Cloverleaf Schools Pass School District Tax For 2007

For those of you who live in the Cloverleaf School district, we want you to know that there will be a .5% School District Tax beginning January 1, 2007.  This means, if you have employees, you will need to start deducting this from their pay if they RESIDE in the Cloverleaf District.

Federal Legislation for 2007

Three new bills were passed in 2007, one in May, one in August and one in November.  The Pension Protection Bill passed in August is a rousing more than 900 pages.

Here are some of the highlights of these bills:

1. The kiddie tax age was raised to age 18 from age 14.  If your kiddos have more than $850 of unearned income, you could potentially be impacted if they are also under age 18. A new trap is that there is only a $6,050 earned income exemption for Alternative Minimum Tax (AMT) on these returns, so we can expect to see more AMT ramifications on the kids returns.
2. The AMT limitation is raised to $65,500 for MFS, $42,500 for Single taxpayers. This will give limited relief to taxpayers in an AMT position, but is far from an overhaul of the AMT that was promised.  It is predicted that the AMT will affect 33% of taxpayers by the year 2008, up from the predicted 6% in 2006.
3. The section 179 expensing election for business equipment is raised to $108,000 but those business vehicles still cap out at $25,000.
4. All the pension and IRA rules made effective by EGTRRA have become permanent and will not sunset after 2010.  This is good news for future planning.
5. The provision to be able to auto deposit your IRA contribution directly from your federal refund is apparently not effective until 2007.  I need to do some more research on this effective date as there have been conflicting reports.
6. There is now an ability for a non-spouse beneficiary to be able to roll over inherited IRA benefits and  not  have to pay tax immediately on the proceeds or make an election to  distribute over a  5 year  period.  There are, however, some restrictions on those roll-over funds. 
7. Taxpayers are permitted to make tax free distributions of IRA funds by directly transferring the funds to their favorite charity.  This provision is only available to taxpayers who are over age 70 ½ and the maximum is $100,000.  It can be used to satisfy the required minimum distribution (RMD) and it was available for the 2006 tax year.  However, if you did not already do it for 2006 the time has expired unless you are in your first year of RMD and are deferring the payment until April 1, 2007.
8. There is a rebate available for telephone excise tax on long distance phone calls made between 3/01/03 and 8/01/06.  Individual taxpayers have an option to take a standard amount based on exemptions. For businesses, there are three options for figuring the amount of rebate.  If you have a business, at the very least, you will need to provide documentation of your April 2006 and September 2006 phone bills that relate to your business activities.  This does include cell phones and land lines.
9. You will need to provide information about any authority over any foreign bank accounts. Since omission of this information on form TDF 90-22.11 carries a mandatory $10,000 civil penalty, this is not something that you want to ignore.  It includes such things as online casino accounts and overseas accounts of family members that you might have signature rights on.  Another example might be Canadian retirement accounts.
10. The energy credit for a personal residence is available for your principal residence only.  The regulations that have been issued subsequent to the passing of this provision and clearly limit this use of the credit to very specific items and will not apply to everything that we initially thought would be included, such as appliances.
11. Vehicle Credits are available in a number of different ways.  There are differing credits for Fuel Cell, Lean Burn, Hybrid and Alternative Fuel vehicles.  With respect to the Hybrids, Toyota and Lexus have gone over the 60,000 vehicles sold, all other manufacturers are way behind.  Therefore,Toyota and Lexus are the only ones that will receive a reduced credit amount.  
12. Two years ago a rule was passed that allowed non -custodial parents to claim dependency of  children based on what the divorce decrees stated.  This rule has been relinquished this year and we are back to the rule that states that the only way that a non-custodial parent can claim the dependency is if the custodial parent signs off on a form 8332.   So the decree is once again not the determining document.
13. There has been a major overhaul of the rules regarding charitable contributions.  There is no longer a limitation on what needs documentation.  If the contribution is cash, you must have documentation, ie a statement from the charity or a cancelled check regardless of the amount of the gift.   Regarding non-cash contributions, they must be documented regardless of the amount, they must be in good or better condition and they are required to have a more than minimal value.  The minimal value has not been defined, but conventional wisdom says that it should probably not be any items of less than $5.00 each.  Because of these new rules, tax and a accounting professionals can no longer assist in assigning the values of the items for you We invite you to visit www.satruck.org to get the current Salvation Army guidelines.  That way you can do the valuations before you provide the information to your friendly professional.
14. The last bill of the year restored  the  expiring  provisions  for the tuition deduction and credits, the teacher out of pocket deduction and  sales tax deduction  Since the forms were printed before this restoration, you will see these reported differently on this year’s return.
15. A new service that we can offer through our office is in assisting immigrant residents in getting a Taxpayer Identification Number.  If you need this service or know of anyone who might need this in order to file a tax return, we would be happy to assist in this filing for you.
16. If you have had any debt cancellations during the year, e.g. credit card settlements, foreclosures and /or bankruptcies, there are some special rules in how to determine the taxability.  It will require us to get some additional information from you, so be prepared to take home some homework in order to resolve these issues.

There are many other new provisions, but we just wanted me to bring your attention to the ones that might affect the largest number of interested visitors to our website.  Should you have specific questions or issues, we invite you to email .  And if we can be of service to in assisting you in preparing your  2006 tax return, we’d be happy to welcome you into our family of clients.  Additionally, if you have business and/or accounting needs we can assist you in these areas as well.

Happy Tax Season!

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