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Tax: The Hong Kong Model
REAL CLEAR MARKETS August 06, 2008 Anti-Business States Awash In Red Ink By Steven Malanga Full article Steven Malanga Real Clear Markets Excerpts: Shortly after he was confirmed as governor of New York earlier this year, David Paterson told a group of business executives that when he received congratulations from old friends he hadn’t heard from in years, he was surprised how many no longer lived in New York. "All of them basically said the same thing," Paterson told the group. "'Good luck in New York state, but we can't pay the taxes. The opportunities aren't there.'” After that experience, Paterson presumably can understand the complaints of corporate executives recently surveyed by Development Counsellors International, which advises companies on where to locate their facilities. More than four in ten of them have ranked New York as the worst state to do business in--second only to California in unfavorable mentions. The most common gripes included high taxes and anti-business regulations. Joining New York and California on the list of most unpopular states were New Jersey, Michigan and Massachusetts. The DCI study, coming as it did amidst growing talk of state fiscal crises around the country, is particularly revealing. Of the approximately $48 billion in accumulated budget shortfalls that the 29 states with projected deficits are facing, $33 billion, or two-thirds of the gap, is concentrated in those five states considered by corporate executives to be the least friendly to business. Meanwhile, among the five states ranked as having the best business environment, Texas and North Carolina have no projected budget gaps, and Georgia, Tennessee and Florida are facing shortfalls amounting to about $4.1 billion, or less than one-tenth of the states’ total. From: Club For Growth Blog February 29, 2008 Court Finds Taxing Authority Unconstitutional Andrew Roth The Virginia Supreme Court today declared that the un-elected bureaucrats of the Northern Virginia Transportation Authority don't have the constitutional mandate to tax, thus saving taxpayers $300 million. Congrats to Kristina Rasmussen and the other plaintiffs in the case.
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Why? It,s as if they have stolen the Constitution of The United States, before we adopted the Income Tax in 1913, which started all the mischief and confiscation of the daily labor of "net taxpayers" in the United States. After ending communism in 1947, an agreement under Britain led to Laissez Faire economics Hong Kong kept the cost of government under 15% for fifty years, compared to our present 34% rate today. Hong Kong had and has almost non-existent tariffs, kept government bureaucracy and regulations very limited and allocated its resources wisely. It keeps cutting taxes, which keep increasing revenues. Hong Kong is also much more free of corruption that practically every nation of the world, including the U.S. We could and should do what Hong Kong does. Apply our Constitution. We would have the same results. To do that we would have to curtail the present, out of control Marxist practice of confiscation from our workers who pay "net taxes" to those who do not. The Mainstream Media, the Democratic Party, most university professors are and have been silent on Hong Kong for fifty years. Anyone surprised?
On the Complete Tax home page under Products and Services Click on Start A New Return. On the new page, near the bottom, a horizontal bar reads: CompleteTax Demo There is nothing to download and your whole tax is done at no charge unless and until you are ready to file your return. It's easy to fill out your personal information and e-file taxes with CompleteTax for federal and state tax refunds. CompleteTax is popular with younger taxpayers just starting to file taxes and more seasoned taxpayers. For investors with capital gains taxes, CompleteTax imports data from Gainskeeper for easy calculation of capital gains and losses on Schedule D. PC Magazine says: “CompleteTax has a great, reputable parent company and terrific multilevel help. It provides a comprehensive interview that tracks income and expenses for even complex tax returns.” Federal returns are $25.95, state returns $12.95. E-filing is free. The Online Guide A useful tax guide provides tax tips and straightforward answers to your tax questions. The Guide is laid out in a highly functional manner. A simple click in each category provides guidance and reminders which help you to proceed easily to the next step. Complete Tax's tabbed navigation makes it easy to jump to different parts of your tax return. The Online Newsletter gives you valuable up to date information. For instance: New Pension Law Allows Tax Return-Funded IRAs. A Tax Glossary is very helpful if you need clarification of any terms. A Tax Calendar reminds you of important due dates.
Tax Complete also offers handy and easy to find--Forms, Tables & Worksheets. You may have heard about last minute changes. These changes were not made until December, just making it into law before congress adjourned for 2006 CompleteTax takes all these changes into account. These features have added reconciliation tools and a new extensive help section, allowing investors to automate capital gains calculations and import this into Complete Tax for income tax reporting. Webwire calls Complete Tax “the most authoritative expertise and best value in online tax preparation and e-filing.” and praises the ease of use and affordability of Complete Tax. About.com says: “I am happy to report that CompleteTax is up to date with the latest tax breaks, including deductions for teachers, students, and sales taxes. CompleteTax handles new tax credits for hybrid cars and energy-efficient home improvements. And unlike TurboTax, CompleteTax allowed me to split my tax refund using IRS Form 8888. This means I can directly deposit my tax refund in up to three bank or retirement accounts.” CompleteTax is the fastest of all the software programs for a complex tax return. The software does offer suggestions for overlooked tax deductions along with diagnostic tools for finding errors in your return in the Tax Return Review section of the program. CompleteTax supports all major Web browsers: Internet Explorer, Firefox, Safari, AOL, and Opera. Feb. 27, 2007-Telephone Tax Refund 10 Million Taxpayers Miss Out on Telephone Tax Refunds;IRS Urges People to Check before Filing WASHINGTON — The Internal Revenue Service today urged taxpayers to check to see if they qualify for the telephone excise tax refund after more than 10 million early filers did not request the one-time refund. In the first release of this year’s weekly filing season statistics, about 30 percent of all taxpayers did not request the telephone tax refund. “Many taxpayers are overlooking this special refund and the chance to get a bigger refund,” said IRS Commissioner Mark W. Everson. “We encourage taxpayers to spend a few extra minutes reviewing their tax return to make sure they are making an accurate request. A little extra time can mean a bigger refund check.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. To make the refund easier to figure, the government established a standard refund amount, based on personal exemptions, ranging from $30 to $60. If taxpayers have phone bills and other records, they can request the actual amount of excise tax paid. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. Taxpayers only have to fill out one line on their return, and they don’t need to present proof to the IRS. Out of the tax returns filed through Feb. 16, more than 10 million taxpayers did not request the telephone tax refund. And nearly half of those returns — more than 4.8 million — were completed by a tax preparer. “We are surprised how many tax preparers are overlooking the telephone tax refund,” Everson said. “We want all taxpayers entitled to this refund to get it, whether they are using a tax preparer or doing the return themselves.” In other statistics released today, early filings show e-file returns are up nearly 3 percent and e-filed returns prepared on home computers up 7 percent compared to last year. Through Feb. 16, the average refund is $2,733, nearly $100 above last year. For people requesting the telephone tax refund, it adds $30 to $60 — or even more — onto a refund. The IRS wants to make it as easy as possible for anyone who paid the tax to get this special refund. If you paid the tax and haven’t filed yet, here are some tips to help you figure the refund correctly and get it quickly: * File electronically. Electronic-filing software flags often overlooked tax breaks and helps you figure them accurately and report them properly. If you use a professional tax preparer, ask that person to e-file your return. * E-file for free. If your income is $52,000 or less, use the Free File link on IRS.gov to connect to a private-sector company offering free e-file services. * Choose direct deposit. Whether you file electronically or on paper, you can get your refund at least a week sooner by having it deposited directly into your checking or savings account. * Consider using the standard-refund amount for the telephone-tax refund. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. You only have to fill out one line on your return, and you don’t need to present proof to the IRS. The standard amount, ranging from $30 to $60, is based on the number of exemptions you can claim on your return. * If you paid more than the standard amount, you may figure your refund using the actual amount of tax shown on your phone bills and other records. Base your refund request on the three-percent federal tax paid, not the total phone bill. Do not count tax paid on local-only service. You must have the phone bills or other records adequate to support the amount you are requesting. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested. * Do not file duplicate requests. If you file a regular income-tax return, do not file Form 1040EZ-T. Designed exclusively for requesting the telephone-tax refund, this simple form is for people who don’t need to file a regular income-tax return. If you want to take advantage of the earned income tax credit for low and moderate income workers, the child tax credit or other tax breaks, file a regular return and include your telephone-tax refund request on that return. * Stay away from tax preparers who falsely claim that many, if not most, phone customers can get hundreds of dollars or more back under this program. * Use the Telephone Excise Tax Refund section on the front page of IRS.gov. Here, you can download forms, find answers to frequently-asked questions and link to participating Free File partners. Issue Number: IR-2007-38 Inside This Issue Free tax help from the IRS is just a phone call away. The IRS provides various services through its toll-free telephone numbers. Some of these services are available 24 hours a day. * Ask questions about your tax return. You can call the IRS Tax Help Line for Individuals at 800-829-1040, to get answers to your federal tax questions. * Order forms and publications. Call 800-TAX-FORM (800-829-3676). Copies of forms, publications and other helpful information are also available around-the-clock at the IRS Web site at www.irs.gov. * Check the status of your refund. Call the Refund Hotline at 800-829-1954. You will need to know your social security number, filing status and the exact whole-dollar amount of your expected refund. TeleTax, the automated refund line, at 800-829-4477 is available around the clock and will also let you check the status of your income tax refund. Automated refund information is generally available four to five weeks after you have filed your tax return. You can also check the status of your refund at IRS.gov by clicking on Where’s My Refund? This service is available 24 hours a day, seven days a week. * Recorded tax information: The TeleTax line at 800-829-4477 has recorded messages covering more than 100 tax topics. Topics include items such as Who Must File?, Highlights of Tax Changes, Education Credits, Individual Retirement Accounts, Earned Income Tax Credit, What to Do if You Can't Pay Your Tax and more. * Hearing-impaired individuals with access to TTY/TDD equipment. Call 800-829-4059 to ask questions or to order forms and publications. This number is answered only by TTY/TDD equipment. The IRS Tax Help Line, Refund Hotline, and the TTY/TDD numbers are available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time. The services offered on the IRS toll-free lines are also available 24 hours a day 7 days a week on the Internet at IRS.gov. If, during the 5-year period ending on the date of sale, you owned the home for at least 2 years and lived in it as your main home for at least 2 years, you can exclude up to the maximum dollar limit. However, you cannot exclude the portion of the gain equal to depreciation allowed or allowable for periods after May 6, 1997. This gain is reported on Form 4797 (PDF),Sale of Business Property. Refer to Publication 523, Selling Your Home, and Form 4797 (PDF), Sale of Business Property, for specifics on calculating and reporting the amount of gain. I sold my principal residence this year. What form do I need to file? If you meet the ownership and use tests, you will generally only need to report the sale of your home if your gain exceeds a certain dollar amount prescribed by law. To determine the amount of gain that can be excluded from income refer to Publication 523, Selling Your Home. You may be entitled to exclude gain from income if during the 5-year period ending on the date of the sale, you have: * Owned the home for at least 2 years (the ownership test), and * Lived in the home as your main home for at least 2 years (the use test). If you owned and lived in the property as your main home for less than 2 years, you may still be able to claim an exclusion in some cases. If you are required or choose to report a gain, it is reported on Form 1040, Schedule D (PDF) , Capital Gains and Losses . If you were on qualified extended duty in the U.S. Armed Services or the Foreign Service you may suspend the five-year test period for up to 10 years. You are on qualified extended duty when the extended duty lasts for more than 90 days or for an indefinite period AND: * At a duty station that is at least 50 miles from the residence sold, or * When residing under orders in government housing. This change applies to home sales after May 6, 1997. You may use this provision for only one property at a time and one sale every two years. References: * Publication 523, Selling Your Home * Tax Topic 701, Sale of your Home - after May 6, 1997 * Tax Topic 703, Basis of Assets Issue Number: TT-2007-34 Inside This Issue TAX FACTS ABOUT CAPITAL GAINS AND LOSSES Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only capital losses on investment property, not personal property. Here are a few tax facts about capital gains and losses: * Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040. * Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. * Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss. * The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2006, the maximum capital gains rates are 5%, 15%, 25% or 28%. * If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately). For more information about reporting capital gains and losses, get Publication 17, Your Federal Income Tax, and Publication 550, Investment Income and Expenses, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676). What is the basis of property received as a gift? To figure the basis of property you get as a gift, you must know its adjusted basis to the donor just before it was given to you. You also must know its fair market value (FMV) at the time it was given to you. and whether any gift tax was paid. If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or loss when you dispose of the property. Your basis for figuring gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property. Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property. See Adjusted Basis in Publication 551, Basis of Assets. If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property. If the FMV is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Increase your basis by all or part of any gift tax paid, depending on the date of the gift. See Gifts received before 1977 in Publication 551, Basis of Assets. Also, for figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property. See Adjusted Basis in Publication 551, Basis of Assets. I have investment property. Can you explain the term basis of assets? Basis is your investment in property for tax purposes. The difference between the selling price of your assets and your basis determines whether there is a taxable gain or loss on the disposition of your property. You need to determine your basis to figure allowable depreciation deductions as well. Your original basis is usually your cost to acquire the asset. Your adjusted basis (which is the basis you use to determine gain or loss or depreciation amounts) is the result of increasing or decreasing your original basis according to certain events. Increases to basis include but are not limited to: . Improvements having a useful life of more than a year . Assessments for local improvements . Sales tax . The cost of extending utilities lines to the property . Legal fees such as the cost of defending or perfecting title . Zoning costs Decreases to basis include but are not limited to: . Depreciation . Nontaxable corporate distributions . Casualty and theft losses . Easements . Rebates from the manufacturer or seller Additional information on basis can be found in Publication 551, Basis of Assets, or Tax Topic 703, Basis of Assets. IRS Update: ssue Number: TT-2007-33 Inside This Issue GAMBLING INCOME AND LOSSES Gambling winnings are fully taxable and must be reported on your tax return. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes. Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld federal income taxes from the payment. Here are some general guidelines on gambling income and losses: * Reporting winnings: The full amount of your gambling winnings for the year must be reported on line 21, Form 1040. You may not use Form 1040A or 1040EZ. * Deducting losses: If you itemize deductions, you can deduct your gambling losses for the year on line 27, Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. For more information see IRS Publication 529, Miscellaneous Deductions, or Publication 525, Taxable and Nontaxable Income, both available on the IRS Web site, IRS.gov, or by calling 800-TAX-FORM (800-829-3676). IRS Update: Issue Number: IR-2007-27 Inside This Issue CAN YOU USE SCHEDULE C-EZ? Your business may be eligible to use the abbreviated Schedule C-EZ instead of the longer Schedule C when reporting business profit and loss on your 2006 Form 1040 federal income tax return. The maximum deductible business expense threshold for filing Schedule C-EZ is $5,000. Schedule C-EZ, Net Profit from Business (Sole Proprietorship), is the simplified version of Schedule C, Profit or Loss from Business (Sole Proprietorship). Schedule C-EZ: * Has an instruction page and a one-page form with three short parts — General Information, Figure Your Net Profit, and Information on Your Vehicle. * Includes a simple worksheet for figuring the amount of deductible expenses. If that amount does not exceed $5,000, and if your business did not have a net loss, you should be able to use the C-EZ instead of Schedule C. Schedule C: * Is two pages long and is divided into five parts — Income, Expenses, Cost of Goods Sold, Information on Your Vehicle, and Other Expenses. * Requires more detailed information than the C-EZ. The instruction package is nine pages long. * Must be used when deductible business expenses exceed $5,000 and/or when a business has a net loss. Using Schedule C-EZ can save time and money and reduce paperwork burden for newly-eligible businesses. More information about Schedule C-EZ and reporting net profit for sole proprietorships can be found on the IRS Web site at IRS.gov. IRS Update: Issue Number: IR-2007-019 Inside This Issue New State Sales Tax Calculator Debuts on IRS.gov WASHINGTON — The Internal Revenue Service is providing a new online tool to help individual taxpayers determine whether they might benefit by electing to deduct their state and local general sales taxes. “The Sales Tax Calculator is another interactive tool on the IRS.gov web site designed to help make it easier for taxpayers to figure their taxes,” said IRS Commissioner Mark W. Everson. Taxpayers who itemize deductions on Schedule A of the Form 1040 in 2006 have the option of deducting the amount of state and local sales taxes paid instead of deducting their state and local income taxes paid. Taxpayers cannot take a deduction for both sales and income taxes. New tax law enacted in late December reinstated the optional deduction for state and local sales taxes. Because of this late enactment date, the IRS previously announced that it would not begin processing returns claiming the sales tax deduction until Feb. 3. To use the Sales Tax Calculator, taxpayers input their adjusted gross income, number of exemptions and zip code. The IRS estimates most taxpayers will get an answer in less than five minutes using the new tool. The calculator is anonymous. Taxpayers do not need to enter their name, Social Security number or any other identifying information. The calculator is another in a series of steps the IRS is taking to reduce taxpayer burden. As an alternate to the online sales tax calculator, taxpayers can use the worksheet in Publication 600, State and Local General Sales Tax, posted on IRS.gov and mailed in early January to about six million individuals who received the Form 1040 tax package. To calculate what their sales tax deduction would be, taxpayers can use either the actual amounts paid or use sales tax tables that allow them to factor in the exact sales taxes paid on certain specified items, such as a car, boat or material to build a house. To find this tool, enter Sales Tax Calculator into the search box at IRS.gov. See related item: Sales Tax Calculator Issue Number: TT-2007-30 Inside This Issue How much, if any, of your social security benefits are taxable depends on your total income and marital status. Generally, if social security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. Your taxable benefits and modified adjusted gross income are figured in a worksheet in the Form 1040A or Form 1040 Instruction booklet. Before you go to the instruction book, do the following quick computation to determine whether some of your benefits may be taxable: * First, add one�half of the total social security you received to all your other income, including any tax exempt interest and other exclusions from income * Then, compare this total to the base amount for your filing status. The 2006 base amounts are: * $32,000 for married couples filing jointly * $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year * $0 for married persons filing separately who lived together during the year For additional information on the taxability of social security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Issue Number: TT-2007-26 Inside This Issue CHANGES TO TAX LAWS IN 2006 Taxpayers should be aware of important changes to the tax law before they complete their 2006 federal income tax forms. Here are some changes that may affect your return. * New energy-saving tax credits. A ten percent credit can now be claimed for various energy-saving improvements made to the taxpayer’s main residence. There is also a thirty percent credit for the cost of energy-saving property such as photovoltaic cells. * Expanded tax savings for retirement plans. 401(k) and 403(b) plans can now create a qualified Roth contribution program. * Retirement contributions from tax free combat pay. Military members serving in Iraq, Afghanistan and other combat zone localities can now count tax-free combat pay when figuring how much to contribute to a Roth or traditional IRA. * Military reservists not subject to early distribution tax. Reservists called to active duty can now receive payments from retirement plans without being subject to the ten percent early-distribution tax. * New rules on donations to charity. To be deductible, clothing and household items donated to charity after Aug. 17, 2006, must be in good used condition or better. * Tax free transfers from IRA’s to charity. An IRA holder, age 70 ½ or over, can directly transfer tax-free, up to $100,000 per year to an eligible charity. This option is available in tax years 2006 and 2007. * “Kiddie” Tax Age Change. Children under 18 with taxable investment income may need to pay at their parents’ higher marginal rates. Before, so-called “kiddie” tax applied only to children under 14. Also new this year, two changes may affect the amount of your refund or the way in which you choose to receive your refund. * Telephone Excise Tax Refund. Individual taxpayers will be able to request a refund if they paid the federal excise tax on long-distance or bundled service. * New Split Refund Option. Taxpayers now can split their refunds among up to three accounts held by up to three U.S. financial institutions, such as banks, mutual funds, brokerage firms or credit unions. For more information, visit the IRS Web site at IRS.gov. Also, see Publication 553, Highlights of 2006 Tax Changes, and the instruction book for Form 1040. Issue Number: TT-2007-15 Inside This Issue MOVING SOON? LET THE IRS KNOW If you changed your home or business address, notify the IRS to ensure that you receive any refunds or correspondence. While the IRS uses the Postal Service’s change of address files to update taxpayer addresses, notifying the IRS directly is still a good idea. There are several ways to do this. * On your tax return: You may correct the address legibly on the mailing label that comes with your tax package or write the new address in the appropriate boxes on your tax return when you file. * Form 8822: You may use Form 8822, Change of Address, to submit an address change at any time during the year. * Verbal Notification: If an IRS employee contacts you about your account, you may verbally provide a change of address. * Written Notification: Write to the IRS center where you file your return and provide your new address. The mailing addresses for the IRS centers are in the tax instruction booklet. In order to process your address change, you will need to provide your full name, old and new addresses, your social security number or employer identification number, and signatures. If you filed a joint return, you should provide the same information for both spouses. If you filed a joint return and have since established separate residences, you should each notify the IRS of your new addresses. In addition to notifying the IRS directly you should notify the U.S. Postal Service. You may file a change of address with your local post office in person or via the internet at www.usps.com. The USPS-United States Official Change of Address Form via the website is safe and secured. It's a good idea to notify your employer of your new address so that you can get your W-2 forms on time. If you change your address after filing your return, don't forget to notify the post office at your old address so your mail can be forwarded. You should also notify the IRS if you make estimated tax payments and you change your address during the year. You should mail a completed Form 8822, Change of Address, or write the IRS center where you file your return. You can continue to use your old pre-printed payment vouchers until the IRS sends you new ones. Do not correct the address on the old voucher. You can download Form 8822, Change of Address at the IRS Web site, IRS.gov, or order by calling 800-TAX-FORM (800-829-3676) Issue Number: IR-2007-029 Inside This Issue Purchasers of GM Hybrids Still Qualify for Tax Credit WASHINGTON — The Internal Revenue Service announced that purchasers of General Motors Corp. qualified vehicles may continue to claim the Alternative Motor Vehicle Credit. The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold. General Motors sold 3,358 qualifying vehicles to retail dealers in the quarter ending December 31, 2006. This brings the cumulative number of qualified General Motors hybrid vehicles sold to 5,558. The credit amount and make and model of qualified vehicles sold are: * Chevrolet Silverado Hybrid 2WD, Model Years 2006 and 2007 — $250 * Chevrolet Silverado Hybrid 4WD, Model Years 2006 and 2007 — $650 * GMC Sierra Hybrid 2WD, Model Years 2006 and 2007 — $250 * GMC Sierra Hybrid 4WD, Model Years 2006 and 2007 — $650 * Saturn Vue Green Line, Model Year 2007 — $650 Taxpayers may claim the full amount of the credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter. See Related Item: Hybrid Cars and Alternative Motor Vehicles Issue Number: TT-2007-28 Inside This Issue More Direct Deposit Options- Split Your Refund Starting in 2007, taxpayers have more choices and flexibility for the direct deposit of 2006 federal income tax refunds. For the first time, taxpayers can split refunds among up to three accounts held by as many as three different U.S. financial institutions, such as banks, mutual funds, brokerage firms or credit unions. The split-refund option is available to taxpayers who choose direct deposit regardless of whether they filed the original returns on paper or in electronic format using Form 1040, 1040A, 1040EZ, 1040-PR, 1040NR, 1040NR-EZ or 1040-SS. However, taxpayers filing Form 1040-EZ-T, Request for Refund of Federal Telephone Excise Tax, or Form 8379, Injured Spouse Allocation, cannot opt to split their refund. To split direct-deposit refunds among two or three accounts or financial institutions, taxpayers should complete new Form 8888, Direct Deposit of Refund to More Than One Account. Taxpayers can continue, though, to use the direct deposit line on Form 1040 to electronically send their refunds to one account. The IRS will electronically deposit refunds to taxpayers’ accounts held by a U.S. financial institution, providing that an accurate account number and American Bankers Association (ABA) routing number is supplied and the financial institution accepts direct deposits for the type of accounts designated. Taxpayers should verify routing and account numbers with their financial institutions. IRS assumes no responsibility for taxpayer or preparer error. Note that taxpayers can do things much faster electronically than by paper. For those filing their taxes electronically, the refund is deposited in their account within two weeks. A paper check refund takes three weeks. Those filing taxes on paper, the process is longer. They get their direct deposit refund within four to six weeks or paper checks within six weeks. By using the IRS’ popular Where’s My Refund? Feature, taxpayers can track their refunds. Taxpayers can access Where’s My Refund? online at IRS.gov or by calling 800-829-1954. Issue Number: IR-2007-027 Inside This Issue IRS Moves to Prevent Telephone Tax Refund Abuse;Help Taxpayers Make Accurate Requests WASHINGTON — The Internal Revenue Service announced today it is taking additional steps to prevent abuse by tax preparers and help taxpayers make accurate requests for the one-time telephone excise tax refund. This week, IRS Criminal Investigation special agents and IRS revenue agents are conducting special site visits with tax preparers across the nation to prevent inflated requests made for the one-time telephone tax refund. Visits began this week to 22 different tax preparers who have handled more than 1,500 tax returns. “We are taking this unusual step to confront blatant abuse of this important refund program,” said IRS Commissioner Mark W. Everson. “We want tax preparers to prepare accurate tax returns. If they don’t, we will move swiftly to impose civil penalties and, where warranted, seek criminal sanctions.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. The IRS also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. The IRS has monitored telephone excise tax refund requests for potential problems since the tax-filing season opened in early January. The IRS has seen some problems with returns from tax preparers that may indicate criminal intent. Some tax-return preparers are requesting thousands of dollars of refunds for their clients in instances where clients are entitled to only a tiny fraction of that amount. In some cases, taxpayers requested a refund in the thousands of dollars, suggesting that the taxpayer paid more for telephone service than they received in income. In several instances, taxpayers requested a refund of $30,000 – hundreds of times of what could be reasonably expected. Some refund requests appear to be for the entire amount of the taxpayer’s phone bill, rather than just the three-percent long-distance tax. Taxpayers who request more of a refund than they are entitled to receive will have their refunds held and they may be subject to an audit. To make the refund easier to figure, the IRS established a standard refund amount, based on personal exemptions, ranging from $30 to $60. If taxpayers have phone bills and other records, they can request the actual amount of excise tax paid. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. You only have to fill out one line on your return, and you don’t need to present proof to the IRS. At the same time, the IRS issued a new reminder today for taxpayers who are not filing for the refund even though they may qualify. In early returns filed this year, more than one-third of early filers did not request the telephone tax refund. Other taxpayers are making mistakes when requesting the refund. The IRS encourages taxpayers to see if they qualify for the telephone tax refund and to make sure they fill out tax returns accurately and completely. The best and most reliable information on this refund can be found in the Telephone Excise Tax Refund section on the front page of IRS.gov, the tax agency’s popular Web site. Here, taxpayers can download forms, find answers to frequently-asked questions and link to participating private-sector Free File partners offering free electronic-filing services. Issue Number: TT-2007-26 Inside This Issue CHANGES TO TAX LAWS IN 2006 Taxpayers should be aware of important changes to the tax law before they complete their 2006 federal income tax forms. Here are some changes that may affect your return. * New energy-saving tax credits. A ten percent credit can now be claimed for various energy-saving improvements made to the taxpayer’s main residence. There is also a thirty percent credit for the cost of energy-saving property such as photovoltaic cells. * Expanded tax savings for retirement plans. 401(k) and 403(b) plans can now create a qualified Roth contribution program. * Retirement contributions from tax free combat pay. Military members serving in Iraq, Afghanistan and other combat zone localities can now count tax-free combat pay when figuring how much to contribute to a Roth or traditional IRA. * Military reservists not subject to early distribution tax. Reservists called to active duty can now receive payments from retirement plans without being subject to the ten percent early-distribution tax. * New rules on donations to charity. To be deductible, clothing and household items donated to charity after Aug. 17, 2006, must be in good used condition or better. * Tax free transfers from IRA’s to charity. An IRA holder, age 70 ½ or over, can directly transfer tax-free, up to $100,000 per year to an eligible charity. This option is available in tax years 2006 and 2007. * “Kiddie” Tax Age Change. Children under 18 with taxable investment income may need to pay at their parents’ higher marginal rates. Before, so-called “kiddie” tax applied only to children under 14. Also new this year, two changes may affect the amount of your refund or the way in which you choose to receive your refund. * Telephone Excise Tax Refund. Individual taxpayers will be able to request a refund if they paid the federal excise tax on long-distance or bundled service. * New Split Refund Option. Taxpayers now can split their refunds among up to three accounts held by up to three U.S. financial institutions, such as banks, mutual funds, brokerage firms or credit unions. For more information, visit the IRS Web site at IRS.gov. Also, see Publication 553, Highlights of 2006 Tax Changes, and the instruction book for Form 1040. . Easements . Rebates from the manufacturer or seller Additional information on basis can be found in Publication 551, Basis of Assets, or Tax Topic 703, Basis of Assets. Do you know any former prisoners of war (POW'S) or their family members? If so, the Department of Veterans Affairs (VA) needs your help. VA is once again reaching out to former prisoners of war not currently using VA benefits and services, urging them to contact the Department to find out if they are eligible for health care, disability compensation and other services.
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