As the year draws to a close, tax season is not too far away. There are three interesting changes that you may want to plan
for when considering your 2006 return.
Multiple direct deposits
Now, you can split your refund between three accounts, including individual retirement accounts (IRAs). Contributions for
a traditional IRA are normally deductible if the deposit is made by the due date of the return (April 16 in 2007). However,
the trustee of the IRA needs to be aware that the direct deposit of your refund will be applied to 2006 IRA contributions.
Otherwise, it will be applied to 2007 and can limit the deductibility of any 2007 contributions you make. Also, if your refund
is adjusted due to garnishments, math errors, or other reasons, you may have to amend your tax return showing the reduced
IRA contributions.
Long distance excise tax refundsIn 1898, to finance the Spanish-American War, the federal government levied a three percent excise tax on long distance charges,
targeting wealthy individuals who had such a service. That tax no longer exists, and the Internal Revenue Service (IRS) is
issuing refunds for the last 3 years. To reduce the paperwork, IRS has established standard refund amounts based on average
household use. For a single filer claiming one exemption, that amounts to an additional $30 reduction in taxes. You have a
right to send in the last 3 years of phone receipts and claim more in terms of a refund, but the time and effort likely will
only pay off in extreme cases.
Higher fees for installment agreement
If you owe at the end of the year, the privilege of paying IRS in installments may become more expensive. Proposed regulations
increase the fee for initial requests to $105 from the current $43 (with the amount cut in half for those who agree to a direct
withdraw) and the cost of restructuring a current agreement from $24 to $45.
Any tax advice contained is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding
penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.
