Honey, it's time.
Tax season is upon us and so you better come to terms with it.
-style, not only will we keep you posted of tax law changes, Web site updates and all the other tax-related minutiae, we'll do our best to address all your pertinent questions, so start sending them in.
Then gear up for some kamikaze coverage this tax season. April 16 is only 76 days away.
Today's column will cover the gamut of what's new this tax season. Fortunately, there were not a ton of changes to the tax law in 2000, nor were there drastic changes to the actual tax forms, but we'll address the few that might affect you. In addition, we'll also report on some Web site updates and launches and resolve some comments from a few readers.
Form W-2s and
Form 1099's are supposed to be postmarked by Jan. 31, so you should be receiving them any day now. Do yourself a favor: Create a tax folder -- yes, an actual folder -- not just a tax pile. Things notoriously disappear from a pile. If you start to collect all these documents in a folder, you have a better shot of staying organized.
A Few Minor Changes
Here's a rundown of the few minor changes that could affect your tax return.
The definition of foster child has changed.
The definition of foster child used to have loose interpretations. The old rule said that as long as the child lived with you for the whole year and you cared for him as your own, you would be eligible for the child tax credit and the earned income credit.
As a reminder: The child tax credit allows you a flat $500 for each dependent child under age 17. It phases out if your adjusted gross income is above $110,000 for joint filers, $75,000 for unmarried individuals and $55,000 for those who are married and filing separately. The earned income credit, which maxes out around $3,800, is for people who work and have earned income under $31,152 for year 2000.
So, in previous years, if you lived with your partner and, say, your partner's child from a previous marriage for a full year and you provided complete support and care, you were able to claim that child as dependent.
But the rules defining a foster child have gotten stricter for 2000, says Maggie Doedtman, manager of tax training at
in Kansas City, Mo. In addition to the old rules outlined above, now the child also must be your brother, sister, stepbrother or stepsister or placed with you by an authorized placement agency.
If not, you do not qualify for the child tax credit or the earned income credit, says Doedtman.
You can report capital gains distributions on Form 1040A.
-- U.S. Individual Income Tax Return
falls in between the very simple Form 1040EZ and the regular ol' Form 1040.
If your taxable income is less than $50,000, then you may qualify to use either the 1040EZ or the 1040A. The big difference between the 1040EZ and the 1040A is that you can report retirement income on 1040A. You can't on 1040EZ. So if you have income from IRA distributions, pensions and annuities, or taxable Social Security, you may be able to use the 1040A.
In the past, you could not report capital gains on either the 1040EZ or the 1040A. Now, capital gain distributions from mutual funds may be reported on Form 1040A, according to
, an information provider to tax professionals. There is a worksheet on page 35 of the
instructions to help you determine the final amount to report.
You will not receive an electronic filing customer number from the IRS this year.
So don't go looking for one in your mailbox. As we previously
reported, new for the 2000 filing season, you can select your own five-digit personal identification number. That number, combined with your 1999 adjusted gross income and total tax due, will serve as your electronic signature.
If you do not have copies of your 1999 return (shame on you), you still can e-file. While you won't be able to create your own identification number, you'll need to file
-- U.S. Individual Income Tax Declaration for Electronic Filing
to verify your signature.
Some Web Site Updates
A few weeks ago I
kicked off its 2000 tax season with a Jan. 13 launch. In addition, I noted that a few institutions, namely
, were offering TurboTax free to their customers.
A few of you wrote in to question whether Fidelity and Vanguard were really offering the product for free.
wrote: "I am a Fidelity customer (long time) and found out about their free offer for TurboTax by reading your piece. I went to the Fidelity site to discover that Fidelity has closed registration on this offer to any new takers. Thought you would want to know. Pretty disappointing, given the scope of an operation like Fidelity."
I don't get it, Scott. I talked to the folks at Fidelity and the online version is indeed free, according to Jim Griffin, a spokesman at Fidelity. If you go to the
Web site, you'll see a box on the right side that takes you through the process.
In addition, as a Fidelity customer, starting Jan. 31 you can download all your trading information, including your cost basis, from Fidelity's site right into TurboTax. So your
Capital Gains and Losses
basically is prepared for you.
But if you made more than 125 transactions in year 2000, the TurboTax online program will not be able to download all your trading activity. Instead, Fidelity will offer you the TurboTax Deluxe software, which can handle your numerous trades.
wrote to say that Vanguard is no longer offering TurboTax for free. "Last year they offered it for free to all registered users, but this year, they decided to nickel-and-dime them by only offering it for free to "high net-worth" individuals; everyone else only gets a 15% discount off the list price!"
Unfortunately, he's correct. "TurboTax is being offered at a 15% discount to Vanguard shareholders," says spokesman John Woerth. You're right, Tom: Only Voyager and Flagship clients, the higher net-worth bunch, may use the service on a complimentary basis. So while Vanguard is offering the product for free, we should've noted that it is only a freebie to a select group of customers. Thanks for keeping me on my toes, Tom.
For more information, check out this
section of Vanguard's site.
If you have everything you need to prepare your tax return and feel like getting a jump start on the rest of us,
Taxes4Less is offering you a 5% discount if your submit your tax information by Jan. 31, says co-founder Greg Yulish.
Last year, we
profiled this online tax preparation site, which offers a unique shoebox option for the unorganized, unmotivated taxpayer. Complete an online application and send $50 plus shipping and handling (you'll need to put it on a credit card), and the Encino, Calif.-based company will send a shoebox, which it calls a "kit." Drop in your tax-related documents -- W-2s, capital gain schedules, K-1s, etc. -- plus last year's return and send it back. Then Taxes4Less will prepare your return for you for around $100, depending on its complexity.
To save the $50 shoebox fee, you can complete an online organizer that details all your tax information and send that back to the company instead.
The site is also offering a "Turbo return" option. For $10, you can call them and get an estimate of your refund over the phone in five minutes. In addition, they've expanded this shoebox option to small business. Their average price is around $400 to $500, as opposed to the $3,000 an accounting firm might charge you, says Yulish.
The site is already preparing 100 individual tax returns a day -- that was the amount it was preparing during its April peak last year.
H&R Block is up and running.
If you prepared your return using
hrblock.com last year and were lucky enough to be unaffected by the
glitches, the site launched this past weekend.
Microsoft's TaxSaver is gone.
If you used this Microsoft's federal-only tax preparation product last year, I'm sorry. The product will not exist for the 2000 tax season. Fortunately, all your information from TaxSaver information can be downloaded into
, H&R Block's sister product.
Tracy Byrnes and
John Rubino, contributors to
TheStreet.com: Guide to Smart Investing in the Internet Era
, this Wednesday, Jan. 31 at 5 p.m. EST, as they discuss the right time to sell stocks in the market. Log on by clicking on the icon on the top of the home page at the time of the chat and have plenty of investing questions.
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