The format for this annual event is to (1) summarize the basic tax information (i.e. personal exemption, standard deduction, deduction and credit limits and phase-outs, etc) that will be used in preparing the current year, in this case 2007, Form 1040 (or 1040A) and provide a heads up on the information available for the next year, 2008, review new tax laws passed during the year and discuss other new developments from regulations, rulings and the courts, (2) give a refresher on a few tax topics of interest (this year it was medical fringe benefits and retirement plans for the self-employed), and (3) supply the 2 hours of annual “ethics” education that is now required for certain licensed or certified professionals (a reaction to the Enron and other accounting scandals).
For me there was nothing new. It was just a reminder of what I have already researched and written about on the Federal Tax Update, Federal Tax Legislation and Information, and What’s New for 2007 and 2008 Pages of my website and here at THE WANDERING TAX PRO. I am already both “ethical” and “moral”, and have been for my 35 years in the business. So since I am neither licensed nor certified for anything I don’t need a class on ethics every year.
Below is a compilation of some of the items of interest discussed yesterday for your information-
* I forgot to mention when discussing changes to the 2007 federal forms that the Schedule A has added a line under the interest category to report the new one-year only (so far) deduction for PMI (not to be confused with PMS). You can deduct the “private mortgage insurance” (PMI) premiums paid in 2007 on insurance contracts issued in 2007 in connection with the purchase of a personal residence. The deduction is phased-out as AGI goes from $100,000 to $110,000 (or $50,000 to $55,000 for Married Filing Separate). Qualified private mortgage insurance premiums will be reported in Box 4 of the 2007 Form 1098. PMI premiums are deducted on Line 13 of the Schedule A, bumping investment interest to Line 14. This is obviously the result of successful lobbying by the mortgage insurance industry.
* If you are claiming an above-the-line deduction for qualified tuition and fees on Line 34 of your 2007 Form 1040 you must complete and attach the new Form 8917. This form is to make sure there is no “double-dipping” of education tax benefits.
* The Nonbusiness Energy Property Credit has a $500.00 “lifetime” maximum. If you made qualified energy-saving purchases this year but claimed the full $500.00 on your 2006 Form 5695 you are out of luck for 2007. Or if you claimed a credit of $300.00 for 2006 you only have $200.00 left for 2007.
* The “Minimum Tax Credit” (MTC) has been increased for 2007, and a portion may now be refundable. You may have a minimum tax credit if you were a victim of the dreaded AMT in the past due to a “timing issue” such as the exercise of an Incentive Stock Option (ISO) or a depreciation deduction. This topic is too complicated to go into here. Besides in 35 years I have never had a client with an MTC.
* The IRS has another new form for 2007. Form 8919 is for employees who are treated by their employer as an independent contractor and given a Form 1099-MISC when they should really be getting a Form W-2. You would use this form to pay the employee share only of FICA tax instead of paying self-employment tax on the 1099 amount. In order to qualify your situation must meet 1 of 7 requirements.
* The IRS website provides the latest up-dated information on the energy credit available for certified hybrid vehicles. The FEMA website has a listing of all the federal disaster areas for 2007.
I have another Year-End Tax Update Workshop, the National Society of Tax Professionals version, scheduled for December 7th in Atlantic City. I had hoped that the AMT fix bill would have been passed by then so it could be included in the discussion, but I doubt it. Senate Majority Leader Harry Reid told reporters on November 6 that the Senate would not consider legislation for the one-year AMT patch until after Congress returns from its Thanksgiving recess on December 3rd!
If an AMT patch is ever passed it will probably not be until January! Even if it gets through the Senate and a conference committee before Christmas it may be vetoed by George W, and Congress will have to either rewrite the bill or try to override the veto. It is déjà vu all over again as for the second year in a row Congress has waited until the very last minute to pass tax legislation that affects the current year’s 1040, causing the IRS to incur additional expense and taxpayers to suffer additional aggravation.
I echo the frustration and anger of Trish McIntire’s post “Here We Go Again” at OUR TAXING TIMES. The way these arseholes in Congress (there is no other way to describe the cafones) are handling the AMT fix is, as Trish puts it, “a shining example of their disregard for anything but their own agenda”.