Forms, Publications, and Computer Programming Were Adequately
Addressed and Updated in Most Instances for the 2005 Filing Season
June 2005
Reference Number: 2005-40-094
This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.
June
03, 2005
MEMORANDUM FOR
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Deputy Inspector General for Audit
SUBJECT: Final Audit Report - Forms, Publications,
and Computer Programming Requests Were Adequately Addressed and Updated in Most
Instances for the 2005 Filing Season (Audit # 200440047)
This
report presents the results of our review of the adequacy of updates and
revisions to tax forms, publications, and computer programming in preparation
for the processing of individual income tax returns. The overall objective of this review was to determine whether the Internal Revenue Service (IRS) accurately
initiated updates to tax products and computer programming for new tax law
provisions that affect the processing of individual income tax returns during
the 2005 Filing Season. This audit
focused on updates to tax products and requests for computer programming
changes needed to implement provisions of eight pieces of tax legislation,
including the recently enacted Working Families Tax Relief Act of 2004 and
American Jobs Creation Act of 2004.
In
summary, the IRS successfully updated tax products and initiated computer
programming requests to update return processing programs necessary to
implement new tax law provisions.
However, we identified two omissions that could affect taxpayers
claiming the refundable portion of the Child Tax Credit (Additional Child Tax
Credit). During our review of tax products,
we found that two tax products, Armed
Forces’ Tax Guide (Publication 3) and Child
Tax Credit (Publication 972), did not adequately address the new tax law requirement
to include nontaxable combat pay in earned income for purposes of computing the
Additional Child Tax Credit. This
omission could cause some military families to claim less than the total credit
amount to which they may be rightfully entitled.
We
recommended the Commissioner, Wage and Investment (W&I) Division, revise Publications
3 and 972 to more thoroughly address the effect of nontaxable combat pay on the
computation of Additional Child Tax Credit and inform military families of this
through appropriate media outlets. Our recommendations
provide a measurable benefit on tax administration by reducing taxpayer burden
for taxpayers who have nontaxable combat pay and are eligible for the
Additional Child Tax Credit and helping ensure these taxpayers receive complete
information on this provision of the new tax legislation.
Management’s Response: IRS
management agreed with our recommendations.
Management agreed that properly implementing new tax law is one of their
greatest management challenges, particularly when the legislation is enacted
late in the year, and acknowledged that the two tax products, Publications 3
and 972, were not updated to address a new requirement concerning nontaxable
combat pay. IRS management will revise
Publications 3 and 972 to address nontaxable combat pay in the Additional Child
Tax Credit discussion and inform potentially affected military families through
the IRS Stakeholder Partnerships, Education, and Communication
organization. However, IRS management
noted that they do not believe the omitted information could cause military
personnel to claim less than the total Additional Child Tax Credit they are
rightfully entitled to or that their corrective actions will have a measurable
impact on tax administration. Management’s
complete response to the draft report is included as Appendix VII.
Office
of Audit Comment: We are pleased the
Commissioner, W&I Division, has agreed to implement our recommendations to
revise the two publications by including information relating to nontaxable
combat pay for purposes of computing the Additional Child Tax Credit and to
immediately contact outside stakeholders to inform military families that may
have been adversely affected. Although
we are puzzled by IRS management’s negative assessment of the potential outcome
from the corrective actions, we believe the agreement to the recommendations reflects
a sound executive decision that will have a positive effect on military
families by reducing their tax burden and ensuring they receive the intended
benefits of the Additional Child Tax Credit.
Copies of this
report are also being sent to the IRS managers affected by the report
recommendations. Please contact me at
(202) 622-6510 if you have questions or Michael R. Phillips, Assistant Inspector
General for Audit (Wage and Investment Income Programs), at (202) 927-0597.
Updates to Tax Forms, Instructions,
and Publications for Tax Year 2004 Were Generally Accurate
Nontaxable Combat Pay Was Not Adequately Addressed in Two Tax Publications
Requests for Computer Programming Changes Were Generally Accurate
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix IV
– Outcome Measures
Appendix V
– Overview of Tax Law Provisions Examined During the Review
Appendix VI – List
of Tax Products Examined
Appendix VII
– Management’s Response to the Draft Report
Many new and significant tax law provisions will affect taxpayers’ Tax Year (TY) 2004 individual income tax returns during the 2005 Filing Season. These provisions were created by 8 different pieces of legislation that have been enacted over the past 8 years. Most recently enacted were the Working Families Tax Relief Act of 2004 (WFTRA) and the American Jobs Creation Act of 2004 (AJCA). Both of these laws were enacted in October 2004 and include 7 provisions that alone will provide Wage and Investment (W&I) Division taxpayers with tax benefits of up to $5.8 billion.
Properly implementing
new tax law is one of the Internal Revenue Service’s (IRS) greatest management
challenges. It is especially challenging
when the legislation is enacted late in the year. Controlling the
implementation of new tax legislation, such as the WFTRA and AJCA, is the
responsibility of the IRS Legislative Analysis, Tracking, and Implementation
Services (LATIS) function.
The LATIS function is responsible
for managing the IRS-wide implementation planning and monitoring of legislation
having a significant impact on the IRS.
This process uses the Legislative Implementation Tracking System (LITS),
an Intranet-based planning and monitoring system that provides real-time status
updates and has management information capabilities. Two areas covered by LITS controls are:
· The revision of various tax forms, instructions, and publications (i.e., tax products). Annually, the IRS must revise or create new tax products to implement new legislation. The IRS function responsible for tax products is the Tax Forms and Publications Division. This Division originates and improves tax forms and publications, ensuring they are understandable and as easy to use as possible and, as a result, enabling taxpayers to meet tax filing and payment obligations.
· The reprogramming of computer systems that are used to process tax returns. The process used for requesting computer programming changes is known as a Request for Information Services. The Requests are submitted to the IRS Modernization and Information Technology Services (MITS) organization by the function responsible for the computer process being changed. The computer programming requests needed for implementing new tax law provisions during the annual processing of individual income tax returns should normally be identified and submitted to the MITS organization by February 28th of the year preceding the filing season.
This review was performed in the W&I Division in
Overall, the IRS successfully updated the tax forms, instructions, and publications relating to the new tax law provisions that affect W&I Division taxpayers’ TY 2004 individual income tax returns.
Our review initially examined 12 tax law provisions included in 6 pieces of tax legislation that became effective in TY 2004. However, in October 2004, 2 pieces of legislation were enacted that included 11 additional provisions that will affect W&I Division taxpayers for TY 2004. A brief summary of the provisions we reviewed for TY 2004 changes can be found in Appendix V.
To identify the tax forms,
instructions, and publications (tax products) requiring updates as a result of the
tax provisions identified, we queried the LITS.
Our query identified 31 tax products requiring updates for the
initial 12 provisions we examined and 45 tax products for the subsequent 11 provisions. Some tax products were identified twice and
subsequently reviewed twice because provisions of the October 2004 legislation
extended or revised provisions previously scheduled to change for TY 2004. For example, the deduction for Educator
Expenses was scheduled to expire for TY 2004 and the tax forms, instructions,
and publications had been updated to reflect the changes. However, WFTRA Section 307 extended this
deduction for TY 2004, and the tax products had to be subsequently revised.
We reviewed a total of 49 tax
products (24 forms, 11 instructions, and 14 publications) to determine
whether they were consistent with the provisions enacted by the Congress. Comparison of each tax product with the
related legislation determined that the tax products we reviewed were accurately
updated, with two exceptions. A list of
the 49 tax products we reviewed can be found in Appendix VI.
During our review of tax products, we found that two publications did not adequately address the new tax law requirement to include nontaxable combat pay in earned income for purposes of computing the refundable portion of the Child Tax Credit (Additional Child Tax Credit). These were the Armed Forces’ Tax Guide (Publication 3) and Child Tax Credit (Publication 972).
Figure 1: Armed
Forces’ Tax Guide (Publication 3)
Figure 1 was
removed due to its size. To see Figure
1, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 2: Child
Tax Credit (Publication 972)
Figure 2 was
removed due to its size. To see Figure 2,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
The new legislation, WFTRA Section
104, provides that combat pay (which is normally not taxable) be included in
computing taxable (earned) income for purposes of calculating the Additional
Child Tax Credit. The Congress enacted
this provision to provide additional tax benefits for military families. By the end of TY 2004, 193,000 Reservists and
National Guard troops had been mobilized for service. Approximately 165,000 troops were in the
combat zones of Iraq and Afghanistan, and many of these troops have families at
home. When nontaxable combat pay is
included in the computation of earned income, the refundable amount of the Child
Tax Credit increases.
Military families who rely on Publications
3 and 972 for guidance will not be informed about
this new tax benefit and could risk losing the benefit of the new law. The Additional Child Tax Credit (Form 8812),
in its instructions section, is the only tax product that adequately addresses
the combat pay issue relative to the Credit.
We discussed this issue with the
IRS Tax Forms and Publications Division and were informed that, due to the
large number of late changes created by the October 2004 legislation, these two
Publications were not updated to include additional information on this new
provision.
To provide military families with complete information on treatment of nontaxable combat pay regarding the Additional Child Tax Credit, the Commissioner, W&I Division, should:
1.
Revise Publications
3 and 972 to more thoroughly address the effect of
nontaxable combat pay on the computation of the Additional Child Tax Credit.
Management’s Response: The IRS will
revise the 2005 Publications 3 and 972 to address nontaxable combat pay in the
Additional Child Tax Credit discussion.
Office of Audit Comment: We are
pleased the Commissioner, W&I Division, has agreed to implement our
recommendation to revise the above publications by including information
relating to nontaxable combat pay for purposes of computing the Additional
Child Tax Credit and to immediately contact outside stakeholders to inform military
families that may have been adversely affected (see Recommendation 2). Although we are puzzled by IRS management’s
negative assessment of the potential outcome from the corrective actions, we
believe the agreement with the recommendations reflects a sound executive
decision that will have a positive effect on military families by reducing
their tax burden and ensuring they receive the intended benefits of the
Additional Child Tax Credit.
2.
Consider
immediately informing potentially affected military families in various Armed
Forces publications or other appropriate media through the IRS Stakeholder
Partnerships, Education, and Communication (SPEC) organization.
Management’s Response: The IRS included
information on treatment of nontaxable combat pay regarding the Additional
Child Tax Credit in the Military Volunteer Income Tax Assistance (VITA)
training materials, and Military VITA volunteers were trained on the treatment
of nontaxable combat pay prior to preparing tax returns for military
taxpayers. The IRS will inform the
Executive Director of the Armed Forces Tax Council of the requirements and
request that a communiqué on the treatment of nontaxable combat pay regarding
the Additional Child Tax Credit be sent immediately to all military bases. Finally, the IRS will coordinate through the
SPEC organization the issuance of a press release for distribution to military
news media regarding the treatment of nontaxable combat pay regarding the
Additional Child Tax Credit.
Overall, the IRS accurately initiated computer programming requests to update return processing programs for new tax law provisions that affect W&I Division taxpayers’ TY 2004 individual income tax returns.
Many of the new tax law provisions for TY 2004 include changes that require the IRS to update its return processing computer programs to ensure taxpayers receive the correct credit or deduction and comply with eligibility requirements. For example, Medicare Prescription Drug Improvement and Modernization Act of 2003 Section 1201 created the deduction for Health Savings Accounts (HSA), which provides a tax-favored treatment for current medical expenses as well as the ability to save on a tax-favored basis for future medical expenses. Several factors are used in determining the computation of the deduction. These include:
· The amount contributed by the taxpayer to the HSA.
· The amount contributed by the taxpayer’s employer to the HSA.
· The taxpayer’s age.
· The deductible for the taxpayer’s High-Deductible Health Plan.
Other eligibility requirements apply but do not affect the computation of the deduction. These include that the individual may not be entitled to Medicare benefits; have no other health insurance coverage, except what is permitted; and must not be claimed as a dependent on another individual’s tax return.
It is essential that computer programs for new tax provisions are updated accurately. According to the Joint Committee on Taxation, the tax effect for this provision alone in Fiscal Year 2005 will be $474 million.
We identified four requests that were initiated for computer programming changes needed to implement the new tax provisions that affect individual income tax return processing during the 2005 Filing Season. In addition, we identified six amendments for subsequent changes made to these computer programming requests. Analysis of these computer programming requests determined that the requested updates submitted by the W&I Division Submission Processing function to the MITS organization were generally accurate. In addition, analysis of computer programming documentation for return processing programs determined that the programs were accurately updated for the new tax law provisions.
While accurate updates to computer programming documentation are a good indication that the actual computer programs were correctly updated, we cannot determine whether they are truly accurate until processing of tax returns begins. We will test the actual accuracy of computer programming updates for these new tax law provisions as a part of our 2005 Filing Season review.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine whether the Internal Revenue Service (IRS) accurately initiated updates to tax products and computer programming for new tax law provisions that affect the processing of individual income tax returns during the 2005 Filing Season. The audit focused on updates to tax products and computer programming required by provisions of the eight pieces of tax legislation listed in Appendix V. To accomplish our objective, we:
I.
Determined whether the IRS initiated changes to
the tax products and the Requests for Information Services (RIS) needed to
implement new tax law provisions that affect the processing of Wage and Investment
(W&I) Division taxpayers’ returns.
A.
Identified 12 new tax legislation provisions
that will have a significant effect on returns filed by W&I Division taxpayers
during the 2005 Filing Season.
B.
Identified 31 tax products that will require
updating as a result of tax law changes affecting Tax Year (TY) 2004 returns
and reviewed 27 tax products to determine whether these instruments were
accurately updated.
C.
Reviewed the RISs controlled by the IRS and
determined whether RISs exist to address the new tax law provisions identified.
II.
Determined whether the RISs initiated for tax
law changes that potentially affect large numbers of W&I Division taxpayers
or tax dollars completely and accurately reflect the new provisions of the tax
law.
A.
Reviewed
the new tax law provisions identified and determined the specific elements and
criteria based on the tax law that should be included in the RISs.
B.
Evaluated
the RIS documentation and
determined whether the necessary elements and criteria were included and
clearly communicated.
C.
Reviewed
the Functional Specification Packages (FSP) that required updating as a result
of the RISs identified and determined whether the necessary elements and
criteria were accurately included in return processing program documentation.
III.
Determined whether the IRS correctly initiated
changes to the tax products, RISs, and FSPs needed to implement provisions of
the recently enacted Working Families Tax Relief Act of 2004 (WFTRA) and
American Jobs Creation Act of 2004 (AJCA)that will affect the processing of
W&I Division taxpayers’ TY 2004 returns.
A.
Reviewed
the WFTRA and AJCA and identified the 11 provisions that will affect the
processing of individual income tax returns during the 2005 Filing Season.
B.
Identified
the 45 tax products that will require revision as a result of the WFTRA and
AJCA provisions identified and reviewed 39 tax products to determine whether the
tax products were accurately updated.
C.
Identified
the one RIS initiated to implement the changes necessary to update return
processing programs as a result of the WFTRA and AJCA provisions identified and
determined whether it correctly reflected the requirements of the legislation.
D.
Reviewed
the FSPs that required changes as a result of the RIS identified and determined
whether changes to the elements and criteria requested in the RIS were
accurately updated.
Appendix II
Major Contributors to This
Report
Michael R. Phillips,
Assistant Inspector General for Audit (Wage and Investment Income Programs)
Scott A. Macfarlane,
Director
Gary L. Young, Audit
Manager
Steven E. Vandigriff,
Lead Auditor
Glory Jampetero,
Auditor
Bonnie G. Shanks,
Auditor
Appendix III
Commissioner C
Office of the
Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Services and Enforcement SE
Deputy
Commissioner, Wage and Investment Division
SE:W
Director, Customer Account Services, Wage and Investment Division SE:W:CAS
Acting Director, Strategy and Finance,
Wage and Investment Division SE:W:S
Acting Chief, Performance Improvement, Wage and Investment
Division SE:W:S:PI
Director, Stakeholder Partnerships, Education, and Communication,
Wage and Investment
Division SE:W:CAR:SPEC
Director,
Submission Processing, Wage
and Investment Division SE:W:CAS:SP
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
RAS:O
Office of
Management Controls OS:CFO:AR:M
Audit Liaison: Acting Senior Operations Advisor, Wage and
Investment Division SE:W:S
Appendix IV
This appendix presents detailed information on the measurable impact that our recommended corrective actions will have on tax administration. This benefit will be incorporated into our Semiannual Report to the Congress.
Type and Value of Outcome Measure:
Methodology Used to Measure the Reported Benefit:
We reviewed a total of 49 tax products (24 forms, 11 instructions, and 14 publications) to determine whether they were consistent with the new provisions enacted by the Congress. We compared each tax product to the related legislation to determine whether each tax product was accurately updated.
Section 104 of the Working
Families Tax Relief Act of 2004 provides that combat
pay (which is normally not taxable) be included in computing taxable (earned)
income for purposes of calculating the refundable portion of the Child Tax
Credit (Additional Child Tax Credit). The
Congress intended this provision to provide assistance to military families in
combat zones by increasing the refundable portion of the Child Tax Credit.
Military families who rely on the Armed Forces’ Tax Guide (Publication 3)
and Child Tax Credit (Publication 972)
for guidance will not be informed about this issue
and could risk losing the benefits of the new law. These publications do not provide any
narrative explanation of this new requirement.
The Additional Child Tax Credit (Form 8812), in its instructions
section, is the only tax product that adequately addresses the combat pay issue
relative to the Credit.
Appendix V
Overview of Tax
Law Provisions Examined During the Review
The following
information describes various tax law provisions that affect tax products for
and processing of individual income tax returns during the 2005 Filing Season.
Taxpayer Relief Act of 1997 (TRA)
The TRA contained the following provision:
1) Section 301 - Restoration of IRA [Individual Retirement Arrangement] Deduction for Certain Taxpayers. Provides for taxpayers covered by a retirement plan at work. The deduction for contributions to a traditional IRA will be reduced if the modified adjusted gross income (MAGI) exceeds the phase-out limitations. For Tax Year (TY) 2004, these phase-out limitations have been increased. The deduction for traditional IRA contributions will be reduced when a taxpayer’s MAGI is more that $65,000 but less than $75,000 for a married couple filing a joint return or a qualified widow(er) (or is more than $45,000 but less than $55,000 for single individuals or taxpayers filing as head of household).
Economic Growth and Tax Relief Reconciliation Act of
2001 (EGTRRA)
The EGTRRA contained the following three provisions:
1) Section 402 - Modifications to Qualified Tuition Programs (QTP). Provides that for TY 2004 a distribution from a QTP established and maintained by an eligible educational institution (generally private colleges and universities) can be excluded from income if the amount distributed is not more than qualified education expenses.
2) Section 431 - Deduction for Higher Education Expenses. Provides for an above-the-line deduction for qualified education expenses. For TY 2004, the amount of qualified education expenses that can be taken into account when figuring the tuition and fees deduction increases from $3,000 to $4,000 if the MAGI is not more than $65,000 ($130,000 if married filing jointly). If the MAGI is more than $65,000 ($130,000 if married filing jointly), but not more than $80,000 ($160,000 if married filing jointly), the maximum tuition and fees deduction will be $2,000. No tuition and fees deduction will be allowed if the MAGI is more than $80,000 ($160,000 if married filing jointly).
3) Section 631 - Change in Catch-Up Contributions for Individuals Age 50 and Over. Provides that participants in 403(b), 401(k), and other applicable employer plans that are age 50 or over at the end of the year generally can make catch-up contributions to the plan. For TY 2004, the maximum catch-up contribution increases to $3,000.
Job Creation and Worker Assistance Act of 2002 (JCWAA)
The JCWAA contained the following five provisions. These provisions were subsequently superseded by the Working Families Tax Relief Act of 2004.
1) Section 406 - Adjusted Gross Income Determined by Taking Into Account Certain Expenses of Elementary and Secondary School Teachers (Educator Expenses). Provides an above-the-line deduction for up to $250 annually of expenses paid or incurred by an eligible educator for books, supplies, computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom. To be eligible for this deduction, the expenses must be otherwise deductible under Internal Revenue Code Section 162 as a trade or business expense. This provision was available for TYs 2002 and 2003, but Section 307 of the Working Families Tax Relief Act of 2004 (see below) extended the Educator Expenses through TY 2005.
2) Section 601 - Allowance of Nonrefundable Personal Credits Against Regular and Minimum Tax Liability. Provides for an individual to offset the entire regular tax liability and alternative minimum tax liability by the personal nonrefundable credits in TYs 2002 and 2003. For TY 2004, the allowance is no longer available.
3) Section 602 - Credit for Qualified Electric Vehicles. Provides for a deferral of the phase-out of the credit for 2 years. Taxpayers may claim the full amount of the credit for qualified purchases made in TYs 2002 and 2003; however, in TY 2004, the phase-out of the credit value commences and it is reduced by 25 percent.
4) Section 606 - Deduction for Clean-Fuel Vehicles and Certain Refueling Property. Provides for a deferral of the phase-out of the deduction for clean-fuel vehicle property by 2 years. Taxpayers may claim the full amount of the deduction for qualified vehicles placed in service in TYs 2002 and 2003; however in TY 2004, the phase-out of the deduction for clean-fuel vehicles commences and it is reduced by 25 percent.
5) Section 612 - Availability of Medical Savings Accounts (MSA). Provides for an extension of the Archer MSA program through December 31, 2003, after which participation is limited to active participants before January 1, 2004, or those covered by a High-Deductible Health Plan of an Archer MSA-participating employer.
Jobs and Growth Tax Relief Reconciliation Act of
2003 (JGTRRA)
The JGTRRA contained the following provision:
1) Section 301 - Reduction in Capital Gains Rates for Individuals; Repeal of 5-Year Holding Period Requirement. Provides that, for sales and dispositions of property after May 5, 2003, the maximum tax rates for net capital gains were reduced from 20 percent to 15 percent and from 10 percent to 5 percent. For TY 2004, the post-May 5, 2003, capital gain distributions language and calculations no longer apply. All sales and dispositions for the year are covered by the new rates.
Military Family Tax Relief Act of 2003 (MFTRA)
The MFTRA contained the following provision:
1) Section 109 - Above-the-Line Deduction for Overnight Travel Expenses of National Guard and Reserve Members. Creates an above-the-line deduction for travel expenses of National Guard troops and Reservists. Travel must take the National Guard soldier or Reservist more than 100 miles away from home and require an overnight stay. The amount of deductible expenses cannot exceed the general Federal Government per diem rate applicable to the locality. The deduction was available in TY 2003, but it had to be written in on the face of the return. For TY 2004, the deduction is being given a specific line on the return.
Medicare Prescription Drug Improvement and
Modernization Act of 2003 (MPDIMA)
The MPDIMA contained the following provision:
1)
Section
1201 - Health Savings Accounts (HSA).
Creates HSAs, which provide tax-favored treatment for current medical
expenses as well as the ability to save on a tax-favored basis for future
medical expenses. Within limits,
contributions to an HSA are deductible if made by an eligible individual and
are excludable from gross income and wages for employment tax purposes if made
by the employer of an eligible individual.
Distributions from HSAs for qualified medical expenses are not
includible in gross income.
Distributions that are not for qualified medical expenses are includible
in gross income and subject to an additional 10 percent tax. The additional 10 percent tax does not apply
after death or disability or when the individual attains the age of Medicare program
eligibility.
Working Families Tax Relief Act of 2004 (WFTRA)
The WFTRA contained the following seven provisions:
1) Section 102 - Acceleration of Increase in Refundability of the Child Tax Credit. Provides for an acceleration of the refundable portion the Child Tax Credit. Beginning in TY 2004, the Child Tax Credit is refundable to the extent of 15 percent of the taxpayer’s taxable earned income in excess of $10,750. Previously, the increase from 10 percent to 15 percent was to occur in TY 2005.
2) Section 104 - Earned Income Includes Combat Pay. Provides that combat pay, which is otherwise excluded from gross income, is treated as earned income for purposes of calculating the refundable portion of the Child Tax Credit beginning in TY 2004. Also beginning in TY 2004, combat pay, if the taxpayer elects, can be included as earned income for purposes of calculating the Earned Income Tax Credit.
3) Section 307 - Deduction for Certain Expenses of School Teachers (Educator Expenses). Provides a 2-year extension of the up to $250 deduction for classroom expenses paid or incurred by an eligible educator. This deduction was scheduled to expire in TY 2003 but has been extended through TY 2005.
4) Section 312 - Allowance of Nonrefundable Personal Credits Against Regular and Minimum Tax Liability. Provides a 1-year extension for an individual to offset the entire regular tax liability and alternative minimum tax liability by the personal nonrefundable credits. The allowance was scheduled to expire in TY 2003 but has been extended through TY 2005.
5) Section 318 - Elimination of Phase-Out of Credit for Qualified Electric Vehicles for [Tax Years] 2004 and 2005. Provides for a deferral of the phase-out of the credit for qualified electric vehicles for 2 years. Taxpayers may claim the full amount of the credit for qualified purchases made in TYs 2004 and 2005.
6)
Section
319 - Elimination of Phase-Out for Deduction for Clean-Fuel Vehicle Property
for [Tax Years] 2004 and 2005. Provides
for a deferral of the phase-out of the deduction for clean-fuel vehicles for 2
years. Taxpayers may claim the full
amount of the deduction for qualified vehicles placed in service in TYs 2004
and 2005.
7)
Section
322 - Availability of Medical Savings Accounts. Provides for an extension of the Archer MSA
program through December 31, 2005.
American Jobs Creation Act of 2004 (AJCA)
The ACJA contained the following provision:
1) Section 501 - Deduction of State and Local General Sales Taxes in Lieu of State and Local Income Taxes. Permits taxpayers to elect, in lieu of the itemized deduction now provided for state and local income taxes, an itemized deduction for their state and local general sales taxes. Taxpayers who elect could deduct either their actual sales taxes paid, as evidenced by their accumulated receipts showing those amounts, or the amount shown for their income bracket in tables issued by the Secretary of the Treasury. The state-by-state tables are to be based on average consumption by taxpayers in each state taking into account filing status, number of dependents, adjusted gross income, and rates of state and local general sales taxation. Taxpayers who use the tables may, in addition to the table amounts, deduct eligible general sales taxes paid with respect to the purchase of motor vehicles, boats, and other items specified by the Secretary of the Treasury. The provision is effective for TY 2004.
Appendix VI
Tax Forms
Tax
Product Title
1. Form
1040
2. Form 1040, Schedule A Schedule A-Itemized Deductions
3. Form 1040, Schedule D Capital Gains and Losses
4. Form 1040, Schedule R Credit for the Elderly or the Disabled
5. Form 1040A U.S. Individual Income Tax Return
6. Form 1040A, Schedule 2 Child and Dependent Care Expenses for Form 1040A Filers
7. Form 1040A, Schedule 3 Credit for the Elderly or the Disabled for Form 1040A Filers
8. Form 1040EZ Income Tax Return for Single and Joint Filers With No Dependents
9. Form 1040NR U.S. Nonresident Alien Income Tax Return
10. Form 2106-EZ Unreimbursed Employee Business Expenses
11. Form 2441 Child and Dependent Care Expenses
12. Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
13. Form 5498-ESA Coverdell ESA Contribution Information
14. Form 8396 Mortgage Interest Credit
15. Form 8801 Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts
16. Form 8812 Additional Child Tax Credit
17. Form 8834 Qualified Electric Vehicle Credit
18. Form 8839 Qualified Adoption Expenses
19. Form 8851 Summary of Archer MSAs
20. Form 8853 Archer MSAs and Long-Term Care Insurance Contracts
21. Form 8863 Education Credits (Hope and Lifetime Learning Credits)
22. Form 8880 Credit for Qualified Retirement Savings Contributions
23. Form 8885 Health Coverage Tax Credit
24. Form 8889 Health Savings Accounts (HSAs)
Tax Form Instructions
Tax
Product Title
1. Form 1040 2004 1040 Instructions
2. Form 1040, Schedule D 2004 Instructions for Schedule D, Capital Gains and Losses
3. Form 1040A 2004 1040A Instructions
4. Form 1040A, Schedule 2 2004 Instructions for Schedule 2 (Form 1040A), Child and Dependent Care Expenses for Form 1040A Filers
5. Form 1040C Instructions
for Form 1040-C,
6. Form 1040EZ 2004 1040EZ Instructions
7. Form 1040NR Instructions
for Form 1040NR,
8. Form 2106 Instructions for Form 2106, Employee Business Expenses
9. Form 2441 Instructions for Form 2441, Child and Dependent Care Expenses
10. Form 8853 Instructions for Form 8853, Archer MSAs and Long-Term Care Insurance Contracts
11. Form 8889 Instructions for Form 8889, Health Savings Accounts (HSAs)
Tax Products
Tax
Product Title
1. Publication
3 Armed Forces’ Tax Guide
2. Publication 17 Your Federal Income Tax For Individuals
3. Publication 502 Medical and
Dental Expenses (Including the Health Coverage Tax Credit)
4. Publication 503 Child and Dependent Care Expenses
5. Publication 504 Divorced or Separated Individuals
6. Publication 524 Credit for the Elderly or the Disabled
7. Publication 529 Miscellaneous Deductions
8. Publication
590 Individual Retirement Arrangements (IRAs)
9. Publication
596 Earned Income Credit (EIC)
10. Publication 600 Optional
State Sales Tax Tables
11. Publication 968 Tax Benefits for Adoption
12. Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans
13. Publication 970 Tax Benefits
for Education
14. Publication 972 Child Tax
Credit
Appendix VII
Management’s Response
to the Draft Report
The response was removed due to its
size. To see the response, please go to
the Adobe PDF version of the report on the TIGTA Public Web Page.