By: Michael S Schmidt
There was a new tax credit enacted, regarding hybrid car purchases, which will affect 2006 taxes. Those consumers who purchased one of these energy saving vehicles became eligible for as much as $3400 in federal tax credits under this new ruling. This tax credit can be claimed on a 2006 tax form or on a late 2006 tax return. As economy minded consumers begin to look to hybrids for gas savings, energy value and tax credits, auto manufacturers are beginning to respond with more of these cars being prepared for the marketplace.
Now taxpayers will find that they are able to claim the entire amount of the hybrid vehicles credit 2006 far in the future. It can be claimed as late as the ending date of the first calendar quarter that immediately follows the quarter in which the manufacturer reports selling the 60,000th model of these qualifying hybrids. This means that each of these cars will have entirely different qualifying dates. When the 60,000 mark is reached, the tax credit then will begin to diminish.
The second quarter following the selling date of the benchmark vehicle will find taxpayers able to claim only a 50% credit, then a 25% credit in the following quarter. After this last quarter immediately following the selling of the benchmark vehicle there are no tax credits remaining to be claimed. These credits can have a big impact on a 2006 tax refund and you should check your 2006 tax online to make sure you have claimed a credit if eligible. Depending on the year that your vehicle becomes eligible for a tax credit, it could even affect a prior tax return.
The following requirements must be met by a taxpayer or a business in order to claim the hybrid car tax credits on a 2006 tax return.
• The hybrid auto must be purchased on or before December 31, 2010.
• The hybrid auto must be placed in service after December 31, 2005.
• The vehicle must be originally put into service by the taxpayer to whom the 2006 tax credit is being paid.
• If the hybrid is leased, the leasing company can claim the tax credit, not the taxpayer.
• This hybrid tax credit does not apply to any used hybrid vehicles. The credit only can be claimed by the original purchasers and users of a new hybrid vehicle that qualifies for the tax credit.
• If the hybrid is purchased by a tax-exempt organization, or entity, the person who sold the vehicle is eligible to claim the credit. This can be done only if the seller discloses to the tax-exempt organization, or entity, the amount of the tax credit.
• The hybrid must be used for the majority of the time within the boundaries of the US. Among the qualifying cars are the Honda Civic Hybrid CVT 2006, Honda Civic Hybrid SULEV MT and CVT 2005, Honda Insight CVT 2005-2006, Honda Accord Hybrid AT 2005-2006, Ford Escape Hybrid FWD and 4WD 2006, Mercury Mariner Hybrid 4WD 2006, Toyota Prius 2005-2006, Toyota Highlander Hybrid 2WD and 4WD 2006, Toyota Camry Hybrid 2007, Lexus RX400h 2WD and 4WD 2006 and the Lexus GS 450h 2007.
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By: Michael S Schmidt
Many taxpayers took the One-Time Tax Refund 2006 that was available as one-time credit when filing your 2006 taxes. It was implemented in order to reimburse consumers for excise taxes that were billed between February 28, 2003 and April 1, 2006. These taxes were paid on long distance services. Most consumers that used either regular phone service or cell phone service were eligible for the tax refund. In excess of 70 percent of the consumers that qualified for the refund claimed it when filing their 2006 tax form.
If you were not among the 70 percent of taxpayers that already claimed your refund on the prior tax return, it would be necessary to file an amended 2006 tax return. You can file an amended return by using Form 1040X which is available on the IRS website. If you failed to request the refund, you are not allowed to include it on your 2007 tax return. In the event you have not yet filed for 2006, you can make the request for the one-time tax refund 2006 when completing a late 2006 tax return.
If you are using the service of a professional that prepares your tax return, be watchful for false claims that you are eligible to receive hundreds of dollars by using this deduction. The refund request of the excise tax paid should not be in excess of three percent of your phone bill. This provision applies to both long distance and any bundled service plans that were billed after February 28, 2003. Unethical tax preparers may convince you to file an amended 2006 tax form with the promise of a substantial refund. Your phone bills would have to be very large in order to receive such a large refund.
In an effort to make claiming the refund easier, the IRS gives taxpayers that had phone service during the eligible time frame the option of a standard deduction. The standard amount ranges from $30-$60 and is determined by the number of exemptions claimed on your return. The standard amount is of course optional. You may claim the actual amount that you were taxed, but you must have the phone records to back up your claim.
If you are unsure if you are eligible for the One-Time Tax Refund 2006 or have any additional, you can find more information on the IRS website.
]]>Direct Deposit, whether it’s your paycheck or your tax refund check, is much safer than waiting to cash or deposit your funds in a standard bank transaction. Direct deposit has become one of the most popular ways to receive your tax refund and one of the most convenient. Every year people file their taxes through a CPA, or one of the many tax services offered or by themselves using preferred tax software. Generally, if you receive a tax refund you’ll want your money as soon as possible. The old adage of “the checks in the mail” doesn’t sit well with most people. Sometimes our tax refund has been spent already or funds are allocated to purchase something or go on a much-needed vacation as a reward.
Since a direct deposit is electronically processed, you can get your funds quickly and without waiting for a physical check in the mail. What you do with the monies received is your option, since 2007 the options to have it split into other accounts has become a new choice. Most direct deposits are generally targeted for one account; upon the completed transaction through your bank, you then have the option to move your funds around. The newest choice is to have those tax refund monies split into three different accounts, savings, mutual funds or your IRA. There is a time widow for some deposits so you’ll need to make sure that you file within the allotted time. An extension will not grant you the privileges given to those who file on time.
In order to take advantage of this newest direct deposit option you must fill out Form 8888 and file it with your tax return. This form instructs the IRS which accounts you want your tax refund deposited into and what each amount should be. Double check the information you give the IRS, it is not their responsibility to verify the information you give them. If you are not receiving your funds, you can still track them through the IRS 1-800 number. Since refunds vary from year to year, you’ll need to fill out a new Form 8888 each time you file your tax return.
The option to split monies into different accounts gives you the choice of making sure your tax refund goes where you want it go. There are some restrictions regarding filing a split of monies for a 1040-EZ-T so you’ll need to check with the IRS to see about those limitations. If you’ve wanted to start a savings account for the kids or want to open a mutual fund for yourself, take advantage of this option. Giving you the option to decide which accounts you want money directly deposited into makes you gives you the power to feel like you’re managing your money a little better.
]]>By: Michael S Schmidt
In 2004, the internal revenue service added the option of deducting state and local sales tax on your 2004 and 2005 federal tax return. This was in place of taking the state income tax deduction. The enactment of this was helpful for people who reside in states that do not withhold state income taxes. In the beginning, this was only to affect 2004- 05 tax returns, however it was extended to the 2007-filing year.
Tax Law Extends State Sales Tax Deduction 2006
Late passage of the Tax Relief and Health Care Act of 2006 prevented the tax tables from being available in the 1040 tax instructions. Instead, the tables were made available on their website and six million copies were mailed out to filers across the country.
The IRS publication 600 will aid taxpayers in calculating the amount of their state sales tax so that they do not have to keep every receipt for the year. This will also be a major help to those who were unaware that the code was still in effect. The calculations are based on income and number of exemptions claimed on the federal return. The publication will also tell taxpayers how to add in any applicable local taxes as well.
What this means for filers who file a late 2006 tax return is there is a deduction they may not be aware of. If you will file a late return, you need to be aware of the extension of this tax deduction. When filing one of these prior year tax returns you can take this deduction on line five of schedule A and write in ST on the dotted line to the left of it.
Additional Local Deductions
In addition to the state sales tax deduction, taxpayers may also deduct local taxes paid on the following:
• Motor vehicle, limited only to the amount paid at the general tax sales tax rate
• Aircraft, boat, home, and in some cases extensive renovations. Again, as long as the rate is at the general sales tax level.
It is always a good idea to keep up with all the new and pertinent information governing your tax liability or deductions. Anyone filing 2006 taxes online should be aware that some programs might not be up to speed on last minute changes such as this.
]]>By: Michael S Schmidt
Charity donations 2006 rulings are more stringent than those that were able to be used for your prior tax return. Clothing and other appliances or home items that are donated after 8/17/06 will have to be in good used condition or even better condition to qualify as charitable donations. If the taxpayer will include a verifiable and actual appraisal of any one item from the home, they can claim a deduction of more than $500 on their 2006 tax return. Items that qualify for donations include clothing, furnishings, and articles of furniture, electronic items, electrical appliances, and household linens.
Beginning in the 2006 tax year individuals will now be required to fully document all of the cash contributions they provide to charities. There are new regulations to be considered for voluntary contributions of any amount that you plan to include on a 2006 tax form. Taxpayers will need to document each of their cash donations separately and cannot combine them to try to qualify for a larger 2006 tax refund. This means that if you donate $200 dollars in cash every two weeks the donations must qualify for the under $250 rules every time, you cannot combine the amounts and consider them as a $500 monthly or $6000 annual contribution.
Cash Contributions that are Less than $250
If taxpayers have cash contributions that are each less than $250, they must also have one of the following documentations if you plan to claim them on your 2006 taxes.
• A check that is canceled shows the amount or a clear and accurate statement that is able to provide a verified check number with the amount of the contribution, the date of the contribution and the charity that received the money.
• Receipt from a qualified charity with their name, date of the cash donation, and the cash amount that was received.
• Another written and verifiable statement with the above information.
Cash Contributions that are more than $250
If there are cash contributions from a taxpayer that are more than $250, an acknowledgment of this contribution must be obtained from the qualified organization. You will need these statements even if you are filing your 2006 tax online. This must be a written statement that meets the following requirements:
• Any cash donation must be documented, personal records and miscellaneous credit card statements are no longer sufficient for this purpose.
• The statement must certify if you received goods or services in exchange for your contribution.
• If there was an exchange there must be a good faith estimation concerning the real value of these items.
• The statement must be received on or before the date that the taxpayer is going to file a return. The contribution must be completed by this date, including any filing extension. This means that if you are filing a late 2006 tax return you must be sure to have your charitable contributions completed well in advance of this date.
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