There are only 48 days left until April 15, the deadline to file federal individual income tax returns. With the latest of the 441 new tax laws taking effect this year, the annual routine of filing can be anything but routine.
The Internal Revenue Service is anticipating 132 million people nationwide to point and click, mail or call in their 2002 tax returns this year. And 340,000 Alaskans are expected to file individual returns.
Spokesperson Judy Monahan said the IRS is encouraging as many people to file their taxes elecetronically -- either over the phone or online -- as possible to comply with a mandate from Congress. To this effect, she said the IRS has contracted with 17 companies that will provide free "e-filing."
"We have to have 70 million or more 'Free File' this year," Monahan said.
For those wanting to prepare their own taxes, companies offering free filing can be located at http://www.irs.gov/formspubs/index.html.
This is the second filing season of changes that came about as a result of the $1.35 trillion tax cut that went into effect in 2001. These changes will continue being phased in through 2010. Meanwhile, federal legislation could introduce even more modifications to the tax code in the name of stimulating the economy.
But with so much change taking place, how does one pinpoint exactly which rules have taken effect this year? And what do tax filers need to know about these rules to correctly fill out returns?
Probably the most significant item Monahan identified was the Earned Income Tax Credit, which is intended to return taxes taken on payday to taxpayers who earn wages below a set income limit.
"It's called a negative tax credit," she said. "You don't have to owe income tax."
According to the IRS, 30,827 Alaskans claimed the EITC for tax year 2001, receiving a total of $41.3 million. Both the income limits and the maximum credit have increased for the 2002 tax year based on cost of living adjustments.
To be eligible for full or partial credit, a married parent of two or more qualifying children must have an adjusted gross income of less than $33,178, and $34,178 for parents filing jointly. With one qualifying child, a single taxpayer must have made less than $29,202, and jointly filing parents of one must have an incomes less than $30,202?
An individual with no children should have had $11,060 to qualify for the credit, and a childless married couple is required to have $12,060 to qualify. The filer cannot have investment income of more than $2,550.
The maximum earned income credit is $4,140 for families with two or more children, $2,506 for families with one child and $376 for an individual without children.
For 2002, changes to the EITC will make more taxpayers eligible by redefining what constitutes earned income. Now, earned income no longer includes nontaxable income such as supplemental military pay for housing or combat, or salary deferral plans such as 401K, Thrift Savings and employer-provided benefits like dependent care.
"More hard-working Americans can receive tax relief or even a tax refund because of changes in this credit," said Bob Wenzel, acting IRS commissioner. "We want all those who are eligible, but only those who are eligible, to apply."
Monahan cautioned that figuring many aspects of eligibility can be tricky.
"EITC can be complex," she said. "I would advise people to get assistance.
Here are some other significant changes affecting individual taxpayers:
The threshold for reporting interest and dividend income -- filed on Schedule B of Form 1040 and Schedule 1 of Form 1040A -- has been raised to $1,500.
Now only taxpayers with taxable interest or ordinary dividends of more than $1,500 will have to file these schedules. As a result of this change, the IRS estimates that 15 million fewer taxpayers will need to file these schedules. The previous threshold, in place since 1974, was $400.
The new 10-percent tax rate is reflected in the 2002 Tax Table and Tax Rate Schedules. This new rate applies to the first $6,000 of taxable income ($10,000 for a head of household; $12,000 for married filing jointly or qualifying widow or widower). The minimum rate that used to be 15 percent.
Taxpayers may deduct 36.5 cents a mile for all business miles driven during 2002. Taxpayers may deduct travel related to qualified medical and moving expenses at a rate of 13 cents a mile. But filers who take this or other itemized deductions can't take the standard deductions commonly allowed on Form 1040EZ.
The interest paid in 2002 on qualified student loans may now be deducted regardless of the age of the loan. Prior to 2002, only payments made in the first 60 months qualified. The modified adjusted gross income limit for this deduction is also increased.
Taxpayers may be able to deduct up to $3,000 of qualified tuition and fees paid in 2002 for higher education for themselves, their spouses or dependents.
Educators may deduct up to $250 in out-of-pocket expenses they paid for classroom supplies.
For 2002, taxpayers may contribute up to $3,000 ($3,500 if age 50 or older at the end of 2002) to either traditional or Roth IRAs. This figure is an increase from a $2,000 limit in the prior year. Contributions for 2002 can be made until the due date for filing your return for that year not including extensions. For most taxpayers, this means that contributions must be made by April 15, 2003.
For more information on tax help, call 1(800) 829-1040 to speak to a customer service representative or arrange a visit at a taxpayer assistance center. Individuals can hear pre-recorded tax information at 1 (800) 829-4477. Individuals, businesses and tax professionals can call 1 (800) 829-3676 to order forms, instructions and publications, or go online to www.irs.gov.
Peninsula Clarion © 2016. All Rights Reserved. | Contact Us