TAX TIPS and MORE
The information presented has been obtained from sources believed to be reliable, but it's accuracy and that of the opinions based thereon is not guaranteed. Any statements nonfactual in nature constitute current opinion and are subject to change. For specific "code" opinion you should consult your income tax and/or financial consultant.
FILING DATES
The President signed the AMT “patch” on December 26th. Tax payers who file five credit forms prior to February 11, 2008 will have their returns delayed. Electronic returns with these forms will not be accepted until the IRS system is updated in February. Paper filers should also wait to file. It is expected that it will take the IRS about seven weeks to update their system. The forms involved are:
Form 8863 Education Credits
Form 8683 Residential Energy Credits
Form 1040A Schedule 2 Child and Dependent Care Expenses
Form 8396 Mortgage Interest Credit
Form 8859 District of Columbia Home Buyer Credit
All returns must be postmarked by Midnight, Tuesday, April 15, 2008.
IRS TO ENFORCE DISCLOSURE RULINGS
IRS will now enforce disclosure rulings on any unreported income or deductions for which you do not have a cancelled check, charge statement or receipt, must have a signed disclosure statement (Form 8275) attached to your return. This includes all vehicle business mileage, other business expenses, plus personal medical and charitable deduction records. The IRS has increased their penalties in this area.
January 2008: OHIO MINIMUM WAGE GOES TO $ 7.00/HOUR
As of Jan. 1, 2008, the minimum wage in Ohio goes to $7.00 per hour. This is for all employers in the state of Ohio, except for the following:
Family members in a family owned business
Employees under the age of 16
Employers with annual receipts under $250,000.00
The record keeping will be very strict. each employer must keep the following information for each employee for the duration of employment plus 3 years after termination.
Name
Address
Occupation
Rate of pay
Hours worked for each day worked
Amount paid to an employee by each pay period
This information must be kept for all employees, including salary, executive, administrative and professional employees. This includes upper management and CEOs.
ALL EMPLOYERS, EVEN THOSE EMPLOYERS NOT REQUIRED TO PAY NEW MINIMUM WAGE, MUST KEEP THESE RECORDS.
This amendment also applies to out-of-state employers who employ individuals in Ohio.
Upon request, the employer must provide, without charge, all of the above required information to an employee or a person acting on behalf of the employee. It is not clear if a co-worker can get this information without authorization.
Tipped employees can be paid as low as $ 3.50 per hour if tips make up the difference to $ 7.00.
HOW TOUGH ARE THE ENFORCEMENT RULES FOR OHIO’S NEW MINIMUM WAGE LAW. SHARP TEETH TOUGH!
These records can be maintained by you or Dalton & Associates can do the work for you. Call Dalton & Associates for rates or to purchase forms to maintain these records.
VEHICLE CHARITABLE DEDUCTION HAS BEEN CLARIFIED AS FOLLOWS:
If the fair market value is between $1 and $249 it’s the amount within the range
If the value is between $250 and $500, the deduction is the lesser of the fair market value or $500
If the value is more than $500, the taxpayer’s charitable deduction is the sale proceeds reported on form 1098-c by the donee organization
If the value exceeds $5,000 an independent appraiser’s figure is the charitable deduction.
THIS IS EFFECTIVE FOR THE 2006 FILING YEAR.
NEW CASH CONTRIBUTION SUBSTANTIATION RULES: FOR YEARS BEGINNING AFTER 2006.
No deduction will be allowed for contributions of cash, checks or other monetary gifts, regardless of the amount, unless the donor maintains a bank record or a receipt, letter or other written communications for the donee, indicating the donee’s name, the contribution date and the amount. No more credit for cash given to Salvation Army’s bucket, cash placed in church basket or any other miscellaneous cash donations unless you get a receipt.
2007 TAX-EXEMPT ORGANIZATIONS UPDATE
Tax-exempt organizations with gross receipts of less than $25,000 are required to file an "annual notice" with basic contact information and financial information. This information is income and break-down of expenses and the officers of organization with social security numbers and addresses.
No penalties are imposed for failure to file this information, but revocation of exempt status is possible.
Effective date is for annual returns beginning after 2006, starting Jan. 1, 2007 and ending Dec. 3, 2007, with information being filed in 2008.
RESIDENTIAL ENERGY CREDIT
Residential Energy Credit improvements must be to an existing home that is owned and used as a principal residence. The lifetime maximum credit per taxpayer is $500 per dwelling. Qualified improvements include:
a. A new exterior window or skylight.( 10% credit up to $200)
b. Insulation or tyvek, etc. Drywall or siding does not qualify for the credit.(10% credit up to $300)
c. A main circulating fan.($50 credit limit)
d. A natural gas, propane or oil furnace or hot water boiler.($150 credit limit)
e. A central air conditioner, heat pump or water heater.($300 credit limit)
Example: In 2007 you install new windows for $3000 and spend $2500 on insulation. The credit calculation is: windows $300 ($3000 x 10%) and insulation $250 ($2500 x 10%). However, due to the specific limits, the eligible credit is only $450 ($200 for windows and $250 for insulation) not $5
The credit taken will reduce the dwelling basis.
KIDDIE TAX
The “kiddie” tax rules now apply to children under age 18. The old law was for children under 14. Children under age 18 who have investment income of more that $1700 are subject to tax at their parents’ rate and must file a Form 8615. An election is available to include a child’s investment income on the parents return for a child under 18, if the child’s gross income is less than $8500.
Beginning in 2008, the “Kiddie Tax” is extended to include children age 18, or who are full-time students age 19 -23, if their earned income is less than half the amount of their support.
STANDARD MILEAGE RATES
The standard mileage rate for the business use of a vehicle is 48 ½ cents per mile. In order to take this deduction you must have in writing the following information:
1. Total miles driven for year (log of daily miles).
2. Total business miles driven for year (log of daily miles).
3. Date vehicle placed into service.
4.
Basis or cost of vehicle
We “must” see all of the above data before we can do your tax return.
Note: The standard mileage rate for 2008 will be 50 ½ cents.
CAPITAL GAIN RATES
If you are in the 10% or 15% income tax brackets for the years 2008 through 2010 you will pay no tax on income from qualified dividends and the sale of stocks or bonds.