Certified Specialist In Taxation Law
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Certified Specialist In Taxation Law |
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HIGHLIGHTS - TAX CHANGES CHILD TAX CREDIT Beginning in 1998, taxpayers may be entitled to a child tax credit for each qualifying child under age 17. The maximum credit for each qualifying child in tax year 1998 is $400, this amount increases to $500 for each qualifying child in 1999. HIGHER EDUCATION TAX CREDITS Beginning with tax year 1998 taxpayers may be able to claim two new tax credits for higher education costs. They are the HOPE SCHOLARSHIP CREDIT (also known as Hope Credit) and the LIFETIME LEARNING CREDIT. The amount of each credit is determined by the amount the taxpayer pays for qualified tuition and related expenses for eligible students, and the amount of the taxpayer's modified adjusted gross income. Refer to PUBLICATION 970, TAX BENEFITS FOR HIGHER EDUCATION for information and examples. EDUCATION INDIVIDUAL RETIREMENT ACCOUNT (IRA) Beginning in tax year 1998, taxpayers may be able to contribute up to $500 each year to a new education IRA for a child under age 18. Contributions to an education IRA are not deductible, but the earnings will grow tax- free until distributed, and in some instances may be withdrawn tax-free. Refer to PUBLICATION 970, TAX BENEFITS FOR HIGHER EDUCATION for information and examples. ROTH IRA Also for tax year 1998, a new individual retirement account (called the Roth IRA) allows taxpayers to establish and make non-deductible contributions. However, qualified distributions of the investment and its earnings are tax-free. A Roth IRA must be designated at the time it is established. See PUBLICATION 590, INDIVIDUAL RETIREMENT ARRANGEMENTS or PUBLICATION 553, HIGHLIGHTS OF 1997 TAX CHANGES for more information DEDUCTIBLE STUDENT LOAN INTEREST Beginning in tax year 1998, taxpayers may be able to deduct interest paid on a qualified student loan. This applies to loan interest payments due and paid after 1997. The deduction may be limited, depending on the taxpayer's modified adjusted gross income. However, the maximum deduction for 1998 cannot be more than $1,000. ELECTION TO AVERAGE FARM INCOME For tax years beginning after 1997 and before 2001, an individual farmer can elect to average all or part of his or her taxable "farm income" over 3 years. EXPANSION OF MATH ERROR AUTHORITY Math Error Authority procedures will be expanded for Tax Year 1998 to include validation of secondary social security numbers (SSNs) and SSNs used on Form 2441, Child and Dependent Care Credit. This means that a dependency exemption may be disallowed or that child care credit may be disallowed or reduced, if a valid SSN is not provided for the secondary taxpayer or on Form 2441. WELFARE-TO-WORK CREDIT The welfare-to-work credit is a new credit employers can take for qualified wages they pay to qualified long-term family assistance recipients who begin work after December 31, 1997, and before May 1, 1999. The credit is available only during the first 2 years of employment. Employers must receive certification from the state employment security agency (SESA) before claiming the credit. CREDIT CARD PAYMENTS To help meet the Congressional mandate to increase the number of electronically filed returns by 2007, IRS is promoting electronic filing for taxpayers. In January 1999, IRS will begin a pilot with a limited scope and eligibility to assess public acceptance of credit card payment for individual returns. During this pilot, IRS is accepting credit card payments for electronically filed Form 1040 or Tele-file balance due returns for Tax Year 1998 ONLY. The IRS awarded two contracts to private sector companies (US Audiotex and NOWS/Intuit) to process credit card payments on behalf of the IRS. The credit card companies and US Audiotex and NOVUS/Intuit will set the convenience fees. IRS WILL NOT BE INVOLVED IN THIS PROCESS. Information about these fees may be obtained from the following:
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