Military persons who serve in a combat zone may elect to include combat pay in the earned income amount used to figure your earned income credit for 2006
(Vocus) April 6, 2007
As tax season comes to a close, Liberty Tax Service, one of the nation's largest retail income tax preparation firms, has announced the seven major questions last-minute taxpayers should answer before filing their 2006 tax returns.
DID YOU KNOW THAT YOU HAVE 2 EXTRA DAYS TO FILE?
The tax filing deadline for 2006 taxes will be Tuesday, April 17th, 2007. Taxpayers will have extra time to file and pay because April 15th falls on a Sunday in 2007, and the following day, Monday, April 16th, is Emancipation Day, a legal holiday in the District of Columbia.
ARE YOU ELIGIBLE FOR THE EARNED INCOME TAX CREDIT?
Twenty percent of eligible low-income workers have overlooked this tax break. The maximum earned income credit (EITC) this year is $4,536. EITC offsets tax liability dollar for dollar, often resulting in a refund.
The adjusted gross income (AGI) and earned income limits for 2006 are:
- $36,348 for taxpayers with more than one qualifying child, ($38,348 for Married Filing Jointly)
- $32,001 for taxpayers with one qualifying child, ($34,001 for Married Filing Jointly)
- $12,120 for taxpayers with no qualifying child, ($14,120 for Married Filing Jointly)
The maximum earned income credit for two or more qualifying children is $4,536, and for one child it is $2,747. For a taxpayer with no children, the maximum earned income credit is $412. The allowable amount of investment income (interest, dividends and capital gain distributions) has increased to $2,800. If the primary taxpayer or spouse served in a combat zone during 2006, they can elect to include combat pay in the earned income amount used to figure earned income credit if this increases the benefit. This does not make combat pay taxable.
"Military persons who serve in a combat zone may elect to include combat pay in the earned income amount used to figure your earned income credit for 2006,"said John Hewitt, CEO of Liberty Tax Service.
DOES THE IRS OWE YOU FROM PAST YEARS?
The IRS reports that there are $2.2 billion dollars in outstanding refunds for 2003. If you're one of the 1.8 million people who could claim a refund for 2003, you must file a 2003 return by April 17th, 2007.
DID YOU CLAIM THE TELEPHONE EXCISE TAX REFUND?
Millions of taxpayers have overlooked this one-time refund so far this tax season. The telephone tax refund will be treated as a one-time payment which can be used as a credit to reduce the amount owed, or to increase the amount of the refund. This year, most individual taxpayers will get a $30 to $60 refund on long-distance phone taxes they paid in the past, and this process won't require itemizing. The IRS has established standard refund amounts from data and phone industry information. These refund amounts are based on the number of exemptions claimed on the 2006 tax return. This tax break applies to everyone who paid for long-distance phone taxes during the specific time interval.
COULD OPENING AN IRA BEFORE APRIL 17th LOWER YOUR TAX LIABILITY?
Taxpayers still have until April 17th to open a traditional Individual Retirement Arrangement (IRA) that may help them lower their tax liability for this year. For taxpayers covered by a pension plan at work, the modified adjusted gross income limit for deducting traditional IRA contributions has increased. A couple filing married filing jointly whose income is between $75,000 and $85,000 can take a partial deduction this year. Single taxpayers (including head of household filers) making between $50,000 and $60,000 can take a partial deduction. The contribution limit for 2006 is $4,000 ($5,000 if age 50 or older).
Those who contributed to an IRA or an employer-sponsored retirement plan in 2006 may be eligible for a credit. This nonrefundable credit is based on the return income and can be up to $1,000 per taxpayer. It can be taken in addition to the deduction of the traditional IRA contribution.
IF YOU ARE A TEACHER OR EDUCATOR DID YOU CLAIM THE $250 DEDUCTION FOR OUT-OF-POCKET EXPENSES?
This tax break was renewed late in 2006. Once again, eligible educators who spend their own money on classroom supplies may qualify for a tax break. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide who works at least 900 hours in either a public or private school. The adjustment for these expenses, of no more than $250, can be claimed whether or not the taxpayer can itemize. This adjustment has been extended through the 2007 tax year.
IS SOMEONE IN YOUR FAMILY IN COLLEGE?
The tuition and fees deduction was also renewed late in 2006. Qualifying higher education expenses such as tuition and fees paid for the primary taxpayer, a spouse, or a dependent may be deductible. It works like this: If one's modified adjusted gross income (MAGI) is not more than $65,000 ($130,000 if you are married filing jointly), the maximum tuition and fees deduction is $4,000. If one's MAGI is larger than $65,000 ($130,000), but is not more than $80,000 ($160,000 if you are married filing jointly), the maximum deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000).
About Liberty Tax Service:
Founded in 1997, Liberty Tax Service is the fastest growing retail tax preparation company in the industry's history. Founder and CEO John T. Hewitt has 38 years of tax industry experience, the most of any CEO in the tax preparation business. Hewitt is also the founder of Jackson Hewitt Tax Service (NYSE: JTX).
Liberty Tax Service (http://www.libertytax.com) operates 2,400 offices throughout the United States and Canada, and has prepared over 4,000,000 individual income tax returns. The company focuses on computerized income tax preparation, electronic filing and refund loans. Emphasis on customer service including audit assistance, a money back guarantee and free tax return checking are just a few of the above and beyond features offered by Liberty Tax Service.
Liberty Tax VP of Marketing
(800) 790-3863 ext. 8022
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