ROBERT SIEGEL, host:
Whether you e-file or not, there are some pitfalls to watch out for this tax season. Kevin McCormally of Kiplinger's Personal Finance magazine is here to give us an idea of what to look out for. Welcome to the program, Kevin.
Mr. KEVIN McCORMALLY (Editorial Director, Kiplinger Washington Editors): Thank you very much.
SIEGEL: And first off, I understand that there are some deductions that do not appear on some of the printed tax forms.
Mr. McCORMALLY: On any of the printed tax forms, because Congress was a little too busy running for reelection last fall to reinstate three important deductions that expired at the end of 2005. The IRS said if you don't do it soon, we can't put them on the forms, and the Congress went out and campaigned and came back and reinstated them, but only in the lame-duck session.
SIEGEL: So if somebody has the forms, what's missing from them that they should know about?
Mr. McCORMALLY: The three key things, there's a $250 deductions for teachers and their aides for out-of-pocket expenses. That's what they call an above-the-line deduction. You get that even if you don't itemize.
Another one is a deduction for college tuition, either $2,000 or $4,000, depending on your income, and this is a deduction that works for people whose incomes are too high to claim either the HOPE or the lifetime learning credit. It doesn't show up.
And the third one, probably the most important, the biggest one, is the deduction for state sales taxes paid. That's the deduction that's usually claimed by people who live in a state that doesn't have an income tax. That goes on Schedule A. That's only for itemizers.
But the IRS does have instructions on its Web site telling you which lines on the forms, which are designated for other purposes, to use for these deductions.
SIEGEL: And for those of us who buy tax preparation software, would the forms that we get online when they're updated, would they show these deductions?
Mr. McCORMALLY: Yes, Robert. Your forms do not show the deductions, but the programs know what lines to put the forms on, and there are questions in the interviews of those programs. So the computers can do this, but if you're doing it by hand, you could miss these very valuable deductions.
SIEGEL: Now, here's the big surprise that comes in the taxes this year, which is a credit or a refund, I guess, for phone taxes that most Americans have been paying for longer than they were alive.
Mr. McCORMALLY: That's right. This is the federal excise tax on long distance services. It was actually created in 1898 to pay for the Spanish-American War, and Congress has kept it almost forever. It's been out of existence for a few times since then.
Finally last year several courts said it was illegal for the government to be collecting this tax, and the administration ordered the IRS to refund it to people on this year's tax returns. It's a one-year-only deal.
SIEGEL: And how much do people typically pay or stand to get back in the way of a credit for this?
Mr. McCORMALLY: Most individuals will either get 30, 40, 50 or $60, depending on how many exemptions they claim on their return. It's not a lot of money, but all it takes is checking a box on the forms, and this deduction is actually on the tax forms. It's there on paper.
SIEGEL: And then an oddity this year, April 15 falls on a Sunday, so filing day is not Monday, April the 16th.
Mr. McCORMALLY: No, because Monday, April 16th is Emancipation Day in the District of Columbia, a local holiday. The Internal Revenue Service is based here, so they can't work that day, so everybody in the country gets an extra day to file their return.
SIEGEL: Until the 17th of April.
Mr. McCORMALLY: Yes.
SIEGEL: Kevin McCormally of Kiplinger's Personal Finance magazine. Thank you very much for talking with us.
Mr. McCORMALLY: Thank you.
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