Taxpayers Begin Preparations for 2007 Returns

The holidays are behind us, and that means tax time is right around the corner. Day to Day's personal finance contributor explains the latest deductions and provides some pointers for preparing your 2007 tax return. Michelle Singletary talks to Alex Chadwick about how to get ready for the tax man.

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ALEX CHADWICK, host:

(Singing) It's the most frustrating time of the year.

Isn't that wonderful? No, not returning gifts or deciding what to do with the fuchsia-colored sweater from your great aunt. It's time start thinking about your 2007 tax return.

You may hate it, you may dread it. Still, you have to do it. Here to give us advice on how is DAY TO DAY personal finance contributor Michelle Singletary.

Hi, Michelle. Welcome back. Happy New Year, and will it be a happy new year for taxpayers?

MICHELLE SINGLETARY: I don't know about that. But it's definitely going to be a happy new year to me, and Happy New Year to you.

CHADWICK: Thank you. So the tax year, what does it offer us this year? What do we need to be aware of before we even think about filing our return?

SINGLETARY: Well, you know, there could be a lot of changes down the pike. So one thing, I have the IRS Web site bookmarked on my computer. And I frequently go to see if there's any changes that I might neglect or my accountant might neglect. But one thing I wanted to tell folks about is a deduction that a lot of people may not know about. And that's for mortgage insurance premiums.

Now, don't confuse this with the insurance you pay to protect your house against fire or theft. I'm talking about the insurance that many people are forced to buy that protects the lenders if there is a financial loss, such as if you can't pay your mortgage. You can take this deduction if you have taken out a new mortgage or refinanced in 2007. And it's for your mortgage insurance premium.

CHADWICK: Well, if this is a special deduction, I'll bet that there is some fine print there somewhere.

SINGLETARY: There's definitely fine print, as there always is when it comes to taxes. It's only available to folks who have an adjusted gross income that is $100,000 or less. If your adjusted gross income's from $100,000 to $109,000, there is a reduced deduction. And if you make more than $109,000, again, adjust it. You will not be entitled to this deduction.

CHADWICK: Is there anything that I can do - you know, it's the first of the year so you think, okay, 2007 is gone. But is there anything that we could still do to increase deductions for what is now last year?

SINGLETARY: You know, some people still have not contributed to a retirement account. And you actually have until April 15th to make contributions to an IRA. And so that's a great way to still get that deduction for 2007. But don't make a habit of this. You really ought to be contributing throughout the year so your money has time to grow. But it's still an option if you haven't had an opportunity to contribute. You still have until April 15.

CHADWICK: Michelle Singletary, she's our regular expert on personal finance. She writes the nationally syndicated column The Color of Money.

Michelle, thank you.

SINGLETARY: You are so welcome.

CHADWICK: And here's a tip for you dear listeners sitting around home all day wondering what to do today. Get in your money question now. Michelle wants to hear it. Go to our Web site, npr.org. Click on the Contact Us link. You'll find it at the top of every page. Be sure to include Michelle in your subject line.

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