It’s
hard to believe, but some people have already filed their
2004 income tax returns. However, if you’re like
most people, you are nowhere near filing your 2004 returns
as yet.
For
those eligible to file Form 1040EZ, one of the most convenient
ways to do so is by telephone. Form 1040EZ is used by
those who have no dependents, no credits other than an
Earned Income Tax Credit, and no adjustments to income.
Taxpayers who are potentially eligible to “TeleFile” receive
a tax package from the IRS. The packet contains a worksheet,
a Customer Service number that serves as an electronic
signature, and a checklist that is used by the taxpayer
to ensure eligibility. After confirming eligibility and
completing the worksheet, the taxpayer calls the toll-free
number and follows the step-by-step instructions that
are given. Direct deposit is available for refunds, and
any payments that are due can be made through authorization
of an electronic funds withdrawal.
As
you probably know, most people are not eligible to use
the TeleFile option. They need to file what has become
known as the “long form.” If you have kept
accurate and organized tax records throughout the year,
you should have no problem completing the appropriate
form and schedules. However, the less organized you kept
your tax records, the longer it will take to complete
your return. After you have gathered and organized everything
you will need for your tax return, there are three ways
you can handle the dreaded task of correctly filling
out the long form: you can manually complete it yourself;
you can use an electronic filing service such as TurboTax,
or you can hire an IRS-authorized provider to prepare
the return for you (most tax return specialists now prepare
your tax return for electronic filing).
One
thing of note: Over “60 percent of individual taxpayers
will be eligible for IRS Free File” with respect
to their 2004 tax returns. The IRS has teamed up with
tax software companies to offer free online tax preparation
and electronic filing services for eligible taxpayers.
Beginning in mid-January of this year, the IRS has posted
on its Web site (IRS.gov) the eligibility requirements
of IRS Free File.
You
can mail a hard-copy of you tax return to the IRS or,
as noted above, file it electronically. Receipt of a
refund will take the longest if you file a hard copy
and request a check for the refund. Electronic filing
is a much faster process, but your refund arrives a little
slower if you request a check for a refund. The fastest
way to receive a refund is to file electronically and
request an automatic deposit to your checking or savings
account. In the unfortunate event you owe the IRS money,
you can mail a check or, if you e-file, you can “schedule
a safe and convenient electronic funds withdrawal from
your bank account” or pay by credit card.
If
you’re preparing your own federal income tax return,
there have been recent changes that may affect your 2004
taxes. Only the main topic headings are given below.
They are provided for informational purposes only and
are not to be construed as actual eligible deductions
or tax advice. For complete information on any of the
topics, including eligibility, be sure to go to http://www.irs.gov/newsroom/article and/or
consult your tax consultant.
- Education
Incentives
- Tax
Credits (Additional Child Tax Credit and Earned Income
Tax Credit)
- Retirement
Plans (elective deferral, catch-up contributions, IRA
deductions)
- Combat
Pay
- Sales
Tax Deduction
- Expense
Limit for SUVs
- Sale
of Personal Residence Acquired in a Like-kind Exchange
- Deduction
for Discrimination Suit Costs
- Non-cash
charitable contributions
- Health
Savings Accounts
- Standard
mileage rate
- Inflation
adjustments for 2004
- Personal
exemption
If
you are preparing your own return, be sure to read the
IRS tax guide, especially the sections on potential deductions.
Luckily, it is difficult for people to meet the medical
deduction given by the IRS, but there are many other
deductions that are sometimes overlooked by individuals – such
as cash and non-cash charitable contributions. Your authorized
tax return preparer will know what to look for. If you
use an authorized online tax or software tax return service, “it” will
question you about almost every conceivable deduction
for which you might be eligible. Take the time to go
through your checkbook registers, cancelled checks, and
all receipts to determine whether you have missed any
potential deductions.
The
IRS is making it easier to compute and file federal income
tax returns. However, it is up to you to make your tax
preparation easier for each upcoming year. Start to keep
accurate records: keep all receipts, cancelled checks,
checkbook registers, etc., throughout the year and organize
them by deduction category in file folders. Create folders
for investments and bank accounts, so it will be easier
to determine income. Your mortgage and real estate information
should be kept in yet another folder. If you do charitable
work, keep track of all expenses including gas and mileage.
Even
though you may have not been prepared for this year’s
tax season, you can certainly be prepared for the next
one. Visit IRS.gov for tips and news on upcoming tax
changes. Through its Web site, tax publications, TeleFile,
and E-File, the IRS is doing its best to make the preparation
and filing of individual tax returns, if not a pleasant
process, a convenient and less complicated process.
