June 2007 Newsletter continued

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Bulletin Board  | Federal & State Tax Forms

This newsletter offers factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects.  No party assumes liability for any loss or damage resulting from reliance or use of this material.
  • 2nd quarter individual & corporate estimated tax payment due 6-15-2007.

2007 Estimated Tax Payment Requirements

 
Fine-tune your estimated tax payments and withholdings for 2007.  If you owed a lot of tax for 2006 or expect that you will owe a lot more tax in 2007 than in 2006, adjust your estimates or withholdings now to avoid a penalty for underpaying your taxes in 2007.  If you prepay an amount equal to 100% of your 2006 tax bill, you will avoid a penalty, no matter how much you owe.
 

If your 2006 adjusted gross income (AGI) topped $150,000, you must prepay 110% of your 2006 tax liability.  There is also no penalty if you prepay at least 90% of your 2007 tax bill.Remember that taxes withheld from your paycheck are treated as if you had paid them evenly during the year.  So extra withholdings later in the year can make up for past underpayments.

Future IRS Audit Targets

 
IRS will step up enforcement.  Congressional investigators have a road map for the Service.  The Government Accountability Office says IRS should focus auditors on these high risk areas:
 
· Sole proprietors who underreport income and inflate write-offs.
· S corporations and partnerships, especially S-company owners who take dividends instead of salaries to minimize payroll tax liability.
· Gamblers who underreport their winnings.  And those who net losses against winnings rather than report them as miscellaneous itemizations.
· Farming activities, especially those of part-time hobby farmers.
· Itemized deductions on Schedule A.  Errors occur most often with medical costs, charitable contributions and job-related expenses.

• Capital gains that filers don't report properly.  For example, sales of vacation homes, rental units, business property and farmland.