2006 Income Tax Seminar Material - Part II
Table of Contents / Page No.
NEW TAX LAW
Tax Increase Prevention and Reconciliation Act 1-10
Children under age 18 subject to kiddie tax 1
AMT exemption amounts for 2006 are increased 2-3
Capital gains rates on qualified dividends are extended for two years 3
AGI limit on conversion of non-Roth IRAs to Roth IRAs is eliminated 4-6
Code Section 179 expense election limits extended for two years 6-8
Taxation of unrecaptured section 1250 gain 8
New Law Requires Partial Payment for Offers in Compromise 9-10
Pension Protection Act of 2006 11-23
Strengthening Traditional Pension Plans 11
Investment Advice 11
IRA distributions donated to charity in 2006 and 2007 may be tax-free 12
Saver’s credit is made permanent 13
Waiver of 10% penalty for certain public safety employees 13
Rollovers to Roth IRAs from qualified plans allowed after 2007 14-16
IRS to provide for direct payment of tax refunds to IRAs 16
Form 8888, Direct Deposit of Refund 17
Nonspouse beneficiaries can roll over qualified plans into IRAs 18
Recordkeeping requirements are toughened for cash contributions 19
Deduction isn't allowed for contributions to certain donor advised funds 19-22
Deductions for contributions of clothing and household items are limited 22-23
FEDERAL DEVELOPMENTS
New Law Expands IRA Options for Military 24
Repeal of 10% Penalty for Distributions to Active Duty Military Reservists 25-25
Work clothing deductions – proof 25
Dependency exemption – support test – proof 25
Activities not-for-profit – lemon farming 25-26
IRS Begins Outreach to Entertainment Industry on Gift Bags 26
Self-employed individuals - special rules for health insurance deductions 27
10% additional tax on early IRA distributions – exceptions 27
No above-the-line deduction for health insurance bought by sole
S Corporation shareholder-employee 27-28
Emotional injury – Income exclusions under Code Section 104(a) 29
Divorce settlement - temporary orders vs. voluntary payments—proof 29
Unreported income - reconstruction of income 29
Cost of removing building's mold is currently deductible 30
Government to Stop Collecting Long-Distance Telephone Tax 30-33
Form 1040EZ-T, Claim for Refund of Federal Telephone Excise Tax 34
IRS “Dirty Dozen for 2006” – 12 Common Scams 35-37
Wesley Snipes accused of tax fraud 37-38
Payments made under settlement agreement - qualification as alimony 38
2007 Social Security Changes Cost-of-Living Adjustment (COLA) 39
IRS Announces Pension Plan Limitations for 2007 40-41
Failure to Renew Extenders Equals Tax Increases 41-42
"Understanding Tax Cuts" 43-44
TAX PLANNING STRATEGIES AND CONSIDERATIONS
Employ the Children Before Year-End 45
Starting a Roth IRA for a Working Child 45-46
Make Use of $12,000 Gift Tax Annual Exclusion 46-47
Donating Appreciated Assets to Charity 47-48
IRA Distributions Donated to Charity in 2006 and 2007 May be Tax-Free 48-51
Individual Retirement Accounts (IRAs) 52-53
Roth –IRA 53-54
Annual Roth vs. Deductible IRA Contribution 55-61
Required Minimum Distribution Rules 62-65
Conversion to Roth IRA 66-72
Net Unrealized Appreciation 73-76
SEP Worksheet – 2006 77
SIMPLE Worksheet – 2006 78
FEDERAL TAX UPDATE
Form 1040 79-133
Dependent – Qualifying Child 81-85
Head of Household 86
Pre-Act Dependency Requirements - Qualifying Relative 87-88
Uniform Definition - Qualifying Child – Flowchart 90
Child Tax Credit 91
Dividends 92-93
Social Security Benefits 94-95
Health Savings Accounts 97-98
Moving expenses 98-99
Self-employed Health Insurance Deduction 99
Student Loan Interest 100
Domestic production activities deduction 101-111
Standard Deduction 113
Personal Exemption 114
Alternative Minimum Tax 114-115
Education Credits 115-116
Residential Energy Credits 117-120
Form 5695, Residential Energy Credits 119-120
Child Tax Credit 121
Alternative Motor Vehicle Credit 121-127
Form 8910, Alternative Motor Vehicle Credit 127
Earned Income Credit 128
Nontaxable combat pay election 128
Additional Child Tax Credit 129
Estimated Tax Penalty 130
Form 4868 - Automatic 6 month extension 130
Where to File Form 1040, Form 1040V, Form 4868 131-133
Form 1040, Schedule A 134-153
Medical and Dental Expenses 135-138
Income Taxes 138
Real Estate Taxes 139
Home Mortgage Interest 139-142
Investment Interest Expense 143-145
Charitable Contributions 145-150
Car Donations 146-150
Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes 149
Casualty and Theft Losses 150-151
Gambling Losses 152-153
Form 1040, Schedule B 154-156
Form 1040, Schedule C 157-169
Accounting Methods 159
Gross Receipts or Sales 160-161
Car and Truck Expenses 162
Depreciation and Section 179 Expense 163-166
Pension and Profit Sharing Plans 166
Repairs and Maintenance 166-167
Travel, Meals, and Entertainment 167
Home Office Expenses 168-169
Form 1040, Schedule D 170-189
Definition of Capital Asset 172
Capital Gains Rates 173
Basis of Mutual Funds 175-178
Sale of Residence 182-187
Form 1040, Schedule E 190-208
Renting your Residence for Less than 15 Days 190
Vacation Home Rules 190-192
Rental Income 192-193
When To Report Rental Income on Schedule C 194
Repairs and Improvements 194-195
Renting Part of Property 197
Passive Activity Rules 197-199
Activities That Are Not Passive Activities - Real Estate Professionals 199-204
Part II: Partnership and S Corp., Income and Loss 205
Form 1065 – (Schedule K-1) 207 - 208
Form 6251, Alternative Minimum Tax – Individuals 209-211
Form 6252, Installment Sale Income 212-215
APPENDIX 216-224
Form 1099-INT, Interest Income 217
Form 8901, Information on Qualifying Children Who are Not Dependents 218
Form 8907, Nonconventional Source Fuel Credit 219
Form 8908, Energy Efficient Home Credit 220
Form 8909, Energy Efficient Appliance Credit 221
Form 8911, Alternative Fuel Vehicle Property Credit 222
Where to File Form 1040ES 223
Dependent Test (Qualifying Child / Qualifying Relative) 224
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