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After You File On Tap for 2004

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 1-888-ALL-TAXX.

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 rules:

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.


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Corcoran Bookkeeping and Tax Service
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