Tax Law Changes for 2005
Each year the IRS updates, eliminates, or alters the existing tax laws. The new tax laws that the IRS imposes are often designed to benefit the traditional taxpayer. Taxpayers who prepare their own taxes are unable to take advantage of these tax benefits if they fail to keep up with the updated IRS tax laws. Listed below is a summary containing important tax law changes for 2005.
Taxpayers who are filing a tax return from the income that they received for 2005 year may receive tax benefits or credits if they have a qualifying child. The IRS has altered the definition of a qualifying child and there are certain restrictions that must be met for a child to be considered a qualifying. A qualifying child needs to the child of the individual who is filing a tax return. The relationship can be through blood, marriage, adoption, or a government sponsored foster care program. For a child to be claimed as a qualifying child for 2005 income tax returns they must live with the taxpayer for more than six months. There are individual age requirements that a child must meet for a taxpayer to be eligible to receive the additional benefits associated with having a qualified child.
The amount of money that an employee and employer will pay for the social security and Medicare tax will remain the same. According to the IRS an employee and employer are required to pay 6.2% of the social security tax and 1.45% of the Medicare tax. For the 2005 income tax returns there is no limit on the amount of income that is subject to the Medicare tax. On the other hand, there is a limit of $90,000 for the social security tax. Wages reported above $90,000 are not subject to the social security tax.
A large number of businesses or individual taxpayers rely on using their charitable contributions as a tax deduction. It is not uncommon for individuals or businesses to donate their old personal or company vehicles. There was recently a change in the way that the charitable contribution of a vehicle is figured. The amount of the donation used for tax benefits depends on the amount of profit that the organization made when reselling the vehicle. Due to this change all businesses or individual taxpayers who are using a vehicle donation as a tax deduction must receive written verification from the charity. If the charity made over $500 from a donation they are required to provide the individual who made the donation with the exact amount of profits obtained.
Individuals who file their taxes using TaxEngine.com and their tax professionals do not necessarily need to aware of every tax law change that the IRS makes. This is because the professionals preparing the taxes are fully aware of them. Individuals who prepare their own taxes using the paper tax forms are encouraged to educate themselves on any possible tax law changes for the year.