Column: Tax Breaks Return in Force

You can claim either a standard refund of $30 to $60, depending on the number of exemptions checked on your tax return, or the actual excise taxes paid for service billed between March 1, 2003, and July 31, 2006, if you have phone bills documenting the tax. You don't have to itemize deductions to claim this refund.

Even if you aren't required to file a tax return _ perhaps your income was too low _ you can still get the refund. There's a new form, 1040 EZ-T, for this purpose.

This year the IRS will, if requested, deposit a refund directly into three separate financial accounts, such as checking, savings and retirement. The idea, said IRS Commissioner Mark W. Everson, is to encourage savings and dampen demand for refund anticipation loans, which provide quick cash for high fees using the expected refund as collateral.

Also for 2006, the usual inflation-related increases are in place for personal and dependent exemptions, standard deductions, thresholds at which certain tax benefits begin to phase out and the maximum income for claiming earned income credit. There's a slight increase in income threshold for the phase-out of the deduction for IRA contributions by joint filers already covered by retirement plans at work.

There's a new wrinkle affecting taxpayers who've hit age 70 1/2, the age at which required minimum withdrawals from IRAs begin. They can now make a direct transfer of up to $100,000 from the IRA to a qualifying charity. The amount of that transfer is excluded from taxable income.

Though this may primarily benefit wealthy taxpayers who don't need the money, it's also a way for the less-well-off to avoid paying income taxes on their required IRA withdrawals and to put the money to charitable use.

In another IRA-related change, military personnel who received nontaxable combat pay in 2006 can include that as earned income when figuring IRA contributions. That gives them a higher IRA contribution, and if they put money into a traditional IRA, it may also mean a higher tax deduction. (Contributions to Roth IRAs aren't tax deductible, though they have tax benefits later on.)

Congress' restoration in December of the expired deductions for education expenses and state and local sales taxes came too late to be reflected on 2006 tax forms and publications, which were printed earlier in the fall.

To incorporate the changes, the IRS says that some lines on the forms will essentially do double duty: For example, Line 5 of the Schedule A itemized deductions form is for state and local income taxes, but taxpayers who choose to deduct state sales taxes instead will enter that figure there.

The IRS says it will send updated instructions to taxpayers who are mailed tax packets. But with electronic tax preparation and filing skyrocketing, not many people still receive such packets.

All forms and instructions are posted on the IRS' Web site.

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On the Net: http://www.irs.gov