From The Chicago Sun-Times, 2/20/02:
http://www.suntimes.com/output/news/cst-nws-tax20.html
Tax cut joy fades into frustration
February 20, 2002
BY LUCIO GUERRERO STAFF REPORTER
When Mary Rotterdam sat down with her accountant this past weekend to
do her taxes, she got a big surprise.
What she thought was going to be a great refund turned out to be only
a good one.
The problem: Like many other taxpayers, Rotterdam didn't understand
how last summer's ballyhooed tax rebates worked.
HOW IT WORKS
Many people filing their federal income tax returns are making
mistakes because of the tax-rebate checks the Bush administration sent
out with great fanfare last summer.
The problem: People didn't realize that those checks--$300 for
singles, $600 for couples filing jointly--were advances based on a tax
cut that saw the federal income tax rate on the first $6,000 of income
for singles and the first $12,000 for married couples filing jointly
trimmed from 15 percent to 10 percent. Rather than make people wait
till tax-return time to see the benefits of that cut, the government
mailed checks in advance.
Now that people are filing their tax returns, here are a couple of
examples of how those advances affect them:
* A family of four that typically gets a $1,000 refund from the IRS
would have gotten back $1,600 at tax time this year, under the new tax
rates. But remember that $600 check last summer? That counts toward
the $1,600. So this family would get just a $1,000 refund when they
file their return.
* A single taxpayer who usually ends up owing the IRS $1,000 would,
under the new rates, owe $700 this year. But that taxpayer would have
gotten a $300 check last summer. So he'd still owe $1,000 come April
15. As a result of the tax cut, the IRS has adjusted the amount
employers withhold from paychecks so that people's take-home pay is
slightly higher.
WATCH OUT FOR LINE 47
Line 47 on the 1040 form relates to last summer's tax refund. If you
got a check last year, leave that line blank when figuring your taxes.
HOW LAST YEAR'S REBATE AFFECTS THIS YEAR'S TAXES
They thought it was free money.
Actually, it was just an advance, meant to more quickly put cash into
taxpayers' hands that they would otherwise have seen only when they
filed this season's federal income tax returns and saw the effect of
the lower tax rates imposed last year to give the economy a $1.35
trillion boost over 10 years.
"That was never clear. That's not the way it was sold to us," said
Rotterdam, a Chicago woman who works as an administrative assistant at
a law firm.
Her accountant broke the news.
"When he told me I already got part of my refund, I just about
screamed," she said.
Rotterdam will be getting an $800 refund.
She was hoping for more--$300 more.
That was the amount of the advance check she got from the federal
government last summer.
"Thankfully, I didn't go out and spend a bunch of money, banking on
this tax cut," she said.
After President Bush signed the 10-year tax cut into law last summer,
checks went out to 85 million households--$300 for single taxpayers,
$500 for single heads of households and $600 for married couples
filing a joint federal tax return.
Tax preparers throughout the country are now trying to explain to
their clients that those checks were just an advance, that they won't
also see a much smaller tax bill or larger refund, too.
"We have a list that we give people when they come in that tries to
explain what's going on," said Steve Hardy, H&R Block's district
manager in the Loop.
One sign of the confusion:
The IRS says that, so far, more than a million 2001 tax returns have
been filed with errors regarding the tax rebate.
In most cases, the agency said, people mistakenly tried, in effect, to
take the tax cut twice.
The mistake turns up on Line 47 of Form 1040.
Most taxpayers got a rebate check last summer.
But some--especially those who owed back taxes or had past-due child
support--didn't.
If you got a check, leave Line 47 blank, said Anthony Burke, a
spokesman for the Internal Revenue Service in Washington.
If you didn't, fill out what the IRS calls a "rate reduction credit
worksheet" to see if you qualify and, if so, how much to claim on Line
47.
The problems arise when people who got a check last summer
nevertheless put down $300 or $600--the amount they already got
back--on Line 47.
"We are asking people to pay close attention to their returns when it
comes to Line 47," said Burke.
The IRS now is double-checking Line 47 on all returns.
Those who made a mistake will be notified by mail either that the IRS
has corrected the error or that the agency wants them to file an
amended return, which will slow any refunds.
__________________________________________________
And Li'l Georgie even sent out $35 million dollars worth of personal
letters to us taking credit for this mess. Remember?
