2007 TAX TIPS brought to you by Stephen J. Litwack, CPA "Let us help you keep more of what you make!" 918 828 9807

Tax Tip #1: Make a deductible 2007 IRA contribution before April 15. (2) If you're in business, contribute to a SEP retirement plan. (3) Check with us to find every available deduction, credit, and tax election that will cut your taxes.

Tax Tip #2: If you have household workers – a housekeeper, nanny, or gardener, for example – you could have payroll tax obligations for 2007 (commonly called the "nanny tax"). This tax applies if you paid a household worker $1,500 or more in 2007.

Tax Tip #3: Check your withholding early in 2008, and again whenever your circumstances change during the year (marriage, divorce, new baby, etc.) to be sure you are having the right amount withheld from your paycheck. You must meet minimum tax payment requirements, but don't over-withhold, or you'll be giving the IRS interest-free use of your money.

Tax Tip #4: Floods, fires, tornadoes, hurricanes. If Mother Nature creates a major disaster in your area, you may be entitled to a special tax break – the choice of taking the unreimbursed loss on that year's return or on the prior year's tax return. Filing an amended return for the prior year could give you a refund of taxes that you could use in recovery.

Tax Tip #5: Not everyone is required to file an income tax return, and the IRS doesn't want returns that aren't necessary. A 2007 tax return must generally be filed when gross income exceeds these thresholds:

• Single – $8,750
• Married, joint – $17, 500
• Head of household – $11,250
• Married, separate – $3,400

  Tax Tip #6: If you turned 70½ last year and have not yet taken your first required IRA distribution, April 1, 2008, is a very important deadline for you. You must take your first distribution by that date or face a 50% penalty tax on the amount not taken. If you're retired, this deadline also applies to other retirement plans, except for Roth IRAs.

  Tax Tip #7: The tax law offers choices in many situations, and if you make the wrong choice, you pay higher taxes. Among the tax choices you may face: the best filing status, the best method for deducting business vehicle expenses, the smartest depreciation strategy, and picking the best tax break for education expenses.

  Tax Tip #8: If you itemize your tax deductions, finding another write-off is like finding money. Review the deductions you normally take; then look back over 2007 for events that may be the source of additional deductions.

  Tax Tip #9: Did you pay college expenses in 2007? If you meet the income limitations, you can deduct up to $4,000 for higher education tuition and fees. Higher-income taxpayers might qualify for a deduction of up to $2,000.

  Tax Tip #10: If you own or lease a vehicle for use in business, you can use actual costs or standard mileage rates to calculate your tax deduction. Tracking expenses and mileage will help determine which method gives you the best deduction. Travel for medical services, a job-related move, and for charitable purposes may also lead to a deduction.

  Tax Tip #11: Even if you don't itemize, you can still deduct certain expenses, including student loan interest, job-related moving expenses, classroom teaching supplies, college tuition, self-employment taxes, health savings account contributions, and alimony paid.

  Tax Tip #12: April 15, 2008, is not only the deadline for filing your 2007 individual income tax return, it's the deadline for 2007 gift tax returns, 2007 returns for partnerships, trusts, and estates, and amended returns for 2004. It's also the deadline for making 2007 contributions to IRAs and paying the first installment of 2008 individual estimated tax.

  Tax Tip #13: Establish exclusive office space if you work at home. If you use a portion of your home exclusively and regularly for business, you may be entitled to a home-office deduction. Satisfying the strict requirements lets you deduct depreciation, insurance, repairs, and utilities for the business part of your home.

  Tax Tip #14: The estate tax exemption remains at $2 million for 2008, and the top tax rate is 45%. As you gather information for your 2007 income tax return, take a little extra time to pull out your will, medical directives, and other estate planning documents. Chances are something needs updating.

  Tax Tip #15: In planning donations to charity, consider giving long-term appreciated property instead of selling the property first and donating the cash. You'll get a deduction for the market value of the property without paying capital gains tax on the appreciation. Do the opposite with property that has lost value: sell it to get the tax loss and give the money to charity for a deduction.

  Tax Tip #16: Check into all the tax credits for which you might qualify. Because some tax credits are reduced or eliminated entirely once your income reaches certain limits, be aware of the phase-out income thresholds for the credits that affect you. With some minor adjustments to your income and deductions, you might be able to salvage all or part of a valuable credit.

  Tax Tip #17: For years, the age threshold for taxing children's unearned income at their parents' highest tax rate was 14. Then the "kiddie tax" went to age 18 for 2006 and 2007. For 2008 it's raised to 19 – and to 24 for full-time students. This might be a good year to consider alternatives for college savings instead of transferring assets to a child.

  Tax Tip #18: If you can't file your 2007 tax return by the April 15 deadline, you can request an extension from the IRS by April 15 and get until October 15, 2008, to file. You can even request the extension by phone or computer. The extension is automatic, meaning no explanation is required; however, it does not give you more time to pay taxes due for 2007.

  Tax Tip #19: A provision in the 2003 tax law goes into effect this year, dropping the tax rate on qualifying dividends and long-term capital gains to zero for taxpayers in the lowest two regular tax brackets. If you're a single filer with income of less than about $32,000 or married with income of less than about $65,000, the new zero rate could apply to you.

  Tax Tip #20: Ads encouraging taxpayers to donate old vehicles to charity are everywhere. Be aware that the tax deduction you're allowed for such a donation is the amount the charity is able to sell your car for, not its "blue book" or other estimated value. The charity must send Form 1098-C to both the donor and the IRS if the vehicle's value exceeds $500.

  Tax Tip #21: Depending on your income, you might qualify for a tax credit for the first $2,000 you contribute to an IRA or other retirement plan. Don't overlook this "saver's credit" as an opportunity to cut your tax bill and increase your retirement nest egg. You have until April 15, 2008, to make an IRA contribution that could reduce your 2007 taxes.

  Tax Tip #22: Postpone taxes by swapping investment or business property instead of selling it. If, instead of selling your property, you exchange it for "like-kind" property in a "tax-deferred" exchange, you can delay the tax until you sell the replacement property.

  Tax Tip #23: If you are helping to support an elderly parent, your college-age child, or others, know the requirements that will give you a dependency exemption. Don't let poor planning or paying for the wrong expenses cost you a tax-cutting dependency exemption or tax deduction.

  Tax Tip #24: If you're saving for a child's college education, do so in a tax-advantaged way. Look at all the available options and choose what is likely to give you the most money for college at the least tax cost. Among the choices to investigate are Section 529 plans, Coverdell education savings accounts, and education savings bonds.

  Tax Tip #25: A health savings account (HSA) combines a high-deductible health insurance policy with a tax-sheltered medical savings account. Contributions to an HSA are deductible, and withdrawals used for qualified medical expenses are tax-free. A recent law now permits one-time transfers from certain other accounts, such as an IRA, to an HSA.

  Tax Tip #26: Two recent tax law changes could benefit you. (1) Non-spouses who inherit retirement plans may transfer the funds directly into a new IRA, extending tax-deferred growth and delaying taxable distributions. (2) Starting in 2010, the $100,000 income limitation for converting a traditional IRA to a Roth IRA ends.

  Tax Tip #27: Since 2001, Congress has passed at least one new tax law every year. These laws have been filled with provisions that phase in or out over several years and some that apply retroactively or take effect at some distant future date.

  Tax Tip #28: The Internet can provide useful information on many subjects, but heed two cautions about online tax material. First, check the date. Tax law changes so frequently that facts are soon out of date and incorrect. Second, beware of tax scams promoted on the Internet.

  Tax Tip #29: The business entity your company operates under can have a significant effect on the taxes you pay and your costs of doing business. As your business grows or changes, it may be advantageous to switch to another form of operating. Among the main entity choices: sole proprietor, partnership, C or S corporation, and LLC.

  Tax Tip #30: What if you omit taxable income or a tax deduction on your tax return? Or you receive a corrected W-2 or 1099 after you've already filed your return. Oversights and errors are not uncommon, so the IRS provides a way for you to correct them. You can file an amended return for up to three years after filing the original return.