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March 1, 2002
Tax Tip for 2002: Don't Give the Government More Than You Owe!
Washington, D.C.-Many Oklahomans will be taking on the dreaded annual ritual over the next
six weeks of filing their income taxes for 2001. If you're getting ready to file for this year, or
even if you're not a procrastinator and have already filed, you need to be aware of a potential
mistake that the IRS says they are seeing in already-filed federal returns as a result of a change to
this year's forms.
The good news is that the change in the form is needed to ensure that taxpayers receive the full
amount of the tax rebate they are due. Last year, Congress passed legislation to give all taxpaying
Americans a lump-sum tax rebate, in the form of a check from the government. Single taxpayers
received up to $300. Single parents received up to $500. And married taxpayers received up to
$600.
The tax rebate was derived from taxpayers' lower tax owed based on the new 10-percent tax rate,
beginning in 2001. But to speed up the process of getting taxpayers their hard-earned money and
to help the faltering economy, the government sent taxpayers rebate checks in 2001, instead of
waiting to deliver the rebate a year later through taxpayers' 2001 tax returns. To estimate
taxpayers' future income, the government used the amounts from taxpayers' 2000 tax forms
instead of waiting until they received their 2001 forms.
But some taxpayers who received no tax rebate or only a partial rebate paid significantly more in
taxes in 2001 than the prior year. Or they may have been claimed as a dependent in 2000 but not
in 2001. They are eligible to receive additional tax rebate funds, and they are who the new tax
form line is intended for.
The new line on the federal tax form is for the Rate Reduction Credit, for taxpayers who did not
receive the maximum tax rebate last year. On some forms already received by the IRS this year,
taxpayers who received the full rebate are incorrectly putting the amount of their rebate checks on
this line, when they should be leaving the line blank. If you have already received the maximum
amount on your tax refund check last year, which was $300, $500, or $600 depending on your
filing status, leave this line blank.
The Rate Reduction Credit line should be used by folks who received less than the full tax rebate
amount, and who had income in 2001 that was higher than 2000. If you fall in this category, use
the Rate Reduction Credit Worksheet in the tax return instructions to find out how much of the
credit you can claim. This credit is the only new line on the basic tax forms - line 47 on Form
1040; line 30 on Form 1040A; line 7 on Form 1040EZ.
If your tax situation changed last year so that you had less taxable income than in 2000, don't
worry, you won't have to give back any of the rebate you received. And there's more good news:
these checks will not be taxed as federal income, or as Oklahoma income.
Taxpayers who have already filed and believe they made a mistake on the new line should wait to
see if the IRS catches it during processing. If the IRS does not contact you by the time you receive
your refund, file an amended return to correct the error and get the refund you are due.
The tax rebate was part of $1.35 trillion in tax relief for American taxpayers that Congress passed
and the President signed last year. This tax relief lowers tax rates for all taxpayers, eliminates the
marriage penalty, repeals the death tax, and doubles the child tax credit. The IRS says as a result,
the returns that have already been filed have larger refunds than last year. At $2,210, the average
refund is almost 12 percent higher than at this time last year.
The IRS has several resources if you're still confused about the changes in the tax forms. The IRS
tax help line is 1-800-829-1040. Or you can access information on the IRS website, at
www.irs.gov.
All Oklahoma taxpayers will be benefitting from the recent tax cut on their 2001 taxes, but just
make sure you fill out your forms correctly, so that you don't negate your lower tax rate with an
accounting error. The federal government already does a good enough job of taking a bite out of
your pocketbook. It doesn't need your help.
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