Phone excise tax refund, other tax time hints

By MIKE SULLIVAN ELGIN -- Keeping pace with an ever-evolving Internal Revenue Service tax code has helped Krueger Tax & Business Advisory become a valuable resource for a growing list of small business owners.

With a new office at 81 Market St. in Elgin and two others in Hampshire and Genoa, owner Matt Krueger has been resolving thorny tax issues for his clients, whose eyes tend to glaze over even at the mere mention that the tax season is here. There are a few new wrinkles this year that both individuals and businesses should think about, Krueger said.

Few are aware they are eligible for a new refund of federal excise taxes collected on cell and long-distance phone service over the last three years. Word came down on May 25 that the IRS no longer would collect the 3 percent excise tax. Instead, the IRS announced that the taxes paid over the three years will be refunded -- and better -- may be claimed on 2006 federal income tax returns.

The refund covers federal excise taxes paid over a 41-month period. To save taxpayers from trying to find 41 months' worth of phone bills -- and then calculating the total federal excise tax paid -- the IRS devised a refund table, based on the number of exemptions a taxpayer claims on his tax return.

The refunds range from $30 to $60 for the average taxpayer, but Krueger said the actual tax paid may have been considerably more, especially for a small business owner. So it could be worth your while to find those old phone bills, he said.

"Actually, some businesses have started to take advantage of it," Krueger said.

He cited a $515,00 refund for a billion-dollar corporation in Freeport that got the cash back based mostly on the taxes paid for cell phone calls made by employees, which Krueger said generated substantial long-distance bills.

Another change announced this year by the IRS, according to Krueger, is the energy efficiency credit, which can net taxpayers up to $500 in cash if they've done specific home improvements such as the installation of new energy-efficient windows or water heaters.

"The maximum credit is $500 and is based on what was purchased," Krueger explained.

"The new code is kind of detailed and we definitely help clients with that," he added.

In addition, Krueger noted, taxpayers may take advantage of sales tax deductions related to home improvements made in prior years during which, for example, they may have purchased a vehicle.

"Basically, the sales tax paid on large purchases -- either for home improvements or a new car -- may be itemized on Schedule A deductions," Krueger explained.

One way of easing one's tax burden, he explained, is to open a small or home-based business.

Krueger notes that if a business owner purchases an SUV weighing more than 6,000 pounds and it's used for more than 50 percent on business, the owner can write off the whole amount -- up to $25,000 in the first year.

"People who are not business owners don't have the luxury to do that," he said.

Krueger's firm also assists clients in crafting 401(k)s, medical bill deductions and health savings accounts.

He said although many of his clients take deductions for gifts made to charities, Krueger cautions them that the IRS, since the summer of 2006, has made requirements for such deductions a bit more stringent.

"They are requiring taxpayers to have either a bank record or some sort of receipt for certain cash and noncash contributions," Krueger said.

For more information, call (847) 683-2500

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