Late tax changes may delay filing

Caution: Tax filing "wait-state" ahead. Though wait-state is a term that is usually applied to the pause you notice when your computer waits for a task to finish, tax legislation signed late in 2007 may have a similar effect on your 2007 taxes — a delay in submitting your return to the IRS.

Here are the details:

The change: On December 26, 2007, President Bush signed a law increasing the alternative minimum tax (AMT) exemption. For 2007, the exemption is $66,250 if you're married filing jointly ($44,350 if you're single or file as head of household).

The law also affects the credits you apply against your AMT liability.

The problem: Filing may be delayed even if you're not subject to the AMT. That's because IRS computers require programming changes to process the new provisions correctly. In addition, the law was enacted after 2007 tax forms were printed, so you might have received forms and instructions with outdated information.

The result: You may have to wait to file your tax return until mid-February.

The specifics: You're affected if your return will include any of the following:

• Hope or lifetime learning credits (Form 8863).

• The nonbusiness energy property credit or the residential energy efficient property credit (Form 5695).

• The credit for child and dependent care expenses (Form 1040A, Schedule 2).

• The mortgage interest credit (Form 8396).

• The District of Columbia first-time homebuyer credit (Form 8859).

All other forms, including the one used to calculate the AMT (Form 6251), have been updated.

Contact us to learn if the delay applies to you. Just don't wait too long. Despite the holdup, the due date for filing your 2007 tax return is still April 15.

2008 standard mileage rates released

If you use the IRS standard mileage rate to reimburse yourself or your employees for the business use of personal automobiles, it's time to update your calculation. Beginning January 1, 2008, the new rate for business driving is 50.5¢ a mile.

The standard rate takes the place of costs such as gas, oil, depreciation, licenses, maintenance, and tires. In most cases you can use the standard amount instead of keeping records of actual expenses. (If you're self-employed, you may want to track both mileage and expenses to determine which gives you a bigger deduction at year-end.)

Remember to save receipts for parking fees and tolls, since they're not included in the standard rate and can by deducted in addition to the mileage rate. You'll also need to maintain a log showing the dates you use your car, truck, or van for business, where you go and the purpose of each trip. In addition, take time now to note your beginning-of-the-year odometer reading. That will make it easier to track the total miles you drive this year.

Another change to mileage rates: For 2008, the amount for deductible medical and moving mileage has been reduced to 19¢ a mile.

The rate for the charitable use of your vehicle remains the same at 14¢ per mile driven during 2008.

Here's a comparative summary of the standard rates per mile:

For answers to your questions about recordkeeping requirements and maximizing vehicle expense deductions, please give us a call.

Note the recordkeeping requirements for charitable contributions

Are you drawing up your year-end charitable contributions list? After you check it twice, add a reminder to gather the paperwork required to claim a gift for yourself: an itemized tax deduction.

Here are four tips:

1. Remember the new rules for cash donations. You'll need a written record to deduct cash donations on your 2007 tax return, no matter what amount you donate. The record can be from the charity or, for donations under $250, in the form of a cancelled check, or credit card or bank statement.
   
   If you contribute via payroll deduction, keep your paystub and documentation from the charity (a pledge card, for example).
   
    
2. Know when old rules still apply. If you donate $250 or more in money or property, ask for a receipt from the charity showing how much you contributed and any benefit you received in return.
   
    
3. Log vehicle expenses. Your record should indicate the charity's name, the dates you used your car, and either the actual cost of gas and oil or the number of miles you drove. Parking fees and tolls are also deductible, whether you claim actual costs or the standard mileage rate for charitable driving (14 cents for 2007).
   
    
4. Keep receipts for unreimbursed items. These include out-of-pocket costs directly related to charitable service, such as buying or cleaning uniforms used for your volunteer work.

Additional recordkeeping rules may apply, depending on what you donate. For instance, some noncash contributions require an appraisal. Give us a call. We can review the records you need to obtain the maximum tax benefit.