Taxes: As April Approaches…
It's just about that time again. With the April 15 deadline approaching, anyone who hasn't gotten it together to do his or her taxes should consider it now.
This year there are some changes, too, brought about by the Revenue Act of 1978. Some people may even be pleasantly surprised to find that they'll receive a bigger refund check than in recent years past. Of course, that doesn't mean the government's taking in less money—fat chance—it just means that some of us will get a few breaks from the ever-increasing tax burden lying on our backs.
Here are some of the changes that will affect your federal income taxes and the way you do them this year:
• The minimum income that requires you to file any income tax return at all has been raised a little. For single people, under and over age 65, respectively, the minimum filing income limits have been raised from $2,950 and $3,700 in 1978 to $3,300 and $4,300 for 1979. For married people, both under age 65 or both over age 65, the income levels necessitating filing have been raised from $4,700 and $6,200 in 1978, respectively, to $5,400 and $7,400 for 1979. If only one of the married filers is over age 65, the limits have been raised from $5,450 to $6,400. For those filing married/separately, the limits have gone from $750 in 1978 to $1,000 in 1979.
• Standard deductions (now called "zero bracket amounts") have been slightly increased for 1979, also. For those married couples tiling jointly, the standard went from $3,200 in 1978 to $3,400 in 1979. Single people and those filing as unmarried heads of households will now get a $2,300 standard deduction instead of the old $2,200. And those who are married but tile separately will get a standard of $1,700 instead of the old $1,600 from 1978.
• Exemptions for dependents have been raised, from $750 last year to $1,000 each today.
• The tax brackets have been widened this year—in response, no doubt, to widespread criticism and complaints from taxpayers being shoved into ever-higher tax brackets by government-caused inflation…while their standard of living decreases. Although only a partial help, this widening of the brackets is intended to dampen criticism of the "progressive" income tax by preventing people from being shoved so quickly into those higher tax brackets.
• The auto mileage deduction has been increased a miniscule amount. Where it was 15 cents for the first 15,000 business miles in 1976 and raised to 17 cents for the first 15,000 miles in 1977, now the IRS is allowing an 18.5 cent deduction per mile in 1979. Of course, the latest and best studies (done by the Hertz Corporation) show that the cost of operating an automobile is now about 38 cents a mile, but that is of little import to the IRS, which can administratively set the mileage allowance at any level it wants.
• The Earned Income Credit—a form of negative income tax instituted in 1975—has been raised also. Whereas last year the maximum credit was 10 percent of $4,000, this year that entitlement has been raised to 10 percent of $5,000, or $500.
• On the other side of the ledger, the state and local gasoline tax deduction has been abolished. The old Schedule A deduction was dropped as a concession to those in Congress who feel that Americans are getting too many tax breaks (sic) or are driving their cars too much.
• Naturally, the ever-increasing FICA (Social Security) taxes have been upped yet again. Here are what the increases over the last several years—and into the future—look like:
These figures illustrate the maximum amount taken out of an employee's pay for FICA taxes during each year. In addition, the employer must match the same amount, as his "contribution." Not bad—a 121 percent increase in a mere six years. But take heart: we haven't seen anything yet. This particularly vicious tax—which they tell us is "for our own good"—is scheduled to top $3,000 in the next several years.
In addition, here are a few simple tips for those getting ready to tackle their income taxes:
1. The easiest way to get ready to do your taxes is to gather all your records together at one time, in one place. The most important records you can have are your cancelled checks and check registers, your business diary and auto mileage log if you keep them, and, of course, your receipts. Get them all together, and the chances are that you'll have everything you need at your fingertips as you do your taxes.
2. If you're doing your own tax return and run into any area you don't understand or have questions about…don't take a chance. Go ask a professional, or see that you have a complete tax guide at your disposal.
3. If you have your taxes done by a professional, the slowest time during the tax season is in late February and early March. That might be a good time to call for an appointment.
4. The IRS says all returns are processed the same—and scrutinized the same—whether they come in during January or on April 15. Common sense would tell us, however, that any return would have a better chance of slipping by with a more cursory examination during the big April 15 rush. Many taxpayers have a "why-take-a-chance" attitude and send in their returns on April 14 or 15 no matter what. Every little bit helps, seems to be their attitude.
Finally, as you do your taxes, reflect on the fact that Americans today pay more taxes on the average than medieval serfs. Wonder to yourself why that should be and how we came to such a pass. After all, we're a country founded upon a revolution against various forms of taxation. But today.…Well, the question often occurs to me: How did they ever get away with it?
Tim Condon is a tax lawyer currently practicing in Florida.