Tax Updates Fall 2007
To help our clients prepare for the 2007 tax season, Frank and Company, p.c. is providing the following updates regarding the Internal Revenue Service (IRS).
Inflation Adjustments and Deductions
Tax brackets, personal exemptions, standard deductions and other tax items will be adjusted for inflation. The personal exemption for 2007 will be $3,400. There are changes to amounts for deductions and credits; moving expenses; tuition and fees; alternative minimum tax; self-employment tax; earned income credit; and other credits.
Health Savings Account (HSA) Deduction
Beginning in 2007, there have been several changes to rules on Health Savings Accounts:
- Individuals can fund their health savings accounts by making a one-time transfer from their IRAs.
- Qualifying health flexible savings accounts (FSA) or Health Reimbursement Arrangements (HRAs) may be transferred directly to an HSA on a one-time basis.
- The maximum deductible contribution is no longer limited to the annual deductible under the high deductible plan.
- The maximum HSA contribution for an individual is $2,850 and $5,650 for family coverage.
For S-Corps
Small businesses now will be able to file Form 2553 (Election by a Small Business Corporation) and form 1120S (US Income Return for an S Corporation) simultaneously. Filing these forms in conjunction is intended as a simplified method for taxpayers to request relief for late S corporation elections.
Get an EIN Instantly
The IRS announced that taxpayers can request and obtain an Employer Identification Number (EIN) in real time through a Web-based system where these requests are processed instantly. In the past, EIN requests could take up to five weeks to be processed.
Section 403 (b) Tax-Sheltered Annuities
The IRS has issued comprehensive guidance on section 403(b) tax-sheltered annuities. These annuities may be bought for only common law employees of certain exempt educational, charitable and religious employers. Taxes on these annuities are deferred until payments are received.
Tax Planning = Tax Savings!
The end of the year is a great time to get your financial house in order and prepare for the filing of your 2007 taxes. There are some actions that will help you save taxes, if you act before December 31. (This is not an exhaustive list.)
- Increase the amount in your employer’s health flexible spending account;
- If your income is NOT taxed at a rate higher than 15%, it may be better to hold off selling capital assets until 2008;
- Make any energy-saving improvements to your home;
- If you are thinking of buying a hybrid vehicle eligible for a tax credit, do it before year’s end;
- Settle insurance or damage claims in order to maximize your casualty loss deduction;
- If you are self-employed, set up a self-employed retirement plan;
- Save gift and estate taxes if you make your gift up to $12,000 to an unlimited number of individuals; and
- Extend your subscriptions to professional journals and pay your professional dues.
For more information on any of these issues or other specific tax questions, please contact the Frank & Company, p.c. Tax Services Department at (703) 821-0702 or info@frankandco.com.
Disclaimer
Copyright 2006 Frank & Company, p.c.
