Income Tax United States

Thanks to a last-minute fix by Congress, most taxpayers who take advantage of the tax credits enacted in 1997 and effective in 1998 won't find their benefits snatched away by the alternative minimum tax. But the fix doesn't go far enough: It (a) doesn't cover quite everybody; (b) is good for only a year; and (c) doesn't get at a more fundamental problem, which is that the AMT is starting to bite on middle-class taxpayers it was not meant for.

California's failure to conform completely to some federal tax changes is leading some experts to warn taxpayers to be careful about making certain tax moves this year. Even taxpayers who aren't affected would be wise to pay attention to the many potentially costly differences between state and federal law, accountants and other tax experts say. "There are enough important differences that you really have to pay attention," said Lynn Freer, president of Spidell Publishing Inc.

Ninety-five billion dollars in tax breaks await America's 120 million taxpayers. That's the value of tax cuts that Congress promised when it passed a massive tax overhaul in 1997. However, as Americans now get their first chance to claim the bulk of this remarkable tax largess on their 1998 tax forms, they'll probably find the process complex, stressful and--for many--fruitless.

Every year around this time, those of us who sold shares of our mutual funds the previous year get a bit of seller's remorse. Now comes the realization: We've got to deal with the. IRS. Ugh. If you sold fund shares last year in an account that isn't tax-deferred--not within an IRA or 401(k)--you triggered either a taxable capital gain or a deductible loss. First, some good news: Even if you have a capital gain on the fund sale, your tax bill might not be as big as you think. Why?

New tax breaks are creating big incentives for middle-income Americans to make less money this year. Accountants and financial planners report that people whose incomes are approaching certain cutoff limits are finding creative ways to defer or offset income. One of the bigger incentives is the $100,000 income limit for converting a traditional individual retirement account, which is taxable in retirement, to a new Roth IRA, which is tax-free in retirement.

Taxpayers who are having problems with the Internal Revenue Service can make appointments to discuss their situations with an IRS official at the agency's next "Problem Solving Day," scheduled for Nov. 14. To schedule an appointment at the IRS' Los Angeles office at 300 N. Los Angeles St., call (213) 894-8852. For an appointment at the agency's Laguna Niguel headquarters at 24000 Avila Road, call (949) 360-2178.

Responding to a groundswell of public fury at one of the government's most-maligned agencies, the Senate unanimously approved legislation Thursday that would restructure the Internal Revenue Service for the first time in decades and give taxpayers an arsenal of new rights when they have disputes with the agency. The 97-0 vote was a rare display of bipartisanship at a time when most issues before Congress--especially tax matters--have split lawmakers along party lines.

Internal Revenue Service Commissioner Charles O. Rossotti disclosed Friday that Americans are failing to pay $195 billion annually in taxes owed to the federal government, the highest estimate ever of the so-called tax gap. The disclosure--coming on the fourth day of Senate hearings marked by sharp criticism of the IRS and its tactics--served as a potent reminder that the agency's much-maligned enforcement efforts serve an important function.

Are taxes going up, up, up year after year without any respite? Have they wiped out the gains in income that Americans have won over the past several years? Are the rich escaping their fair share of taxes? Many Americans believe the answers to all of these is "yes" and much more. To be sure, the tax system is complex, and different sets of figures can point to different conclusions.