Maryanov Madsen Gordon Campbell, Certified Public Accountants

2006 forms that came in the mail don't reflect Congress' shuffle

Howard Gordon
Special to The Desert Sun
February 9, 2007

Congress' last-minute changes to the law have made the always-daunting task of filing your tax return even more difficult this year. Adding to the complexity are electronic payment options as well as a new telephone excise-tax refund.

The big problem is that the 2006 forms you received in the mail do not reflect those last-minute changes, and this makes filing especially problematic for those of you who don't use computers (most computer programs have now been updated.

The good news is that because April 15 falls on a Sunday, and because Monday is Emancipation Day in Washington. D.C. and Patriot's Day in Massachusetts, we get until Tuesday the 17th to file returns. Additionally, the IRS will be open on Monday the 16th.This all adds up to a procrastinator's dream!

One of the changes gives you the option of using either the amount of your state income tax or the total actual sales tax you paid to the state in 2006 as a deduction on your federal return. This is an obviously important change if you live in a state without an income tax, but it can also benefit California residents, since a large purchase may make your sales tax total higher than your state income tax and give you a larger deduction. This option would be recorded on schedule A, line 5 on form 1040. Put the letters ST on the dotted line.

The Higher Education Tuition and Fees deduction was also part of last-minute changes. It is claimed on form 1040 at line 35, the line that was formerly used only for the Domestic Production Activities Deduction (don't even try to figure that one out). To claim it, enter a T in the space to the left of that line.

The Educator Expense deduction, limited to $250, can be claimed on line 23 on form 1040, which is titled "Archer MSA" deduction. Enter the letter E on the dotted line to the left of that entry, or B if you're actually claiming the Archer MSA deduction. They sure didn't make it simple, did they?

There are lots of electronic payment options this year. You can pay your 2006 tax bill or the tax that you are required to pay when you request an automatic "extension of time to file". You can make your quarterly estimated tax payments as they become due in 2007 or even make a credit card payment on any active installment agreement you may have with the IRS. You can also have funds withdrawn from your bank account electronically, but you must use electronic filing to do that.

A credit card can be used for payments to the IRS with either paper or electronic filing, and you can make a credit card payment over the phone. Remember, the credit card company charges a fee for this service and interest on unpaid credit card balances. In my opinion, that fee and the interest they charge is too high to be worth the convenience.

For more detailed information, log on to www.IRS.gov for IRS fact sheet 2007-11 about electronic payments, and IRS publication 600 for more information about the changes Congress made.

For information on the new telephone long-distance excise tax refund, see my column in the February 19 issue of the Desert Sun's "Desert Business Review".

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