President Signs New Tax Act

If you think the Pension Protection Act of 2006 (H.R. 4) that President Bush just signed into law won't apply to you, think again. Here's a brief introduction to some of what's hidden within the 993 pages of legislation:

• You can tell the IRS to deposit your refund into your IRA.
• The Saver's Tax Credit for low income workers is permanent. Eligible individuals will receive a non-refundable tax credit of up to 50 percent on up to $2,000 in contributions to an IRA, 401(k), 403(b), SIMPLE or 457 plan. That means you can save up to $1,000 in taxes above and beyond the tax deduction already associated with these contributions.
• No deduction is allowed for used clothing or household goods unless they are in “good condition”. How do you prove “good condition” to the IRS? I have no idea, but I'm advising my clients to take pictures of what they intend to donate before they make the donation and keep the pictures with their tax records. This rule begins today, August 17, 2006.
• No deduction is allowed for ANY cash contribution to any charity unless the taxpayer has a canceled check (or bank statement) or receipt from the charity
  stating the date of donation, amount of donation and the name of the charity. This rule also begins today. Does this mean that the Salvation Army will start handing out receipts when you put money in their bucket this Christmas? If they don't, there's no deduction for donating.
• If you make a donation (not to exceed $100,000 of donations a year), to a charity directly from your IRA or Roth IRA the distribution is tax-free.
• Employers can automatically enroll their employees in the Company's 401(k)
• New penalties for bogus appraisals used for tax purposes.
• New information reporting requirements for exempt entities (churches, charities, and other non-profits) who previously were not required to file a return or report.
• Until December 31, 2007, C-Corporations can donate books they have in their inventory (bookstores or anyone who sells books) to schools (K – 12) and receive the lessor of twice their basis or their basis plus one-half of their appreciated value, IF the schools use the
  books in it's educational program.

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