Q: Which line on the basic 2001 tax form is causing problems with some filers?
A: The IRS says many early filers have made an error regarding the only new line on the standard federal income tax forms: Line 47 of Form 1040; Line 30 of Form 1040A; or Line 7 of Form 1040EZ. Called the Rate Reduction Credit, the line applies to those taxpayers who did not receive last summer’s "tax rebate" for the maximum amount according to their income and filing status. According to the IRS, some taxpayers are listing the amount of money they received in last year’s check from the federal government after the new tax relief law was signed by President Bush in June. However, the new Rate Reduction Credit line should be left blank if taxpayers already received the maximum amount: $300 for a single person or a married person filing separately; $500 for head of household; $600 for a married couple filing jointly or a qualifying widow(er). On the other hand, some taxpayers who ought to claim a credit are leaving the line unfilled. In general, taxpayers who did not reach the maximum "rebate" amount may be entitled to claim as a credit the difference as a Rate Reduction Credit. The new credit line was added to the 2001 tax returns to ensure that those taxpayers whose filing status or income changed from the year 2000 to 2001 would receive the full benefit from the new 10 percent tax rate that went into effect on January 1, 2001.
Q: What should taxpayers who filed incorrectly do about their tax return?
A: The IRS advises taxpayers who already filed to double-check their tax refund to see if the IRS caught the error during processing. If the IRS does not contact you or correct the error before your refund is sent, taxpayers will need to file an amended return to correct the mistake. If you’re uncertain whether you’re eligible for the Rate Reduction Credit, use the worksheet included in the 2001 tax return to figure out eligibility. Taxpayers also can call the IRS directly at (800)829-1040 for assistance. To learn more about the credit, call (800)829-4477, press "3" for recorded tax topics and select topic "609." Remember, if you can be claimed as a dependent on another person’s 2001 tax return, you are not eligible for the credit. For those who have yet to file, be advised to carefully read the instructions regarding the new line. This will help avert errors and expedite the turn-around time so you may receive your refund as quickly as possible.