View Point
What you should know about taxes

By Dee Proffitt

This tax season has had some challenges put in our path. The Alternative Minimum Tax will apply to many middle-class taxpayers. Married couples making only $66,250 may owe this tax.

This really backfired on us because it was originally intended to make the very wealthy pay at least a minimum tax. So they had to figure tax on income without some of the preference items that most wealthy people use to avoid taxes. The only problem is that they have not revamped the rules and now you may be liable for this tax.

There have been some changes in the laws passed by Congress and there have also been new procedures put into effect to the IRS. All of these are retroactive to the beginning of 2007. A few of these are:

The credit card companies are now being asked to send the IRS information about customer’s purchases so the IRS can determine if people, especially self employed or cash businesses, are claiming their income. If they are spending, they must have income to claim.

The proof, or position, the taxpayer takes on a questionable item on their return has to be “more likely than not” that the IRS will agree with the taxpayer. It used to be “a one in three chance” that the IRS would agree with the taxpayer (to avoid penalties).

For 2007, taxpayers must have receipts or cancelled checks, or electronic proof for ALL contributions (money contributions). This means no Salvation Army kettle, no deduction for cash in church offering plate unless you use an envelope and get a statement from the church.

Registered domestic partners in California will be required to file as married although not allowed to do so for the Federal return.

There are 3 forms that will cause you to delay filing your return until February 11th. They are:

Form 8863 – education credits;

Form 5695 – energy credits;

Form 8396 – mortgage interest credit

This new delay makes us wonder what will happen when they are all sent in at the same time. Let’s hope the system can take it!

 

Dee Proffitt is an accountant and enrolled agent who works and lives in Claremont.