It doesn't always pay to itemize your deductions when filing your federal tax return.
You should compare what you'll save to this year's standard deduction.
The standard deduction is a fixed dollar amount you can lop off your gross income when you don't itemize. The amount you can deduct depends on your filing status. It's higher this year and could save you money, so check it out.
Here's a general outline for your 2001 taxes:
• Singles get a $4,550 standard deduction
• If you're filing head of household it's $6,650
• If you're married filing jointly or a qualifying widow or widower you can deduct $7,600
• It's half that if you are married but filing separately
Standard deductions are even higher for those 65 and older.
Most people qualify for a standard deduction but there are a few exceptions. So make sure you check out the IRS' Web site at irs.gov before you file.
E-Filing
What would it take to get you to file your federal income taxes online?
How about the promise of a quicker refund and an entirely paperless return? That's right. This year the IRS is offering that option.
But only if you file electronically, using a special pin number that you create.
It's called a self-select pin and once you create it, it's as good as your signature. You can file your taxes online and you won't have to mail in a signature form or even your W-2.
To find out how to e-file through a low or no cost IRS partner, go to irs.gov/efile.
Which Form to Use?
That's half the battle when you file your federal income tax return.
For most of us there are three to choose from:
The easiest by far is the 1040EZ.
It's the perfect form if you're single, or filing with your spouse and have a combined income below $50,000, interest income of no more than $400, have no dependents, use a standard deduction and both you and your spouse are under 65.
If you need just a little more flexibility, but still fall below $50,000 in taxable income, the 1040A is the next best thing.
It's also simple to use and you can claim dependents as well as other forms of income that you can't claim on the 1040EZ — including pension, social security and capital gain distributions. But you still can't itemize.
For that you need a 1040. And if your taxable income is higher than $50,000 or you're self-employed the 1040 is also for you.
You can get copies of all of these forms and instructions on how to use them from the IRS Web site at irs.gov.
Time is Running Out
Time is running out for the 1.7 million people who qualified for a tax refund in 1998 but failed to file.
These are folks who may have earned too little to be required to file but had taxes withheld from their wages. Or they are among those who had no taxes withheld but were eligible for a refundable tax credit available to those with low-incomes.
In cases like these the IRS gives you three years to file and claim your refund.
After that your hard-earned cash becomes the property of the U.S. Treasury.
April 15 a total of $2.3 billion in refunds from 1998 could go to Uncle Sam if the money isn't claimed by then.
That's about $1,300 for each person who failed to file.
Make sure you're not one of them.
Relief for Victims
Tax season is taxing enough for most of us. But it's a far more daunting task for the thousands of American families affected by the terrorist attacks.
Though the government is helping to make things a little easier.
The Victims of Terrorist Tax Relief Act of 2001 provides major breaks for those hit by the Oklahoma City bombing, the September 11 terrorist attacks and the anthrax attacks.
Check out IRS Publication 39-20 for details. Among them you'll find that:
• The IRS forgives the income tax liabilities of those killed
• The agency provides tax-free treatment for some forms of disaster relief including payments from the September 11 Victims Compensation Fund
• The IRS also postpones a number of deadlines
You can access Publication 39-20 on the IRS Web site at irs.gov or call 1-800-tax-form (800-829-3676) for a printed copy.
Rebate Roadblock
More than a million people have made the same simple mistake on their tax returns this year and it's delaying their refunds. It's easy to do and could happen to you.
So, before you file your federal income taxes this year, stop, look and listen! You could be making a big mistake!
There's a new line on the federal income tax form that many of us should leave blank. It's there to claim a "rate reduction credit" that not all of us are qualified to take.
You'll find it on line 47 of your 1040 form, line 30 if you use a 1040-A form and line 7 on form 1040-EZ.
It's there for people who did not receive the full amount they were due in last year's tax rebate program.
Remember those checks?
If you're single, or married filing separately and you got a $300 rebate check last year you don't qualify for the credit.
If your filing status is "head of household" and you got a rebate check for $500 don't touch that line.
Married couples filing jointly or widows and widowers who got a $600 rebate are also not qualified and should leave that line blank.
If you did not get a rebate check last year or you didn't receive the full amount you were due, you may be eligible to claim this credit.
For more information go to irs.gov.
And to find out how much you should have received call the IRS Teletax System toll-free at (800) 829-4477.
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