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2004 Income Tax rate @ 10%

Single Filers Up to $7,150
Married, filing jointly Up to $14,300
Married, filing separately Up to $7,150
Head of Household Up to $10,200
More information...

2004 Standard deduction amount

Single $4,850
Married, filing jointly $9,700
Married, filing separately $4,850
Head of Household $7,150
Personal exemption amount $3,100

IRS Has $2 Billion for People Who Have Not Filed a 2001 Tax Return

WASHINGTON — Unclaimed refunds totaling more than $2 billion are awaiting about 1.7 million people who failed to file an income tax return for 2001, the Internal Revenue Service announced today. However, in order to collect the money, a return must be filed with the IRS no later than April 15, 2005.>

The IRS estimates that half of those who could claim refunds would receive more than $484. In some cases, individuals had taxes withheld from their wages or made payments against their taxes out of self-employed earnings but had too little income to require filing a tax return. Some taxpayers may also be eligible for the refundable Earned Income Tax Credit.

The window is closing for 2001 refunds,” IRS Commissioner Mark W. Everson said. “As soon as you send us your tax return, you’ll get your money. But if you don’t file, you won’t get anything.”

In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity to claim a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2001 returns, the window closes on April 15, 2005. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2001 refund that their checks will be held if they have not filed tax returns for 2002 or 2003. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, individuals stand to lose more than refunds of taxes withheld or paid during 2001. Many low-income workers may not have claimed the Earned Income Tax Credit (EITC). Although eligible taxpayers may get a refund when their EITC is more than their tax, those who file returns more than three years late would be able only to offset their tax. They would not be able to receive refunds if the credit exceeds their tax.

Generally, individuals qualified for the EITC in 2001 if they earned less than $32,121 and had two or more qualifying children living with them, earned less than $28,281 with one qualifying child or earned less than $10,710 with no qualifying child.

Current and prior year tax forms are available on IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Taxpayers who need help may also call the IRS help line at 1-800-829-1040.

State-by-state estimates for individuals who failed to file a 2001 return with a refund due are below.

Recent Changes May Affect Your 2004 Taxes

Some recent tax law changes are effective for the 2004 Tax Year. If these items affect you, be sure to get the details when you prepare your tax return.

Educators’ Deduction — This had expired at the end of 2003, but was restored for two more years. IR-2004-124 has more information.

Clean Fuel Vehicle Deduction — The maximum amount of this deduction was scheduled to drop this year and next, but has been retained at the $2,000 level through 2005. IR-2004-125 has information on this deduction and the newest vehicle to qualify for it.

Child Tax Credit — Taxpayers with a credit amount more than their tax could get a refund of the difference, up to 10% of the amount by which their 2004 taxable earned income exceeds $10,750. This percentage was raised to 15% for 2004, meaning a larger refund for many of these taxpayers.

Combat Pay — Some military personnel receiving combat pay get larger tax credits because of two law changes. The new law counts excludable combat pay as income when figuring the Child Tax Credit and gives the taxpayer the option of counting or ignoring combat pay as income when figuring the Earned Income Tax Credit. Counting combat pay as income when calculating these credits does not change the exclusion of combat pay from taxable income.

For more about the effect of excludable income on the EITC, see Q&A-37 in Miscellaneous Provisions - Combat Zone Service.

For more details on combat pay, see Military Pay Exclusion – Combat Zone Service

Sales Tax Deduction — Taxpayers who itemize deductions will have a choice of claiming a state and local tax deduction for either sales or income taxes on their 2004 and 2005 returns. Publication 600, Optional State Sales Tax Tables (PDF 93K) provides tables to use in determining the deduction amount, relieving taxpayers of the need to save receipts throughout the year. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate. Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for sales or income taxes. For more details on the sales tax deduction, see news release IR-2004-153.

New Law Encourages Tsunami Relief Contributions — Contributions made to qualified charities to help victims of the Tsunami can be deducted for tax year 2004 even if they are made in January 2005, under a new law enacted on Jan. 7.

Expense Limit for SUVs — Businesses should be aware of a change regarding the deduction for certain sport utility vehicles (SUVs) placed in service after Oct. 22. Under the American Jobs Creation Act of 2004, businesses cannot take a first-year deduction of more than $25,000 for an SUV. The business would depreciate the remaining cost. (The limit for vehicles placed in service before Oct. 23 was $100,000.) The new limit does not affect other types of property where the taxpayer decides to expense the cost instead of depreciating the property.

Sale of Personal Residence Acquired in a Like-kind Exchange — Taxpayers who convert rental property to a principal residence should know that a tax law change may limit their ability to exclude gain on the sale of that residence if they obtained the property through a like-kind exchange. Generally, a taxpayer can exclude up to $250,000 of gain on the sale of a home, provided the individual has owned and used it as a principal residence for two out of the five years before the sale. The exclusion is $500,000 for a married couple if both meet the use test. The American Jobs Creation Act of 2004 does not allow any exclusion if the taxpayer sells the home within five years of acquiring the property through a like-kind exchange. The new law applies to sales after October 22, 2004.

Deduction for Discrimination Suit Costs — A new deduction is available for those who pay attorney’s fees and court costs in connection with discrimination suits. Taxpayers can take the new deduction whether they itemize or not. The deduction cannot exceed the amount includible in income for the year on account of a judgment or settlement resulting from the discrimination claim. Generally, personal legal expenses are not deductible, but an employee who incurs legal expenses related to doing or keeping his job could deduct these expenses on Schedule A as a miscellaneous itemized deduction.  However, under The American Jobs Creation Act of 2004, an individual with legal fees and court costs arising from a discrimination suit may deduct the costs directly from income on the front of the tax return; this is known as an above-the-line deduction.

Under this new deduction, amounts paid for attorney’s fees and court costs are deductible in computing alternative minimum tax, and are not subject to the 2 percent floor on miscellaneous itemized deductions or the overall limitation on itemized deductions. The Act, signed into law on Oct. 22, 2004, describes the discrimination claims qualifying for this new deduction. Only costs paid after Oct. 22, 2004, for judgments or settlements occurring after that date qualify for this deduction.

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