Holiday Season Tax Update
Added on 12/7/04
Season’s Greetings to you and best wishes for good health, peace and
prosperity in the coming year!
It is never too early to start organizing your financial records, so please read
on for the latest changes and some helpful hints for the upcoming tax season.
Please note that if you have any questions and would like to contact your
preparer, you may call our office or e-mail them directly by visiting our web
site, and click on “contact us”.
If you are going to be eligible to start receiving Social Security benefits,
contact the Social Security Administration 3 months before your eligibility
date. You may do so by calling 1-800-772-1213 or reduce processing time by
applying online at www.ssa.gov, click on “Social Security...Apply to retire
here!”
Form 1040 for tax year 2004 will have a check-off box giving your tax preparer
permission to discuss minor tax problems with the Internal Revenue Service. The
“Yes” box will be automatically checked unless you advise your tax preparer
otherwise. This will enable your tax preparer to correct common errors. Major
tax issues will still require your consent with a power of attorney.
YOUR TAX DEDUCTIONS…
1. The standard deduction for 2004 for a married couple filing a joint return
has been increased to $9,700; for a single person $4,850; and head of household
$7,150.
2. The personal exemption for 2004 is $3,100.
3. The reimbursement rate for mileage is $0.375 for business miles; $0.14 for
medical and $.014 for charity.
4. The meal rate for truckers is $41 per day. Per diem rates have changed
depending on the area in which you have traveled.
Highlights of the new tax law:
1. INCREASED CHILD TAX CREDIT:
The child tax credit is $1,000 for 2004. If you are eligible the amount will be
claimed on the 2004 tax return. The $1,000 credit has been extended until 2010.
2. MARRIAGE PENALTY RELIEF:
The basic standard deduction for a married couple filing a joint return is
double the single standard deduction. The end of the 15% tax bracket for joint
returns is twice that for single filers. These provisions are for 2004 to 2010.
3. INCREASED 10% TAX BRACKET:
For 2004 the 10% Tax Bracket is increased to $14,300 of taxable income for joint
filers and $7,150 for single filers. The 10% bracket for head of household is
$10,200.
4. REDUCTION IN RATES:
The tax rates above 15% are 25%, 28%, 33% and 35%.
5. ADDITIONAL FIRST YEAR DEPRECIATION:
An additional 50% depreciation is allowed on certain business property placed
into service this year. The property must be new and have a recovery period of
20 years or less. The limit on Section 179 expense has been increased to
$102,000 for federal only.
6. SALE OF CAPITAL ASSETS:
Assets held more than 12 months qualify for long term gains taxed at rates of 5%
or 15%.
Collectibles, such as coins or works of art, do not get these special rates; the
maximum remains at 28% on these assets. Depreciation recapture on real estate is
taxed at a maximum of 25%.
Remember... if you sold any capital asset, we need to know what you paid for the
asset and when you purchased it. Sale of a mutual fund or trading one mutual
fund for another is the sale of stock. We will need the cost and purchase date
of the fund you sold or traded.
7. DIVIDEND INCOME:
Dividends for 2004 will be taxed at the Capital Gains rates of 5% and 15%.
Eligible dividends will be from domestic and qualified foreign stocks. Some
income items, such as money market interest, that are called dividends are
actually interest and do not qualify. It is very important for you to include
any 1099 forms you receive with your tax information.
8.SCHOOL TEACHER DEDUCTION:
The $250 deduction for qualified classroom expenses has been extended for 2004
and 2005.
9. CASUALTY LOSSES:
After the flooding from Frances and Ivan, 59 PA counties were considered
disaster areas. These include Susquehanna, Wyoming and Bradford. If you had a
loss from the flooding that was not covered by insurance, you may have a
deductible casualty loss. The loss is an itemized deduction and subject to
certain limitations. You will need to know your cost in the property, fair
market value before and after the casualty and any reimbursement amounts.
FROM PENNSYLVANIA …
The use of Schedule SP tax forgiveness has been expanded. The allowance per
dependent child has been increased to $9,500. Many of you will be paying less or
no PA income tax. This means refunds for those who had tax withheld.
WHAT TO BRING TO YOUR TAX APPOINTMENT
1. State and local tax booklet or label including envelopes.
2. Federal, state and local estimated payment vouchers.
3. W-2's, 1099's, SSA statement or business records if you are self-employed.
4. Social security cards for you, your spouse and dependents.
5. Date of birth for taxpayer, spouse and all dependents.
DIRECT DEPOSIT: Direct deposit of your federal refund check is also available at
no extra charge for Forms 1040, 1040A or 1040EZ. To provide us with the bank
information required for your direct deposit, please bring a cancelled check or
blank deposit slip from your bank.
BILLING: Our fees are based on the complexity of your tax return. Your tax
return fee can, therefore, vary from year to year. Factors such as selling
stock, deducting child care expenses, etc., will require additional tax
schedules and time. You will receive an itemized bill showing the charge for
each form prepared. Payment is requested at the time your tax return is
complete, unless prior arrangements have been made. Billing is not factored into
our fees, therefore, a $3.00 fee per month will be charged on accounts over
sixty days. There will be a minimum charge of $20.00 to make changes in your tax
return once it is completed if it is due to your omission of information. There
will be no charge if it is due to our error.
We look forward to working with you in 2005. If you have any questions please
feel free to contact us. You may do so by calling or using the online form
on our website.
There is no nicer time than the holidays to say
thank you for your business. Have a great holiday season!