Tax Time 1996 Tax Packages

TAX PACKAGES

The Internal Revenue Service will send about 110 million income tax packages and postcards this year. Most taxpayers will get their forms by early January. IRS expects to receive over 118 million tax returns in 1996, with continued growth in such alternatives as electronic filing and the 1040PC and a decline in the "long" Form 1040:

Type of Filing                            1995            1996
1040PC Format                             2.9 m           4.6 m
Electronic Filing/TeleFile               11.8 m          16.1 m
Form 1040EZ                              18.1 m          17.5 m
Form 1040A                               20.5 m          18.4 m
Form 1040                                63.4 m          61.9 m

In place of tax packages, the IRS will mail about 33 million postcards to many taxpayers who used a paid preparer last year. The postcard includes a pre-printed label for use on the tax return. Taxpayers who want to do their own forms may request a package of forms and instructions by sending a reply card to the IRS. Those using paid preparers should give the labels to their preparers for use on the returns. Since preparers seldom use IRS-printed forms, this postcard program saved the public $2 million in printing and distribution costs last year.

IRS is sending a payment voucher, Form 1040-V, with almost all Form 1040 tax packages. Taxpayers with a balance due should mail the vouchers with their payments. Taxpayers may also request Form 1040-V from the IRS. The vouchers allow the IRS to process payments more efficiently and accurately.

The printing bill for the total mail out is $27.1 million, with postage costing another $20.4 million. The average costs are 53.6 cents for each tax package and 20.3 cents per postcard.

Additional forms and publications are available by calling 1-800-TAX-FORM (1-800-829-3676) weekdays. Computer users may access the Internal Revenue Information Services bulletin board by modem at 703-321-8020 or on the World Wide Web at http://www.irs.gov.

TAX FORMS: WHAT'S NEW FOR '95?

• Most Filers May Choose Direct Deposit of Refunds -- The convenience of direct deposit for tax refunds will be available for most people this year. Previously, only those who filed electronically or used the 1040PC format could get direct deposit. Now, taxpayers will be able to put their bank account information on Form 8888 and attach it to the tax return. The new form will be in the tax packages for Forms 1040 and 1040A and will also be available through the toll-free IRS forms number.

• Unemployment Compensation Recipients Can Use Form 1040EZ -- As part of IRS' continuing effort to simplify forms, it has made the shortest tax form, the 1040EZ, available to those reporting income from unemployment compensation.

• Less Paperwork for Household Employers -- People who paid at least $1,000 to any household employee during the year will use the new Schedule H to report and pay federal employment taxes. This single form replaces up to five forms that had been used previously. Taxpayers may attach Schedule H to either Form 1040 or 1040A.

• Social Security Numbers Required for More Children -- You must list a social security number for any dependent born before November 1995. Previously, the number was not needed for a dependent born during the tax year. Next year, all dependents born before December 1996 will need numbers, and for 1997 and later years, all dependents must have numbers.

• Self-Employed Health Insurance Deduction Restored -- This tax break now applies for any month in which neither the self-employed person nor the spouse was eligible to participate in an employer-sponsored health plan. This deduction had expired at the end of 1993 and was restored retroactively to the beginning of 1994. Eligible taxpayers who failed to take this deduction for 1994 should file an amended return (Form 1040X), using the worksheet in the 1994 tax instructions to figure the deduction. For 1995, the maximum deduction increases from 25 percent to 30 percent of qualifying insurance premiums.

• Earned Income Tax Credit (EITC) Qualifications Changed --Military personnel on extended active duty overseas may now qualify for the EITC. Nonresident aliens generally are no longer eligible for this benefit for lower income workers.

• Standard mileage rate raised -- You may deduct 30 cents a mile for all business miles driven, up one cent from 1994.

INFLATION ADJUSTMENTS FOR 1995

The filing requirements, personal exemption, standard deduction and maximum Earned Income Tax Credit amounts are adjusted each year for inflation.

The 1995 filing requirements are:
Single                                    $  6,400
Head of household                         $  8,250
Married filing joint                      $ 11,550
Married filing separately                 $  2,500
Qualifying widow(er)                      $  9,050

• Different amounts apply if the taxpayer or spouse is age 65 or older, or if the taxpayer can be claimed as a dependent on someone else's return. There are also other specific situations which require the filing of a return, such as when the net earnings from self-employment are $400 or more.

• The personal exemption amount for 1995 is $2,500 -- $50 more than last year. Higher income taxpayers may have to reduce the personal exemption amount they claim if their adjusted gross income exceeds:

   Single                                          $114,700
   Head of household                               $143,350
   Married filing jointly or
      Qualifying widow(er)                         $172,050
   Married filing separately                       $ 86,025

There is a worksheet in the tax package for these taxpayers to figure their personal exemption amount.

• The increased standard deduction amounts for 1995 are:

   Single                                      $3,900
   Head of household                                $5,750
   Married filing jointly or
     Qualifying widow(er)                           $6,550
   Married filing separately                        $3,275

Different amounts apply if the taxpayer or spouse is age 65 or older, is blind, or if the taxpayer can be claimed as a dependent on someone else's return.

• The Earned Income Tax Credit limits for 1995 are:

                                   Income Limit      Maximum Credit
  One qualifying child                 $ 24,396          $ 2,094
  Two or more children                 $ 26,673          $ 3,110
  No children                          $  9,230          $   314

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