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New IRS Guidelines for Tax Filers in 2007

The IRS has issued new guidelines to taxpayers on how best to
claim the extended deductions in the Tax Relief and Health Care
Act of 2006, which was passed before congress took a recess in
December, 2006 and signed last week by President Bush.

The 2007 tax season will begin as planned. However, due to the
recent changes the IRS will not be able to process tax returns
of tax filers who will be claiming (1) state and local sales tax
deductions, (2) higher education tuition and fees deductions and
(3) educator expenses, until early February.

Unsurprisingly, January is the slowest time of the tax season
with less than 6 percent of the tax returns filed in the first
two weeks; last year, about 6.7 million returns were filed by
January 27. Statistics for 2005 indicates that about 930,000
taxpayers claimed any of the three deductions by February 1.
This year the IRS anticipates about 136 million tax returns.

According to IRS Commissioner, Mark W. Everson, "the IRS is
taking a number of steps to ensure taxpayers have the correct
information on these deductions when they prepare and file their
tax returns." The IRS encourages those who may be eligible for
these deductions to file electronically. "They will get their
refund faster through e-file. Even more importantly, e-file will
greatly reduce the chances of making an error compared to
claiming the deductions on the paper 1040", said Everson.

The primary forms - Forms 1040, 1040A and Schedule A&B that are
already in circulation do not include the deductions that were
approved by the Congress in December. To ensure a smooth
sailing, the IRS has created a special issue of Publication 600.
Tax filers and tax professionals can get the updated information
on the late legislation by visiting irs.gov. In addition, the
IRS will conduct a special mailing of Publication 600 which will
be sent out to over 6 million taxpayers. For those taxpayers who
intend to e-file, the IRS has updated the tax software to
include the three new deductions.

The sales tax deduction which was claimed by approximately 11.2
million tax returns last year applies to nine states" Alaska,
Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas,
Washington and Wyoming. To claim the sales tax deduction
taxpayers must fill line 5 Schedule A (Form 1040) by entering ST
on the line to the left of line 5 to indicate that you are
claiming the sales tax deduction instead of the deduction for
state and local income tax

The higher education provision (Hope credit and Lifetime
Learning credits) was filed by about 4.7 million taxpayers last
year. The credit which is up to $4000 for tuition and fees paid
to post-secondary institutions cannot be claimed on Form 1040A.
It must be claimed on Form 1040 on line 23.

The provision for education expenses, which allows educators
(particularly teachers) to deduct up to $250 on personal
expenses on school supplies, was claimed by 3.5 taxpayers in
2005. The deduction can be claimed by filling line 23 on Form
1040.

Taxpayers and tax professionals wanting to learn more about
these changes should visit www.irs.gov or call the IRS:
1-800-TAX-FORM.