As you would expect, the various amounts for exemptions, standard deductions, etc in these January 2007 posts apply to tax year 2006. You can find the appropriate 2007 amounts on the WHAT’S NEW FOR 2007 Page of my website.
GETTING READY TO PREPARE YOUR RETURN -
A reminder for taxpayers who have brokerage accounts - Because of the rules and rates for “qualified” dividends that have been in effect since 2004, you should again this year receive at least one “Corrected” 1099 statement. You should wait a few weeks after receiving the original 1099 information before giving your “stuff” to your preparer.
A bank may issue one Form 1099-INT for all the accounts – savings, money market and CDs – that belong to the same name and Social Security number. There may be 6 or 7 accounts listed on a 1099-INT. It is important to verify each account listed on the form to make sure all of them belong to you. One of my clients received a 1099-INT last year with someone else’s account, that earned $300+ interest, included in the listing! Had he not carefully checked the form he would have paid close to $100.00 in unnecessary federal and state income tax. If you find an error on a Form 1099-INT go to the bank immediately and request a corrected form.
Another reminder – According to Internal Revenue Service Revenue Ruling 69-184 you cannot be both a partner in and an employee of the same partnership. A partner cannot receive a salary from the partnership, and should not be given a W-2. If you are a partner who received “guaranteed payments” in 2007 but you receive a 2007 Form W-2 from the partnership you should go to the partnership’s accounting firm, tell them that they FU-ed. Check out my January 2006 post “EMPLOYEE OR PARTNER – THAT IS THE QUESTION”.
WHAT TO GIVE YOUR TAX PREPARER- PART I and PART II
New for 2007 – Retired Policemen and Firefighters need to provide your tax pro with the amount withheld from your pension for the year for health insurance premiums.
As you are gathering your “stuff” to hand over to your preparer it is a good time to review the new stricter documentation rules for cash contributions. Check out my post “NEW RULES FOR CASH CONTRIBUTIONS.”
A final reminder - The upcoming tax-filing season will be full of delayed refunds.
As TAX GIRL Kelly Phillips Erb correctly points out “Congress is responsible for this mess, not IRS”. The employees of the IRS deserve kudos for being on top of the issue and putting in long hard hours to fix their system with the least possible amount of delay and inconvenience.
But there will be delays and inconvenience, and I expect more than the IRS has suggested in its information releases.
If you are a victim, do not take your anger out on the IRS. Instead write a chastising letter to your Congress-persons. Tell them to make abolishing the dreaded Alternative Minimum Tax a priority for early in 2008. And tell them to be damned sure that there is never again a repeat of the 2007 fiasco.