10 tips to get you through your 2006 returns

It's tax time -- again.

Whether you do your own return or hire a preparer, knowing the twists and turns in the tax code can help trim what you owe or boost a refund.

This year's no-brainer comes from a government mea culpa that translates into a one-time break for almost everyone. The Treasury is rebating part of a 3 percent excise tax on long-distance phone calls that it admitted it erroneously collected. But to the Internal Revenue Service's surprise, many early filers, including nearly 166,000 Massachusetts residents, have neglected to claim the rebate.

The simple path for most individuals is to claim a standard amount that ranges from $30 to $60. People who don't file a return because their income or Social Security benefits aren't taxable can use the 1040EZ-T form just to get the rebate.

No record of calls is needed unless you opt to claim the actual tax paid in the 41-month restitution period, March 2003 through July 2006.

"This is low-hanging fruit you would be foolish not to claim," says accountant Norman Posner, managing partner at Samet & Co. in Chestnut Hill.

With diligence, here other federal breaks that can be plucked:

Hidden deductions. Because Congress didn't reinstate some expired breaks until after 2006 forms were printed, filers who claim these deductions must enter them on lines labeled for other items.

A deduction for up to $4,000 in college tuition is claimed on the 1040's line 35 and noted with a "T"; state and local sales tax is claimed on schedule A's line 5 with the notation "ST"; a $250 deduction for teachers who buy classroom supplies is claimed on the 1040's line 23 with the notation "E."

Going green. Stretching miles per gallon by buying a hybrid car or keeping your home comfy with less energy can also conserve tax.

Depending on a hybrid's make and model and when it was bought, you can earn a tax credit of $250 to $3,150. Search on the word "hybrid" at irs.gov for updates on the credits. Every dollar of a tax credit slices your tax by a dollar. (A deduction, by contrast, only reduces the amount of income upon which tax is figured.)

Also available is a credit of up to $500 for part of the cost of upgrading such items as heating and cooling equipment, windows, doors, and insulation at your home. IRS Form 5695 gives technical details for qualifying items. Manufacturers may also issue certificates that a product qualifies -- keep the certificate for your records.

Kiddie tax. Some tax-shrewd parents who celebrated their teenager's 14th birthday may be in for a shock.

Before 2006, part of the investment income of a child under 14 could be taxed at a parent's higher tax rate if the income exceeded a cap -- $1,700 for 2006 and 2007. At 14, the child's own, presumably lower, tax rate would kick in.

Effective with 2006, the potential extra bite applies through age 17. The idea is to curb parents who avoid tax by shifting income-producing assets to a child, but advisers say the change can also penalize legitimate nest egg building.

"Parents with a kid who previously hit 14 and was clear of the tax may now all of a sudden find him or her back under it," cautions Ed Smith, a tax partner in Boston at BDO Seidman accountants.

On the positive side, $1,700 of investment income may still get lightly taxed. Once that amount is hit, emphasizing long-term growth and tax-exempt income in a youngster's portfolio over currently taxable dividends and other income can make sense, says accountant Posner.

Giving to charity. Don't focus only on cash donations. Also deductible are out-of-pocket costs for, say, a Scout leader's uniform, office supplies, hosting a fund-raiser, or attending a charity's convention as a delegate -- and the value of a car, furnishings, or other used goods you donate.

Using your car in volunteer work allows a deduction for buying gas, or a flat 14 cents a mile, plus tolls and parking. Hurricane Katrina-related assistance qualifies for 32 cents a mile.

Warning: Used clothing and household items donated after Aug. 17, 2006, must generally be in at least good condition to be deductible.

And effective with cash donations of any amount made in 2007 you must, if audited, substantiate the amount with a canceled check, receipt from the charity, or other official proof. A jotted note or your word of honor just won't do.

State and local tax. With the sales tax deduction extended, people who itemize can deduct either state and local income tax or state and local sales tax for 2006.

Massachusetts residents who itemize federal deductions typically come out ahead by deducting state income tax. But with large spending and limited taxable state income, it can be worth a comparison, says Bob Scharin, an analyst at publisher Thomson Tax and Accounting.

You can tally and claim the actual amount of sales tax paid or look up an amount in IRS tables, based on income and exemptions.

If you use the table, don't understate your income when determining your deduction, Scharin warns. Income can include municipal bond interest, untaxed Social Security benefits, and other amounts not reflected in your adjusted gross income.

You can add to the table amount the sales tax on certain items such as a car, RV, or boat.

Saving for the future. It may still be possible to create a big 2006 tax deduction.

People who qualify for a tax-deductible individual retirement account have until the April tax-filing deadline to open a new IRA or contribute to an existing one and deduct the deposit on 2006's return. Depending on age and other factors, that can be as much as $10,000 for a couple.

April is also the deadline for 2006 deposits to a Roth IRA, which has easier eligibility rules. There's no tax deduction, but withdrawals of deposits and investment earnings are generally tax free, unlike those from a deductible IRA.

Self-employed people, even part-time entrepreneurs, have until the filing deadline or later with an extension to contribute to other arrangements, including SEPs and Keogh plans. The amount, up to $44,000 in some popular plans, depends on self-employment income and the type of account.

Filing status. In special situations, a federal filing status you haven't considered before can pay off.

If you're divorced or otherwise unmarried, you may be able to file as head of household if you provide a home for your child, parent, or other relative. You will pay less tax than filing as single. A parent you support doesn't even necessarily have to live with you.

A spouse who is still married but is separated and caring for a child can in some cases qualify to file as head of household -- not as good as filing jointly, which may be prickly, but better than married filing separately.

Someone whose spouse died in 2006 can still file a joint return for that year and if there are dependent children, may be able to take advantage of joint filing benefits by filing as a "qualifying widow(er)" in 2007 and 2008.

AMT. If you're hit by the separately figured alternative minimum tax, growl and bear it. There isn't anything to do about it for 2006.

And the shape of the AMT for 2007 is unclear, as Congress wrestles with replacing a current interim patch of the out-of-control auxiliary tax with a more permanent fix.

The AMT, which you pay if it is higher than your regularly figured tax, was originally aimed at well-to-do taxpayers who escaped gobs of tax through shelters and other manipulations.

But because of structural flaws, it threatens to nab a growing number of middle-income people with rather ordinary finances.

Large payments of property tax and state income tax can trigger the AMT since those items aren't deductible when figuring the additional tax.

That makes many Massachusetts residents vulnerable. Depending on the shape of any fix this year, minimizing the AMT for 2007 can involve timing the year in which to take certain deductions and receive certain income.

Roughly 3.5 million to 4 million filers nationwide are expected to be hit for 2006, and without a fix perhaps 23 million for 2007, according to government and other estimates. You may have to wade through the process of figuring the AMT to determine if it applies to you.

Procrastinators. Because April 15 is a Sunday and April 16 is a holiday -- Patriots Day in Massachusetts and Emancipation Day in the District of Columbia -- taxpayers everywhere get until April 17 to file. Enjoy.