Our tax laws continue to change as Uncle Sam again announced several revisions during the year. Some of the announcements came late in the Fall. Some of the new laws enacted by congress are related to businesses while others apply to individuals.
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As a result, Roger and Nedra of Eichlers Tax Service have attended numerous tax seminars this year, including the IRS’s Nationwide Tax Forum in Chicago, an IRS/Missouri Symposium in Columbia, The University of Missouri Farm and Business Tax School in Savannah, and several "up-date" tax schools for both federal and state tax change.
Nedra reported that one of the most popular issues is the increase in the mileage rate for business use of vehicles. The business mileage rate announced in January for 2005 was .405 cents per mile. Then in late August a new rate was announced for Sept. 1 to the end of the year. The new rate increased the deduction by eight cents. Of course, the rate decreases to .445 in January for 2006.
The new Uniform Definition of a Child, effective for the tax year 2005 was created by the Working Families Tax Relief Act of 2004 according to Roger. In the past, the rules effecting the definition of a child varied with each code section of the law. The Uniform Definition of a Child was intended to provide one set of rules that would apply to the various tax laws that involve children, such as the Dependent Deduction, the Child Tax Credit, Child Care Credit and Earned Income Credit, and so on.
Of course, there are exceptions! For an example, the age of the child is not uniform through the tax code. The Child Care Credit age limitation is different than the age of the Child Tax Credit which also differs from the age of the dependent. In addition, to include some additional variations the new law not only refers to a qualifying child, but now we also have definitions for a Qualifying Relative.
Standard Deductions and Personal Exemptions have been increased for 2005. Likewise, many of the so called "phase-outs" have been increased. The Alternative Minimum Tax continues to raise issues of concern. However, Congress has not acted to eliminate or revise it at this point in time.
Good news for retirement plans including the Traditional and Roth IRAs. In 2005, qualified tax payers contributions increased to $4,000 and 2006. Also, people over age 50 can include $500 extra in the 2005 contribution and 1,000 extra in 2006. Other retirement plans have also been increased to allow greater contributions annually.
Even though we continue to hear about efforts to simplify taxes, every year the revisions seem to make them more complex.