LOS ANGELES – There's plenty to keep in mind as you wrap up your tax-return filing in the two weeks ahead.
You've already heard about the telephone excise tax refund until it's coming out your ears. All our experts remind you not to overlook it - and not to get too greedy about the amount you request. Moderation in all things.
When it comes to businesses, Michael Collins, a tax partner for BDO Seidman in Detroit, said many small business owners seem to be missing the telephone excise tax on their business returns.
If you're running a business and want help coming up with the highest possible phone-tax refund, Yosef Rabinowitz's refund calculator might be worth the cost. Rabinowitz, managing director of TBRC Cost Recovery, LLC in New York, charges $4.95 to individual filers and $24.95 to business filers.
Mary Canning, dean of the Schools of Taxation and Accounting at Golden Gate University in San Francisco, Calif., adds that it's wise to verify all your income.
Canning urges business owners not to rely on Forms 1099 and memory! Check your books, records and all deposits, Canning says. Often taxpayers forget about income deposited early in the first quarter of the year and not all payers provide businesses with 1099s.
Some taxpayers received 1099s in 2005 that reported income they didn't receive until January. Naturally, you omitted that income from your tax returns. Remember to include that January income this year. It won't be on the 2006 Form 1099 you receive from that vendor.
Deducting long-term-care insurance
Lee P. Thaete, a certified public accontant and financial consultant for AXA Advisors, offers an interesting twist on deducting long-term-care insurance. If you are self-employed, you may be able to deduct these premiums on Line 29 of your Form 1040 as part of your self-employed health insurance deduction.
The IRS instructions require that the "insurance plan" be established under the business. But those requirements are for partners in partnerships and LLCs and for S Corporation shareholders owning more than 2.5 percent of the shares. According to IRS Publication 535, for sole proprietors, the policy does not have to be in the name of the business; it is in the name of the sole proprietor.
In other words, Thaete explains, a sole proprietor, age 61, could deduct $2,830 in premiums as well as amounts for his spouse as long as there is sufficient net profit reported on Schedule C to cover the amount of the deduction.
Reecy Aresty, author of "How to Pay for College without Going Broke" points out that the $4,000 tuition and fees deduction was extended by Congress at the end of the year. Since the Extender Bill came so late, the publications and instruction booklets don't include this information.
Aresty says the deduction is doubly easy to miss, since there is no line for it on the Form 1040. Aresty describes the special trick for a taxpayer to actually take the deduction. You must physically write a "T" on line 35 of the 1040. If you also claim a deduction for "domestic production activities," you must also write a "B" and attach a breakdown showing the amounts claimed for each deduction.
Incidentally, the $250 deduction for educators' supplies was also extended. Thaete says that even though the line for this deduction is no longer on the Form 1040, you can report educator costs on line 23, Form 1040, with an "E" entered to the left of the entry.
It takes energy
Remember those home improvements you made early last year? You put in double-paned windows, or insulation, or solar power, or ...
Don't forget to take advantage of the federal tax credits for those improvements, says Rozanne Weissman, spokeswoman for the Alliance to Save Energy in Washington, D.C. They're still available for improvements you make to your home through the end of 2007. For a list of eligible improvements and IRS Form 5695, please visit the Alliance to Save Energy's Web site .
With all these tax-law changes to keep track of and regular tax-return tasks to complete, plus your intense need to get everything just right on your tax return, you may want more time to file.
Don't knock yourself out. If you think you're going to need an extension, plan for it now. There are only two extension forms this year to cover all people and all businesses and entities.
People get to use Form 4868. See the form (PDF).
Form 4868 will give you another six months, until Oct. 15.
Businesses, trusts, etc. get to use Form 7004. See the form (PDF).
Form 7004 will give you another six months, until Oct. 15, if it's a calendar-year entity.
When you fill it in, if you think you'll owe money when you finally file your tax return, be sure to fill in the balance you expect to owe. Don't just put an amount that you can afford to pay. Otherwise, IRS might reject your extension because it wasn't a true representation of your total tax liability.
Even though it's an automatic extension to file, it's not an automatic extension to pay. IRS is looking for the payment on April 17.
If you can't afford to pay now, don't worry. The interest rate is fairly low this year: 8 percent per year. And the underpayment penalty, if you get an extension, is only 0.5 percent per month, until the final due date of the return. Combined, that's only 7 percent for the whole six months.
Some states accept the IRS extension, but many don't. You can find your state's forms by clicking on your state on the U.S. tax map. Visit the Web site.
Estimated tax payments
April 17 is also the due date for your first estimated tax payment for 2007. If you haven't already budgeted for the extension payment and the first estimate, now is the time to scramble to get your money together in time.
Try not to pay with a credit card. Despite those alluring reward points, you're still going to pay about 2.9 percent in convenience fees. If you must use a credit card, see if you can use a credit card convenience check. Find one with fees that are limited to $50 or $75 — or the lowest fees you can find.
If you have a hard time remembering to make your quarterly payments on time, IRS spokeswoman Nora Butler suggests you consider setting up an Electronic Federal Tax Payment System account (EFTPS). That lets you pre-schedule your estimated tax payments for the whole year. Visit the site.
By the way, all the online tax preparation companies, as well as the Free File Alliance members, are prepared to file taxpayers' federal and state extensions electronically. By filing the extension electronically, you have a receipt that IRS and your state received it.
Eva Rosenberg is the founder of TaxMama.com and an enrolled agent licensed to represent taxpayers before the IRS. She is the author of the book, "Small Business Taxes Made Easy."
Copyright (c) 2006 MarketWatch, Inc.