Help With Your Federal Income Tax, Articles and stories related to the IRS, taxes, tax credits, EITC and tax deductions and updated tax news

Friday, September 28, 2007

New Online Employer Identification Number Application Processes Requests in Minutes

IR-2007-161, Sept. 25, 2007

WASHINGTON — Taxpayers can now request an Employer Identification Number (EIN) through a Web-based system that instantly processes requests and generates identification numbers in real time, the Internal Revenue Service announced today.

"This new and improved online application will reduce the time it takes taxpayers to get an EIN," said Richard Morgante, Commissioner of the IRS Wage & Investment Division. "Essentially they can get one while they wait –– within minutes."

Here's how it works. A taxpayer accesses the Internet EIN system through IRS.gov and enters the required information. If the information passes the automatic validity checks, the IRS issues a permanent EIN to the taxpayer. If the information does not pass the validity checks, it is rejected. The taxpayer then has an opportunity to correct the information and resubmit the application.

http://www.irs.gov/newsroom/article/0,,id=174316,00.html


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Thursday, September 27, 2007

Where to Find a Tax Attorney

Here are some links to sites where you can find a tax attorney in your area should you need one. Hopefully you never will.

http://attorneypages.com/586/index.htm

http://lawyers.findlaw.com/lawyer/practice/Taxation-Law

http://www.taxdeal.com/

Tuesday, September 25, 2007

The Sale of Your Main Home

Selling Your Main Home

This explains the term “main home.” Usually, the home you live in most of the time is your main home and can be a house, houseboat, mobile home, cooperative apartment or condominium.

To exclude gain under the rules, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale.


If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land.

If you have more than one home, you can exclude gain only from the sale of your main home. You must include in income gain from the sale of any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Figuring Gain or Loss

To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Subtract the adjusted basis from the amount realized to get your gain or loss. You may be able to exclude up to $250,000 of the gain from your income, or up to $500,000 if you file Married Filing Jointly. A loss from the sale of your main home is not tax deductible because it is personal use property. The closing real estate agent should provide you and the IRS with Form 1099-S, Proceeds From Real Estate Transactions, and the total amount received should be shown in Box 2.


Selling Price


The selling price is the total amount you receive for your home. It includes money, all notes, mortgages, or other debts assumed by the buyer as part of the sale, and the fair market value of any other property or any services you receive.
The selling price of your home does not include amounts you received for personal property sold with your home. Personal property is property that is not a permanent part of the home. Examples are furniture, draperies, and lawn equipment. Separately stated amounts you received for these items should not be shown on Form 1099-S. Any gains from sales of personal property must be included in your income. The capital gains and losses are reported on Schedule D. The Schedule D instructions explain how to report transactions from Form 1099-S

The amount realized when selling your main home is the selling price minus selling expenses. These include commissions, advertising fees, legal fees and loan charges, such as points or loan placement fees. If the amount realized is more than the adjusted basis, the difference, minus any part that is excludable, is generally a taxable gain. If not, the difference is a loss and cannot be deducted.

Basis in a Home

The basis in a home is determined by how the home was acquired. If the home is is built or bought, the basis is the cost of the home. If your home was acquired another way, such as a gift or inheritance, the basis is either the Fair Market Value(FMV) when you got it or the previous owners adjusted basis.

Adjusted Basis of a Home

While you own your home, you made need to make adjustments to the basis, either increases or decreases. This must be determined before you can calculate the gain or loss when you sell your home.

Increases include additions and other improvements that have a useful life of more than a year, special assessments for local improvements, and amounts spent after a casualty to restore damaged property.

Decreases include gain that was postponed from the sale of a previous home before May 7, 1997, deductible casualty losses, insurance payments received or expected for casualty losses, and payments received for granting a right-of-way or easement.

Improvements add to the value of a home, prolong its useful life, or adapt it to new uses. Examples of improvements include adding a bathroom in a unfinished basement, constructing a new fence, adding new plumbing or wiring, and replacing a roof. Theses improvements are added to the basis or your home.

Repairs maintain a home but do not add value or prolong its life. Repairs include painting inside or out, fixing gutters, floors or broken windows, and repairing leaks. You do not add these to the cost basis of your home.

As always, it is very important to keep accurate records for everything related to your home.

For more detailed information, refer to IRS Publication 523 Selling Your Home

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Special Web Section Unveiled for Homeowners Who Lose Homes; Foreclosure Tax Relief Available to Many

R-2007-159, Sept. 17, 2007

WASHINGTON — The Internal Revenue Service unveiled a special new section today on IRS.gov for people who have lost their homes due to foreclosure. The IRS also reassured homeowners that, although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.

The new section of IRS.gov includes a variety of information, including a worksheet designed to help borrowers determine whether any of the foreclosure-related relief provisions apply to them. For those taxpayers who find they owe additional tax, it also includes a form they can use to request a payment agreement with the IRS. . In some cases, eligible taxpayers may qualify to settle their tax debt for less than the full amount due using an offer-in-compromise.

The IRS urges struggling homeowners to consider their options carefully before giving up their homes through foreclosure.

Under the tax law, if the debt wiped out through foreclosure exceeds the value of the property, the difference is normally taxable income. But a special rule allows insolvent borrowers to offset that income to the extent their liabilities exceed their assets.

The IRS cautions that under the law, relief may be limited or unavailable in some situations where, for example, part or all of a home was ever used for business or rented out.

Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. By law, this form must show the amount of debt forgiven and the fair market value of property given up through foreclosure. Though the winning bid at a foreclosure auction is normally a property’s fair market value, it may not necessarily reflect its true value in some cases.

Read The Rest Here

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Friday, September 14, 2007

Judge denies Snipes' requests

By KEVIN GRAHAM, Times Staff Writer
Published September 14, 2007




OCALA - A federal judge has denied actor Wesley Snipes' request to move his tax fraud trial from Ocala to New York City.

Senior U.S. District Judge William Terrell Hodges also denied Snipes' requests to have his trial separate from two co-defendants.

Prosecutors say Snipes tried to defraud the government of more than $11-million in income taxes. He has pleaded not guilty.

Hodges, who presides over cases at the federal courthouse in Ocala, issued his ruling last week.

Snipes says in court papers that it would be easier for his attorneys in Atlanta and Miami to fly to New York for court proceedings than a courthouse in Ocala.



Read The Rest

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Wednesday, September 12, 2007

Back To School Tax Breaks For Teachers, Parents and Students

IR-2007-158, Sept. 11, 2007

WASHINGTON — With the new school year now under way, the Internal Revenue Service today reminded teachers, parents and students that saving receipts and keeping good records can help them take advantage of various education-related deductions and credits on their 2007 federal income tax return.

“The start of the school year is a good time to remind parents, students and teachers to save all receipts related to tax-advantaged education expenses,” said IRS Acting Commissioner Linda Stiff. “Good recordkeeping makes sense because it can help avoid missing a deduction or credit at tax time.”

Deductions reduce the income on which tax is figured. Credits reduce the overall tax. Though both can lower a person’s year-end tax bill or increase their refund, credits normally result in greater tax savings.

The educator expense deduction allows teachers and other educators to deduct the cost of books, supplies, equipment and software used in the classroom. Eligible educators include those who work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide in a public or private elementary or secondary school.

Worth up to $250, the educator expense deduction is available, whether or not the educator itemizes their deductions on Schedule A. In tax-year 2005, teachers and educators deducted just over $893 million of these out-of-pocket classroom expenses. Under current law, this deduction is scheduled to expire at the end of this year.

Three key tax breaks — the tuition and fees deduction, the Hope credit and the lifetime learning credit — help parents and students pay for the cost of post-secondary education. All three are available, regardless of whether an eligible taxpayer itemizes their deductions. Under current law, the tuition and fees deduction is scheduled to expire at the end of this year, but the two credits remain in effect. In tax-year 2005, taxpayers claimed tuition and fees deductions totaling nearly $11 billion and education credits of almost $6.2 billion.

Read The Rest

Wednesday, September 5, 2007

What is Your Filing Status?

Generally, your marital status on the last day of the year determines your status for the entire year.

If you are unmarried, or if you are legally separated from your spouse under a divorce or separate maintenance decree according to your state law, and you do not qualify for another filing status, your filing status is single.

Generally, to qualify for head of household status, you must be unmarried and you must have paid more than half the cost of maintaining as your home a household that was the main home for a qualifying person for more than half the year. You may also qualify for head of household status if you, though married, file a separate return, your spouse was not a member of your household during the last six months of the tax year, and you provided more than half the cost of maintaining as your home a household that was the main home for more than one half of your tax year of a qualifying person.

If you are married, you and your spouse may file a joint return or separate returns. If your spouse died and you did not remarry in the year that your spouse died, you may still file a joint return for that year. This is the last year for which you may file a joint return with that spouse.

You may be able to file as a qualifying widow or widower for the two years following the year your spouse died. To do this, you must meet all four of the following tests:

1. You were entitled to file a joint return with your spouse for the year he or she died. It does not matter whether you actually filed a joint return,
2. You did not remarry in the two years following the year your spouse died,
3. You have a child, stepchild, or adopted child (a foster child does not meet this requirement) for whom you can claim a dependency exemption, and
4. You paid more than half the cost of maintaining a household that was the main home for you and that child, for the whole year.

After the two years following the year in which your spouse died, you may qualify for head of household status.

If you are married filing a separate return and your spouse itemizes deductions, or if you are a dual-status alien, you cannot take the standard deduction even if you were born before January 2, 1943, or you are blind.


The standard deductions for 2007 have increased slightly over 2006.

If you file Single or Married Filing Separately(MFS), your deduction is $5,350.

If you file Married Filing Jointly(MFJ), your deduction is $10,700

If you file Head of Household, your deduction is $7,850.

If you were born before January 2, 1943, or you are blind, the standard deductions are slightly higher.



One last thought, and I cannot stress this enough, the vast majority of the time it is to your advantage to file MFJ instead of MFS, even if one spouse does not have any income. If MFS gives you the best benefit, then by all means use that filing status. Chances are though, MFJ will give you the best benefit.

Tuesday, September 4, 2007

Tax Law Changes For 2007

Here are some of the tax law changes for 2007. I'm sure there are more changes that will happen in the coming months, and I will keep you informed.


Adoption

Adoption credit. Beginning in 2007, the credit allowed for an adoption of a child with special needs is $11,390 and the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $11,390. The credit begins to phase out if you have modified adjusted gross income of $170,820 or more and is completely phased out if you have modified adjusted gross income of $210,820 or more.

Adoption assistance program. Beginning in 2007, you may be able to exclude up to $11,390 from your gross income for qualified adoption expenses paid or incurred by your employer under a qualified adoption assistance program in connection with your adoption of an eligible child. This income exclusion starts to phase out if your modified adjusted gross income is $170,820 or more and is completely phased out if your modified adjusted gross income is $210,820 or more.


Alternative Minimum Tax


The following changes to the AMT went into effect for 2007.

AMT exemption amount decreased. The AMT exemption amount has decreased to $33,750 ($45,000 if married filing jointly or qualifying widow(er); $22,500 if married filing separately).

Exemption amount for a child. The minimum exemption amount for a child under age 18 has increased to $6,300.

Hurricane Katrina additional exemption expired. The additional exemption for taxpayers who provide housing for a person displaced by Hurricane Katrina has expired. Therefore, the additional exemption amount (formerly line 6 of Form 8914) is no longer allowable for the AMT.

Certain credits no longer allowed against the AMT. The credit for child and dependent care expenses, credit for the elderly or the disabled, education credits, residential energy credits, mortgage interest credit, and the District of Columbia first-time homebuyer credit are no longer allowed against the AMT, and a new tax liability limit applies. This limit is your regular tax minus any tentative minimum tax,figured without any AMT foreign tax credit.

Archer MSA Limits Increased

For Archer MSA purposes for 2007, the minimum annual deductible of a high deductible health plan increases to $1,900 ($3,750 for family coverage). The maximum annual deductible of a high deductible health plan increases to $2,850 ($5,650 for family coverage). The maximum out-of-pocket expenses limit increases to $3,750 ($6,900 for family coverage).


Capital Asset Treatment for Self-Created Musical Works


Musical compositions and copyrights in musical works are generally not capital assets. However, you can elect to treat these types of property as capital assets if you sell or exchange them in tax years beginning after May 17, 2006, and:

* Your personal efforts created the property, or
* You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced.


Charitable Contributions


New recordkeeping requirements for cash contributions. You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written communication from the charity. The written communication must include the name of the charity, date of the contribution, and amount of the contribution. For more information, see Publication 526, Charitable Contributions.

Contributions to donor advised funds. You cannot deduct a contribution to a donor advised fund after February 13, 2007, if the sponsoring organization is a war veterans' organization, a fraternal society, or a nonprofit cemetery company. There are also other circumstances in which you cannot deduct your contribution to a donor advised fund. Generally, a donor advised fund is a fund or account in which a donor can, because of being a donor, advise the fund how to distribute or invest amounts held in the fund. For details, see Internal Revenue Code section 170(f)(18).

Filing fee for easements on buildings in historic districts. A new $500 filing fee must be paid for each qualified conservation contribution after February 12, 2007, that is an easement on a building in a registered historic district, if the claimed deduction is more than $10,000. See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13).


Credit for Prior Year Minimum Tax


If you have any unused minimum tax credit carryforward from 2003 or earlier years, your minimum tax credit allowable for 2007 is not less than the "AMT refundable credit amount." In addition, a portion of the credit may be refundable in 2007. That means, if the refundable part of the credit is more than your tax, you can get a refund of the difference.

To figure the refundable amount of your minimum tax credit, and the AMT refundable credit amount, apply the rules that follow under Long-term unused minimum tax credit, AMT refundable credit amount, and Credit refundable.

Long-term unused minimum tax credit. To figure the refundable amount of your minimum tax credit, you must first determine whether you have any "long-term unused minimum tax credit." Your long-term unused minimum tax credit is the amount of your minimum tax credit carryforward from 2003 (2003 Form 8801, line 26), reduced by the amount of any minimum tax credits you claimed for 2004, 2005, and 2006 (line 25 of your 2004, 2005, and 2006 Forms 8801).

AMT refundable credit amount. After you figure your long-term unused minimum tax credit, you then must figure your "AMT refundable credit amount." Your AMT refundable credit amount is the greater of:

* 20% (.20) of your long-term unused minimum tax credit, or
* The lesser of:
o $5,000, or
o Your long-term unused minimum tax credit.

The AMT refundable credit amount is reduced if your adjusted gross income (AGI) exceeds certain threshold amounts based on your filing status. The AGI threshold amounts for 2007 are in the table that follows.

Your AMT refundable credit amount is reduced by 2% (.02) for every $2,500 ($1,250 if your filing status is married filing separately) that your AGI exceeds the threshold amount. Use your 2006 tax return and AGI (2006 Forms 1040, line 38, and 1040NR, line 36) as a guide in estimating your 2007 AGI.

If you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must refigure your AGI by adding back any foreign earned income and housing exclusion (2006 Form 2555, line 45, or 2006 Form 2555-EZ, line 18), foreign housing deduction (2006 Form 2555, line 50), income from American Samoa that you are excluding (2006 Form 4563, line 15), and income from Puerto Rico that you are excluding.

For 2007, the AMT refundable credit amount is reduced if your AGI is more than the applicable amount in the second column of the following table and is eliminated if your AGI is more than the applicable amount in the third column.

Filing Status:

AGI That Reduces Credit

AGI That Eliminates Credit

Single

$156,400

$278,900

Married filing jointly or qualifying widow(er)

$234,600

$357,100

Married filing separately

$117,300

$178,550

Head of household

$195,500

$318,000




Credit refundable. The refundable amount of your credit is the amount by which your minimum tax credit for the year exceeds the amount your minimum tax credit would be without regard to the above rules.

Form 8801. To claim the refundable and nonrefundable parts of this credit, use the 2007 Form 8801, Credit for Prior Year Minimum Tax--Individuals, Estates, and Trusts.


District of Columbia First-Time Homebuyer Credit Extended


The credit for the first-time purchase of a home in the District of Columbia was extended through 2007. To claim this credit, use Form 8859.


Earned Income Amount for Additional Child Tax Credit


For 2007, the minimum earned income amount used to figure the additional child tax credit has increased to $11,750.


Earned Income Credit Amounts Increase


Amount of credit increased. The maximum amount of the credit has increased. The most you can get is:

* $2,853 if you have one qualifying child,
* $4,716 if you have more than one qualifying child, or
* $428 if you do not have a qualifying child.

Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2007. You may be able to take the credit if:

* You have more than one qualifying child and you earn less than $37,783 ($39,783 if married filing jointly),
* You have one qualifying child and you earn less than $33,241 ($35,241 if married filing jointly), or
* You do not have a qualifying child and you earn less than $12,590 ($14,590 if married filing jointly).

The maximum amount of adjusted gross income (AGI) you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.

Investment income amount increased. The maximum amount of investment income you can have and still get the credit has increased to $2,900 for 2007.

Advance payment of the credit. If you get advance payments of the credit from your employer with your pay, the total advance payments you get during 2007 can be as much as $1,712.

Nontaxable combat pay election extended. You can elect to have your nontaxable combat pay included in earned income when you figure your earned income credit for 2007. This election was previously due to expire at the end of 2006 but has been extended through 2007. For more information about the election, see Publication 596.

Income Limits Increased for Reduction of Education Savings Bond Exclusion

For 2007, the amount of your interest exclusion is phased out (gradually reduced) if your filing status is married filing jointly or qualifying widow(er) and your modified adjusted gross income (MAGI) is between $98,400 and $128,400. You cannot take the deduction if your MAGI is $128,400 or more. For 2006, the exclusion phased out between $94,700 and $124,700.

For all other filing statuses, your interest exclusion is phased out if your MAGI is between $65,600 and $80,600. You cannot take a deduction if your MAGI is $80,600 or more. For 2006, the exclusion phased out between $63,100 and $78,100. For more information, see chapter 9 in Publication 970, Tax Benefits for Education.


Expired Tax Benefits


The following tax benefits have expired and will not apply for 2007.

Relief granted for Hurricanes Katrina, Rita, and Wilma.

*
Tax-favored treatment of qualified hurricane distributions from eligible retirement plans.
*
Increased limits and delayed repayment on loans from qualified employer plans.
*
Special rules so a temporary relocation did not affect whether you provided more than half of an individual's support, whether you furnished more than half the cost of keeping up a household, and whether you could treat an individual as a student.
*
Increased limits and an expanded definition of qualified education expenses for the Hope and lifetime learning credits.
*
Additional exemption for housing individuals displaced by Hurricane Katrina.
*
Exclusion from income for discharge of nonbusiness debt by reason of Hurricane Katrina.

Qualified electric vehicle credit. You cannot claim this credit for any vehicle you placed in service after 2006.

Health Savings Accounts (HSAs)

High deductible health plan. (HDHP) For HSA purposes, the minimum annual deductible of an HDHP increases to $1,100 ($2,200 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,500 ($11,000 for family coverage).

Deductible limitation on contributions. The annual deductible limitation for contributions to your HSA based on the amount of your health insurance deductible is repealed. For 2007, the maximum HSA deduction increases to $2,850 ($5,650 for family coverage) regardless of the amount of your health insurance deductible. The maximum additional deduction for individuals age 55 or older increases to $800.

Deductible contributions for part-year coverage. For HSA purposes, you can be treated as an eligible individual for each month in your tax year if you are an eligible individual during the last month of your tax year. This applies to each month for which you would not otherwise qualify as an eligible individual. For these months, you are treated as enrolled in the same HDHP that you were enrolled in for the last month of your tax year. However, if you are not an eligible individual, for any reason other than death or becoming disabled, for the 12 months following the end of your tax year, any contribution attributable to these months is included in your income and is subject to an additional 10% tax. The income and additional 10% tax are reported for the tax year in which you cease to be an eligible individual.

Transfers from a health reimbursement arrangement (HRA) or health flexible spending arrangement (FSA) to an HSA. Your employer can make a one-time direct transfer of the balance in your HRA or health FSA to your HSA without violating the requirements for those arrangements. The maximum allowable transfer is the lesser of the HRA or health FSA balance on September 21, 2006, or on the date of transfer.

The amount transferred is not included in your gross income, is not taken into account in applying the HSA contribution limitation, and is not deductible. However, if you are not an eligible individual, for any reason other than death or becoming disabled, for the 12 months following the month of the transfer, the amount transferred is included in your income and is subject to an additional 10% tax. The income and additional 10% tax are reported for the tax year in which you cease to be an eligible individual.

If the employer makes a transfer available to any employee, all employees who are covered under an HDHP of the employer must be allowed to make a transfer. Otherwise, the employer is subject to an excise tax.

Generally, you are not an eligible individual for an HSA if you have health coverage other than an HDHP. For tax years beginning after 2006, coverage under a health FSA for the period immediately following the health FSA's plan year during which unused benefits or contributions remaining at the end of the year may be paid or reimbursed to you for qualified expenses incurred during that period does not disqualify you from being an eligible individual. The coverage does not disqualify you if the balance in the health FSA at the end of the plan year is zero or the entire remaining balance in the health FSA is transferred to your HSA as described above.

Comparable contributions by an employer. An employer that makes contributions to the HSAs of employees must make comparable contributions to all comparable participating employees' HSAs. For tax years beginning after 2006, for purposes of making contributions to the HSA of an employee who is not highly compensated, a comparable participating employee does not include a highly compensated employee.

Income Limits Increased for Hope and Lifetime Learning Credits

For 2007, the amount of your Hope or lifetime learning credit is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $47,000 and $57,000 ($94,000 and $114,000 if you file a joint return). You cannot claim an education credit if your MAGI is $57,000 or more ($114,000 or more if you file a joint return). This is an increase from the 2006 limits of $45,000 and $55,000 ($90,000 and $110,000 if filing a joint return). For more information, see chapters 2 and 3 in Publication 970, Tax Benefits for Education.

Increase in Limit on Long-Term Care and Accelerated Death Benefits Exclusion

The limit on the exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract increases for 2007 to $260 per day. The limit applies to the total of these payments and any accelerated death benefits made on a per diem or other periodic basis under a life insurance contract because the insured is chronically ill.

Under this limit, the excludable amount for any period is figured by subtracting any reimbursement received (through insurance or otherwise) for the cost of qualified long-term care services during the period from the larger of the following amounts.

* The cost of qualified long-term care services during the period.
* The dollar amount for the period ($260 per day for any period in 2007).

Medicare Part D Premiums Deductible as Medical Expenses

Medicare Part D is a voluntary prescription drug insurance program for persons with Medicare A or B. You can include as a medical expense premiums you pay for Medicare D.

Mortgage Insurance Premiums Treated as Home Mortgage Interest

Premiums that you pay or accrue for "qualified mortgage insurance" during 2007 in connection with home acquisition debt on your qualified home are deductible as home mortgage interest. The amount you can deduct is reduced by 10% (.10) for every $1,000 ($500 if your filing status is married filing separately) by which your adjusted gross income exceeds $100,000 ($50,000 if your filing status is married filing separately).

For the definitions of home acquisition debt and qualified home, see Publication 936, Home Mortgage Interest Deduction.

Qualified mortgage insurance. Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006).

Special rules for prepaid mortgage insurance. If you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the taxable year, such premiums are treated as paid in the period to which they are allocated. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term (except in the case of qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Administration).

Schedule A (Form 1040). You can deduct mortgage insurance premiums you paid or accrued during 2007 on Line 13 of the 2007 Schedule A (Form 1040).

Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as home mortgage interest.

Mortgage insurance premiums you paid or accrued after December 31, 2007, or that are properly allocable to any period after December 31, 2007, are not deductible as home mortgage interest.

Social Security and Medicare Taxes

The maximum amount of wages subject to the social security tax for 2007 is $97,500. There is no limit on the amount of wages subject to the Medicare tax.

Standard Mileage Rates

Business-related mileage. For 2007, the standard mileage rate for the cost of operating your car for business use is 48 ½ cents per mile.

Car expenses and use of the standard mileage rate are explained in chapter 4 of Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Medical- and move-related mileage. For 2007, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is 20 cents per mile. See Transportation under What Medical Expenses Are Includable in Publication 502 or Travel by car under Deductible Moving Expenses in Publication 521.

Charitable-related mileage. For 2007, the standard mileage rate for the cost of operating your car for charitable purposes remains 14 cents per mile.

Whistleblower Fees

If you receive an award from the IRS for information provided after December 19, 2006, that substantially contributes to the detection of violations of tax laws by the IRS, you may be able to deduct attorney fees and court costs paid by you in connection with the award, up to the amount of the award includible in your gross income on account of the award, as an adjustment to income.

Saturday, September 1, 2007

IRS E-mail Phishing Scam

This is another phishing scam to beware of.

Updated Aug. 24, 2007 — The Internal Revenue Service today warned taxpayers of a new phishing scam, in which an e-mail purporting to come from the IRS advises taxpayers they can receive $80 by filling out an online customer satisfaction survey. The IRS urges taxpayers to ignore this solicitation and not provide any requested information. The IRS does not initiate contact with taxpayers through e-mail.

Updated June 19, 2007 — In another recent scam, consumers have received a "Tax Avoidance Investigation" e-mail claiming to come from the IRS' "Fraud Department" in which the recipient is asked to complete an "investigation form," for which there is a link contained in the e-mail, because of possible fraud that the recipient committed. It is believed that clicking on the link may activate a Trojan Horse.

IR-2007-109, May 31, 2007

WASHINGTON — The Internal Revenue Service today alerted taxpayers to the latest versions of an e-mail scam intended to fool people into believing they are under investigation by the agency’s Criminal Investigation division.

The e-mail purporting to be from IRS Criminal Investigation falsely states that the person is under a criminal probe for submitting a false tax return to the California Franchise Tax Board. The e-mail seeks to entice people to click on a link or open an attachment to learn more information about the complaint against them. The IRS warned people that the e-mail link and attachment is a Trojan Horse that can take over the person’s computer hard drive and allow someone to have remote access to the computer.

The IRS urged people not to click the link in the e-mail or open the attachment.
Similar e-mail variations suggest a customer has filed a complaint against a company and the IRS can act as an arbitrator. The latest versions appear aimed at business taxpayers as well as individual taxpayers.

The IRS does not send out unsolicited e-mails or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

Read The Rest

I've noticed I'm getting more of these in one of my e-mail accounts, usually 2-3 a day. Do not open any e-mails from people you do not know.