This page is to be used in conjunction with The Educator's and
Healthcare Income Tax Guide, The State and Local Government Guide,
and The Taxpayer's Guide, for preparing your 2007 federal tax return. As is the case in the
printed tax guides, it is the reader's responsibility to assure that the tax facts are correct and that they apply to your individual situation.
Due to the ongoing nature of Tax Code rulings, Tax Court decisions, new laws,
etc., this page will help keep you up-to-date. We will publish any changes or corrections to the guide on this page. As new information becomes available, we will add it to
this Tax Guide Updates page. Individual page updates are
listed below in numeric order.
CURRENT TAX
GUIDE UPDATES - 2007
Page 2 - New in 2007
Poker tournaments must start reporting winnings to the IRS in
March 2008. Players are required to give their tax
identification number or have 28% withheld from their winnings
over $5000. Rev. Proc. 2007-57
Page 4 - The IRS & You
Your inbox may receive an email from the IRS offering a refund
if you will respond by giving your social security number and a
credit card. Do Not Respond – it is a fake. The IRS does
not send any emails regarding refunds and would not ask for
information such as your social security number or your credit
card. Forward the email to
phishing@irs.gov then delete it!
Checks mailed in with your tax return will be converted into
direct debits, meaning they will be deducted from your checking
account immediately. Be sure your account has the funds
available.
How to get your refund quickly? File as early as possible and
file electronically. Choose to have your refund deposited
directly into a checking/savings account, IRA, Coverdell ESA,
HSA, or Archer MSA. It can be deposited into as many as three of
the above accounts.
Page 6 - Alternative Minimum Tax (AMT)
The exemptions were raised for 2007: $66,350 for married filing
jointly and $44,350 for singles. Dependent care and tuition
credits can offset AMT.
AMT Tax Credit
Unused AMT tax credits can be used over a 5-year period
beginning in 2007 according to a new law.
Page 7 - Business Deductions
New per diem rates took effect October 1, 2007. See Rev. Proc.
2007-63
Page 8 - Capital Losses
The IRS has privately ruled that Enron stock losses do not
qualify as theft. They are capital losses and subject to capital
loss rules. Losses greater than $3000 above capital gains is
carried forward to later tax years.
Page 11 - Divorce & Alimony
Tax Court has ruled if you are paying your ex’s mortgage and you
are legally responsible for the mortgage, your alimony deduction
will be half of the payment since half of it is your personal
obligation. (Harris, TC Summ 2007-169)
Page 12 - Education Deductions
The IRS is checking the names and social security numbers of
students for filers claiming education deductions and credits.
Use Form 8917.
To get the latest credits available on hybrid cars, go to
www.fueleconomy.gov.
Pages 15 & 46 - Job Hunting Expenses
When hunting for a job in your current profession, you may
deduct travel expenses of airfare, lodging, auto expenses
including car rental and meals.
Page 15 - Loans
If your mortgage is discharged in 2007 due to insolvency, up to
$2 million can be excluded from income. The debt must be to
build, buy or improve your primary home.
Page 21 - Sources of Tax-Free Income
►
Income
Earned Overseas
More: The maximum amount for the foreign housing allowance
exclusion for 2007 is $11,998. Workers in high cost areas
receive an even larger exclusion. See Notice 2007-77
Page 30 - Non-reportable – Non-taxable Income
Cash rewards for credit card use.
Page 35 - Medical & Dental Deductions
In a private ruling, the IRS says diet foods and supplements are
not a medical expense and cannot be reimbursed by flexible
spending programs. Costs of weight-loss programs prescribed by a
physician to treat obesity or other illnesses are deductible.
Many diagnostic tests are deductible whether the taxpayer shows
symptoms or not (such as annual physicals, whole body scans).
Rev. Rul. 2007-72
Page 53 - Case Study
In our case study, the Alternative Minimum Tax (AMT) applied to
and seemed unfair to our family based on their income. Congress
recognized the unfairness that taxpayers, with middle incomes,
are now having to pay AMT, which was originally enacted to be
sure upper income taxpayers paid their fair share. As a result,
they repealed a portion of the law late in December. Our example
was run prior to this change in the law, therefore the AMT
calculation in the case study would probably have a different
outcome. Every taxpayer still must perform the AMT calculation
on their return and will pay the higher tax of either the AMT or
regular income tax.
FILING TIPS
File Form 4868 to obtain an automatic 6-month extension by April
15 but do not forget to pay the taxes you expect to owe at the
time you file your extension. Otherwise, you will be charged
interest plus a penalty of .5% per month on what you owe.
LOOKING AHEAD TO 2008
Standard mileage rate:
Business............................
50.5 cents per mile
Medical/Moving...................
19 cents per mile
Charitable..........................
14 cents per mile
Social Security Wage Base: $102,000
IRA and Roth IRA maximum contribution: $5,000 (50 and older add
additional $1,000)
