash into the Salvation Army bucket at Christmas, Hemingway said.
“Now, I’m going to stop and think about that,” she said.
Writing a check instead is a good way to give but still get the tax refund you deserve, she said.
Blue Book value no more
Donating your car to charity isn’t as lucrative tax-wise as it used to be. A tax law that changed in 2005, which many people still overlook, dictates that you have to wait until the charity actually sells the car and sends you the 1099 form before you can write off the amount, Mintz said.
Prior to the new law, you could just use the fair market value of the car as the write-off, which is typically higher than what the car is actually sold for.
“People were really inflating the value of the car,” she said.
Don’t cash in stock yet!
For the years 2008 to 2010, capital gains and dividends tax rates will fall to 0 percent for taxpayers in the 10 or 15 percent tax bracket. So if you can hold off to cash in, you could potentially get substantial tax savings, Mintz said.
Prior to 2008, long-term capital gains from the sale of assets held longer than one year, as well as dividends, were taxed at a maximum of 5 percent if the seller was in the 10 or 15 percent tax bracket.
Need free tax assistance?
Low-income families qualify for the Volunteer Income Tax Assistance. Certified volunteers sponsored by various organizations receive training to help prepare basic tax returns in communities across the country. Don’t forget to bring last year’s tax forms and current W-2 from employer, 1099s with interest, and Social Security card.
Some local VITA sites in the area are:
Decatur Public Library
504 Cherry St. N.E.
n Mondays, 1 to 5 p.m.; Wednesdays, 1 to 5 p.m.; Saturday, 9:30 a.m. to 1 p.m.
Athens State University
Chasteen Hall, corner of Clinton
and Hobbs Streets
March 17, 9 a.m. to noon; April 7, 9 a.m. to noon
245 B Jackson St. S.E.
Thursdays, 8 a.m. to 4 p.m.
By appointment only. Call 355-7252.
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