US E-Filing Season Starts On Thursday

by Leroy Baker, Tax-News.com, New York

11 January 2006

With the IRS due to accept e-filed tax returns from January 13th, H & R Block has declared tomorrow 'National Tax Advice Day'; the firm's representatives will be on high alert across the nation to help clients with their tax returns.

Says H & R Block: 'Millions of taxpayers will lose or gain tax benefits this year because of major tax law changes and missed credits, including new guidelines for claiming child-related benefits and new tax breaks for hurricane victims and charitable donors. The Alternative Minimum Tax (AMT) is on track to snare almost 4 million taxpayers this year, and millions more will fail to claim credits for their higher education expenses.

The company says it will mobilize its network of more than 70,000 tax professionals to deliver free advice on tax topics with the most widespread impact. The educational effort will be in full force from tomorrow.

'Our tax experts have identified five major tax areas that deserve special attention by taxpayers this year,' said Tim Gokey, President of the US Tax Division of H&R Block. “H&R Block’s National Tax Advice Day is about making people aware of these tax issues and helping them claim every tax benefit to which they’re entitled.”

H&R Block’s “Taxes 2006: The Top 5 Things You Need to Know”:

• Child-related tax benefits — Nearly 50 million, or 38 percent of all tax returns, claim dependents and may be affected by changes in the way the tax law defines a child. The new definition applies when claiming the exemption for a dependent, using head of household filing status, and claiming the child tax credit, the child and dependent care credit, and the earned income tax credit. Anyone with a child may gain or lose important tax benefits due to the changes.
• Charitable giving & Hurricane relief — A new law provides special tax benefits for Hurricane Katrina victims and those who have helped them. The Katrina Emergency Tax Relief Act (KETRA) increases the amount an individual can currently deduct for cash contributions to qualified charities, and provides a deduction of up to $2,000 to taxpayers who provided rent-free housing to hurricane victims for at least two months in 2005. Several KETRA provisions were also extended to individuals affected by Hurricanes Rita and Wilma including an increased deduction for claiming casualty losses and waiving penalties for early withdrawals from qualified retirement plans.
• The Alternative Minimum Tax (AMT) — Millions of taxpayers could be surprised by an additional tax surcharge averaging $2,770 as this complex tax affects an increasing number of middle-income families. The number of taxpayers paying the AMT is estimated to soar from nearly 4 million in 2005 to almost 20 million in 2006 if the law remains unchanged. Under AMT, personal exemptions are not allowed which means that families with as few as two dependents may be subject to this extra tax. As the number of personal exemptions increases, so does the probability of being hit with AMT. Other top AMT snares include: Large state and local tax payments, high miscellaneous itemized deductions such as unreimbursed employee business expenses, and income from exercising incentive stock options.
• The Earned Income Tax Credit (EITC) — Millions of low- and moderate-income families are eligible but don’t claim the EITC, which is worth an average of about $1,760. As many as 25 percent of those eligible — or about 7.3 million taxpayers last year alone — failed to claim it, according to government figures. Many working families fail to claim the EITC due to a lack of awareness or the complexity of the eligibility requirements and tax forms.
• Education-related tax benefits — Millions of Americans don’t maximize their education-related tax benefits, in part, because it can be a complicated process. Nearly 27 percent of eligible taxpayers — 4.1 million people — fail to claim education tax benefits, according to a recent government report. Evaluating which education tax break provides the greatest savings — the lifetime learning credit, the Hope credit, and the tuition and fees deduction — can be difficult because of phase-out provisions and varying eligibility guidelines. New changes allow eligible students in the core Hurricane Katrina disaster area to claim up to $3,000 for the Hope credit and up to $4,000 for the Lifetime Learning credit. That is double the amount typically allowed. The expanded credit is available for 2005 and 2006.

H & R Block is also offering prizes this season through its 'Double Your Refund Instant Win Game' in which those who file their tax returns through the firm are entered for a game in which they can win a variety of prizes, including a doubling of their tax refund.

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