The IRS estimates that 25% of taxpayers who are eligible for the Earned Income Tax Credit fail to claim it. The EITC was created in 1975 to offset the burden of Social Security taxes and to serve as a work incentive. The amount of the credit varies but it is generally determined by income and family size.

A taxpayer may be able to take the credit for tax year 2006 if the taxpayer:

* has more than one qualifying child and earns less than $36,348 ($38,348 if married filing jointly),

* has one qualifying child and earns less than $32,001 ($34,001 if married filing jointly), or

* does not have a qualifying child and earns less than $12,120 ($14,120 if married filing jointly).

To help taxpayers and tax preparers to determine eligibility for the EITC, the IRS has an interactive tool, the EITC Assistant. Basically if the EITC exceeds the amount of taxes owed, then a refund is due. You may be eligible for the Earned Income Tax Credit even if you didn’t earn enough income to be required to file a return. But if you do qualify, you will have to file to receive your refund.

If you are vacillating on whether or not to buy that Toyota hybrid vehicle, this might give you incentive to do it sooner rather than later.

The deadline to receive the full tax credit for the purchase of a Toyota hybrid is October 1,2006. Taxpayers will only be entitled to a 50% credit for vehicles purchased after October 1.

And the credit goes down from there. If you wait until April 2007, you will only be allowed 25% of the credit.

The telephone tax has been in place for more than a century. In 1898, when the tax was established, only the well-to-do had telephones and this was meant to be a “luxury” tax. Due to a recent court ruling that determined that this tax does not apply to long-distance services as they exist today, taxpayers will be eligible for a refund.

The refund applies to all excise tax paid on long-distance service billed after February 28, 2003. This refund may be claimed only on your 2006 income tax return and is being refunded for only three years due to the legal statute of limitations.

The IRS will refund a “safe harbor amount” to taxpayers without requiring documentation of long-distance taxes paid or the taxpayer can request the actual amount of taxes paid and the goverment will refund that amount plus interest. Be aware though that the interest paid is taxable income that must be reported on your 2007 tax return.

Happy in your present career but not your present job? Will you be launching a new job search? Did you know are entitled to claim expenses related to a new job search as deductions on your federal taxes?

IRS Publication 529 lists the following rules regarding eligibility for the tax deductions:

You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:

1. You are looking for a job in a new occupation,

2. There was a substantial break between the ending of your last job and your looking for a new one, or

3. You are looking for a job for the first time.

You can deduct fees you pay employment and outplacement agencies, the costs of preparing, copying and mailing a resume and even travel expenses related to a job search in a new area as long as your trip to the area was primarily related to seeking a new job in your present occupation.

Further information and instructions can be found in Publication 529 available from the IRS.