Tax
News
2006 Tax News
Long Distance Tax
Credit
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IRS
Announces Hybrid Cars that Qualify for a Tax Credit
Last year's Energy Policy Act
replaced the $2,000 clean-fuel burning deduction with a tax credit
that is potentially worth much more. The tax credit for hybrid
vehicles applies to vehicles purchased or placed in service on or
after January 1, 2006.
The credit is only available to the
original purchaser of a new, qualifying vehicle. (If a qualifying
vehicle is leased to a consumer, the leasing company may claim the
credit.) The amount of the credit varies based on the fuel
efficiency of the vehicle.
These models have been certified
by the IRS for the credit in the following amounts:
-
2007 Ford Escape Front WD
Hybrid — $2,600
-
2007 Ford Escape 4 WD Hybrid —
$1,950
-
2007 Mercury Mariner 4 WD
Hybrid — $1,950
-
2007 Toyota Camry Hybrid —
$2,600
- 2005 Toyota Prius — $3,150
- 2006 Toyota Prius — $3,150
- 2006 Toyota Highlander 4WD
Hybrid — $2,600
- 2006 Toyota Highlander 2WD
Hybrid — $2,600
- 2007 Lexus GS 450h — $1,550
- 2006 Lexus RX400h 2WD — $2,200
- 2006 Lexus RX400h 4WD — $2,200
- 2006 Ford Escape Hybrid Front WD
— $2,600
- 2006 Ford Escape Hybrid 4 WD —
$1,950
- 2006 Mercury Mariner Hybrid 4 WD
— $1,950
- 2005 Honda Insight CVT — $1,450
- 2006 Honda Insight CVT
— $1,450
- 2005 Honda Civic Hybrid MT and
CVT — $1,700
- 2006 Honda Civic Hybrid CVT —
$2,100
- 2005 Honda Accord Hybrid AT and
Navi AT — $650
- 2006 Honda Accord Hybrid AT
w/updated calibration and Navi AT w/updated calibration —
$1,300
Another hurdle: If you're
interested in the tax break, you may want to buy soon because the
full credit is only available for a limited time. Taxpayers can
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. The IRS and manufacturers
are tracking these amounts. For example, for the quarter ending
March 31, 2006, the IRS announced that Toyota (which owns Lexus)
sold 41,779 qualifying vehicles to retail dealers and Ford (which
owns Mercury) sold 6,192 qualifying vehicles.
For the second
and third calendar quarters after the manufacturer records its sale
of the 60,000th vehicle, taxpayers may claim 50 percent of the
credit. For the fourth and fifth calendar quarters, taxpayers may
claim 25 percent of the credit.
Collect a Double Tax Break For
Fuel-Efficient Vehicles
Several new federal income tax credits kicked in this year for
buying new fuel-efficient vehicles. In this article, we explain two
of them, list the IRS-approved credit amounts to date, and show you
how to combine the credit with another tax break for home equity
loans
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Employers
with less than $4000 payroll may file Form
944
Beginning January 1, 2006, certain
employment tax filers will be able to file the new Form 944
(Employer’s Annual Federal Tax Return) once a year rather than
filing Form 941 (Employer’s Quarterly Federal Tax Return) four times
a year.
The new Form 944 will reduce burden on eligible small
employers who file quarterly returns with little or no employment
tax due. Most employers who file Form 944 will be able to make a
single payment with their annual return.
Eligible employers
are those with estimated annual employment tax liability of $1,000
or less. The IRS will begin mailing notification letters between
February 1 and February 15, 2006 to eligible small employers for
calendar year 2006. Employers who do not receive a letter and
believe they are eligible to file the new Form 944 can call the IRS
at 1-800-829-0115 to find out if they qualify. Taxpayers should
contact the IRS by April 1, 2006.
New employers who expect to
owe $1,000 or less in total annual employment tax (approximately
$4,000 or less in annual wages) also are eligible to file Form 944.
These employers can indicate their estimated tax amount when
applying for their EIN (Employer’s Identification Number) on Form
SS-4. The IRS will notify the employer to file either Form 944 or
Form 941 in the same notice indicating the taxpayer’s new EIN
1/4/06
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The IRS is hiring private debt
collectors.
The Internal Revenue Service
plans to turn over the names of people who owe $7.7 billion to debt
collection agencies starting in June. If the extra heat pays off,
the agency gradually will add to the list as it whittles away
roughly $50.7 billion in unpaid taxes.
The move will give
many Americans one more reason to hate the IRS.
"It's hard
enough making it as it is, and then you're going to have a
government agency hiring collectors to hound people?" said Christina
Hess, 24, a catering administrative assistant who doesn't owe any
back taxes. "It just seems like another way to screw us any way they
can."
IRS officials say turning over the names of deadbeat
taxpayers to professional collectors is necessary to slow the
growing debt of the most recalcitrant taxpayers. Their overdue taxes
grew 86 percent to $13 billion between 2000 and 2003.
"We
believe that many of these taxpayers have simply chosen not to pay,
even though they have the means to do so," IRS Commissioner Mark
Everson said in congressional testimony. "This is unfair to every
hard-working taxpayer who has paid his or her fair
share."
Congress voted to allow the IRS to use debt collectors
last year as a way to generate more income in light of the
ballooning budget deficit.
The agency is reviewing bids and
plans to pick between one and three collection agencies by
March.
To minimize scams, IRS employees will send letters
notifying taxpayers that a debt collector will be contacting
them.
A similar plan failed miserably when it was tested
about a decade ago, costing the government about $21 million to
collect just $3.1 million, according to a Government Accountability
Office report. 1/2/06
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IRS Audits are now
focusing on Executive Fringe Benefits.
The purpose is to deny the
deduction for the business and to include the expenses as income for
the Executive. Areas scrutinized in the audits
include:
- Athletic Skyboxes and Cultural Entertainment
Suites Awards
- Bonuses Club Memberships
- Corporate Credit Cards
- Employee Discounts
- Paid Vacations
- Employer-Paid Parking
- Loans Executive Dining Room
- Relocation Costs
- Financial Planning
- Outplacement Services
- Chauffeurs
- Transportation/ Company Cars
- Spousal/ Dependent Travel
- Private Jet Use
- Transfer of Property (such as real estate, stock,
computers, furniture and cell phones)
- Personal Use of "Listed" Property (such as
computers, cell phones, and home office items)
10/25/05
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44.5 cents
Mileage
The Internal Revenue Service today issued the 2006
optional standard mileage rates used to calculate the deductible
costs of operating an automobile for business, charitable, medical
or moving purposes.
Beginning Jan. 1, 2006, the standard
mileage rates for the use of a car (including vans, pickups or panel
trucks) will be:
44.5 cents per mile for business miles
driven;
18 cents per mile driven for medical or moving purposes;
and
14 cents per mile driven in service of charitable
organizations, other than activities related to Hurricane Katrina
relief.
The new rate for business miles compares to a rate of
40.5 cents per mile for the first eight months of 2005. In
September, the IRS made a special one-time adjustment for the last
four months of 2005, raising the rate for business miles to 48.5
cents per mile in response to a sharp increase in gas prices, which
topped $3 a gallon. 12/5/05
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The US Tax System
is Voluntary tax protester found Guilty
Irwin Schiff, an anti-tax crusader, and an associate
were found guilty on October 24, 2005 of multiple charges including
conspiracy, tax evasion and tax fraud.
Mr. Schiff, 77, who
argues that paying taxes is voluntary, was handcuffed and led from
United States District Court after a jury found him guilty of all 13
charges. Schiff has written books and maintained a lucrative
business convincing gullible people that his convoluted ramblings
were valid legal research. 10/28/05
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IRS Tax Extensions for
6 Months
Form 4868 will get you an automatic 6-month extension
and Form 2688 will become obsolete.Additionally, Form 7004 will also
give you an automatic 6-month extension and will also be used for
extensions for trusts and partnerships as well.Forms 2758, 8736 and
8800 will likewise become obsolete. All effective Jan1 2006.
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Nexus Issue to be
Addressed by New Jersey Supreme Court
The New Jersey Supreme Court has agreed to review a decision that
raises the question of whether physical presence is required to
establish sufficient nexus under the Commerce Clause of the U.S.
Constitution for purposes of imposing the corporation business tax
on the income of out-of-state corporations. The New Jersey Superior
Court, Appellate Division concluded that the tax was
constitutionally applied to income derived by a Delaware corporation
from the licensing of trademarks, trade names, and service marks to
a New Jersey clothing retailer, even though the corporation had no
offices, employees, or real or tangible property in the state (see
TAXDAY, 2005/08/25, S.14).
Lanco, Inc. v. Director, Division of Taxation, New Jersey
Supreme Court, Dkt. 58542, petition for certiorari granted January
30, 2006.
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