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Cash in on 5 refund opportunities

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in Small Business Tax,Small Business Tax Deduction Strategies

You might file an amended return for deductions or credits that slipped through the cracks. But you can also change the way you handle certain items on your return.

Here are five common examples to change things to your advantage:
  1. Join together. Say you and your spouse originally filed separate returns to benefit from the income floors on medical or miscellaneous expenses. But now you’ve figured out that you would have come out ahead overall by filing jointly. File a joint amended return to correct the error. Note: You can’t file separate amended returns after you initially filed jointly.

  2. Reclaim overpayments. When you filed your ‘06 return, you may have asked the IRS to apply an overpayment toward 2007 estimated-tax liability. But now you need the cash pronto. Obtain an overpayment refund by filing an amended return.

  3. Switch business car methods. Maybe you used the standard mileage method for your new business car (44.5 cents per business mile in 2006). But another look at your ’06 records shows that you should have deducted your actual expenses instead. You can switch to the actualexpense method on an amended return, but then you can’t switch back.

  4. Choose the sales tax deduction. The IRS gave taxpayers the option of deducting state sales tax instead of state income tax on 2006 returns. In addition to the amounts in the IRS tables, you can add the sales tax paid on certain big-ticket items such as cars and boats. File an amended return to claim the sales tax deduction if you overlooked a benefit.

  5. Plug in telephone-tax credit. If you missed the special tax credit for long-distance telephone-tax charges, you’re not alone. Claim the actual tax paid for the allowable period (March 1, 2003, to Sept. 30, 2006) or use the IRS-approved safe harbor amount based on your personal exemptions.
Tip: Filing an amended return on the federal level may also require changes in state tax returns. Make sure you cover all your bases.

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