Gimme A Break
Here are some tips for winning the annual battle with the IRS
Speaking of kids, building a family by adoption can yield a bigger tax credit. Starting with 2002, up to $10,000 can be subtracted from your tax bill to defray legal, travel, and other expenses to complete the process. That's double the previous allowance, and the credit now doesn't begin to phase out until adjusted gross income tops $150,000, up from $75,000.
Midnight moves. Last-minute tax savers? Self-employed people, including moonlighters, can put a sizable sum into a retirement plan this year, yet apply the deposit to cut 2002 tax. And the caps are higher than ever. Procrastinators have until April 15, or later with an extension, to set up a Simplified Employee Pension (SEP) or to contribute to an existing one. The deposit can be up to about 20 percent of their self-employment income. The payoff: a 2002 tax deduction of as much as $40,000. Similar amounts can still be added to a typical Keogh plan, but it's too late to set up a new one for 2002. Employees, too, can tap expanded last-minute options. Workers who are not in a 401(k) or other retirement plan at work--or whose income is under certain limits--can use a tax-deductible IRA to still fund a nest egg and also trim the amount of income hit by tax. April 15 is the deadline to open an account and make a $3,000 deposit that's tax deductible on 2002's return--$1,000 more than previously allowed; persons 50 or older can put in an extra $500. (A couple filing a joint return can put in twice these amounts even if only one spouse works.)
In the end, 3 out of 4 taxpayers get a refund--an average of $2,195 among early filers this year, $41 more than at this time a year ago. They could often get the cash faster by reducing the tax withheld from their paychecks--a work sheet with the W-4 you give your employer can help, as can publication 919, "How Do I Adjust My Tax Withholding?" (www.irs.gov or 800-829-3676). But many look forward to the rebate and prefer to play it safe. Getting a check from the treasury is a lot easier to digest than writing one.
To read our weekly tax column, go to www.usnews.com.
No-cost help
Online filing
Free! That's the latest come-on at the IRS's Web site--www.irs.gov--where you can browse a list of 16 online tax preparers currently offering no-cost electronic preparation and filing of returns. But watch out. If you don't meet income or other limitations, you will be asked to pay. Income caps of $27,000 to $33,000 are common, though one site welcomes anyone with income over $50,000, another people 50 or older. Included are biggies TurboTax, TaxACT, and H&R Block.
You may be bombarded to buy extras--such as more extensive tax advice, filing a state return, or taking out an instant loan to immediately cash in on a refund.
Last year, 36 percent of taxpayers filed electronically. The goal is 80 percent by 2007, but that seems optimistic to many.
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