Differences Between 2007-2008 Pub 17 for Fed Taxes

From our good friends at the IRS.  Enjoy and for more information please visit the IRS web site at www.irs.gov:

Kim Greenblatt

Publication 17 – Introductory Material

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Table of Contents

What’s New for 2007
What’s New for 2008
Reminders
Introduction
Icons.
Ordering forms and publications.
Tax questions.
All material in this publication may be reprinted freely. A citation to Your Federal Income Tax (2007) would be appropriate.

The explanations and examples in this publication reflect the interpretation by the Internal Revenue Service (IRS) of:

Tax laws enacted by Congress,

Treasury regulations, and

Court decisions.

However, the information given does not cover every situation and is not intended to replace the law or change its meaning.

This publication covers some subjects on which a court may have made a decision more favorable to taxpayers than the interpretation by the IRS. Until these differing interpretations are resolved by higher court decisions or in some other way, this publication will continue to present the interpretations by the IRS.

All taxpayers have important rights when working with the IRS. These rights are described in Your Rights as a Taxpayer in the back of this publication.

What’s New for 2007
This section summarizes important tax changes that took effect in 2007. Most of these changes are discussed in more detail throughout this publication.

Changes are also discussed in Publication 553, Highlights of 2007 Tax Changes.

Extended tax provisions. The following tax provisions have been extended through 2007.

The deduction from adjusted gross income (AGI) for educator expenses.

The deduction for qualified tuition and fees.

The District of Columbia first-time homebuyer credit (for homes purchased before January 1, 2008).

The election to include nontaxable combat pay in earned income for figuring the earned income credit.

The itemized deduction for state and local general sales taxes.

Telephone excise tax credit. This credit was available on your 2006 tax return. If you filed but did not claim this credit on your 2006 return, file Form 1040X, Amended U.S. Individual Income Tax Return, using a simplified procedure explained in its instructions to amend your 2006 return. If you were not required to file a 2006 return, see the 2006 Form 1040EZ-T, Request for Refund of Federal Telephone Excise Tax.

Standard mileage rates. The standard mileage rate for the cost of operating your car is 48.5 cents a mile for all business miles driven in 2007. See chapter 26. The standard mileage rate allowed for use of your car for medical reasons is 20 cents a mile for 2007. See chapter 21. The standard mileage rate allowed for use of your car for determining moving expenses is 20 cents a mile for 2007. See Publication 521, Moving Expenses.

Retirement savings plans. The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans. Traditional IRA income limits. You may be able to take an IRA deduction if you were covered by a retirement plan and your modified adjusted gross income is less than $62,000 ($103,000, if you are married filing jointly or a qualifying widow(er)). See chapter 17. Roth IRA income limit. You may be able to make a Roth IRA contribution if your modified adjusted gross income is less than $114,000 ($166,000, if you are married filing jointly or a qualifying widow(er)). Catch-up contributions in certain employer bankruptcies. You may be able to deduct up to an additional $3,000 contributed to your IRA if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. See Publication 590, Individual Retirement Arrangements (IRAs). Qualified health savings account (HSA) funding distribution. Generally, you can make a one-time direct transfer from your IRA to your HSA and exclude the amount transferred from your income. See Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Limit on elective deferrals. Generally, the maximum amount of elective deferrals under a salary reduction agreement that could be contributed to a qualified plan increased to $15,500 ($20,500 if you were age 50 or older). However, for SIMPLE plans, the amount is $10,500 ($13,000 if you were age 50 or older). Rollovers by nonspouse beneficiaries. For distributions after 2006, a nonspouse designated beneficiary may have a distribution from an eligible retirement plan of a deceased employee directly transfered (trustee-to-trustee) to his or her own IRA set up to receive the distribution. The transfer will be treated as an eligible rollover distribution and the receiving IRA will be treated as an inherited IRA. See Publication 575, Pension and Annuity Income, for more information. Retired public safety officer. For distributions after 2006, an eligible retired public safety officer can elect to exclude from income distributions of up to $3,000 made directly from a governmental retirement plan to the providers of accident, health, or long-term care insurance. See Publication 575 for more information. Retirement savings contributions credit. The adjusted gross income limit for claiming this credit is increased to $26,000 ($39,000 if head of household; $52,000 if married filing jointly). See chapter 37.

Mortgage insurance premiums. You may be able to treat mortgage insurance premiums paid in connection with home acquisition debt as home mortgage interest. See chapter 23.

Qualified joint venture. A qualified joint venture conducted by you and your spouse may not be treated as a partnership if you file a joint return for the tax year. See chapter 12.

New recordkeeping requirements for cash contributions. You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and amount) or a written communication from the charity. The written communication must include the name of the charity, date of the contribution, and amount of the contribution. See chapter 24.

Certain amounts increased. Some tax items that are indexed for inflation increased for 2007. Earned income credit (EIC). The maximum amount of income you can earn and still get EIC increased. The amount depends on your filing status and number of children. The maximum amount of investment income you can have and still be eligible for the credit increased to $2,900. See chapter 36. Standard deduction. The standard deduction for taxpayers who do not itemize deductions on Schedule A (Form 1040) has increased. The amount depends on your filing status. See chapter 20. Exemption amount. You are allowed a $3,400 deduction for each exemption to which you are entitled. However, your exemption amount could be phased out if you have high income. See chapter 3. Limit on itemized deductions. Some of your itemized deductions may be limited if your adjusted gross income is more than $156,400 ($78,200 if you are married filing separately). See chapter 29. Tax benefits for adoption. The adoption credit and the maximum exclusion from income of benefits under an employer’s adoption assistance program are increased to $11,390. See Adoption Credit in chapter 37. Hope or lifetime learning credit income limits increased. The amount of income you can have and still receive a Hope or lifetime learning credit has increased. See chapter 35. Social security and Medicare taxes. The maximum wages subject to social security tax (6.2%) increased to $97,500. All wages are subject to Medicare tax (1.45%).

Expired tax provision. The tax provision allowing an additional exemption amount for housing a person displaced by Hurricane Katrina has expired.

Frivolous tax submissions. The IRS has published a list of positions that are identified as frivolous. The penalty for filing a frivolous tax return is $5,000. Also, the $5,000 penalty will apply to other specified frivolous submissions. See chapter 1.

Filing erroneous claim for refund or credit. You may have to pay a penalty if, after May 25, 2007, you file an erroneous claim for refund or credit. See chapter 1.

Mailing your return. If you are filing a paper return, you may be mailing your return to a different address because the IRS has changed the filing location for several areas. If you received an envelope with your tax package, please use it. Otherwise, see Where To File near the end of this publication for a list of IRS addresses.

What’s New for 2008
This section summarizes the important changes that take effect in 2008 that could affect your estimated tax payments for 2008. More information on these and other changes can be found in Publication 553.

Retirement savings plans. The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans. IRA deduction increases. The amount you, and your spouse if filing jointly, may be able to deduct as an IRA contribution will increase to $5,000 ($6,000 if age 50 or older at the end of 2008). You may be able to deduct up to an additional $3,000 contributed to your IRA if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. See Publication 590. IRA income limits. You may be able to take an IRA deduction if you were covered by a retirement plan and your 2008 modified adjusted gross income is less than $63,000 ($105,000, if you are married filing jointly or a qualifying widow(er)).

Phaseouts reduced. Personal exemptions. The phaseout of the limit on personal exemptions is reduced by 2/3. Itemized deductions. The phaseout of the limit on itemized deductions is reduced by 2/3.

Child’s investment income. Beginning in 2008, the rules regarding the age at which a child’s investment income may be subject to tax at the parent’s tax rate is changed to include a child who is age 18 or a student under age 24, whose earned income is not more than one-half of the child’s support.

Capital gain tax rate reduced. The 5% capital gain tax rate is reduced to zero.

Expiring tax provisions. The following tax provisions are scheduled to expire at the end of 2007.

The deduction for educator expenses in figuring adjusted gross income (AGI).

The deduction for qualified tuition and fees.

The exclusion from income of qualified charitable distributions.

The itemized deduction for state and local general sales taxes.

The credit for nonbusiness energy property.

The District of Columbia first-time homebuyer credit (for homes purchased after 2007).

The election to include nontaxable combat pay in earned income for figuring the earned income credit.

At the time this publication went to print, Congress was considering legislation that would extend these provisions. To find out if this legislation was enacted, and for more details, go to www.irs.gov, click on “More Forms and Publications,” and then on “What’s Hot in forms and publications,” or see Publication 553.

Reminders
Listed below are important reminders and other items that may help you file your 2007 tax return. Many of these items are explained in more detail later in this publication.

Write in your social security number. To protect your privacy, social security numbers (SSNs) are not printed on the peel-off label that comes in the mail with your tax instruction booklet. This means you must enter your SSN in the space provided on your tax form. If you filed a joint return for 2006 and are filing a joint return for 2007 with the same spouse, enter your names and SSNs in the same order as on your 2006 return. See chapter 1.

Secure your tax records from identity theft. Identity theft occurs when someone use your personal information such as your name, social security number (SSN), or other identifying information, without your permission, to commit fraud or other crimes. An identity thief may use your SSN to get a job or may file a tax return using your SSN to receive a refund.To reduce your risk:

Protect your SSN,

Ensure your employer is protecting your SSN, and

Be careful when choosing a tax preparer.

Call the IRS at 1-800-829-1040 if you think your identity has been used inappropriately for tax purposes. Victims of identity theft who are experiencing economic harm or a systemic problem, or are seeking help in resolving tax problems that have not been resolved through normal channels, may be eligible for Taxpayer Advocate Service (TAS) assistance. You can reach TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Protect yourself from suspicious emails or phishing schemes. Phishing is the creation and use of email and websites designed to mimic legitimate business emails and websites. The most common form is the act of sending an email to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft. The IRS does not initiate contacts with taxpayers via emails. Also, the IRS does not request detailed personal information through email or ask taxpayers for the PIN numbers, passwords, or similar secret access information for their credit card, bank, or other financial accounts.If you receive an unsolicited email claiming to be from the IRS, forward this message to: phishing@irs.gov. You may also report misuse of the IRS name, logo, forms or other IRS property to the Treasury Inspector General for Tax Administration toll-free at 1-800-366-4484. You can forward suspicious emails to the Federal Trade Commission at: spam@uce.gov or contact them at www.ftc.gov/idtheft or 1-877-IDTHEFT (1-877-438-4338). Visit the IRS website at www.irs.gov to learn more about identity theft and how to reduce your risk.

Taxpayer identification numbers. You must provide the taxpayer identification number for each person for whom you claim certain tax benefits. This applies even if the person was born in 2007. Generally, this number is the person’s social security number (SSN). See chapter 1.

Individual retirement arrangements (IRAs). The following paragraphs highlight information that affects IRAs. Combat pay. For purposes of taking an IRA deduction, earned income includes any nontaxable combat pay received by a member of the U.S. Armed Forces. Qualified charitable distributions. If you have reached age 70½, you can make a qualified charitable distribution directly from your IRA to a qualified organization. You do not include the distribution in your income. See Publication 590, Individual Retirement Arrangements (IRAs), for more information.

Foreign source income. If you are a U.S. citizen with income from sources outside the United States (foreign income), you must report all such income on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or 1099 from the foreign payer. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties). If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. For details, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

Automatic six month extension to file tax return. You can use Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, to obtain an automatic 6-month extension of time to file your tax return. See chapter 1.

Advance earned income credit. If a qualifying child lives with you and you expect to qualify for the earned income credit in 2008, you may be able to get part of the credit paid to you in advance throughout the year (by your employer) instead of waiting until you file your tax return. See chapter 36.

Tax Computation Worksheet. If your taxable income is $100,000 or more, figure your tax using the Tax Computation Worksheet. The Tax Computation Worksheet is found near the end of this publication immediately following the Tax Tables.

Joint return responsibility. Generally, both spouses are responsible for the tax and any interest or penalties on a joint tax return. In some cases, one spouse may be relieved of that responsibility for items of the other spouse that were incorrectly reported on the joint return. See chapter 2.

Include your phone number on your return. To promptly resolve any questions we have in processing your tax return, we would like to be able to call you. Please enter your daytime telephone number on your tax form next to your signature.

Third party designee. You can check the “Yes” box in the “Third Party Designee” area of your return to authorize the IRS to discuss your return with a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. It also allows your designee to perform certain actions. See chapter 1.

Payment of taxes. Make your check or money order payable to “United States Treasury.” You can pay your taxes by credit card, using the Electronic Federal Tax Payment System (EFTPS), or, if you file electronically, by electronic funds withdrawal. See chapter 1.

Faster ways to file your return. The IRS offers fast, accurate ways to file your tax return information without filing a paper tax return. You can use IRS e-file (electronic filing). See chapter 1.

Free electronic filing. You may be able to file your 2007 taxes online for free thanks to an electronic filing agreement. See chapter 1.

Change of address. If you change your address, you should notify the IRS. See Change of Address , under What Happens After I File, in chapter 1.

Private delivery services. You may be able to use a designated private delivery service to mail your tax returns and payments. See chapter 1.

Refund on a late filed return. If you were due a refund but you did not file a return, you generally must file your return within 3 years from the date the return was due (including extensions) to get that refund. See chapter 1.

Split refunds. If you choose direct deposit of your refund, you may be able to split the refund into two or three accounts. See chapter 1.

Privacy Act and paperwork reduction information. The IRS Restructuring and Reform Act of 1998, the Privacy Act of 1974, and the Paperwork Reduction Act of 1980 require that when we ask you for information we must first tell you what our legal right is to ask for the information, why we are asking for it, how it will be used, what could happen if we do not receive it, and whether your response is voluntary, required to obtain a benefit, or mandatory under the law. A complete statement on this subject can be found in your tax form instruction booklet.

Customer service for taxpayers. The Internal Revenue Service has expanded customer service for taxpayers. You can set up a personal appointment at the most convenient Taxpayer Assistance Center, on the most convenient business day. See How To Get Tax Help in the back of this publication.

Treasury Inspector General for Tax Administration. If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (1-800-877-8339 for TTY/TDD users). You can remain anonymous.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction
This publication covers the general rules for filing a federal income tax return. It supplements the information contained in your tax form instruction booklet. It explains the tax law to make sure you pay only the tax you owe and no more.

How this publication is arranged. This publication closely follows Form 1040, U.S. Individual Income Tax Return. It is divided into six parts which cover different sections of Form 1040. Each part is further divided into chapters which generally discuss one line of the form. Do not worry if you file Form 1040A or Form 1040EZ. Anything included on a line of either of these forms is also included on Form 1040.

The table of contents inside the front cover and the index in the back of the publication are useful tools to help you find the information you need.

What is in this publication. The publication begins with the rules for filing a tax return. It explains:
Who must file a return,

Which tax form to use,

When the return is due,

How to e-file your return, and

Other general information.

It will help you identify which filing status you qualify for, whether you can claim any dependents, and whether the income you receive is taxable. The publication goes on to explain the standard deduction, the kinds of expenses you may be able to deduct, and the various kinds of credits you may be able to take to reduce your tax.

Throughout the publication are examples showing how the tax law applies in typical situations. Sample forms and schedules show you how to report certain items on your return. Also throughout the publication are flowcharts and tables that present tax information in an easy-to-understand manner.

Many of the subjects discussed in this publication are discussed in greater detail in other IRS publications. References to those other publications are provided for your information.

Icons. Small graphic symbols, or icons, are used to draw your attention to special information. See Table 1, Legend of Icons, below, for an explanation of each icon used in this publication.

What is not covered in this publication. Some material that you may find helpful is not included in this publication but can be found in your tax form instruction booklet. This includes lists of:
Where to report certain items shown on information documents, and

Recorded tax information topics (TeleTax).

If you operate your own business or have other self-employment income, such as from babysitting or selling crafts, see the following publications for more information.
Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ).

Publication 535, Business Expenses.

Publication 587, Business Use of Your Home (Including Use by Daycare Providers).

Help from the IRS. There are many ways you can get help from the IRS. These are explained under How To Get Tax Help in the back of this publication.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

You can write to us at the following address:

Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put “Publications Comment” on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Ordering forms and publications. Visit
www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.

National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903

Tax questions. If you have a tax question, check the information available on www.irs.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.

IRS mission. Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.

Table 1. Legend of Icons

Icon Explanation
Items that may cause you particular problems, or an alert about pending legislation that may be enacted after this publication goes to print.
An Internet site or an email address.
An address you may need.
Items you should keep in your personal records.
Items you may need to figure or a worksheet you may need to complete.
An important phone number.
Helpful information you may need.

You are looking at the differences between Pub 17 from 2007 and 2008 courtesy of Kim Greenblatt’s blog, profitable.

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