Expert’s Corner: Preparing for Tax Season

David R. Evanson

The Career Advisor, Winter, 2004

Another year comes to an end and investors as well as their advisers will begin the arduous task of preparing to file tax returns for 2003. We asked Norman Solomon, chairman of the Individual Income Tax Technical Resource Panel of the American Institute of CPAszz Tax Section what areas he thought that taxpayers might have the most questions about in the upcoming tax season. According to Solomon, you might want to bone up on the following areas:

February 5, 2004- Timing for new taxes on dividends and capital gains. According to Solomon, the massive Jobs and Growth Tax Relief and Reconciliation Act of 2003 set new rates for dividends and capital gains taxes. “While the new rates are reasonably well understood among taxpayers,” he says, “there is less understanding of when they are effective.” As it turns out, the new capital gains rates are effective for sales made after May 5, 2003, while the new dividend rates for dividends took effect retroactive to January 1, 2003. Advertisement

New appreciation for depreciation. Solomon also said that new regulations concerning Section 179 might provoke questions among some taxpayers. The new ceiling for the depreciation of qualified property is $100,000, up from $25,000, with a 1 for 1 reduction of the depreciation benefit once purchases exceed $400,000.

Child credits. Solomon said that the credits for eligible children are higher this year, but taxpayers may experience some confusion because some taxpayers have already received child credit rebates, while others have not.

While tax time can be a bit frustrating for all of us, try to enjoy the season, because it beats the heck out of the other alternative inevitability.