Most taxpayers are unaware of the credits and deductions they are entitled to each year. Last year over $1 billion in credits and deductions went unclaimed. There are six major tax laws that have changed this year:
· Long-distant telephone tax credit: Anyone who has owned a phone, mobile or land line at any time since March 2003 are eligible for a new, automatic $30-$60 standard credit. You can claim for more than the standard credit if you still have all your long distance phone bills from March 2003 through July 2006.
· If you bought a hybrid vehicle last year (2006), this environment credit is worth up to $2,600, depending on the make and model of the car.
· Or had any energy-smart home improvements that help the improvements that help the environment, this is a one time credit up to $500 if you purchase energy-efficient windows, doors, or furnace or air conditioners. The IRS is providing incentives to taxpayers who are doing their part of taking care of Mother earth.
· Incentives to save: The IRS continues to reward eligible taxpayers simply for stocking away their own money. If you invest in an IRA or another eligible retirement plan, this credit is worth up to $1,000 or $2,000 for joint filers. While other taxpayers are eligible for incentives linked to catching up on retirement savings later on in life.
· You can now have your refund deposit split into three different bank accounts.
· The Earned Income Tax Credit: This credit is available to both families and single people on a low income. This credit is worth up to $4,500 for taxpayers with dependents, and $400 if have no dependents.
· Big changes in the charitable contributions: The IRS is getting tougher concerning the documentation of these contributions. Cash donations are no longer deductible unless you have a receipt from the organization; or a canceled check or a credit card receipt will suffice. This includes donations of clothing and household items.
When doing your taxes, be sure to know what you're doing if you're using a software program. This past year, about 60% of the taxes I did during the off-season (04/18 – 12/31) were amending taxes done with these software programs. I am not knocking the software, but it is really important to know what you are doing.
One other big problem that comes up with taxes is taking the advice of friends. Over the years, my colleagues and I have had many disagreements with clients that believe that they can claim certain deductions because a friend or (the big one) ‘my hairdresser told me”. If you have any questions about doing your taxes, call the IRS at (800) 829-1040, or log on to Nationaltaxadvice.com.
