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The Latest Tax News

We hope you’re enjoying this holiday season.  As the year winds down, we thought you’d appreciate a briefing on four noteworthy tax events.   

IRS Headquarters Reopens
After a six-month closure due to flooding, IRS headquarters reopened roughly one week ago.  As of December 11^th, submissions should no longer be sent to the temporary address and now follow standard procedures.  Taxpayers have also been reminded to fax a copy of their requests to the headquarters’ (202) 622-7707 number; the temporary fax and telephone numbers should no longer be used.  

No Change in Interest Rates
On December 12^th the IRS announced that there will be no change in interest rates for the first quarter of 2007.  Current interest rates are as follows:  

• 8% for overpayments [7% in the case of a corporation]

• 8% for underpayments

• 10% for large corporate underpayments

• 5.5% for the portion of a corporate overpayment exceeding $10,000

As a matter of code, interest rates are determined on a quarterly basis.  Interest rates for overpayment and underpayment is determined by the federal short-term rate plus 3% for taxpayers other than corporations.  For corporations, underpayment is the federal short-term rate plus 3%; overpayment is the federal short-term rate plus 2%.  

Tax Law Changes and How They Affect Charitable Contributions
Last summer the Pension Protection Act made several changes to tax law, many of which you should be aware of when giving charitable contributions this year-end:  

• IRA pension owners, 70 ½ and over, can transfer up to $100,000, tax-free, to eligible charities.

• Clothing and household items donated after August 17^th, 2006 must be in good condition to qualify.

• Taxpayers can claim any item more than $500 regardless of condition, as long as it’s accompanied by an appraisal.   

• Monetary contributions more than $250 must come with a receipt from the charity and a bank record  

• Donations can be made by cash, check, electronic transfer, credit card, or payroll deduction (must accompany a copy of the pay stub, W-2 statement, or other employer document)

For more information, visit the IRS website.  

Hybrid Cars and Alternative Motor Vehicles Will Get You a Tax Credit
The clean-burning deduction has been replaced with a tax credit by the Energy Policy Act of 2005.  Taxpayers who purchased hybrid and alternative motor vehicles after January 1, 2006 can claim an additional tax credit and either lower the federal tax due, or eliminate their federal obligation altogether.  The credit is only available to actual purchasers of qualifying vehicles; leasing companies claim the credit for qualifying vehicles leased to customers.

For more information, visit the IRS website.

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