After You File
Your return has been filed. The refund's been spent. Now you can relax until next year. Guess again!
Getting a refund check does not signal all is done. Your return was accepted. It has not been approved. IRS spends a few months processing all those returns. Then they decide whether or not to audit.
Refund Late? IRS says they
can't check until 10 weeks after you
filed. You can try earlier, but may
get no help. Automated assistance is
at 1-800-829-4477. There's also a
Refund Hotline at 1-800-829-1954.
Or check the "Where's My Refund"
link at www.irs.gov. You'll need
your Social Security Number and the
exact amount of your refund.
Got a Letter Instead? Call me
now! The letters are confusing.
Don't risk making an even bigger
mess - let me handle it for you.
Still Owe? IRS sends bills in
June. They show the balance, plus
any interest and/or penalty. The bills
only allow a 10-day "grace period"
before the amount changes again.
Pay Soon. Send what you can.
Write your Social Security Number
on the check and "Income Tax -
Year 2003". If you can pay off the
bill within a couple of months, do it.
Installment Plans. If you need
more time to pay, call me. We can
get an installment plan. IRS charges $43 to set one up, but the finance
charges drop. If you can pay within
a month or two don't waste $43.
Pay by Credit Card. You can
pay with your credit card. The catch
- you pay a "convenience fee" as
high as 2.5. You'll find details at
1-800-2PAYTAX. Or you can call
Will You Be Audited? Who
can say? Computers generate most
audits. It happens when reports from
employers, banks, or brokers don't
match up with your return. For now
be sure your records are in a safe
place. We might need them.
Your Records. Put your return
in a safe place. Also keep copies of
financial records and worksheets we
used to prepare your return, along
with your check register.
Older Records. It's wise to
keep the tax returns indefinitely.
Also, keep records of investments or
property you still own. What about
bills, statements, canceled checks,
and worksheets? Three years' worth
of records is a must. Two more
years is a good idea. Anything
beyond 5 years should be destroyed.
On Tap for 2004
Good news! No big changes are planned for 2004. But Congress is likely to tamper with taxes before the elections in November.
Child Tax Credits. The credit is a full $1,000 for each child under 17. In 2003 the credit was $1,000 but most parents got $400 of this as an "Advance Rebate" in August. This year you must wait until you file the return. Not all parents get the credit. If income is more than $110,000 for couples ($75,000) for single filers) the credit is reduced $50 for each $1,000 above the limit. The credit can also be lost
if your tax is smaller than the credit,
although a special "Additional Child
Tax Credit" might recover the loss.
Tax Rates. Low rates again in
2004. There is talk about making the
rates permanent. The low capital
gains rates are still in place. And
"qualified" dividends are taxed at the
low capital gain rates. These should
make 2004 a "happy" year!
Other Provisions. There are
dozens of other changes for 2004.
Here are some of the more common
IRA Contributions. The
maximum contribution stays $3,000,
plus $500 for those 50 or older by
year-end. Limit is $4,000 in 2005.
Pension Contributions. Both
401(k) and the 403(b) plans allow up
to the first $13,000 in earnings to be
deterred. Add $3,000 if you are 50
or older by year-end. Other plans:
SIMPLE plans allow up to $9.000,
with an extra $1.500 for 50 & older.
SEPs are at $40,000 plus $3,000 for
older participants. Profit-sharing
plans are fixed at $41,000.
Mileage Deductions. Driving
for job, business, or rental driving is
37.5¢ per mile. Though gas prices
jumped this year, IRS says it will not
change the mileage rate in mid-year.
Bonus Depreciation. 2004 is
the last year for bonus write-off of
50% of equipment costs. The bonus
is allowed even if the business
reports a loss. Expensing is allowed
up to $102,000, but requires a profit.
Expensing of SUVs. As this
is written you may still deduct the
cost of a vehicle exceeding 6,000
pounds Gross Vehicle Weight. It
seems Congress is on the verge of
limiting this to $25,000. Will it be
retroactive? Who knows!
Tuition Deductions. You may
deduct tuition and fees for college
and trade schools if your income
stays below $65,000 for single filers
($ 130,000 for couples). But, the
deduction jumps from $3,000 to
$4,000 for 2004. New wrinkle:
Incomes above these limits but
below $80,000 ($160,000 for
couples) may deduct up to $2,000.
2004 - Beware! We normally look
at what happened last year to make
plans for the current year. But, 2003
was unusual. The strategy could
backfire in 2004. Two very different
kinds of surprises can affect what
you will see at filing time.
Child Credit Increase. As
mentioned, the Child Tax Credit is
$ 1,000 for 2004. That's the same as
in 2003. But 2003 had the Advance
Rebates. For 2004 you must file
your return to get the credit. Again -
you get the credit for any child who
has not reached age 1 7 at the end of
2004. The credit begins to phase out
at an income of $75,000 ($1 10,000
for a couple). The $400 increase
will make 2004 returns seem better
than you might have expected.
Larger refunds, or smaller bills.
Withholding Decreases. If
you pay taxes via withholding, 2004
will be different. The withholding
tables were reduced in July 2003.
The same tables are used in 2004,
but they will be in use for the full
year. As a result, there is less
withholding in 2004 than in 2003 on
the same pay. This could throw a
monkey wrench into your planning
efforts. If you anticipate a problem,
please call me.
Read our last newsletter.