Your Tax Return, With Some Change

To get you started on your research, here is a crib sheet of some of the changes for 2006 you may not be aware of, as outlined by the NATP and CCH:

· Individual taxpayers may still elect to deduct either state and local income taxes or state and local general sales taxes as an itemized deduction. Look for Publication 600, which includes the state and local sales tax tables and instructions for claiming the sales tax deduction.

· For 2006 only, taxpayers are eligible for the Telephone Excise Tax Refund, which is designed to refund previously collected long-distance telephone taxes. The refund is available to anyone who paid such taxes on a land line, or for wireless or voice-over-Internet-protocol service. And so that we all don't have to go digging for old telephone bills, the IRS is offering a standard refund amount ranging from $30 to $60. How much you get is based on the number of exemptions you claim on your tax return. The standard amount is not available to businesses and nonprofit groups, which must base their refunds on the amount of tax paid.

· Just as a reminder, the maximum tax-deferred contribution to a 401(k) plan, a tax-sheltered 403(b) annuity, a salary reduction simplified employee pension or a government-sponsored 457 plan increases to $15,000 for 2006. People 50 or older are permitted additional catch-up contributions of $5,000 to their plans in 2006.

· Beginning in 2006, there are new energy-saving tax credits, subject to a lifetime limit of $500.

· For the first time, you can divide your refund and have it deposited in up to three accounts. This includes having the money sent directly to a retirement account such as a 401(k) or an individual retirement account. To have your refund divided, you have to complete and attach to your federal income tax return Form 8888, "Direct Deposit of Refund to More Than One Account."

The latter change may be welcome among many couples who file jointly. I've encountered quite a few spouses who learn, after the fact, that their husband or wife spent the joint tax refund without their knowledge. Spouses who keep separate accounts can now split the refund before the money comes into the household.