A Special One Time Tax Credit on Your 2006 Individual Tax Return

Phone companies have been given notice to stop assessing the federal excise tax as of August 30, 2006 on toll calls. This change in telephone billing statements demands restitution. Thus, the IRS has announced that a one time credit will be available when filing your 2006 tax return of which will be limited. For instance if you are a single person without any dependents, you can claim a $30 credit on line 71 on your 1040. If you are single and have a dependent(s), you can claim a $40 credit. If you are a married couple and file jointly, you can also claim a $40 credit. Finally, if you are married, file jointly, and have dependents you can claim $50 for one child and $60 for two children.

The maximum credit you can claim is $60. The only exception is if you have all your phone bills starting AFTER February 28, 2003 through July31, 2006. In this case you can add up the ACTUAL TAX AS IT APPEARS ON YOUR BILLS AND CLAIM THAT FOR A CREDIT. If you have your actual phone bills and come up with the ACTUAL TAX AMOUNT, you cannot use line 71 on your tax return. Rather you must complete Form 8913 and attach it to your tax return. This tax credit is a refundable credit and you will receive this amount regardless of how your tax return works out.

If you file a business return please contact Sylvia at Bell & Company 501.753.9700.

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Alternative Power Supply Units

Many trucks now have been outfitted with alternative power supply units. These units are normally tied into the main fuel supply for the truck. This means that on-road taxed fuel is being used in an off-road manner. The fuel used in the power supply would then be eligible for the fuel tax credit for the federal taxes paid in the price of the fuel.

The units usually have an hour meter on them measuring the use of the unit. The manufacturer can supply the gallons per hour usage of the machine. Proper documentation would mean that you would be eligible for the taxes paid on this fuel as a refundable credit.

If you would like more information give Jeff Lovelady at call 501.753.9700 or e-mail jeff.lovelady@bellandcompany.net.

Arkansas Proposed Rules 2006-3

The Arkansas Department of Finance and Administration has filed proposed rule 2006-3, “Withholding on Nonresident Members of Pass-Through Entities. The public hearing will be held Wednesday, January 3, 2007, at 1:00 p.m. in the second floor conference room (#2330) of the Ledbetter Building, 1800 West Seventh Street, Little Rock, Arkansas. All interested parties may attend and present their views on the subjects and issues involved.

This proposed rule will require all pass-through entities that make a distribution to a non-resident member to deduct and withhold Arkansas income tax from the distributions that would be taxable as Arkansas source income. Pass-through entities include (not limited to) S-corporations, partnerships, limited liability companies and trusts. The tax would be withheld at the highest tax rate levied under the code for that type of entity. Distributions aggregating less than $1,000 a year would not be subject.

Each pass-through entity that makes distributions subject to Arkansas income tax would be required to register, with the Department, using form AR4ER. Annually, the pass-through entity would be required to file a Form AR 941PT with the Department to report distributions and withholdings, and Form AR1099PT must be provided to the non-resident member who received the distribution and was subject to withholding.

If you would like more information contact Roxie Benincosa 501.753.9700 or e-mail roxie.benincosa@bellandcompany.net.

Per Diem Ruling - Additional Information

Last post we posted the latest IRS REV Ruling on using cents per mile to determine per diem. The new guidelines would have you test the monthly payroll calculations, to see if per diem paid exceeded the daily $52 allowance. It is not clear if the testing should be random or 100% testing, and if required weekly, bi-weekly or monthly. The gist of the ruling is to curb abuse where more than the $52 limit is being paid out, thus payroll taxes are not collected on the overage. The penalty for being out of compliance is loss of the entire per diem amount, thus subjecting the whole per diem payment to payroll tax liability, plus penalty and interest.

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In a recent state audit of a truck company, the state position was to require our firm to pro-rate the federal income to the domicile state based on mileage run thru the state to total miles driven, and did not allow the company to report all income to its state of domicile.