Phil's 2007 Tax Tips

• IRS ONLINE WITHHOLDING CALCULATOR:  Make sure you have your (& spouse's) most recent pay stub & most recent tax return available to help you complete information.  This calculator is especially helpful for two-income households to make sure they are getting the right withholdings taken from their pay.  Access IRS Withholding Calculator.

• USAGE OF AUTOMOBILE FOR BUSINESS:  Deductions are 48.5 cents per mile for mileage.  In 2008, it goes up to 50.5 cents.

• WORKING STUDENTS:  You are exempt from federal income withholdings and you can be claimed as a dependent by your parents IF:  total 2007 income will not be over $5,500 or your unearned income (interest, dividends, etc.) will not exceed $850 and you had no income tax liability for 2007.  If you paid social security & Medicare taxes (7.65% of earned income), this will not be refunded.  If you do have federal taxes taken out of your income for p/t, summer jobs, file your taxes to get a refund.  If no refund & made less than $5,000 with no interest or dividends, there's no need to file. If you are under 24 years old & a student, your parents can claim you no matter how much you earn.  But when student files, they CANNOT claim themselves.

• CHILD CARE & SUMMER DAY CAMP EXPENSES (child must be under 13 years old): The cost of child care creates a credit against any tax liability.  The credit ranges from 20% - 35% depending on your income.  The 35% rate applies if your Adjusted Gross Income (AGI) is under $15,000 & 20% if your AGI is over $43,000.  The maximum child care deduction is $3,000 for one child and $6,000 for two or more.  This will be multiplied by the rate (20% to 35%) resulting in your tax credit.  Under dependent care assistance plan where child care dollars are excluded from income, maximum is $5,000 for one child and $10,000 for two or more children. To get the deduction you must have the provider's SS# or EIN#. Without this, the exempt money will be taxed. Note:  If AGI is less than $15,000 use credit method.

• ADVICE TO NEWLYWEDS: Your marital status on December 31 determines whether you are considered married for that year.  If you change your name, let the Social Security Administration know your name change.  Use their SS-5 Form. Newlyweds may find that they  now have enough deductions to itemize on their taxes.  Amounts paid for medical care, mortgage interest, charitable contributions, casualty losses and certain miscellaneous costs can reduce your taxable income, lowering your tax.  Note:  If both are wage earners, lower your exemptions to single & zero, as the second salary is taxed at a higher rate.

• SELLING YOUR HOME: You may exclude up to $250,000 for single or $500,000 for married taxpayers filing jointly from your profit of the sale.  Your home must have been owned by you and used as your main residence for a period of at least two out of the last five years prior to its sale.  If you DO NOT meet the ownership and use tests, you may be allowed to use a reduced maximum exclusion amount if you sold your home due to health, a change in place of employment or unforeseen circumstances (includes divorce or disaster resulting in a casualty to your home). You may also claim 18 cents per mile moving mileage.

• HOMEOWNERS: making the January 2008 mortgage payment in December 2007 (early enough for the bank to get and record the payment in 2007) will save you about $500 in Federal income taxes.  Example:  if your mortgage interest is $2000 a month and you are in the 25% tax bracket, the savings in tax avoidance would be $500.

• CAPITAL LOSSES:  Have stocks that are losing money and you have not sold them yet?  Why not sell enough to record a $3,000 loss (max. allowed in one year, any amount greater becomes a carry over).  In a 25% tax bracket this equals $750 and would reduce your Adjusted Gross Income, which would lower your limitation for Misc. Deductions 2% and Medical 7.5%, giving you a greater Itemized Deduction amount.  If you don't want to sell any stocks because you feel that they will come back to the original prices, you can sell the stock to create your tax loss for the current year and buy the stocks back after 30 days giving you a lower base (purchase price) or you can buy the stock 30 days before you plan to sell.

• TRANSPORTATION AND/OR AUTO EXPENSES:  You can claim travel to and from your doctor, hospital, clients, specialist, drug store or for therapy is deductible at 18 cents per mile for travel for medical reasons.  Even if the specialist is 300 miles away, that airfare and hotel is deductible and if you had a minor child that required the specialist, the trip for the parent or any person over 21 that is escorting this minor child is deductible.

• OTHER THAN CASH CHARITY: If you have old clothes in good or very good condition, don't throw them out!  Note:  Used underwear is disallowed.  Bag them and call either the Salvation Army (click here for a location), St Mary's Church in Newark, NJ, Goodwill Industries (click here for a location) OR Vietnam Vets of American (1-800-775-VETS).  Any one of these groups have pick ups and will give you a receipt.  You must list and value the items.  Items can range from clothing, books, old computer equipment, household items and even an old car (that you couldn't get rid of). Values could go up to $4999 without a certified appraisal and can be listed on Form 8283.  This could amount to a substantial tax avoidance for you.  Of course, you must itemize your tax return to get this deduction.

• ESTIMATED STATE TAX PAYMENTS:  Making the last payment (due Jan 15, 2008) by December 2007 will make a deduction for 2007.

• MISCELLANEOUS DEDUCTIONS:  (total expenses must exceed 2% of your AGI) there are many expenses that are tax deductible that most taxpayers are not aware of.  Some of the are as follows:

• JOB HUNTING EXPENSES:  Even if you did not change your job, just looking for a better job or a career change is acceptable. Newspapers, phone calls for interviews, resume, meals while job hunting, travel locally or out of town.

  If you own stocks, bonds or have a savings account, you may deduct FINANCIAL NEWSPAPERS and MAGAZINES (anything that list interest rates, stock or bond prices)

  The hidden IRA FEES which are deducted from your IRA account balance are deductible items.  You must look at the detail statement of your IRA or call your IRA rep to find out what these fees are.

  Use of HOME OR CELLULAR PHONE for business (even if it is used to call the office to say you are going to be late or not in).  Calls to clients, potential clients, business associates, etc - all count.

  CHARITABLE WORK, like the use of your car (at 14 cents per mile) to help a senior citizen (not mom/dad or your old uncle) go to church, to vote or to visit the doctor.  Meals that you provided to a charity.  Supplies you purchased and used for charitable work; however, your personal labor is not deductible.  For Hurricane Katrina relief any charitable mileage is deductible at 32 cents per mile.

  FINANCIAL AND ESTATE PLANNING ADVICE preparing or renewing your will

  SAFETY DEPOSIT BOX charges are deductible.

  WORK CLOTHES includes WINTER & WETWEAR for outdoor workers (uniforms purchased, repaired and/or cleaned), tools purchased, repaired or sharpened that are used for your job are deductible.

  UNION DUES, ASSOCIATION FEES, MEMBERSHIP to any organization that helps you in job networking, work shops & seminars associated with your job.

  Trips to CONFERENCES, plus REGISTRATION FEES, overnight stays and meals are all deductible if the conference is related to your job or a charitable organization you are helping

  A HOME COMPUTER, plus Internet service, printer toner/ink, software, etc. is deductible for several reasons:  doing work at home, keeping client files, education for job improvement, making or updating your resume for job hunting, investment tracking, keeping your income tax records and/or doing your own tax return (but we hope you use The Tax Shoppe!)

  GIFTS TO FELLOW EMPLOYEES  (for birthdays, Christmas, marriage, promotion, retirement or just for doing a good job) are deductible (up to $25 per gift) to as many employees you give to, and multiple gifts are allowed (more than one gift per person.)

  GIFTS TO CLIENTS (not counting BUSINESS MEALS where only 50% of total is deductible): Inviting clients or employees to your home for a party or get together is deductible (Be careful not to be too expensive).

• RESIDENTIAL ENERGY CREDITS:  Tax credits to homeowners for improvements to an existing residence (not a new home) are as follows:

            Energy efficient windows will get you a $200 tax credit (this is for 1 or 100 windows). 

            New roof, furnace, solar energy will get you up to a $2,000 credit

            Doors &  air conditioners (limited to $300 tax credit)

            Water heater or any other energy efficient improvement qualifies for a $500 credit. 

            Form 5695 is used to claim these credits.  It must be an improvement to an existing residence.  It cannot be taken on new homes.

There are many more deductible expenses that the average person is not aware of.  That is why 90 million taxpayers have their returns prepared professionally.

Give us the opportunity to help you.  We will, in almost 100% of the cases, save you more than enough money to cover the cost and put some dollars in your pocket or reduce the taxes you may owe.