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Top Tax Season Trends: Here's What Taxpayers Want To Know
COLUMBIA, Md., March 16 /PRNewswire/ -- Fiducial, an international
provider of professional outsourcing services for small businesses
and
individuals, reported today five tax questions that seem to be high
on
taxpayers' minds this tax season. According to Fiducial, recent
tax law
changes are creating increased confusion and questions about:
1. Whether to opt out of bonus depreciation for new property purchases;
2. Who must file amended returns for reporting dividend income;
3. Who should claim education tax credits - the parent or child;
4. Who must pay the Alternative Minimum Tax; and
5. How to maximize losses on the sale of securities.
"With the number of tax law changes, the tax code has become
more
confusing than ever before," said Andrew Martin, Fiducial's
manager of tax
services. "The IRS has written and then rewritten new tax rules,
leaving the
door open to wide-ranging interpretation by accounting professionals
and
financial institutions."
Fiducial, which offers tax preparation and advisory services through
a
nationwide network of 600 professionals and online through its
http://www.fiducial.com Web site, has seen significant growth in
the number of
taxpayers who are coming to its offices asking for specific tax
advice about
these topics, according to Martin.
Fiducial offered some perspectives on why these five topics are
generating
taxpayer interest:
Bonus Depreciation on New Property Purchases - Take It or Leave
It?
Businesses are allowed to take an additional 30 percent in depreciation
for new property purchased after September 10, 2001 and before May
4, 2003 and
50 percent for new property purchased between May 5 until September
11, 2004.
However, the poor economy has reduced many business owners' income
in 2003 --
which means they may be better off claiming these bonus deductions
in future
years when their income is expected to be higher. For 2003, many
are deciding
whether to "opt out" of this bonus depreciation, thus
negating some of the tax
advantages they believed they were getting when they made their
purchases.
Revised 1099 Forms - Return to Sender
The tax act of 2003 significantly changed the tax rates applied
to certain
types of dividend income reported to taxpayers from brokerage firms
that
generate 1099-DIV forms. These changes, involving certain exceptions
and other
complicating factors, are causing so much confusion among the firms
preparing
the 1099 forms that many brokerage houses, mutual fund companies
and other
firms had to revise and then reissue these forms to their customers.
Taxpayers
who have already filed their returns based on the 1099-DIV form
must amend
their returns, while taxpayers who have yet to file must spend additional
time
making sure that their forms are correct.
Education Tax Credits - For Mom, Dad or Child?
There has been a fair amount of publicity surrounding tax credits
available for tuition and fees paid to universities and other institutions
of
higher education, like the Hope Scholarship Credit and the Lifetime
Learning
Credit. There are several restrictions on the credits, however,
and this is
causing confusion about who actually qualifies for the credit. The
credits are
generally not available for higher-income taxpayers and can only
be claimed by
the parent if the child is claimed as a dependent on the parent's
tax return.
Children can claim the credits, but only if they actually pay the
tuition or
fees, which can be accomplished, Martin says, through gifts from
the parents.
To Pay or Not Pay the Alternative Minimum Tax
Originally instituted in the late 1960s as a means of ensuring that
high-
income people didn't escape paying taxes all together, the federal
alternative
minimum tax (AMT) now impacts more than three million taxpayers
annually --
many of whom would consider themselves middle class. Because inflation
was not
factored into the AMT when it was created, many Americans who were
not
intended to pay the tax are doing so today. According to Martin,
the main
cause is increased exemption amounts and high state income tax deductions.
Taxpayers should make sure that their preparers are accurately computing
their
AMT.
Maximizing Stock Market Losses to Lessen Tax Burden
With the number of taxpayers who suffered stock market losses over
the
last several years, many are thinking about ways that those losses
can help
reduce their tax burden. The losses can only be taken, however,
if the
security was actually sold or is deemed to be worthless. Also, the
losses
must first be applied to offset capital gains and then can be applied
to
offset ordinary income to the maximum amount of $3,000. After that,
the loss
must be carried forward and used in future years. With the lower
tax rates of
today, the capital loss offsets are not as valuable against capital
gain
income as they are against ordinary income, and taxpayers who sold
securities
as a year-end tax planning strategy are finding that they may have
taken
losses prematurely. Those who neglected to monitor the worth of
their
securities are finding that they have missed out on deductions,
as worthless
securities can only be taken as a loss in the year of worthlessness.
Fiducial's Martin and his team of tax specialists are working
with clients
across the country to tackle these and other tax challenges, and
to ready them
for next year. The company has expanded its Web site to include
helpful
resources for taxpayers; visitors also can use the site's handy
zip code
locator to find the Fiducial professional nearest them.
About Fiducial
Established in Europe in 1970, Fiducial is currently the ninth
largest
accounting firm in the U.S. and the thirteenth largest in the world.
Privately held with revenues exceeding $600 million, Fiducial has
over 6,500
employees worldwide serving 185,000 clients. U.S. operations are
headquartered in New York City and rely on its Technical and Administrative
Support Center (TASC) in Columbia, Maryland for support. For more
information
about Fiducial, go to: http://www.fiducial.com.
SOURCE Fiducial
Web Site: http://www.fiducial.com
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