A Message From the Commissioner
Dear Taxpayer,
Paying taxes is a unifying experience fundamental to democracy and the rule of law. Each year, almost two hundred million
taxpayers carry out this
vital obligation by filing their return. The Internal Revenue Service seeks to help people understand and pay taxes as easily
as possible.
More than half of all taxpayers file their taxes electronically. E-filing not only generates fewer errors than paper, but also ensures
faster refunds. Many returns are e-filed by tax preparers, but increasing numbers come straight from home computers. Taxpayers with an
adjusted gross income of $50,000 or less can e-file for free. Instructions for electronic filing and Free File can be found on our website
at
www.irs.gov.
To protect the honest taxpayer, we have strengthened enforcement of the tax laws. The vast majority of taxpayers pay honestly
and accurately, and
they have every right to expect their neighbors and competitors to do the same. Over the past several years, IRS audits and
collections have risen
significantly, and tax laws and regulations have been toughened.
If you need more information about taxes, visit
www.irs.gov. Learn how to file taxes, obtain tax forms, and find out if you are
eligible for the earned income credit. You may also call our toll-free numbers: 1-800-829-1040 for individuals and 1-800-829-4933
for businesses.
Please do not hesitate to contact us if you need help. We hope this packet is useful to you.
Sincerely,
Mark W. Everson
Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Quick and Easy Access to Tax Help and Forms
If you live outside the United States, see Pub. 54 to find out how to get help and forms.
Internet
You can access the IRS website 24 hours a day,
7 days a week, at
www.irs.gov to:
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Access commercial tax preparation and e-file services available free
to eligible taxpayers;
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Check the status of your 2006 refund;
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Download forms, instructions, and publications;
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Order IRS products online;
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Research your tax questions online;
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Search publications online by topic or keyword;
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Figure your withholding allowances using our
Withholding Calculator; and
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Sign up to receive local and national tax news by email.
Mail
You can order forms, instructions, and publications by completing the order blank
on page 82. You should receive your order within 10 days after we receive your request.
Walk-In
You can pick up some of the most requested forms, instructions, and publications at many IRS offices, post offices, and libraries.
Some grocery
stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of reproducible
tax forms
available to photocopy or print from a CD-ROM.
Phone
You can order forms and publications and
receive automated information by phone.
Forms and publications.
Call 1-800-TAX-FORM (1-800-829-3676) during the hours shown
on page 10 to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should
receive your order
within 10 days.
TeleTax topics.
Call 1-800-829-4477 24 hours a day, 7 days a week, to listen to pre-recorded messages covering about 150 tax topics.
See pages 8 and 9 for a list of the topics.
Refund information.
You can check the status of your 2006 refund 24 hours a day, 7 days a week.
See page 8 for details.
IRS Tax Products CD
You can order Publication 1796, IRS Tax Products CD, and obtain:
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Current-year forms, instructions, and publications.
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Prior-year forms, instructions, and publications.
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Bonus: Historical Tax Products DVD - Ships with the final release.
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Tax Map: an electronic research tool and finding aid.
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Tax law frequently asked questions.
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Tax Topics from the IRS telephone response system.
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Fill-in, print, and save features for most tax forms.
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Internal Revenue Bulletins.
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Toll-free and email technical support.
The CD is released twice during the year. The first release will ship the beginning of January and the final release will
ship the beginning of
March.
Buy the CD from National Technical Information Service at
www.irs.gov/cdorders for $25 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll-free
to buy the CD for $25 (plus a $5 handling fee). Price is subject to change.
Other ways to get help.
See
page 65 for information.
All topics are available in Spanish.
101
IRS services—Volunteer tax assistance, toll-free telephone, walk-in assistance, and outreach programs
102
Tax assistance for individuals with disabilities and the hearing impaired
103
Tax help for small businesses and the self-employed
104
Taxpayer Advocate Service—Help for problem situations
105
Armed Forces tax information
107
Tax relief in disaster situations
151
Your appeal rights
152
Refunds—How long they should take
153
What to do if you haven't filed your tax return
154
2006 Form W-2 and Form 1099-R—What to do if not received
155
Forms and publications—How to order
156
Copy of your tax return—How to get one
157
Change of address—How to notify IRS
158
Ensuring proper credit of payments
159
Prior year(s) Form W-2—How to get a copy of
201
The collection process
202
Tax payment options
203
Failure to pay child support and federal nontax and state income tax obligations
204
Offers in compromise
205
Innocent spouse relief (and separation of liability and equitable relief)
Alternative Filing Methods
253
Substitute tax forms
254
How to choose a paid tax preparer
301
When, where, and how to file
302
Highlights of tax changes
303
Checklist of common errors when preparing your tax return
304
Extension of time to file your tax return
305
Recordkeeping
306
Penalty for underpayment of estimated tax
307
Backup withholding
308
Amended returns
309
Roth IRA contributions
310
Coverdell education savings accounts
311
Power of attorney information
312
Disclosure authorizations
313
Qualified tuition programs (QTPs)
Filing Requirements, Filing Status, and Exemptions
351
Who must file?
352
Which form—1040, 1040A, or 1040EZ?
353
What is your filing status?
354
Dependents
355
Estimated tax
356
Decedents
357
Tax information for parents of kidnapped children
401
Wages and salaries
402
Tips
403
Interest received
404
Dividends
405
Refunds of state and local taxes
406
Alimony received
407
Business income
408
Sole proprietorship
409
Capital gains and losses
410
Pensions and annuities
411
Pensions—The general rule and the simplified method
412
Lump-sum distributions
413
Rollovers from retirement plans
414
Rental income and expenses
415
Renting residential and vacation property
416
Farming and fishing income
417
Earnings for clergy
418
Unemployment compensation
419
Gambling income and expenses
420
Bartering income
421
Scholarship and fellowship grants
422
Nontaxable income
423
Social security and equivalent railroad retirement benefits
424
401(k) plans
425
Passive activities—Losses and credits
426
Other income
427
Stock options
428
Roth IRA distributions
429
Traders in securities (information for Form 1040 filers)
430
Exchange of policyholder interest for stock
451
Individual retirement arrangements (IRAs)
452
Alimony paid
453
Bad debt deduction
455
Moving expenses
456
Student loan interest deduction
501
Should I itemize?
502
Medical and dental expenses
503
Deductible taxes
504
Home mortgage points
505
Interest expense
506
Contributions
507
Casualty and theft losses
508
Miscellaneous expenses
509
Business use of home
510
Business use of car
511
Business travel expenses
512
Business entertainment expenses
513
Educational expenses
514
Employee business expenses
515
Casualty, disaster, and theft losses
551
Standard deduction
552
Tax and credits figured by the IRS
553
Tax on a child's investment income
554
Self-employment tax
555
Ten-year tax option for lump-sum distributions
556
Alternative minimum tax
557
Tax on early distributions from traditional and Roth IRAs
558
Tax on early distributions from retirement plans
601
Earned income credit (EIC)
602
Child and dependent care credit
603
Credit for the elderly or the disabled
604
Advance earned income credit
605
Education credits
606
Child tax credits
607
Adoption credit
608
Excess social security and RRTA tax withheld
610
Retirement savings contributions credit
651
Notices—What to do
652
Notice of underreported income—CP 2000
653
IRS notices and bills, penalties, and interest charges
Basis of Assets, Depreciation, and Sale of Assets
701
Sale of your home
703
Basis of assets
704
Depreciation
705
Installment sales
751
Social security and Medicare withholding rates
752
Form W-2—Where, when, and how to file
753
Form W-4—Employee's Withholding Allowance Certificate
754
Form W-5—Advance earned income credit
755
Employer identification number (EIN)—How to apply
756
Employment taxes for household employees
757
Form 941—Deposit requirements
758
Form 941—Employer's Quarterly Federal Tax Return
759
Form 940—Deposit requirements
760
Form 940—Employer's Annual Federal Unemployment Tax Return
761
Tips—Withholding and reporting
762
Independent contractor vs. employee
Electronic Magnetic Media Filers—1099 Series and Related Information Returns
801
Who must file magnetically
802
Applications, forms, and information
803
Waivers and extensions
804
Test files and combined federal and state filing
805
Electronic filing of information returns
Tax Information for Aliens and U.S. Citizens Living Abroad
851
Resident and nonresident aliens
852
Dual-status alien
853
Foreign earned income exclusion—General
854
Foreign earned income exclusion—Who qualifies?
855
Foreign earned income exclusion—What qualifies?
856
Foreign tax credit
857
Individual taxpayer identification number (ITIN)—Form W-7
858
Alien tax clearance
Tax Information for Puerto Rico Residents (in Spanish only)
901
Is a person with income from Puerto Rican sources required to file a federal income tax return?
902
Credits and deductions for taxpayers with Puerto Rican source income that is exempt from U.S. tax
903
Federal employment taxes for employers in Puerto Rico
904
Tax assistance for Puerto Rico residents
Topic numbers are effective
January 1, 2007.
If you cannot find the answer to your question using one of the methods listed on page 7, please call us for assistance at
1-800-829-1040. You will
not be charged for the call unless your phone company charges you for toll-free calls. Our normal hours of operation are Monday
through Friday from
7:00 a.m. to 10:00 p.m. local time. Assistance provided to callers from Alaska and Hawaii will be based on the hours of operation
in the Pacific time
zone.
If you want to check the status of your 2006 refund, see Refund Information
on page 8.
IRS representatives care about the quality of the service provided to you, our customer. You can help us provide accurate,
complete answers to your
questions by having the following information available.
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The tax form, schedule, or notice to which your question relates.
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The facts about your particular situation. The answer to the same question often varies from one taxpayer to another because
of differences
in their age, income, whether they can be claimed as a dependent, etc.
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The name of any IRS publication or other source of information that you used to look for the answer.
To maintain your account security, you may be asked for the following information, which you should also have available.
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Your social security number.
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The amount of refund and filing status shown on your tax return.
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The “Caller ID Number” shown at the top of any notice you received.
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Your personal identification number (PIN) if you have one.
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Your date of birth.
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The numbers in your street address.
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Your ZIP code.
If you are asking for an installment agreement to pay your tax, you will be asked for the highest amount you can pay each
month and the date on
which you can pay it.
Evaluation of services provided.
The IRS uses several methods to evaluate our telephone service. One method is to record telephone calls for quality
purposes only. A random sample
of recorded calls is selected for review through the quality assurance process. Other methods include listening to live calls
in progress and random
selection of customers for participation in a customer satisfaction survey.
Call 1-800-829-1040 (deaf customers with access to TTY/TDD equipment may call 1-800-829-4059). Our menu allows you to speak
your responses or use
your keypad to select a menu option. After receiving your menu selection, the system will direct your call to the appropriate
assistance. You can do
the following within the system.
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Order tax forms and publications.
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Find out what you owe.
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Determine if we have adjusted your account or received payments you made.
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Request a transcript of your tax return or account.
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Find out where to send your tax return or payment.
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Request more time to pay or set up a monthly installment agreement.
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Find out if you qualify for innocent spouse relief.
If you do not fully understand the answer you receive, or you feel our representative may not fully understand your question,
our representative
needs to know this. He or she will be happy to take additional time to be sure your question is answered fully.
By law, you are responsible for paying your share of federal income tax. If we should make an error in answering your question,
you are still
responsible for the payment of the correct tax. Should this occur, however, you will not be charged any penalty.
