Purchasers of Ford Hybrids Still Qualify for Tax Credit

Purchasers of Ford Hybrids Still Qualify for Tax Credit

IR-2007-22, Jan. 31, 2007 WASHINGTON — The Internal Revenue Service announced that purchasers of qualified Ford Motor Company vehicles may continue to claim the Alternative Motor Vehicle Credit. Also, four qualifying 2008 Ford hybrid vehicles were announced. The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold. Ford sold 5,645 qualifying vehicles to retail dealers during the quarter ending Dec. 31, 2006. This brings the total number of Ford qualifying hybrids reported to date to 22,156. Purchasers of Ford’s qualified vehicles may continue to rely on the previously issued IRS certifications concerning the vehicles’ qualification for the credit. However, those seeking the credit should remember that the full credit may be available only for a limited time. The credit amount and make and model of previously certified vehicles sold are: Ford Escape 2WD, Model Years 2005, 2006 and 2007 — $2,600 Ford Escape 4WD, Model Years 2005, 2006 and 2007 — $1,950 Mercury Mariner 4WD, Model Years 2006 and 2007 — $1,950 IRS also certified additional 2008 Ford vehicles for the following credit amounts: Ford Escape 2WD Hybrid Model Year 2008 — $3,000 Mercury Mariner 2WD Hybrid Model Year 2008 — $3,000 Ford Escape 4WD Hybrid Model Year 2008 — $2,200 Mercury Mariner 4WD Hybrid Model year 2008 — $2,200 Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter. See related item: Hybrid Cars and Alternative Motor Vehicles

Mistakes Abound on Telephone-Tax Refund Requests; IRS Offers Tips for Getting a Speedy Refund

Mistakes Abound on Telephone-Tax Refund Requests; IRS Offers Tips for Getting a Speedy Refund

IR-2007-21, Jan. 31, 2007 WASHINGTON — The Internal Revenue Service today offered taxpayers tips for requesting the telephone excise tax refund, after early tax returns show some people are making basic mistakes, others are requesting excessive refunds and many are missing out on the refunds, altogether. “We encourage taxpayers to take a few minutes and review the details of the telephone-tax refund,” said IRS Commissioner Mark W. Everson. “A little extra time will reduce the chance for a mistake, avoid a refund delay and possibly add a few dollars onto refund checks.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. Early mistakes found on a sample of 2006 returns filed during January include: Filling out the Form 1040EZ-T, Request for Refund of Federal Telephone Excise Tax, incorrectly by failing to show a refund amount on Line 1a. Designed exclusively for requesting the telephone-tax refund, this simple form is for people who don’t need to file a regular income-tax return. Filing an incomplete form typically delays a refund and often leads to follow-up correspondence with the IRS. More than 10 million low-income people, many of them senior citizens, are expected to file this form. Failing to request the telephone tax refund on a regular federal income-tax return in situations where the taxpayer appears to qualify. More than one-third of early filers did not request the telephone tax refund. This includes filers on Forms 1040, 1040A, 1040EZ, 1040NR and 1040NR-EZ. About 136 million individuals and couples are expected to file one of these forms, and most will, likely, qualify for the telephone-tax refund. Anyone who files one of these forms cannot file Form 1040EZ-T. Filing duplicate requests. Usually, this involves filing both Form 1040EZ-T and a regular income-tax return. Anyone who files a regular return cannot file Form 1040EZ-T. Doing so will delay any refund for months and result in a phone call or letter from the IRS. Requesting a refund that appears to be based on the entire amount of the taxpayer’s phone bills, rather than just the three-percent tax on long-distance and bundled service. Requesting a refund in the thousands of dollars, suggesting that the taxpayer paid more for telephone service than they received in income. The IRS is investigating potential abuses among early filers who requested large and apparently improper amounts for the telephone tax refund. The IRS will take prompt action against taxpayers who request improper refund amounts and the return preparers who help them. The IRS wants to make it as easy as possible for anyone who paid the tax to get this special refund. If you paid the tax and haven’t filed yet, here are some tips to help you figure the refund correctly and get it quickly: File electronically. Electronic-filing software flags often overlooked tax breaks and helps you figure them accurately and report them properly. If you use a professional tax preparer, ask that person to e-file your return. E-file for free. If your income is $52,000 or less, use the Free File link on this Web site to connect to a private-sector company offering free e-file services. Choose direct deposit. Whether you file electronically or on paper, you can get your refund at least a week sooner by having it deposited directly into your checking or savings account. Consider using the standard-refund amount for the telephone-tax refund. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. You only have to fill out one line on your return, and you don’t need to present proof to the IRS.The standard amount, ranging from $30 to $60, is based on the number of exemptions you can claim on your return. If you paid more than the standard amount, you may figure your refund using the actual amount of tax shown on your phone bills and other records. Base your refund request on the three-percent federal tax paid, not the total phone bill. Do not count tax paid on local-only service. You must have the phone bills or other records adequate to support the amount you are requesting. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested. Do not file duplicate requests. If you file a regular income-tax return, do not file Form 1040EZ-T. If you want to take advantage of the earned income tax credit for low and moderate income workers, the child tax credit or other tax breaks, file a regular return and include your telephone-tax refund request on that return. Stay away from tax preparers who falsely claim that many, if not most, phone customers can get hundreds of dollars or more back under this program. Use the Telephone Excise Tax Refund section on the front page this Web site. Here, you can download forms, find answers to frequently-asked questions and link to participating Free File partners. Related Items: Telephone Excise Tax Refund IR-2007-16, Some Telephone Tax Refund Requests May Be Too High; IRS Will Deny Improper Requests FS-2007-1, One-Time Tax Refund Available to Long-Distance Telephone Customers

Taxpayer Advocacy Panel Members Selected

Taxpayer Advocacy Panel Members Selected

IR-2007-20, Jan. 30, 2007 WASHINGTON — The Treasury Department and the Internal Revenue Service are pleased to announce the selection of 33 new members to serve on the nationwide Taxpayer Advocacy Panel (TAP), a Federal Advisory committee charged with providing direct taxpayer input to the Internal Revenue Service. The new panel members will join 64 returning members to round out the panel of 97 volunteers for 2007. The new members were selected from over 700 interested individuals from all over the country, who applied through an open recruitment period last spring. TAP is a Federal Advisory committee charged with providing direct taxpayer input to the Internal Revenue Service. The volunteer members provide a taxpayer’s perspective on critical tax administration programs and help the IRS identify ways to improve customer service. Oversight and program support for the TAP is the responsibility of the Taxpayer Advocate Service, an independent organization within the IRS that helps resolve taxpayer problems and recommends changes that will prevent problems. The mission of the panel is to listen to taxpayers, identify issues and make suggestions for improving IRS service and customer satisfaction. Panel members will work with IRS executives on priority topics – primarily those involving the Wage and Investment Division and Small Business/Self-Employed Division. Members also serve as a conduit for grassroots issues from the public and forward taxpayers’ issues and concerns to the IRS with recommendations for improvement. "The new panel members have an important job to help make sure the IRS provides the top quality service taxpayers want and deserve“, said Nina Olson, IRS National Taxpayer Advocate and head of the Taxpayer Advocate Service. “At a time when the IRS is engaged in the process of reviewing and reforming tax procedures and how services are provided to taxpayers, input from the citizen volunteers at TAP has never been more important. We actively seek the members’ views and encourage them to have input on IRS initiatives before decisions are made.” TAP members are U.S. citizens who volunteer to serve a three-year appointment and are expected to devote 300 to 500 hours per year to panel activities. Panel members come from all walks of life with balanced representation from all 50 states, the District of Columbia and Puerto Rico. Taxpayers can contact their state’s representative to the Panel by calling 1-888-912-1227 or via the internet at www.improveirs.org. Taxpayers can also write to the Panel and mail correspondence to: Taxpayer Advocacy Panel (TAP) TA: TAP Room 1314 1111 Constitution Avenue, N.W. Washington, D.C. 20224 Individuals interested in volunteering to serve on the panel may submit an application via the web site www.improveirs.org during the next open recruiting period from March 19 to April 30, 2007. Editors, please note that a list of the new panel members by state is included below. New Taxpayer Advocacy Panel Members Selected in December 2006 Tice, Charles (Chuck) — Blytheville, Ariz. Lee, Merijane (M J) — Portola Valley, Calif. Lundberg, Gary — Carlsbad, Calif. Davidson, Charles — Redding, Calif. Stahl, Howard — Los Angeles, Calif. Jason, Julie — Greenwich, Conn. Paris, Mark — Panama City, Fla. Rodriguez, Alberto — Miami, Fla. Armstrong, Mary — Pensacola, Fla. Cooper III, Reuben (Dale) — Atlanta, Ga. Edwards, James (Byron) — Roswell, Ga. Tremblay, Donna — Buford, Ga. Freeman, Chris — Pleasant Hill, Iowa Khan, Anne — Chicago, Ill. Kennedy, Jeff L. — Louisville, Ky. Fulkrod, Steve — Bel Air, Md. Wright, Kenneth K. — Ashland, Mo. Shah, Rajiv — Columbia, Mo. Hutchinson, Carolyn — Fletcher, N.C. Lester, Judy — Chapel Hill, N.C. Widmer, Harris — Fargo, N.D. Chapman, Benson — Wayne, N.J. Criel, Laura — Albuquerque, N.M. Whiteside, Deidra — Buffalo, N.Y. Chen, Betty — New York, N.Y. Wernz, Stan — Cincinnati, Ohio Bensen, Milissa — Hermiston, Ore. Brown, Kimberly — Blakeslee, Pa. Bryant, Pat — Millington, Tenn. Bell, S. Kay — Austin, Texas Bryant, Michael — Oakton, Va. Yaeger, William — Alexandria, Va. Colombo, Paul — Colchester, Vt.

New State Sales Tax Calculator Debuts on IRS.gov

New State Sales Tax Calculator Debuts on IRS.gov

IR-2007-19, Jan. 29, 2007 WASHINGTON — The Internal Revenue Service is providing a new online tool to help individual taxpayers determine whether they might benefit by electing to deduct their state and local general sales taxes. “The Sales Tax Calculator is another interactive tool on the IRS.gov web site designed to help make it easier for taxpayers to figure their taxes,” said IRS Commissioner Mark W. Everson. Taxpayers who itemize deductions on Schedule A of the Form 1040 in 2006 have the option of deducting the amount of state and local sales taxes paid instead of deducting their state and local income taxes paid. Taxpayers cannot take a deduction for both sales and income taxes. New tax law enacted in late December reinstated the optional deduction for state and local sales taxes. Because of this late enactment date, the IRS previously announced that it would not begin processing returns claiming the sales tax deduction until Feb. 3. To use the Sales Tax Calculator, taxpayers input their adjusted gross income, number of exemptions and zip code. The IRS estimates most taxpayers will get an answer in less than five minutes using the new tool. The calculator is anonymous. Taxpayers do not need to enter their name, Social Security number or any other identifying information. The calculator is another in a series of steps the IRS is taking to reduce taxpayer burden. As an alternate to the online sales tax calculator, taxpayers can use the worksheet in Publication 600, State and Local General Sales Tax, posted on IRS.gov and mailed in early January to about six million individuals who received the Form 1040 tax package. To calculate what their sales tax deduction would be, taxpayers can use either the actual amounts paid or use sales tax tables that allow them to factor in the exact sales taxes paid on certain specified items, such as a car, boat or material to build a house. To find this tool, enter Sales Tax Calculator into the search box on this Web site. See related item: Sales Tax Calculator

IRS.gov Offers Online Alternative Minimum Tax Assistance

IRS.gov Offers Online Alternative Minimum Tax Assistance

IR-2007-18, Jan. 26, 2007 WASHINGTON — The Internal Revenue Service announced that it has updated its online tool to help taxpayers determine whether they may owe the Alternative Minimum Tax (AMT). Most taxpayers can enter their data and get an answer in five to 10 minutes using this Internet-based calculator, available at on this Web site. “Nobody likes the AMT. But this tool helps people learn quickly whether they’re going to be paying this tax,” said IRS Commissioner Mark W. Everson. “We also remind taxpayers that AMT calculations are automatic when you use e-file rather than filing a paper return.” The online AMT Assistant is an automated version of the Worksheet to see if you should fill in Form 6251, Alternative Minimum Tax. The worksheet, contained in the Form 1040 Instruction Booklet, helps determine whether a taxpayer may be subject to AMT. The IRS projects that most taxpayers using the online AMT Assistant will find that the AMT does not apply to them. The AMT Assistant is aimed at individual taxpayers and can be used by individuals, tax practitioners and community or public service organizations. All entries are anonymous. Taxpayers filing paper returns benefit the most from the AMT Assistant since electronic filing software generally computes AMT liability automatically. By entering “AMT Assistant” in the IRS.gov search box, taxpayers can easily find the tool. To use the AMT Assistant, taxpayers must complete a draft Form 1040 through line 44 and have that information at hand to use the AMT Assistant, which is one of several online tools available on IRS.gov. Related Item: AMT Assistant

Redesigned Form 940 Has Many Improvements for Tax Year 2006

Redesigned Form 940 Has Many Improvements for Tax Year 2006

IR-2007-17, Jan. 26, 2007 WASHINGTON — Payroll professionals and business owners who file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, for 2006, due by Jan. 31, will notice several improvements in the form and instructions. The IRS has redesigned Form 940 to be more user-friendly, reducing the burden for more than one million filers. In May 2004, a team led by the IRS office of Taxpayer Burden Reduction began the process of redesigning Form 940. IRS employment tax experts worked with representatives from other federal and state agencies, gathering input from internal and external stakeholders to create a plain language form that is logical, easy to follow, and compatible with optical scanning. The new Form 940 incorporates the advantages of Form 940-EZ (discontinued for tax year 2006) into a simplified form for all filers. Improvements include: A logical sequence from the taxpayer’s point of view Eight separate parts with visual cues, breaking up the task into smaller steps A new Schedule A for multi-state employers or credit reduction situations Check boxes instead of “A, B, C” questions The IRS is committed to reducing unnecessary taxpayer burden and welcomes input from tax and payroll professionals, business owners and the general public on opportunities to make it easier to comply with the tax laws. More information can be found in Form 13285A, Reducing Tax Burden on America's Taxpayers, and at the link below for the Office of Taxpayer Burden Reduction. Related Items: Form 940 Form 940 Instructions Form 940, Schedule A Office of Taxpayer Burden Reduction Form 13285A, Reducing Tax Burden on America's Taxpayers

Some Telephone Tax Refund Requests May Be Too High; IRS Will Deny Improper Requests

Some Telephone Tax Refund Requests May Be Too High; IRS Will Deny Improper Requests

IR-2007-16, Jan. 25, 2007 WASHINGTON — The Internal Revenue Service said today that early filings show some individual taxpayers have requested large and apparently improper amounts for the special telephone tax refund. The IRS is investigating potential abuses in this area and will take prompt action against taxpayers who claim improper refund amounts and the return preparers who help them. “While the vast majority of taxpayers are claiming the telephone tax refund correctly, we are seeing some clear abuse involving overstated refund requests,” said IRS Commissioner Mark W. Everson. “People requesting an inflated amount will likely see their refund frozen, may have their entire tax return audited and even face criminal prosecution where warranted.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. The IRS checked a sample of returns filed through mid-January and found that some individual taxpayers requested telephone tax refunds that appear to be excessive: In some cases, taxpayers appear to be requesting a refund of the entire amount of their phone bills, rather than just the three-percent tax on long-distance and bundled service that they are entitled to. Some individuals are making requests for thousands of dollars, indicating that they had phone bills topping $100,000 – an amount exceeding their income. Some tax preparers are helping their clients file apparently improper requests. “If we find inappropriate refund claims, we will aggressively pursue tax preparers and promoters who make the improper requests, and we will contact individual taxpayers in egregious situations,” Everson said. “Audit letters will be sent out soon and, when appropriate, our investigators will visit tax preparers who have been preparing questionable telephone tax refunds.” The IRS is making it as easy as possible for taxpayers to get this special refund. Research and contacts with telephone service providers indicated that standard refund amounts, ranging from $30 to $60, based on the number of exemptions claimed on their tax return, would approximate the eligible amount for most taxpayers. Taxpayers do not need to present proof for requesting the standard amount. Alternatively, they can figure the refund using the actual amount of tax paid, based on their phone bills and other records. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested. The IRS reminds taxpayers that the best way to avoid mistakes and get a refund quickly is to file a return electronically and have the refund deposited directly into a checking or savings account. Electronic-filing software helps taxpayers figure tax breaks, such as the telephone tax refund, accurately and report them properly. Free e-file services are available to low and moderate-income taxpayers (incomes of $52,000 or less) through the Free File link on this Web site. Another way to avoid mistakes is to stay away from unscrupulous promoters and tax preparers who make false claims about the telephone tax refund and suggest that many, if not most, phone customers can get hundreds of dollars or more back under this program. The best and most reliable information on this unique refund can be found in the Telephone Excise Tax Refund section of this Web site. Here, taxpayers can download forms, find answers to frequently-asked questions and link to participating private-sector Free File partners offering free electronic-filing services. Related Item: Telephone Excise Tax Refund Free File