ROR Tax Professionals

2006 Tax Changes and Additions

Charitable Contributions

The IRS is going to require a little more information from taxpayers claiming deductions for charitable contributions from now on. New standards require receipts for all cash contributions, regardless of size, starting in January 2007. By receipts, the IRS means bank information, like cancelled checks, or written acknowledgement from the receiving organization, including name of the organization, date, and amount given.

Also, as of August 17, 2006, non-cash items must be in good, or better, condition in order to deduct their value on your tax return. Putting your camera to use might be a good idea, because having a picture of the item before you donate it may be the best way to substantiate your deduction. Contributions of single items worth more than $500 don’t need to be in good condition, but the IRS is now requiring a qualified appraisal.

Need to know how much your donated items are worth? You can use the valuation guide on the Links & Resources page.

New Rules/Clarifications for Qualifying Children

During 2006, the IRS issued Information clarifying who is able to claim tax benefits relating to children. This is especially important for our clients who are unmarried couples when both are the child(ren’s) legal parents.

The rules for qualifying children remain the same; they must be related to the taxpayer, live with the taxpayer for more than half the year, meet the age requirement for the credit or deduction claimed, and can’t provide more than half of their own support for the year. If a couple is unmarried, the person with the higher Adjusted Gross Income will generally be the one to file as Head of Household and claim the dependency deduction, child and dependent care credit, and child tax credit because they are normally the one most likely to benefit from the deductions and/or credits.

The biggest recent change involves the Earned Income Tax Credit

If you received an Earned Income Credit in 2005 for a child who didn’t qualify as your dependent, you may not qualify for the credit in 2006. There are a lot of details surrounding these changes and how they affect you. If you have any questions, be sure to give us a call.

More 2006 Tax Changes and Additions

Energy Credits

If you’re a home owner, you might be able to qualify for a tax credit if you made energy-saving changes to your property in 2006 and 2007. With certain limitations, the energy credit is available for storm doors and windows, insulation, electric heat pump water heaters, electric heat pumps, certain air conditioners and water heaters using other forms of energy, and certain fans inside gas, oil or propane furnaces, solar water heater and electricity and fuel cells.

To claim the credit, make sure you get the product’s certification information from your dealer and bring it in, along with the sales receipt.

Long Distance Telephone Excise Tax

The 3% excise tax you’ve been paying on long-distance service has been repealed effective July 31, 2006. In addition to no longer collecting the tax on most services, the IRS is going to refund the tax on billings from March 1, 2003 to July 31, 2006.

The amount of the credit on your tax return will be the actual amount of excise tax paid, or $30 plus $10 for each additional exemption claimed, up to a maximum total credit of $60 per family. For Businesses, just bring in copies of your April and September 2006 telephone bills, and we’ll help you calculate the amount of your credit.