WASHINGTON (AP) -- Lower income taxes, a bigger child tax credit, new breaks for education and enhanced retirement savings are only a few of the dozens of changes awaiting taxpayers in 2002 as a result of the sweeping tax law enacted last year.
In all, the 10-year, $1.35 trillion tax cut passed by Congress and signed by President Bush last June made 441 tax law changes, according to H&R Block Inc. Most will be gradually phased in over the decade, but some important ones are already in effect.
''The changes are some of the most significant shifts in the tax code we've seen in many years,'' said Mark A. Ernst, H&R Block president and chief executive officer.
Even with the changes, the Internal Revenue Service is promising a smooth tax filing season through this year's deadline of midnight April 15. The IRS expects to get about 132 million individual tax returns this year, including a projected 45 million that will be filed electronically.
Due to extra mailroom precautions resulting from last year's anthrax scare, IRS Commissioner Charles Rossotti says taxpayers should give computer e-filing a fresh look to reduce the chance for paperwork delays and to cut the agency's costs.
''The less paper we get, the better off we're going to be,'' Rossotti said.
Millions of taxpayers already received some benefit of the big tax cut in the form of rebate checks of up to $600 that were mailed out over the summer and fall. The checks represented only a sampling of what's to come.
Key changes affecting 2001 returns:
- The child tax credit for eligible families rises from $500 to $600.
- Taxpayers who did not receive a rebate check or got less than the full amount may be able to claim a credit for the money that will either reduce their tax bills or increase their refunds.
- Alternative minimum tax exemptions rise by $4,000 for married couple filing jointly, $2,000 for individuals and heads of households.
- Income tax rates, except the 15 percent rate, were reduced by one percentage point on July 1, 2001.
More is on tap for 2002. For starters, a new 10 percent income tax rate will apply to the first $6,000 earned by single taxpayers, $10,000 for heads of households and $12,000 for married couples filing jointly.
For 2001, the rebate checks were chosen by Congress to deliver the benefit of this lower tax bracket. The upper income tax rate cuts remain the same until 2004, when they fall by another percentage point.
People saving for retirement gain a number of important benefits in 2002, beginning with a $1,000 increase in the maximum annual contribution to an individual retirement account and a $500 increase in limits for 401(k)-type plans. These limits will continue to rise through the decade.
Those age 50 and up get special, higher ''catch-up'' limits permitting additional contributions in 2002 of $500 to an IRA and $1,000 to a 401(k).
Besides boosting a taxpayer's savings, contributing to retirement plans on a pre-tax basis lowers taxable income in 2002, said John W. Roth, an attorney with CCH Inc., a leading tax publishing firm. By adjusting W-4 forms now, he said, a taxpayer can take advantage of those lower taxes right away and boost take-home pay.
''You can start receiving your 2002 refund in January instead of waiting until 2003,'' Roth said.
Other changes taking effect in 2002 include:
- Increased annual contribution limits for tax-favored Coverdell Education Savings Accounts and tax-free distributions from Section 529 education plans if the money is used for qualified expenses. A $3,000 higher education deduction for qualified taxpayers also will apply to 2002 expenses, even for taxpayers who do not itemize deductions.
- The child adoption tax credit rises to $10,000 and the income limits for taxpayers become more generous.
- The top estate tax rate drops from 55 percent to 50 percent and the per-person exemption rises from $675,000 to $1 million. The annual gift tax limit rises by $1,000, to $11,000.
Peninsula Clarion ©2013. All Rights Reserved.