Everyone has already heard there are 441 changes in the Internal Revenue Code this year. I have a class to teach next week on these changes so let me tell you where they are.
For businesses there are really very few changes: some strange adjustments in the tax deposit rules for 2004, some changes to how to deal with Alaska Native Settlement Trusts, and a new credit for employer-provided child care expenses. For some employers who have numerous employees with small children this could turn into a real tax savings.
For individuals there are lots of changes. The focus of the Act was on individual tax relief, and this is the largest tax cut since 1981. It may not seem like much this year because of the phase-in over a number or years. But over the next ten years it is projected to save individual taxpayers as much as $1.35 trillion. (For those of you who, like me, don’t really comprehend that figure without seeing the zeroes, it looks like this: $1,350,000,000,000.00. I find it hard to comprehend even when I see the zeroes.)
The tax cut comes in many forms: a new lower income tax bracket, adjustments to the other tax brackets, relief from the marriage penalty, education incentives, some relief from the alternative minimum tax, changes to the limits on IRAs and other pension accounts.
The one single item that will affect people here is the Child Tax Credit. Individuals with dependent children under the age of 17 can claim this credit and use it to offset a portion of their tax liability. Over the next ten years this credit is increased gradually from $500 per child in 2000, $600 per child in 2001, to $1,000 per child beginning in 2010. Also, at least a portion of the credit is available to all taxpayers as a refundable credit. There have been a number of credits available to us for years but previously only the Earned Income Credit was a refundable credit. This will make a difference on this year’s tax return.
You can find all of these changes in the current books handed out by the IRS. Their instructions are relatively simple and you should be able to complete the forms in the estimated time that they give in the books. You should at least get familiar with the new rules from the books if you are going to prepare your own return. You can also go to the Federal building downtown and they will help you prepare your return and file it electronically. Of course I would recommend that you see a full-time professional.