Tax Time 1997-Tax Packages

The Internal Revenue Service will send about 65.5 million income tax packages this year. Most taxpayers will get their forms soon after New Year's Day. The IRS expects to receive almost 120 million tax returns in 1997, with continued growth in filing by telephone and electronically.

About a third of the tax packages, over 22 million, will contain no tax forms. TeleFile packages will invite certain taxpayers to file by telephone. The packages contain a worksheet rather than a tax form. The TeleFile program has been expanded to include married taxpayers filing joint returns as well as singles.

The postcard program for Form 1040 has been eliminated for a savings of $9 million. The IRS would have mailed about 46 million postcards, instead of tax packages, to many taxpayers who used a paid preparer last year. This postcard program has included a pre-printed label for use on the tax return and a reply card for taxpayers who wanted forms and instructions. The postcard program was started to save printing and distribution costs, since preparers seldom used IRS-printed forms. But since preparers also seldom used the labels, the program was eliminated.

The IRS is sending a payment voucher, Form 1040-V, with all Form 1040 tax packages. Taxpayers with a balance due should mail the vouchers with their payments. The vouchers allow the IRS to process payments more efficiently and accurately.

The printing bill for the total mailout is $11.2 million, with postage costing another $13.4 million.

Forms and publications are available by modem on the Internal Revenue Information Services bulletin board at 703-321-8020 or on the World Wide Web at http://www.irs.gov.

TAX FORMS: WHAT'S NEW FOR '96?

Direct Deposit of Refunds -- This year taxpayers don't have to file an extra form for the convenience of having their tax refunds sent directly to their bank accounts. Instead, taxpayers will be able to put their bank account information on the appropriate lines of Forms 1040, 1040A or 1040EZ.

Taxpayer Identification Numbers (TIN) Needed for All Dependents and for All Qualifying Persons for the Child and Dependent Care Credit -- Unless the child was born in December 1996, a taxpayer identification number -- generally the SSN -- must be provided for each person claimed as a dependent or qualifying person for the child and dependent care credit. If a TIN is incorrect or missing, the exemption and the credit may not be allowed.

Taxpayer Identification Numbers for Aliens -- If taxpayers, their dependents, or qualifying children are nonresident or resident aliens who don't have -- and are not eligible to get -- a social security number (SSN), they must file Form W-7 with the IRS to get an individual taxpayer identification number (ITIN).

Taxpayers will enter this number on their tax returns when asked for the SSN and use it for tax purposes only. An ITIN does not entitle a person to the earned income credit or social security benefits, nor does it change employment or immigration status under U.S. law.

Employer Provided Educational Assistance Benefits -- The exclusion from gross income for up to $5,250 of qualified employer-provided educational assistance benefits was extended retroactively to apply to tax years beginning after 1994 and before June 1, 1997. The exclusion does not apply to graduate-level courses beginning after June 30, 1996.

Unearned Income of Children Under 14 -- The amounts involved in the election to claim a child's unearned income on the parent's return (rather than filing a return for the child) have been increased. The maximum amount of the child's interest and dividend income has been raised from less than $5,000 to less than $6,500. The amount not taxed has increased from $500 to $650.

Earned Income Tax Credit (EITC) Changes -- Unless the child was born in December 1996, a social security number must be provided for each qualifying child to claim the earned income credit. If the social security number is incorrect or missing, the credit may not be allowed. Generally, persons with investment income of more than $2,200 can't claim the EITC. The maximum amount of the credit and the maximum amount of earned income allowed to still claim the credit have increased.

Standard Mileage Rates -- You may deduct 31 cents a mile for all business miles driven, up one cent from 1995. The rate for medical and moving expenses also increases one cent to 10 cents a mile.

INFLATION ADJUSTMENTS FOR 1996

The filing requirements, personal exemption, standard deduction and maximum Earned Income Tax Credit amounts are adjusted each year for inflation.

The 1996 filing requirements are:

              Single . .. . .. . .. . .. . .. . .$  6,550
              Head of household. . . . . . . . . $  8,450
              Married filing jointly. . . . . . .$ 11,800
              Married filing separately. . . . . $  2,550
              Qualifying widow(er). . .. . .. .. $  9,250

Different amounts apply if the taxpayer or spouse is age 65 or older, or if the taxpayer can be claimed as a dependent on someone else's return. There are also other specific situations which require the filing of a return, such as when the net earnings from self-employment are $400 or more.

The personal exemption amount for 1996 is $2,550 -- $50 more than last year. Higher income taxpayers may have to reduce the personal exemption amount they claim if their adjusted gross income exceeds:

              Single . .. . .. . .. . .. . .. .  $117,950
              Head of household. . . . . . . . . $147,450
              Married filing jointly or
              Qualifying widow(er). . . . . . .  $176,950
              Married filing separately.. . . .  $ 88,475

There is a worksheet in the tax package for these taxpayers to figure their personal exemption amount.

The increased standard deduction amounts for 1996 are:

              Single . .. . .. . .. . .. . .. . .$ 4,000
              Head of household... . . . . . . . $ 5,900
              Married filing jointly or
              Qualifying widow(er).. .. . . . .  $ 6,700
              Married filing separately. . . . . $ 3,350

Different amounts apply if the taxpayer or spouse is age 65 or older, is blind, or if the taxpayer can be claimed as a dependent on someone else's return.

The Earned Income Tax Credit limits for 1996 are:

                                    Earned Income   Maximum Credit Limit
         One qualifying child  . . . . . $ 25,078 . . . . $2,152
         Two or more qual. children . . .$ 28,495 . . . . $3,556
         No qualifying children . . . . .$  9,500 . . . . . $323

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