2007 Tax PreparationAs always with the start of the new year a new tax filing season begins. this letter explains some of the tax changes that I would like to make you aware of that may impact your 2007 tax filings. Every year, Congress or the Internal Revenue Service makes life better or worse for the taxpayers by changing the tax laws or the tax rules that implement the tax laws. 2007 was no exception. There are a number of changes, mostly required to adjust the tax code for inflation. Changes for 2007 range from annual adjustments to account for inflation to an important new rule on record keeping for charitable deductions. Late in December the Congress enacted an "AMT patch" which should limit the number of taxpayers subject to the minimum tax. In December the Congress passed, and the President signed, the "Tax Increase Prevention Act of 2007, on December 19, 2007. Congress' intent was to exempt as many taxpayers as possible from the imposition of the Alternate Minimum Tax. The change principally increases the exemption amounts available that reduce the income subject to the minimum tax. Due to the late date of enactment, the IRS has announced that return processing may be delayed. To avoid this possibility, I suggest you get your information to me as soon as possible. As usual the tax brackets, the standard deduction and personal exemptions have been adjusted upward. These are annual adjustments and will continue at least through 2008. Reflecting the current levels of gasoline prices, the standard mileage rate for business use of your automobile has been increased to 50.5 cents a mile. The Pension Protection Act of 2006 included several provisions that require enhanced record keeping for charitable contributions. For cash contributions, taxpayers must have a statement from charity showing the name, date and the amount given; a bank record (cancelled check) if the amount is $250 or less is alternative. There is no dollar threshold for the record keeping requirement. Clothing and household items donated to charity must be in "good used condition or better" to be deductible. However a taxpayer can claim a deduction of more than $500 for any single item regardless of condition if qualified appraisal of the item is included with the return. For a contribution of an auto, if the claimed value of the vehicle is more than $500, the deduction is usually limited to the gross proceeds from the sale of the vehicle. The deduction for IRA or Roth contributions are $4,000 (with a $1,000 catch-up if you are age 50 or over). The amount is limited by your taxable compensation. For 2007 a federal tax refund can be directly deposited into a qualifying IRA account. The deduction for education costs continue. The Hope Credit for the first two years of undergraduate education is $1,650. The Lifetime Learning credit is $2,000. The usual phase-outs of these deductions continue as your Adjust Gross Income increases. As you know, it is possible to obtain a six month extension to file your income tax return. If you need to obtain an extension, please contact me by at least April 1, 2008. The extension is an extension to file the return not to pay any tax due. Both the Internal Revenue Service and the various states consider a return filed by the extension due date with any balance due, to be a return with an invalid extension. There are interested and penalties charged from the original due date (April 15, 2008) to the date of actual filing. It is very important that we discuss your situation and if necessary make a payment with the extension requires to avoid the later assessment of interest. Please call my office to set up an appointment. If you prefer you may assemble and drop off, fax, mail or e-mail your information to my office. I will be available to meet with you Monday through Saturday and will be available for early evening hours if needed. I look forward to working with you and I want to help you realize the best tax benefits available. Yours very truly, |