2008 Auto Depreciation Limits 

The IRS has released the inflation-adjusted depreciation limits for business autos, light trucks, and vans placed in service in 2008.  The only change are minor, except for the 50% bonus election for qualifying autos .  Please see the updated table in our Resources - Helpful Tables section.

IRS Announces Interest Rate for Calendar Quarters Beginning April 1, 2008

The IRS has announced that the interest rates for tax overpayments and underpayments for the calendar quarter beginning April 1, 2008 will decrease to 6% (from 7%).

Economic Stimulus Act of 2008 - IRS Will Send Stimulus Payments Automatically Starting in May; Eligible Taxpayers Must File a 2007 Tax Return to Receive Rebate 

The Internal Revenue Service on February 13 advised taxpayers that in most cases they will not have to do anything extra this year to get the economic stimulus payments beginning in May.  The Act was signed into law on February 13.  

“If you are eligible for a payment, all you have to do is file a 2007 tax return and the IRS will do the rest,” said Acting IRS Commissioner Linda Stiff.

The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payments.

The IRS will begin sending taxpayers their payments in early May after the current tax season concludes. Payments to more than 130 million taxpayers will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future.

Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.

Most taxpayers just need to file a 2007 tax return as usual. No other action, extra form or call is necessary. This Web site will be the best information source for all updates and taxpayer questions.

In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return).

The law also allows for payments for select taxpayers who have no tax liability, such as low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income.

Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. While these people may not be normally required to file a tax return because they do not meet the filing requirement, the IRS emphasizes they must file a 2007 return in order to receive a payment.

Recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X. The IRS is working with the Social Security Administration and Department of Veterans Affairs to ensure that recipients are aware of this issue.

“Some people receiving Social Security and veterans’ benefits may not realize they will need to file a tax return to get the stimulus payment,” Stiff said. “To reach these people, the IRS and Treasury will work closely with the Department of Veterans Affairs, the Social Security Administration and key beneficiary groups on outreach efforts.”

Eligible taxpayers who qualify for a payment will receive an additional $300 for each child who qualifies for the child tax credit.

Payments to higher income taxpayers will be reduced by 5 percent of the amount of adjusted gross income above $75,000 for individuals and $150,000 for those filing jointly.

Taxpayers must have valid Social Security Numbers to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. And, children must have valid Social Security Numbers to be eligible as qualifying children.

Taxpayers who file their tax returns using an Individual Taxpayer Identification Number issued by the IRS or any number issued by the IRS are ineligible. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS.

To accommodate taxpayers who file tax returns later in the year, the IRS will continue sending payments until December 31, 2008. The IRS also cautions taxpayers that if they file their 2007 tax return and then move their residence that they should file a change of address card with the U.S. Postal Service.

The IRS will mail two informational notices to taxpayers advising them of the stimulus payments. However, taxpayers should be alert for tax rebate scams such as telephone calls or e-mails claiming to be from the IRS and asking for sensitive financial information. The IRS will not call or e-mail taxpayers about these payments nor will it ask for financial information. Scam e-mails and information about scam calls should be forwarded to phishing@irs.gov.

Business incentives included in the Act:

Section 179 expensing for businesses will also be increased beginning 2008 to $250,000 with an overall investment limit increase to $800,000.   

A "bonus" depreciation of 50% of qualified property placed in 2008 is also now available for both regular and alternative minimum tax purposes.  Qualified property includes property with recovery periods of 20 year or less, non-custom-made computer software, and qualified leasehold improvement property.  The original use must begin with the taxpayer.

IRS Check Cashing

  Social Security 1099 for 2007

If you have already received your 1099 from the Social Security Administration, check the form carefully and do not be surprised if you receive another one.

          Alternative Motor Vehicle Credit 2008 -  GM                                                                                                               

The Internal Revenue Service has certified five 2008 model year General Motors Corp. vehicles as meeting the requirements of the Alternative Motor Vehicle Credit for qualified hybrid motor vehicles. The credit amount for each vehicle is:
--Chevrolet Tahoe Hybrid (2WD) --$2,200;
--Chevrolet Tahoe Hybrid (4WD) --$2,200;
--GMC Yukon Hybrid (2WD) --$2,200;
--GMC Yukon Hybrid (4WD) --$2,200; and
--Saturn Vue Green Line --$1,550
This brings the total number of GM certified hybrid vehicles for the 2008 model year to seven. The Chevrolet Malibu Hybrid ($1,300.00) and the Saturn Aura Hybrid ($1,300.00) were previously certified.

Alternative Minimum Tax (AMT) Patch Legislation Signed into Law

On December 26, 2007, President Bush signed a one-year extension of the AMT patch, effective retroactively to January 1, 2007.  This is the legislation we have been waiting for, because without the patch, it was predicted that an estimated 25 million taxpayers would pay an average of $2,000 more in taxes for 2007.

2008 Mileage Rates

Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

• 50.5 cents per mile for business miles driven;
• 19 cents per mile driven for medical or moving purposes; and
• 14 cents per mile driven in service of charitable organizations.

Email Scams

IRS Announces Pension Plan Limitations for 2008

The defined contribution plan limit (profit-sharing plans, SEP-IRA) will increase to $46,000 with the annual compensation limit increasing to $230,000.  Please see our updated Helpful Tables for more information.

  Social Security Announces 2.3 % Benefit Increase for 2008

Monthly benefits for social security recipients will increase 2.3% in 2008.  Based on that increase, the maximum amount of earnings subject to the social security tax will increase to $102,000.  Please see our Helpful Tables section of this website.

Small Business & Work Opportunity Tax Act

The President signed on May 25, 2007 the Iraq emergency supplemental appropriations bill which included the Small Business & Work Opportunity Tax Act.  The tax part of the bill contained the increase of the popular section 179 expensing limits.  Please see the updated table in our Helpful Tables.  Also in the bill was another extension to the kiddie tax.  Effective for tax years beginning after the date of enactment (this means that 2007 will still be taxed under the old rules), the tax is extended to all children age 18 or under (formerly 17 or under) and students who are 18 or over but under 23 and who have earned income which does not exceed 1/2 of the child's support for the year.  

Social Security Projection

The Social Security Administration's Office of the Chief Actuary (OCA) is projecting that the Social Security wage base will increase to $102,300 in 2008, and will reach $141,900 by 2016. The projections were included as part of the annual report to Congress by the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Fund programs.

Actual annual increases in the wage base are announced in October of the preceding year and are based on then-current economic conditions. As a result, the OCA's forecasts, especially the longer-range ones, are subject to change. Last year's actuarial estimate of $98,400 for the 2007 Social Security wage base was $900 greater than the actual amount of $97,500. The SSA forecasts through 2016 are as follows:

• 2008 — $102,300
• 2009 — $106,800
• 2010 — $111,600
• 2011 — $116,400
• 2012 — $121,500
• 2013 — $126,300
• 2014 — $131,700
• 2015 — $136,800
• 2016 — $141,900

                    IRS Alerts Taxpayers of Website and E-Mail Scams

The IRS has issued a warning to taxpayers regarding website and e-mail scams. Concern over the increase in websites purporting to be official websites prompted the IRS to alert taxpayers and remind them that the address for the official IRS website is www.irs.gov. The IRS warns that these phony websites look very much like the official IRS website; however, they prompt taxpayers to enter personal and financial data, which will then be used to steal the taxpayer's identity. Taxpayers are urged to closely check the address of the website. The phony addresses end with .net or .com; however, only irs.gov is the legitimate address.

The IRS further warned of e-mail phishing scams that lead the victim to one of these phony sites. Taxpayers have received e-mails, claiming to be from the IRS, advising them of a federal tax refund and directing them to open a link that takes them to one of these websites. Taxpayers are advised not to open unsolicited e-mail claiming to be from the IRS, or open any attachments or provide any personal information.

 IRS "Dirty Dozen"

IRS has identified the following tax scams as this year's “Dirty Dozen:”

(1) Telephone excise tax refund abuse. Early filings show that some individuals have requested large and apparently improper amounts for the special telephone tax refund. For example, some taxpayers seem to be seeking a refund of their entire phone bills, rather than just the 3% long-distance excise tax. In some cases, tax preparers are filing improper requests for their clients. IRS is investigating potential abuses in this area and will take prompt action.

(2) Abusive Roth IRAs. IRS says that taxpayers should be wary of advisers who encourage them to shift under-valued property to Roth Individual Retirement Arrangements (IRAs). For instance, some promoters have the taxpayer move under-valued common stock into a Roth IRA, circumventing the annual maximum contribution limit and allowing otherwise taxable income to go untaxed.

(3) Identity theft. IRS says that it's aware of several e-mail identity theft scams (so called “phishing”) involving taxes. Fraudsters send bank customers fictitious correspondence and IRS forms in an attempt to trick them into disclosing personal financial data. A typical e-mail notifies a taxpayer of an outstanding refund, urging him to click on a hyperlink and visit an official-looking Web site where he is asked to give his Social Security and credit card number. IRS emphasizes that it does not use e-mail to initiate contact with taxpayers. A taxpayer who has any doubt whether a contact from IRS is authentic can call 1-800-829-1040 to confirm it.

(4) Disguised corporate ownership. IRS says that domestic shell corporations and other entities have been formed and operated in certain states to disguise the ownership of a business or financial activity. They are being used to facilitate income underreporting, non-filing of tax returns, listed transactions, money laundering, financial crimes and possibly terrorist financing.

(5) Zero wages. In this scam, a Form 4852, Substitute Form W-2, or a “corrected” Form 1099 showing zero or little income is filed with a return. The taxpayer may include a statement rebutting wages and taxes reported to IRS by the payer or may refer to the paying company's refusal to issue a corrected Form W-2.

(6) Return preparer fraud. Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients' refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. IRS says that taxpayers should choose carefully when hiring a tax preparer.

(7) American Indian employment credit. In this scam, Native American employees reduce the income on their returns, citing an American Indian employment or treaty credit. Although businesses employing Native Americans or their spouses can claim such a credit, it isn't available to employees. Unscrupulous promoters have also informed Native Americans that they're not subject to federal income tax and had them eliminate withholding by filing Form W-8 BEN, Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding. Promoters have also sent e-mail with false IRS letterheads to solicit personal financial information in order to process their “non-tax” status.

(8) Trust misuse. Unscrupulous promoters for years have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits, and IRS is actively examining these arrangements. IRS says that taxpayers should seek the advice of a trusted professional before entering into a trust.

(9) Structured entity credits. IRS says that promoters of this newly identified scheme set up partnerships to own and sell state conservation easement credits, and rehabilitation and other credits. The credits are the only assets and once they're fully used, investors receive a K-1 indicating the initial investment is a total loss, deductible on their return. IRS states that forming such an entity isn't a viable business purpose; the investments aren't valid; and the losses aren't deductible.

(10) Abuse of charitable organizations and deductions. IRS says it has observed an increase in the use of tax-exempt organizations to improperly shield income or assets from taxation. This can occur, for example, when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund but maintains control over the assets or income, thereby obtaining a tax deduction without transferring a commensurate benefit to charity. Contributions of non-cash assets also continue to be an area of abuse, especially the overvaluation of contributed property. IRS also notes an upswing in private tuition payments being disguised as charitable contributions to religious organizations.

(11) Form 843 tax abatement. This scam is involves a return filer requesting abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement. Often the requesters have failed to file returns in the past and the tax they want abated has been assessed by IRS through the Substitute for Return Program.

(12) Frivolous arguments. IRS warns taxpayers to be aware of frivolous arguments such as wages are not income and paying taxes is entirely voluntary.

Pension Protection Act of 2006

The President signed HR 4 on August 17.  Many charities could potentially benefit from the new law, which allows for direct IRA distributions to charities for taxpayers over 70 1/2 years of age.  Each IRA owner is limited to $100,000 per year and the distributed amount will satisfy the plan owner's required minimum distribution.  Donors who normally max out on their charitable donations will be able to give more because direct IRA donations operate independently of the percentage limitation rules.  On the other hand, donations of household goods (including clothing) and cash donations have been tightened.  No deduction is allowed for any contribution of cash, check, or other monetary gift unless the taxpayer can show a bank statement, cancelled check, or a written confirmation from the charity showing the date the donation was made and the amount.  

Estate Tax Relief

House Ways and Means Committee Chairman William M. Thomas (R-Calif.) introduced legislation on June 19 to provide permanent estate tax relief beginning in 2011.  The "Permanent Estate Tax Relief Bill of 2006" (HR 5638) would reduce to 15 % the rate of tax on estates worth up to $25 million.  Larger estates would be taxed at 30%.  Effective January 1, 2010, the exemption amount would be increased to $5 million per taxpayer, with any unused exemption carried over to the surviving spouse.  (On June 22, the House approved the bill with a vote of 269-156. The Senate will not be voting until after the 4th of July recess.)

 End to the Long-Distance Telephone Excise Tax 

The government has finally decided to end the antiquated long distance excise tax which was originally established in 1898 as a luxury tax on wealthy Americans who owned telephones.  As a result, they will be refunding all excise tax paid on long-distance service over the last 3 years.  No immediate action is required by the taxpayers.  The refunds will be a part of the 2006 tax returns filed in 2007.  The IRS announced on August 31 the standard amounts that most long-distance customers can use to figure their refund.  The amounts are based on the total number of exemptions claimed on the 2006 federal income tax return.  The standards amounts will be $30 for a person filing with 1 exemption, $40 for 2 exemptions, $50 for 3 and $60 for 4 or more exemptions.   Individuals may figure their refund using the actual amount of tax paid  for service billed after February 28, 2003 and before August 1, 2006.  Those individuals not required to file a regular tax return may apply for the refund on the new Form 1040EZ-T.  Businesses currently have no simplified method; they must show the actual amount of excise tax paid.  The IRS may come up with a simplified method in the future for businesses.

New Energy Tax Credit - Certified Vehicles 

Effective 2006, the former $2,000 deduction for purchasers of qualifying hybrid automobiles is replaced by a credit of up to $3,400.  The credit amount is determined under a complicated set of rules which only the manufacturers will be able to provide.  Currently, the following vehicles have been certified by the IRS to qualify for the credit:

• 2006 Ford Escape Hybrid Front WD: $2,600.
• 2006 Ford Escape Hybrid 4 WD: $1,950.
• 2006 Mercury Mariner Hybrid 4 WD: $1,950
• 2005 Toyota Prius: $3,150.
• 2006 Toyota Prius: $3,150.
• 2006 Toyota Highlander 4WD Hybrid: $2,600.
• 2006 Toyota Highlander 2WD Hybrid: $2,600.
• 2006 Lexus RX400h 2WD: $2,200.
• 2006 Lexus RX400h 4WD: $2,200.
• 2007 Ford Escape Front-Wheel Drive Hybrid: $2,600.
• 2007 Ford Escape Four-Wheel Drive Hybrid: $1,950.
• 2007 Mercury Mariner Four-Wheel Drive Hybrid: $1,950.
• 2008 Ford Escape 2WD Hybrid: $3,000.
• 2008 Mercury Mariner 2WD Hybrid: $3,000.
• 2008 Ford Escape 4WD Hybrid: $2,200.
• 2008 Mercury Mariner 4WD Hybrid: $2,200.

Taxpayers seeking the credit should plan to buy early since the full credit is only available for a limited time.  Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle.  For the second and third calendar quarters after the 60,000th sale, taxpayers may claim 50% of the credit.  For the forth and fifth calendar quarters, the credit is 25%.  No credit is allowed after the fifth quarter.

Tax Increase Prevention & Reconciliation Act of 2005

On May 17, 2006 President Bush signed into law HR 4297.  Here is a brief summary of the changes with broad impact:

• Extends the dividend and capital gains tax rate cuts for two more years, through 2010.

• The section 179 small business expensing was also extended for two more years, through 2009. 

• Eliminates the $100,000 adjusted gross income ceiling for converting regular IRA accounts to Roth IRA's, effective for tax years after 2009.

• Increases the "kiddie tax" age to children under 18 (currently 14).  This is effective for the 2006 tax year.

Watch Out for the Tax Scammers

The IRS does not communicate with taxpayers via email.  Watch out for emails claiming to be from the IRS instructing you to access a secure website to find out about your refund.  The website is not the official IRS website.  The website asks for social security numbers and credit and bank information.  The official "Where's My Refund" website is at:  https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp .

Electronic Tax Payment Options 

There are 2 ways that you can pay your taxes other than by manual check:

Credit Card Payments:  During tax season, we receive many inquiries regarding the payment of Federal and State income taxes by credit card.  There are 2 private companies awarded contracts by the IRS.  Both companies charge a convenience fee, approximately 2.49% of the payment amount.  Click on the links to set up a payment if you decide to use the credit card payment method, or call the toll free numbers.  Official Payments Corporation (1-800-272-9829) and Link2Gov Corporation (1-888-729-1040).

Electronic Federal Tax Payment System (EFTPS):  This is a free service provided by the US Department of Treasury.  You can pay federal taxes electronically, either by phone or online, 24 hours a day, 7 days a week.  To use EFTPS, you must first enroll.  Visit the EFTPS website or call the EFTPS at 1-800-555-4477 for an enrollment form.  You must access EFTPS at least by 8 PM (ET) at least one business day in advance of the due date to report your tax information.  Individuals can schedule payments up to 365 days in advance of their tax due date, and scheduled payments can be changed or cancelled up to 2 business days in advance of the scheduled payment date.