ILLINOIS COMMENTARY

Free Tax Filing and Tax Credits Available

With April 15 approaching, taxpayers are gathering their records and preparing to file their 2003 tax returns. Before you begin, you should consider some of the filing programs and tax credits that IRS offers. If you are eligible, these programs and credits can make your tax-filing season much easier and may even reduce the amount of tax you owe.

Free File
You may be one of millions of taxpayers who will be able to prepare and file their 2003 federal tax returns electronically this year — for free. At least 60 percent, or 78 million taxpayers, are eligible to use free commercial online tax preparation software to e-file.

Free File, available at IRS.gov, gives taxpayers free access to the benefits of online tax preparation and e-filing. Filing taxes electronically is easy, fast and secure. Plus, people receive their refunds in half the time of a paper return. Free File applies only to the federal tax return.

The IRS and the Free File Alliance, a private-sector consortium of tax software companies, formed a partnership last year to help taxpayers electronically prepare and file their federal tax returns for free. Each Free File Alliance member sets taxpayer eligibility requirements for its program, and the requirements differ from company to company. Generally, eligibility will be based on factors such as age, adjusted gross income, state residency, military status, eligibility to file a Form 1040EZ or receive the Earned Income Tax Credit. Not all taxpayers are eligible for these free services.

The software eliminates most common errors, such as math errors, that can hold up a refund. You also get an acknowledgment of receipt of your electronically filed return by the IRS.

Child Tax Credit
You may be able to claim a child tax credit if you have a qualifying child. For 2003, the maximum amount of the credit was increased to $1,000 for each qualifying child.

A qualifying child is a child who:

• Is claimed as your dependent,

• Was under age 17 at the end of 2003,

• Is your son, daughter, adopted child, descendant of a child, stepchild, or eligible foster child, and

• Is a U.S. citizen or resident.

The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase out begins depends on your filing status, as shown below:

Married Filing Joint .......$110,000

Head of Household/Single/Qualifying Widow/Widower.......................$75,000

Married filing Separate ....$55,000

Individuals entitled to receive the child tax credit may also be eligible to receive the child and dependent care credit and the earned income credit. Publication 972, Child Tax Credit, contains more information.

Earned Income Tax Credit
Working taxpayers with low incomes may qualify for the Earned Income Tax Credit (EITC), a federal tax credit for individuals and families meeting certain income and eligibility guidelines. The EITC reduces the amount of taxes you owe and may result in a refund check. To qualify, you must work and have earned income. Earned income includes taxable wages, salaries and tips, net earnings from self-employment and gross income received as a statutory employee.

To be eligible for a full or partial credit, you must have an adjusted gross income of less than:

• $33,692 ($34,692 married filing jointly MFJ) and two or more qualifying children;

• $29,666 ($30,666 MFJ) and one qualifying child;

• $11,230 ($12,230 MFJ) with no children.

To learn more about these programs and credits, visit www.irs.gov.

Sonya Jacobs is a Taxpayer Education Specialist with the Stakeholder Partnership, Education and Communication Branch in the Wage and Investment Division of Internal Revenue Service. She helps train more than 600 IRS volunteers throughout central and southern Illinois. The opinions and views of guest commentators are their own and may not represent those of the Association of Illinois Electric Cooperatives or the electric co-ops of Illinois.

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