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Tax Time 2005

Numbers Crunch

By Albert B. Crenshaw
Washington Post Staff Writer
Sunday, March 6, 2005; Page F01

Since 2001, American taxpayers have had no greater friends than the members of Congress.

Through last fall, lawmakers in that period enacted five major tax bills, three containing the words "tax relief" in their names and the other two featuring "jobs creation" in their titles.

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So why, then, does the nation need a President's Advisory Panel on Federal Tax Reform, which recently set up shop and began looking for ways to revise the tax laws?

If you haven't done your tax return yet, you're about to find out.

The Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002, the Jobs and Growth Tax Relief Act of 2003, the Working Families Tax Relief Act of 2004 and the American Jobs Creation Act of 2004 have taken a tax system that was already complicated enough and turned it into a kaleidoscope of annually changing brackets, limits and rules.

Provisions blink on and off like lights in Times Square. Benefits scheduled to expire are extended -- or allowed to expire and then extended. Benefits scheduled to phase in are suddenly accelerated, but their scheduled expiration date is left in place.

In addition, over the years many long-standing rules have been dramatically altered, trapping unwary taxpayers. For example, the ability to roll over profit from the sale of a principal residence into another home tax-free, eliminated way back in 1997, was so ingrained in many taxpayers' minds that the change didn't register with them.

"We're still seeing people get into trouble on that," said Jackie Perlman, a CPA and senior tax research coordinator with H&R Block in Kansas City, even though the flat exclusion that replaced it is actually a better deal for many taxpayers. (That's the rule that allows single tax filers to keep $250,000 profit tax-free; it's $500,000 for married couples who file jointly.)

So as we turn into the home stretch of this year's filing season, it's clear that taxpayers who don't use professionals to prepare their returns need to have up-to-date guides and/or software. In addition, don't pooh-pooh the Internal Revenue Service Web site. It's www.irs.gov, and you can get publications and instructions on most issues, as well as most required forms.

And don't neglect your state or states, if you have income derived from more than one. People using home computer programs "have got to make sure they sign up for the automatic downloads" of any updates, said CPA Art Auerbach of Goodman & Co. in McLean. "Some legislatures are making retroactive changes" to state rules, so "you want to get the latest and greatest" from any state where you have to file a return.


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