The 2007 Internal Revenue Service (IRS) season promises to be a busy one, with a new refund deposit feature, the telephone excise tax refunds and the recently enacted tax breaks that will require extra attention from tax preparers.
"Taxpayers will have a number of new tax benefits and features available this year," said Mark Everson, IRS commissioner. "We encourage taxpayers to take a few minutes to review these changes, particularly those involving the recently enacted tax law provisions. The IRS will do everything it can to minimize the impact on taxpayers."
Telephone Excise Tax Refund
A request for a refund can be made by individuals taxpayers if they paid the federal excise tax on long-distance or bundled service. The Federal excise tax stopped being collected by the government in August and plans were announced to provide refunds of these taxes billed after February 28, 2003, and before August 1, 2006. Requests for refunds are expected from over 146 million individual taxpayers.
Taxpayers have several options to request refunds.
1. Individual taxpayers can request refunds by using the standard amounts that are based on the total number of exemptions claimed on the 2006 federal tax return. If the standard amount is chosen, it will save the filer the time of sorting through 41 months of old phone bills. The standard amounts are $30 for a person filing a return with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more. As an example, a married couple filing a joint return, with two dependent children -- a total of four exemptions -- is eligible for the maximum $60 standard. To receive the standard amount, the eligible individual taxpayers will complete an additional line on their regular 2006 1040 return (line 71 on Form 1040; Line 42 on Form 1040A; Line 9 on Form 1040EZ.)
2. Individual taxpayers who want to request a refund of the actual amount of tax paid should figure that amount using Form 8913 and report it on their income tax return.
3. Business and tax-exempt organizations can also request a refund under a different procedure. More information is available at IRS.gov.
New 1040EZ-T Form
For those people who do not need to file a regular tax return, a special, shorter form to allow them to request the telephone refund was developed by the IRS. Form 1040EZ-T copies will be available at IRS.gov, over the phone and a numerous other locations. People who qualify for 1040EZ-T are urged to file electronically through the Free File program, available for free beginning later this month. Using this new form, more than 10 million taxpayers who aren't normally required to file a tax return, may be able to use this new form. Taxpayers may either request the standard amount on the form or attach a Form 8913 to request actual amounts.
Recent Tax Law Enactments
The IRS is Taking steps to help taxpayers receive the information they need to take advantage of tax law provisions enacted in December after the IRS forms were printed.
The recent legislation affects a number of areas of tax law. The most significant of these involve the deductions for state and local sales tax, educator expenses and higher education tuition and fees. More information is available at the IRS site.
A special IRS mailing of Publication 600, with sales tax tables and instructions for deductions on Schedule A (Form 1040), will go out to 6 million taxpayers who will receive the 2006 1040 package this month.
Any taxpayers using the paper Form 1040 will have to follow special instructions if they are claiming any of the three deductions. The key paper 1040 forms were printed in November, so taxpayers will have to make special notations to claim the deductions if they are using the paper forms. For anyone using IRS e-file or Free File, tax software will be updated on the three key tax provisions, with refunds going out faster to e-filers.
"As we always do, we encourage taxpayers who think they may claim these deductions to file electronically. They get their refunds faster through e-file," said Everson. He stresses that e-file reduces the chances for making an error, compared to claiming deductions on the paper 1040 and that e-file is secure, fast and reliable.
The IRS will be not be able to process tax returns claiming any extender-related deductions until early February; all others can be filed and processed normally. Based on last year, only about 930,000 tax returns claimed any of the three extender provisions by February 1.
New Split Refund Option
Taxpayer are now able to split their refunds among up to three accounts held by three different U.S. financial institutions, like credit unions, mutual funds and banks. To split the funds among two or three different account, taxpayers should complete the new 8888 Form, They can also continue to use the direct deposit line on Form 1040 to electronically send the funds for deposit to one account.
Free File Improvement
Improvements in the free electronic filing program which begins later this month, will benefit the 95 million taxpayers who qualify by earning $52,000 or less. The program now features an agreement by private sector partners to remove Refund Anticipation Loans (RALs), as well as other ancillary offerings from the program. Free File is a partnership between the IRS and the private sector Free File Alliance.
There are several options to help taxpayers deal with the many changes this year. IRS.gov has new features that include:
1040 Central. This online stop will aid people who are looking for key forms and trying to find the new changes to the tax code. It also gives answers to the most frequently asked taxpayer questions.
Where's My Refund? After filing their returns, taxpayers are able to track their refund through this new online tool at IRS.gov. To use "Where's My Refund?" taxpayers will need some of the exact information contained on their tax returns. Users may access this secure site and be able to discover if the IRS has processed their tax return and if the refund has been sent.
E-file has received high marks from the public and it ranks as one of the most popular government programs, according to the American Customer Satisfaction index. An overwhelming 97 percent of respondents to an e-file survey would recommend its use to others.
"With all the changes taking place, this is a good year for paper filers to try e-file," advises Everson. "We remind taxpayers that e-filing is fast, secure and reliable."