Taking a Stand on Tax Issues
If you tend to get lost in all the political rhetoric that goes with presidential campaigns, you can get a black-and-white look at the tax proposals of each presidential candidate online. This will give you time to consider how the various proposals might impact you and your family, and help in your choice of a president. See the proposals at www.taxpolicycenter.org.
Consider charity for required withdrawals
Sometimes it comes down to a choice—give it to the government or give it to charity. In the event that you're 70½ or older and you don't need a required IRA withdrawal, you can always give it to charity.
The withdrawal won't be taxed to you if you have the check made out by your IRA, payable to the charitable organization of your choice.
The donation isn't deductible, but it won't add extra income and won't have the potential of causing you to lose other deductions, personal exemptions or add to the taxes on Social Security benefits. Plus, it makes you feel good to help someone else if you can.
Tax return do-over
If you file your tax return and make a mistake, don't wring your hands and spend hours on the phone waiting to talk to an IRS official. File an amended return as soon as you spot the mistake, using form 1040X. The form is at www.irs.gov.
Foreclosures rampant
By the end of 2007, it was estimated foreclosures on U.S. residential property surpassed 2 million. To put that in perspective, in 2006 there were 797,176 such foreclosures filed—60% fewer.
New filing election for married business owners
Husband-and-wife business owners who file as a partnership may want to look into a new election—the qualified joint venture.
This option came into being with the signing of the Small Business and Work Opportunity Tax Act of 2007. To qualify, both must be in a trade or business together, with no one else as owner. Both should participate in the business and work a minimum of 500 hours.
If the two file as a qualified joint venture, they will divide the income, gains, losses, deductions and credits between them based on their interest. They will each report as a sole proprietorship on schedule C or schedule F. Each reports net earnings for self employment.
One advantage of this may be to give each spouse credit for Social Security earnings on which retirement benefits are based. This new filing option is available for the 2007 year. For more details and to see if the plan would benefit you, go to www.irs.gov and search for Qualified Joint Venture.
Missed deductions
Don't be one of the 2.1 million taxpayers who missed their state and local sales tax deductions last year. The number of people missing that deduction, says the Treasury Department, climbed 50% from the year before. In dollars the miss cost taxpayers about $3.6 billion. This deduction is especially important to consider if you pay no state income tax, if your state taxes are low or if you've made a large purchase—say a new truck.