Taxes: Resources for 1998 - 1999

Dateline: 02/28/99

Y2K or not, you still have to file your taxes. But wait, it could be fun this year since you can even file via the Web. Okay, not even the Web can make doing taxes fun. So here are some resources that might at least lighten the load.

In this article, you will find information on the following:
Tax Reform -- A Year Later
New Tax Rules for 1998
IRS Takes Credit Cards?
Tax Help From the IRS
Forms, Forms, Forms
Web-based Tax Filing

Tax Reform Update
One year ago...
The IRS had been lashed by the legislators, pounded by the public, and mauled by the media. Yet two tax reform bills that would have drastically changed our system of taxation went absolutely nowhere in the 105th Congress.

H.R. 1040 - The Armey-Shelby Flat Tax by Rep. Dick Armey (R. Texas) proposing that we all pay a flat 17% of our taxable income and do so on a single post card sized return, made it as far as some House Committees, but no further. (Read all about the Flat Tax proposal.)

H.R. 1325 - The National Sales Tax Act by Rep. Dan Schaefer (R. Colorado) doing away with the IRS and imposing a sales tax of 15% on "the gross receipts from the sale of any taxable property or service sold in the United States." was never reported out of  the Ways and Means Committee. Neither bill made it to floor debate by the 105th Congress. (Read all about the Sales Tax proposal.)

What now?
So far in the 106th Congress, only Senator Richard Lugar (R. Indiana ) has picked up the Tax Reform gauntlet. His Senate Resolution 24 "Expressing the sense of the Senate that the income tax should be eliminated and replaced with a national sales tax." proposes to express the Senate's support for changing the tax system. Its passage would help pave the way for future, more substantive legislation. The Resolution was referred to the Senate Finance Committee on January 19, 1999.

LowerTaxes.nu - is a new web site dedicated to teaching taxpayers how to effectively work within the state and federal legislative systems to lower taxes. Though focused on Washington State, LowerTaxes.nu features important information for all taxpayers.

New Tax Rules
Tax Code Changes for 1998 include new or amended rules for:
(click on links for complete details from the IRS)

• Capital gains tax rates
• Sale or exchange of a home (more)
• Individual Retirement Accounts (IRAs)
• Child Tax Credit (increased)
• Hope Scholarship - Education Credits
• Estimated taxes - penalty for underpayment
  "There is no penalty for underpayment of estimated tax where the tax liability shown on the return less withholding paid, is less than $1,000." - IRS
• Estate and Gift tax exemption
  "The unified estate and gift tax exemption is gradually increased from 1998 to 2007 from $625,000 to
  $1 million. The exemption amount in 1998 is $625,000." - IRS
• Mileage Rate for charitable miles
  "The standard mileage rate for charitable miles is 14 cents in 1998. The special rate for rural mail carriers has been repealed and replaced with an exclusion to income equal to the Equipment Maintenance Allowance." - IRS
• Self-employed health insurance deduction
  "The self-employed health insurance deduction is 45% for 1998 and 1999." - IRS
• Student Loan - interest deduction
  "For 1998 you may be able to deduct up to $1,000 for qualified student loan interest. You may only deduct interest that is paid during the first sixty months that interest payments are required. The qualified education loan must be for you, your spouse or a dependent." - IRS

For more information on these and other tax law changes, download IRS Publication 553, "Highlights of 1998 Tax Changes."

IRS Takes Credit Cards
For the first time its history, the IRS will allow taxpayers to pay taxes due with a credit card. But, and these are some significant "buts:"

• Only "...taxpayers who file Form 1040 electronically using (1) an Authorized IRS e-file Provider (i.e., an Electronic Return Originator [ERO]), (2) a commercial tax preparation software, or (3) TeleFile, can make balance due payments by credit card using a touch-tone telephone."
• At this time, the IRS will only take MasterCard, American Express, NOVUS/Discover, and other NOVUS Brand cards. (Additional cards may be accepted in the future.)
• If you file a paper 1040, the IRS says it is "possible" for you to pay with a card by calling 1-888-2PAY-TAX. However, IRS encourages the use of credit cards only be electronic filers.

Clearly, the IRS is "testing" credit card payments this year. Watch for them to extend the service if it proves successful.
Credit Card Q&A - from the IRS
Credit Card Q&A for Tax Professionals - from the IRS

Tax Help From the IRS
As it has for some time, the IRS web site really offers a lot of tax help. Here are some handy links:

Tax Trails
Probably the most helpful IRS resource, Tax Trails is an interactive tax-related expert system session which leads you to an answer by simply responding to a series of Yes or No questions. Popular titles answer questions about standard deductions, medical expenses, deduction of interest, capital gains and losses, and dependents.

Frequently Asked Questions
A handy collection of answers to questions the IRS is asked a thousand times a day.

Making Installment Payments
If you can't pay all of what you owe and IF you file your return on time, you can attach a Form 9465, Installment Agreement to your return. But, do not do this until you have read Tax Topic 202 on the subject. You may find it much less expensive to get a loan from your bank to pay your taxes than making installment payments to the IRS.

Offers in Compromise
"The IRS accepts an offer in compromise to settle unpaid accounts for less than the amount owed when doubt exists as to whether you owe the liability or when there is doubt that the liability can be collected in full and your offer reasonably reflects collection potential." - IRS. Read Tax Topic 204.

Extension to File
Links for downloading the form(s) you'll need for requesting more time to file your return.

Tax Tables
A handy, online version of the 1998 Tax Table and Tax Rate Schedules.

Download Publication 17
This contains all the instructions for filing any personal tax return. It comes with examples of correctly completed forms, tables and worksheets. It's a 2.8 Megabyte .pdf file, but well worth the download if your taxes are at all complicated.

Forms, Forms, etc.
The IRS Forms and Publications page was the only forms source I listed last year. It is a fine source, but tends to get really busy and slow starting about April 1st. Fortunately, there are some new forms sources this year.

FedWorld Tax Form Search
Has forms, publications, and instructions. Just enter the form number or some descriptive words to find the forms you need.

Quicken's Tax Center Forms
From Intuit, the Turbo Tax folks comes a handy collection of the most often needed tax forms and IRS publications.

State Tax Forms
New this year! My own collection of links to state tax forms from all 50 states and New York City.

Web-based Filing
More people than ever will be filing directly from a PC this year.Whether you use the ever-popular Turbo Tax or Auto Tax, online filing has become a convenient and reliable way to file.

New this year, you can even file directly via the Web as the Intuit (Turbo Tax) folks have launched "Web Turbo Tax." This web-based version of Turbo Tax will step you through the entire filing process. When it's all over but the crying (or cheering), you can either download your completed tax forms for printing and mailing or have Web Turbo Tax file them for you electronically. The cost for Web Turbo Tax is $9.95 each for Federal and State 1040EZ or $19.95 each for Federal and State 1040/1040A returns. But, if your adjusted gross income is $20,000 or less, you may be able to prepare and submit your tax return free through the Quicken Tax Freedom program. (You must prepare your return through the Quicken Tax Freedom web site to qualify.)

Some other web-based preparation and filing services you might consider include:
FileYourTaxes.com
SecureTax.com
Kiplinger Tax Cut
FileSafe
Electronic Filing Services, Inc.
GAC Little ELF
Thompson's OneTax.com
UDS ELECtroTax
ETax Online
Charges and services offered by the above firms differ, so start now and shop around.

Let the Good Times Roll
There! Taxes are all done. Now the decks are cleared for some serious Y2K worry. Every millennium, it's something else, isn't it?