Accounting Professor Offers Last-Minute Tax Tips
By Lori Wright, Media Relations
February 20, 2008
Before you file your taxes, you may want to consider several last-minute tips
before sending your W-2s to Uncle Sam by April 15.
John Colliander, adjunct professor in accounting and taxation at UNH’s
Whittemore School of Business and Economics, suggests taxpayers consider several
strategies in preparing and filing their 2007 tax returns.
The maximum contribution for 2007 to your Individual Retirement Account (either
Roth or traditional) is $4,000 (increasing to $5,000 for 2008). Individuals
who have reached age 50 before Dec. 31, 2007, are allowed an additional "catch
up" contribution of $1,000. It’s not too late to make your 2007
IRA contribution: Taxpayers have until April 15, 2008, to make their 2007 contribution.
In fact, a deduction may be taken on your 2007 tax return even though the contribution
has not as yet been made.
The 2007 alternative capital gains tax rate for individuals in the 10 percent
or 15 percent tax bracket is 5 percent. Beginning in 2008, a 0 percent rate
replaces the 5 percent rate. If you qualify for this rate, you might consider
selling capital assets that have appreciated while this 0 percent rate is in
effect. While this rate is presently in effect for next year as well, there
is no guarantee that there will not be a tax change, so you might want to take
advantage of this rate in 2008.
Personal Energy Credits
Individuals are entitled to a variety of personal energy credits for 2007.
Among these are credits for the installation of certain energy saving devices
installed in your principal residence prior to Jan. 1, 2008 (e.g. qualified
exterior doors, windows, furnaces, and the like). You also may be entitled
to an alternative motor vehicle credit on your 2007 tax return if you purchased
an eligible vehicle last year (e.g. a qualified hybrid vehicle). Among other
requirements you must meet, you must be the original user of the vehicle. You
would claim this credit on form 8910.
Foreign Tax Credit
If you are the recipient of foreign source income (e.g. dividends from a Canadian
corporation) from which foreign income taxes were withheld at the source, you
may be entitled to a credit against your U.S. income for these taxes. There
are limits to the amount of credit to which a taxpayer is entitled, but generally
most, if not all, foreign taxes paid is eligible for the credit.
Unfortunately for tax years beginning after Aug. 17, 2006 (generally meaning
2007), no deduction for any cash contribution will be allowed without some
bank record or receipt. For example, weekly cash contributions to your local
church would not be deductible without some form of substantiation.
If an individual holds two jobs, each employer is required to withhold social
security taxes. Since individuals are liable for the FICA portion of such taxes
only up to a total wage base of $97,500 (for 2007), in many instances a person’s
actual FICA payments may exceed the maximum payments due. Don’t forget
that such excess FICA is a credit against taxes owed.
Alternative Minimum Tax
In recent years, inflation has overtaken the AMT exemption amount. Congress
passed the Tax Increase Prevention Act of 2007 late in December, which, among
other things, raises the AMT exemption amount. If you are subject to the AMT,
be sure that the AMT form you are using (form 6251) is the current form, reflecting
this new exemption amount.
As in prior years, individuals are entitled to an automatic six-month extension
to file their individual tax return (1040). Filing form 4868 by April 15, 2008,
will extend the filing deadline to Oct. 15, 2008. It will not, however, extend
the due date for the payment of taxes. The estimated amount of your taxes is
due with the filing of form 4868. Failure pay all taxes by April 15, 2008,
will result in the assessment of penalties and interest.