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ARTICLE0207LL
INCOME TAX TIME
PART II
Due to inflation, the $100,000 first year (Sec.179) write off for equipment put into service is $108,000 for 2006. The $100,000 write off phases out if the total amount of equipment acquired exceeds $430,000 in any year, adjusted for inflation. The $108,000 and $430,000 will be adjusted for 2007.
Pensions and IRAs
The amount you can contribute to IRAs for 2006 and 2007 is $4,000 and if you’re 50 years or older by the end of the tax year, you can kick in an additional $1,000. You can contribute up to $15,000 to your 401K and an extra $5,000 if you’re at least 50. For 2007, it is $20,500. For (Simple) Plans, which must be opened prior to October 1 of any year for that year the limits are $10,000 for 2006 & $10,500 for 2007. If you are 50 or older, the limits are $12,500 and $13,000.
Paying IRS Balances
If you receive a “balance due” notice from the IRS, there are three ways in which you can handle paying your liability.
You can now apply on-line for a payment agreement to deal with overdue tax. Go to www.irs.gov and use the pull down menu under “I need to….” to select “Set Up a Payment Plan”.
Tax Tip
Overlooked medical expenses: If your doctor prescribes items or services that involve home improvements for a specific condition, many times those medical expenses can be deducted. Examples include central air-conditioning to alleviate a respiratory condition, a lap swimming pool in the event you are allergic to chemicals in the water of public pools, an elevator for arthritics or heart patients. Improvements to accommodate a disability are fully deductible without regard to any increase in value. These include the modification of kitchen cupboards or counters, railings and support bars in bathrooms, ramp ways and widening of doorways and halls, and grading the grounds around a home for easier access. If you rent and are not compensated by the landlord for the cost, medically related improvements are fully deductible.
Additionally, you can deduct medical costs you pay for dependents, even if they are married and have their own dependents and there is no test for gross income.
FREQUENTLY ASKED
QUESTIONS
How much of my income
should I set aside for taxes?
Keeping in mind that everyone’s tax situation is different, we recommend at least 20-30% of your net income. Since it’s the beginning of the year, it is a good idea to follow this plan. It can be adjusted after your 2006 tax return is completed and also during the year after doing a tax projection.
TAX TIP
By now most of you should have prepared your income tax information to get to your tax preparer.
IMPORTANT! For those
of you who have pass through entities, such as LLC’s and S-Corporations, it is
extremely important to have your tax information to your preparer
immediately! The S-corporation returns
are due
TAX TIP
Beginning 2007, all taxpayers will need a receipt for every charitable donation you make. You no longer can deduct contributions in cash without a check or receipt.
TAX TIP – New tax credit on your 2006 Federal Tax Return Only
In July, 2006, the Federal Government stopped requiring the collection of the Federal Excise Tax on long distance telephone services. To request a refund for actual amounts, businesses (including sole proprietors, corporations and partnerships) must complete Form 8913, Credit for Federal Telephone Excise Tax Paid. To complete this form, businesses may determine the actual amount of refundable long-distance telephone excise taxes they paid for the 41 months from March, 2003 through July, 2006, or use the formula to figure their refunds. You would need the April, 2006 and September, 2006 phone bills to use the formula and claim a credit. Or, individuals can claim a safe harbor amount. The IRS already has provided individual taxpayers with the option to use standard amounts based on the number of exemptions allowed to that taxpayer. Individual taxpayers can request a $30 refund with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.
Sole proprietors reporting more than $25,000 of gross income have three options: they can use the standard amounts which cover both personal and business expenses, they can use the formula for their business expenses and actual for their personal ones, or they can choose to use actual amounts for both business and personal.
ALERT
Drivers can have income tax problems (i.e. per diem
reimbursement subject to income and employment tax) if their employer
reimburses them in excess of the Federal per diem rate which for 2007 is $52
per day. This is so if not being
reimbursed for actual expenses.
This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. Contributions to this article were made by Shasta May, Director Business Development for PBS. If you would like further information, please contact us at (800) 697-5153. Visit our Web Site at http://www.pbstax.com .
“Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.