The tax rates are reduced for this filing season. The highest rate previously had been 39.1 percent. It was cut by one-half point to 38.6 percent. If you were in the 27.5 percent tax bracket last year, it is now 27 percent. The 15 percent bracket remains the same and so does the ten percent rate.

There are a number of changes involving savings and retirement plans, and the key is that there are additional incentives in these areas.

For example, if you have a traditional IRA and your employer provides you with a retirement plan, the amount of income you can have and not get hit with a deduction phase out is increased. The maximum Individual Retirement Account contribution and the allowable deduction limit is also increased. The limit depends on your age at the end of 2002.

Be aware of some changes to Coverdell Education Savings Accounts. The contribution limit is increased to $2,000 per beneficiary. Tax free distributions can be used for so-called special needs services.

Among the other changes in place this year, you may be able to file your 2002 federal taxes online without charge. There are many benefits to electronic filing, which include a quicker turnaround time when you are due a refund.

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New deductions/credits
Everybody can use a little encouragement, even if it’s something as mundane as a reduction in your income tax bill. And some of this year's tax law changes provide incentives to save for college and retirement.

For this year's filing season, there's a new deduction for college tuition and fees and less paperwork for taxpayers with interest and dividend income. Lower income taxpayers find a new credit for retirement savings. Lower income working parents enjoy a special credit to offset payroll taxes.

Tax credits reduce your tax bill dollar for dollar, subtracted directly from the amount of tax owed.

Failing to keep up to date on these and other newly available tax deductions can cost you. In fact, the General Accounting Office estimates that one year recently, more than two million taxpayers overpaid their taxes, by an average of $438 per return. The total overpayment was put at more than $900 million. Most took the standard deduction instead of itemizing such things as real estate taxes, contributions to charity, mortgage interest and local income taxes.

As you go about filing out this year's return, or are having it done for you, consider looking ahead to next year. There may be things you can do now that will put you in better position to take advantage of next year's tax law changes.

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Waiting for your refund
From the minute you sign your tax form, realizing that you are owed a refund, the countdown begins. When will you actually see the money? Many people practically have the money spent before tax season arrives.

The IRS says for the majority of people who file a complete and accurate return, a refund check should be issued in six to eight weeks. For the computer-savvy who file a return electronically, a refund should be sent much more quickly - in less than three weeks.

If that isn't fast enough for you, direct deposit should get the money into your bank account even more quickly.

Keep in mind that some financial institutions won't allow a joint refund to be deposited into an individual's account. So double-check with your bank or credit union to confirm that your direct deposit can be sent to that particular account.

If you want to check on the status of your refund, say if you've been waiting four weeks or more, there are two ways to go about it. You can surf to the IRS web site, looking for the "Where's My Refund" section. If you want to use the phone, the automated service is available at 800-829-4477. When you call, you'll need to know the amount of the expected refund, as well as the first Social Security number on the return and filing status. IRS updates the TeleTax refund information each weekend.

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Refinancing a mortgage - tax breaks
Low interest rates have helped to keep the housing market booming, even when other parts of the economy have been just so-so.

So come tax filing time, the question of what's deductible and when becomes an issue.

If you are among the fortunate homeowners who have been able to get a lower interest rate on your mortgage, that's the first and biggest benefit. The second is that you can deduct certain fees or points that you may be charged when you refinance.

Like home mortgage interest, points paid to get a home mortgage are usually deductible when you itemize on Schedule A of the Form 1040. If these are points paid to get an original home mortgage, then they may be fully deductible in the year they are paid.

However, it is a different story when refinancing. They must be deducted over the life of the loan. For example, if it is a 30-year mortgage, then the deductions are spread out over three decades.

If this is the second time around that you are refinancing, then the balance of the points paid for the first refinanced mortgage may be fully deductible when they're paid off.

What about other costs that are due at closing, such as appraisal or home inspection fees, or those that don't involve interest? Generally, they won't help you at tax time, since they are not deductible.

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Saving for retirement
Given the performance of the stock market over the past three years, a lot of people who've been planning to retire are wondering where their nest egg flew off to.

There is some good news for taxpayers in this area, particularly those who feel the need to save more aggressively to make up for funds lost to market declines.

The limit on tax-deferred contributions to Individual Retirement Accounts and other retirement savings plans has increased. And for people who turned 50 before 2003, there is a possibility they can make catch-up contributions, depending on the type of retirement plan. Taxpayers may contribute more to some of these plans, get increased tax benefits and have additional possibilities for retirement account rollovers and distributions.

In addition, a new Retirement Savings Contributions Credit is available to assist lower-income taxpayers save more for retirement. Single filers with income of up to $25,000 can qualify. That income limit is $50,000 for married couples filing jointly.

The maximum allowable annual contribution to traditional IRA's and Roth IRA's has gone up to $3,000, up from $2,000.

For those who've already retired, there's also some good news. The IRS has adjusted life expectancy tables allowing IRA distributions to be spread over a longer period. As result, there's a reduction in the minimum IRA distribution, and similarly the annual tax obligation, for those age 70 and a-half or older.

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Electronic filing
According to Uncle Sam, more than 46 million taxpayers filed their tax returns electronically last year. And the high-tech option isn't limited only to federal returns. You can usually file a state tax return at the same time you file the federal return electronically.

It is estimated that about 100 million taxpayers will receive a refund this year. That means a lot of people could get their money more quickly, if they file electronically and opt for direct deposit of the refund.

Here's why. If you file electronically, the IRS says your refund should be issued within three weeks. That's about half the time it takes them to process your refund if you file the traditional paper return. And if you choose to have your refund sent directly to your bank account, it could take as few as ten days.

If you owe taxes when you file your federal return, there is an online payment option that carries no additional charge.

The system is available to individuals and business taxpayers alike. Along with the Internet, there are EFTPS payment methods via the telephone, through free software or through financial institutions.

IRS: electronic filing

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 The earned income credit
There's some good news this filing season for lower income wage earners. It may seem easier to claim a special tax credit designed to make one's tax burden a little more bearable.

New rules have taken effect for the earned income credit.

This season, for the first time, only taxable income is used to figure the credit. Some taxpayers will find it easier to qualify for the credit, linked to income and family size. And for some, the credit is bigger than in previous years.

You may qualify if your investment income is below $2,550, and if you have one child, earned income is less than $29,201. You can qualify if you have two or more children and earned income is less than $33,178.

There are a variety of tests that should be applied for qualification, including the age of the child, and the relationship to the filer, and whether the child has lived with you for more than six months.

To claim the credit, you must file a tax return, even if no tax is owed. This also applies if, under other circumstances, you didn't earn enough money that would have required you to file a return, or if no income taxes were withheld from pay. Figure the earned income credit using the worksheet for the 1040 Form. You can use the simpler 1040A or the 1040EZ, if you otherwise wouldn't have had to file a return. The IRS calculates the credit for you.

Any refund that flows from the earned income credit won't be used to decide eligibility for low-income housing, food stamps and Medicaid.

IRS: Earned Income Credit

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More deductions for education savers
Next to the cost of retirement, there are few things more daunting for parents than saving for their children's college education.

Fortunately, there are a variety of tax benefits around, which can help relieve some of the burden.

One new benefit involves simplicity. Some taxpayers may deduct up to $3,000 for last year's college or post-secondary tuition and fees for themselves, a spouse or dependent without having to itemize deductions on Schedule A of the Form 1040. It can be claimed on the main part of the form. Next year, the maximum rises to $4,000.

There are income thresholds that come into play here. The deduction is not allowed if, for single filers, adjusted gross income tops $65,000. For married filing jointly, the maximum is $130,000.

There are two tax credits available to those who opt not to take the $3,000 deduction. Those are the Hope Scholarship or Lifetime Learning Credit. As opposed to deductions, which reduce income used to base your tax, credits reduce taxes dollar for dollar.

Also this year, annual contributions to a child's Coverdell Education Savings Accounts have been increased from $500 to $2,000. Earnings on these accounts are tax-deferred and can be tax free when used for qualified education expenses. And for this tax filing season, qualified expenses have been expanded to include accredited elementary or secondary public, private or religious schools.

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Record-keeping a must
If you liked the feeling that you had back in your old school days when you hadn't prepared for a test, and then crammed at the last minute, then you'll love filing a tax return without adequate record-keeping.

Seriously, you'll do yourself a great favor by making good record keeping an ongoing consideration, and not just something done in the hours before the tax-filing deadline of April 15th.

If you don't have a filing cabinet or accordion file, consider getting one. Even just a few plain file folders might do the trick.

Such records will help you to support deductions you've claimed on your return should the IRS select your return for audit and ask you to prove your deductions.

Generally, the rule is that tax records should be retained for three years. But some documents, such as those related to the purchase or sale of a home, as well as stock transactions, IRA's and business or rental property should be kept longer, if not indefinitely. And the statutes of limitation vary among states. Some actually carry a longer time requirement.

What kinds of records are we talking about? Generally anything that has a bearing on your tax return. Those include bills, receipts, invoices, mileage logs, canceled checks and any other proof of payment -- any records to support deductions or credits claimed on your return.

It is also the case that if you hire a preparer to do your taxes, good-record keeping makes things easier for everyone, leading to a quicker and more accurately completed return.

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Using a paid professional to do your taxes
When you are deciding to seek some professional tax help, there are varying levels of expertise and cost

If you are warming to the idea of seeking a professional to prepare your tax return, there's a range of services available. The challenge is matching your needs to the expertise of the person you settle upon.

At the highest end of the cost scale is the tax attorney. This choice is suited for high-income households or individuals, likely involving six figures or more. A possible exception to the high income consideration is an extraordinarily complex financial situation. Tax attorneys can charge $200 or $300 an hour. So if you don't need that level of expertise, don't pay for it.

Next is the certified public accountant. CPA's can charge $100 an hour or more. They're particularly useful for people who have complex or unique tax situations, or make more than just a moderate income.

After that comes the enrolled agent, or EA for short. A person with this license can prepare a return and represent the taxpayer in an audit. As with a CPA, you probably wouldn't consider using an enrolled agent unless you choose to itemize your deductions on your return. Here you can expect to pay a couple of hundred dollars.

At the bottom of the professional tax adviser scale is a person under the general heading of "preparer." They're relatively inexpensive, but also have a lower level of training. H & R Block is the best known of the large preparer firms. These professionals are the best choice for taxpayers who aren't do-it-yourselfers and have less complex financial lives.

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The push for audits
In recent years, under pressure from Congress, the IRS has said that it is making service a priority. At the same time, it has the mandate of enforcing compliance with the tax laws. In other words, it still has to catch tax-cheats.

After some research, the IRS has decided to focus on a variety of key areas. It says it will first go after those who are promoting certain areas of tax avoidance. After that, the IRS says it will zero in on participants in the schemes.

So what are they? One is use of offshore credit cards that the government believes are sometimes used to avoid paying US taxes. Apparently the problem is that these credit cards provide easy access to offshore funds and accounts in tax haven countries that allow income to be hidden.

Another area of focus will be on so-called high-risk, high-income taxpayers. The tax agency is aware that high-income returns are generally more complex and that can mean more opportunities to hide income through partnerships, trusts or corporations.

It will look for unreported income, which the government believes to represent the largest portion of the tax gap.

Scams said to be on the rise, and targeted for attention, include those reliant on a mistaken belief that taxpayer compliance is voluntary or that that the Constitution doesn't provide for tax collection. That's wrong.

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You're no dummy
Let's face it. One of the oldest cliches around involves the inevitability of both death and taxes. Given that folks have come to rely on associating one with the other, the notion of filling out a tax return doesn't generally bring a smile to one's face.

Plenty of folks make the effort to provide information about taxes, but there's a tax guide with a sense of humor that we've found. And that's the Taxes for Dummies book. This is the book series that began by providing basic computer information to people and has since branched out to such areas as travel, cooking and sports.

The information in Taxes for Dummies is basically the same as you'll find in other tax guides. It has more illustrations, and the occasional wry or amusing remark thrown in. There are also some interesting historical asides. For example, this year's version tells about the Cohan rule. Famed entertainer George M. Cohan claimed $55,000 of business-related travel and entertainment expenses in 1921 and '22. The IRS refused the claim because there were no receipts. A federal appeals court disagreed, saying the IRS should allow so-called approximation. Eventually, Congress intervened, requiring proof of travel and entertainment expenses.

But Tax Court still allows estimates for taxi fares, petty cash and office expenses, as well as tips and business gifts.

Bottom line, George M. Cohan was no "dummy."

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Errors everybody makes
The simplest errors can seem like the hardest ones to avoid.

The IRS says it sees certain simple errors over and over on tax returns. Here's a basic checklist of things to look at so that you aren't tripped up.

First, don't forget to take the peel-off label that's provided on your tax booklet, and place it on your return. Make sure all the information is correct. If it isn't, enter the correction. Also, make sure you entered the correct Social Security number in the space provided. That's one of the things that's not on the label, to help protect your privacy.

Missing or incorrect Social Security numbers are among the most common mistakes.

Then there are the simple math errors. Any error in addition or subtraction can potentially delay the processing of your return.

Make sure you entered income, deductions and credits on the correct lines, and that the totals are correct.

Other greatest hits, in the simple tax error category, include entering the incorrect tax on the form, even though that prescribed number is found in a table in the back of the tax booklet.

This one is so simple, it is silly, but it is one of the most common problems in filing of tax returns. Be sure to sign and date the return. If it is a joint return, ask your spouse to please sign and date the return as well.

And after it has been signed, don't forget to make a copy of the return for your own file.

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When a clunker becomes a tax break: trading your car for a tax deduction
So you've got a used car that you are thinking about trading in. Maybe it isn't worth that much, so the amount that you would be able to use for a down payment is just the proverbial drop in the bucket.

Perhaps you might do your heart some good by donating the car to a qualified charity. In the process, you may get a tax deduction.

The contribution is deductible only if it is made to a qualified organization. If you ask, a charity should be able to provide proof, such as a tax exemption certificate. IRS Publication 78 also lists these organizations, which include governments, veterans groups, nonprofit schools, parks and recreation facilities and religious organizations. Publication 78 is available online and is also found at many public libraries.

As with other contributions of property, generally you can deduct only the so-called fair market value of a car given to charity.

That's price at which it would likely change hands between a willing seller and buyer.

Finding the fair market value, particularly for used cars, boats and RV's is quite a bit easier than it used to be. There are free Internet sites where you can do this. For cars, one of the popular sources is Kelley Blue Book. Remember that if the property being donated needs substantial repair, for example, then that can detract from the value.

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AUDIT: The taxpayer's nightmare
For the most recent years for which there are figures available, the odds of being audited were pretty low. One in 202 for 1998 returns, and even lower than that in the following year. But the IRS is beefing up its enforcement budget, although it remains below the level officials would like.

The good news is that even when there is there an audit, or examination, as the IRS likes to put it, it is most often done by mail. The agency dispatches a letter to the taxpayer, asking about a return, or a possible error for further documentation. Usually the taxpayer sends in the information or paperwork, or if the government is owed additional tax, then a check is sent. Keep in mind that failure to answer an initial letter, only invites additional scrutiny or attention from the IRS.

Indeed, a little farther up on the tax stress meter is an IRS request for an interview. If you get such a request, you have the right to a tax preparer or attorney present during the interview. And if the tax return in question is for a business, then IRS agents may visit the company's office.

Experts agree that during an interview, taxpayers should be honest. But they should also avoid offering information that isn't requested. Even if nervous, short of being misleading, one should attempt to avoid being too helpful by talking too much.

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A friend within the IRS?
If you've tried and tried to get a problem with the IRS fixed, there's a possible solution within the tax agency itself.

It is called Taxpayer Advocate Service. It is an option for you if you have had a problem with the IRS that is taking more than a month to resolve, if you don't like the way tax laws have been applied to you, or just don't think you've gotten a fair shake.

A call to the advocate is only in order though if you've exhausted all normal IRS channels. So it is not a substitute for the normal administrative processes of the agency.

It might also apply if you would suffer a hardship as result of IRS actions such as garnisheeing wages to pay a tax debt.

It is the tax advocate's mission to represent your interests by cutting through red tape, or at least provide an independent assessment of your case.

There are taxpayer advocate offices in every state and IRS service center. Not by accident, you may file Form 911 the "Application for Taxpayer Assistance Order". Or you can request that an IRS employee fill one out for you.

You are entitled to certain rights when dealing with the IRS. You should expect private, courteous treatment, as well as legal or other representation if summoned to an IRS interview.

The IRS has more information on the advocate service, in Publication 1546, which you can find on the IRS web site.

Sources for tax forms
Let's say you need a basic tax form, such as the 1040EZ. Or one that's off the beaten track, such as Form 8834 for the Qualified Electric Vehicle Credit. Your options where to turn have increased significantly in recent years, thanks in part to the personal computer.

Perhaps it is no surprise that the Internet is one of the most convenient sources for tax forms, beginning with the IRS web site.

There you can download forms and print them out. This requires the free Adobe Acrobat reader software. If you don't already have it, you can get it online as well.

Most states have similar sites where you can get their forms.

Some of the Internet portals, like Yahoo, have central sites that act as gateways to forms you can download as well.

If you have some time to play around with, you can ask for forms over the phone by calling 1-800-TAX-FORM. The IRS also has a number you can call using the phone attached to a fax machine and it is printed that way.

For those who don't mind a drive or brisk walk, many post offices, libraries and IRS offices provide a variety of forms and publications. Some of the basic forms are also available in a number of the commercially prepared tax guides, found at the bookstore or online. Those, of course, provide additional advice, alongside the forms which you can get free elsewhere.

Stocks and mutual funds may mean losses
A bear market is the kind of experience most people would rather forget. Unfortunately, three straight losing years for the stock market means that a lot of taxpayers have become all too familiar with net capital losses.

But let's start with the good news when it comes to holding mutual funds and equities.

There's less paperwork this year for reporting interest and dividend income. In the past, taxpayers with interest or dividend income of more than $400 were required to file Schedule B or Schedule 1 "one" with their 1040 or 1040A tax returns. For a 2002 return, only taxpayers with more than 15-hundred dollars of interest or dividend income need to file those schedules. The IRS says that means less paperwork, at least in this area, for about 15 million taxpayers.

For those who saw the value of their holdings decline again in the past year, what are the implications? A loss may only be claimed on an asset if it was sold during 2002 for less than it cost.

The amount of net capital loss subtracted on line 13 of the 1040 is limited to $3,000. Any losses above that amount must be carried over to future tax years.

A mutual fund that lost value in the past year can still carry a negative tax consequence. That's because capital gains taxes may be owed if the fund's portfolio manager sold some of his holdings during the year at a profit.

Does Junior need to file?
For many Americans who've been around a while, the notion of filing a tax return wasn't something they had to consider until they had their first job. But as saving or investing for a child's education has become more popular, more people have become aware of increased tax implications that follow. Of course, many school-age youngsters aren't quite ready to tackle the often complicated task of filling out a tax return. This is best left to mom, dad or a paid preparer.

Sometimes, these implications can catch first-time parents by surprise.

Before they reach the age of 14, children are allowed $750 of unearned income before they have to file. That is income coming from interest or dividends on investments. After that, the next $750 of unearned income for these children is federally taxed at the ten percent tax rate. Beyond $1500, it is taxed at the parents' tax rate.

For children aged 14 and older, the IRS considers them the same as adults.

Two potential pitfalls to consider when putting money into an account held in a child's name. An application for financial aid could be adversely affected by junior's savings or investment account. Also, depending on the law in the state where you live, the child in whose name the custodial account is held, he or she gets access to the money at either age 18 or 21. That means they have the opportunity to spend it on something other than education.

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When you get your inheritance
Recent tax law changes make it possible for an individual to pass on, or should we say pass along, a million dollars to beneficiaries without paying federal taxes. As it now stands, the amount that can be passed to heirs federal estate tax-free rises steadily in the coming years, and is then phased out completely in the year 2010. But because the ten-year tax cut law is set to expire -- no pun intended in the following year, the million dollar benchmark comes back into play in 2011. There has been some rumbling in Washington that Congress will try to make much, if not all, of the law permanent. But that hasn't happened yet.

If one is married at the time of death, all assets that are left to a spouse are excluded from federal estate taxes.

The top tax rate for the largest estates for 2002 was 50 percent. That rate drops by a percent each year for the next five years. At the same time, the estate tax exclusion increases so smaller estates will pass tax-free to the heirs.

There are a number of legal strategies for helping to reduce estate taxes. And as with other financial services, there are a variety of folks who will be happy to charge you a fee for advice. Remember each year that you can give up to $11,000 tax free to as many individuals and organizations as you like. Larger gifts provided to heirs are subject to the gift tax.

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End-of-year fixes
Okay, so you procrastinated last year. But this is the year that you are going to get your financial house in order for next year's tax return.

It may become obvious too late in the tax season of any given year, that you didn't pay enough in taxes. How can you avoid a repeat of that problem in the following year?

There are a variety of pretty simple fine-tuning moves that you can make, to put yourself in a better position for the next tax-filing season.

These include adjusting the withholding on your paycheck, or changing the number of dependents that you claim on your W-4 Form. By increasing your withholding, you tell your employer to send more of your money to the IRS. Some people prefer to overshoot on the withholding, which becomes a kind of forced savings account. Of course, the money is eventually returned to you in the form of a tax payment or perhaps even a refund, without interest. So, if that's the only way you can save, so be it. Keep in mind you are losing the opportunity to get a better return on your funds elsewhere.

A relatively easy way to boost your deductions and reduce your tax bill is to give away cash or property to qualified charities. The IRS demands different levels of proof, and becomes more demanding in the proof as the level of giving goes up. For so-called non-cash contributions, along with Schedule A of the Form 1040, you are also required to send in Form 8283.

If you donate your time to charity, you can deduct expenses incurred while doing your good deeds. These may include the cost of operating your car or costs for meals. Once again, you will need documentation.

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Making amends: amending your return
You may have heard the old line quoted from F. Scott Fitzgerald there are no second acts in American lives. It doesn't necessarily hold true when it comes to filing a tax return. The time may arise when you need to file an amended return.

Why file an amended return? It is a chance to correct any error that you've discovered after your return has been filed.

The IRS usually corrects simple math errors or asks for forms that may have been left out. So, in these cases, an amended return is not required.

However, it is advised if you've incorrectly reported your filing status, your total income or deductions or credits.

Here's where the "X" comes in. Use the Form 1040X to correct an already filed Form 1040, 1040A, 1040EZ or electronically-filed return. If you are filing to claim an additional refund, wait until you have received the original refund. It is okay to cash the check, while waiting for the additional money. If you owe additional tax, it is best to file the 1040X and pay the tax by April 15th to avoid penalty and interest.

In most cases, to claim a refund, the 1040X must be filed within three years of the date the original return was filed, or within two years of the date you paid the tax, whichever is later.

If you are filing more than one amended return, you should mail each in a separate envelope.

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Tax assistance that is free
If you are someone with special needs, or just an average Joe, or Jill. There are sources for free income tax information.

For some, just the thought of filing out tax forms leads to sweaty palms. If you need a little hand-holding, figuratively speaking, there are a variety of sources to turn to for free tax help.

If you just need information about your federal return, that's easy. It is available through the Internet on the IRS web site and over the telephone at 1-800-829-1040, both are free IRS services.

Walk in service is available at many libraries, post offices and IRS offices if you would rather pick up a form or publication.

What if you really need some help filling out your return, and aren't in a position to pay someone. For basic help, there are two programs available in many communities. The first is through Volunteer Income Tax Assistance or VITA. That usually begins in early February and runs through filing season, and there are no real requirements to qualify for the free help.

The second program is called Tax Counseling for the Elderly or TCE. AARP is the biggest single participant in this program and it is available for low and middle-income taxpayers, persons with disabilities, and the elderly as well as people who don't speak English. AARP says it operates more than 10-thousand help sites each year at such places as senior centers, libraries and malls. They also provide service to taxpayers in their homes, if they are physically unable to get to the site.

If you feel like you are tax savvy and would like to help people, these programs are always looking for volunteers. They do provide training before tax season.

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If you don't have what you need - when your employer doesn't cooperate.
You've done your part. You have your tax forms ready to fill out. Pencils are sharpened and you've pulled the calculator out of the messy drawer where your keep your bills. Trouble is, your employer hasn't kept its end of the bargain by providing you with a W-2 form. That's the statement showing your wages and taxes for the past year.

The IRS says you should be provided this no later than January 31st, although if mailed a few days leeway should be allowed.

Here's what is suggested if the deadline passes. Contact your employer and ask when the W-2 was mailed. Could it have been returned because of an incomplete or incorrect address? Then, after making contact, the IRS suggests giving the workplace a reasonable amount of time to again mail or re-issue the W-2.

If none of that works, call the IRS and provide your information and that of the employer over the phone. Then the IRS will send a letter to the employer, reminding that the W-2 deadline has passed.

You still are required to file your tax return by the deadline if you don't get your W-2 by estimating wages earned as well as federal income tax withheld. That's done with Form 4852, called the "Substitute for Form W-2."

If you get a corrected W-2 after the return is filed, and the information doesn't match, then you'll need to file an amended return, using the Form 1040X.

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Home sweet deductible home
Along with the peace of mind that one gets from owning a home, one of the great added benefits is the deductibility of mortgage interest.

With interest rates at historic low levels, many Americans have found the lure of buying a home irresistible, either the first time or trading up.

As result, some are for the first time, learning of the details of home purchase related deductions.

Mortgage interest paid in 2002 is generally deductible. Within certain limits, this is for new, existing or refinanced home loans. Mortgage closing costs are not deductible, however.

Some points or fees paid to lenders for a mortgage are fully deductible, but others must be spread out over the life of the loan.

There's also been a boom in refinancing. Here, deductibility of points depends on whether the mortgage was used to pay for home improvements or simply to lower the cost of an existing loan. Generally, points paid to refinance an existing mortgage are not fully deductible the year in which they are paid. However, points on the portion of the "refi" used to make improvements on one's main home are fully deductible in the year the loan was opened. Otherwise, they must be deducted over the life of the loan.

Items which are not deductible include appraisal, notary, deed preparation fees or mortgage insurance.

For more information on this complicated subject, check out IRS Publication 936, at the IRS web site.

Taxpayer rights - more than you thought
It is actually required by law. The IRS is expected to protect taxpayer rights. That may seem at odds with its mission of collecting taxes, but it is the case.

The tax agency has been required in recent years to make taxpayer rights a top priority. That translates to action, in that it is supposed to explain those rights to taxpayers and keep private information confidential. All of this while being professional and courteous. Remember who is paying the bill, after all.

As far as specifics, taxpayers may ask to have someone represent them before the IRS and to have them on hand for any meetings with IRS employees. If there is a dispute, then there's a right to request that the independent IRS Appeals office review the case. After that, if the disagreement continues, they may take their case through the court system.

A new option in recent years is the Taxpayer Advocate. That's an office of the IRS set up to resolve issues that just can't seem to get fixed any other way. The advocate's office is there to help if an IRS action is causing the taxpayer significant hardship.

All of this and more is outlined in IRS Publication 1 (one), titled "Your Rights as a Taxpayer." There's also a Spanish language version available, titled Publication 1SP. You can request the publications at 1-800-TAX-FORM, or download them on the Internet at the IRS web site. If you don't have Internet access yourself, it is likely available at the local library free of charge as are many tax publications.

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Do you have to buy a tax guide?
Here's something that's worth more than what you pay for it. IRS Publication 17.

A quick check of the local bookstore finds that most commercially prepared tax guides start at around $15. Some are more expensive than that. And this is for a book that you really can only use once.

One of the best-kept secrets around when it comes to tax advice is IRS Publication 17. This publication is hundreds of pages thick, and it has very much the look and feel of the commercial guides that are for sale. You can download Pub 17 off the IRS web site. You can either keep it in the electronic format on your computer, or print it out. Just make sure you don't need your computer printer for a while, because printing will take some time.

You can also ask the IRS to send you a printed version of Publication 17. If you don't need it for a couple of weeks yet, they'll mail it to you, free of charge. Call the main IRS toll-free line at 800-829-1040.

Like the commercially prepared tax guides, Pub 17 has a number of forms included. Once again, if you have Internet access, you can also download federal forms separately from the IRS web site.

Most people who have to file federal income tax returns have to file state returns as well. And similar tax preparation assistance can be found in the individual state web sites, where forms and publications may also be downloaded.

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Whether to itemize
The question whether to itemize depends on how much you had in certain expenses in 2002. Those expenses can include money paid for health care, mortgage interest, taxes, casualty losses and deductions that fall under the general heading of "miscellaneous".

The key question is this. If the total amount spent on these categories is more than the standard deduction, then you will likely benefit from itemizing.

So how much are the standard deductions? For a single filer, the standard deduction is $4700. For married filing jointly, the standard deduction is $7850. Head of household is $6900. For married filing separately, it is $3925.

The standard deduction rises for taxpayers 65 or older and for those who are blind.

Itemized deductions may be limited if adjusted gross income is more than $137,300 or $68,650 for married filing separately. The limit applies to all itemized deductions except medical and dental expenses, non-business casualty and theft losses, gambling losses and investment interest.

If a married couple is filing separate returns, and one spouse decides to itemize, the other must also itemize. That means the standard deduction cannot be claimed.

There are some taxpayers who are not eligible for the standard deduction. These include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than twelve months.

For more information on itemized deductions, check Schedule A of the 1040 Form.

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Charity at tax time
There's a Chinese proverb about giving. "Charity and justice are worth a thousand ounces of gold." For most of us, that may overstate the case, at least when it comes to income tax deductions.

Nevertheless, donations to charity often do have a reward in the income tax realm. Giving can provide a tax deduction if you are itemizing, on Form 1040, Schedule A.

Contributions must be made to qualified organizations for them to be deductible. How can you tell if they fall under that general heading? The organizations themselves should be able to disclose if they are qualified and if donations to them are deductible. The IRS web site, also has a search feature covering so-called exempt organizations. That will also help you to know if an organization is qualified.

These groups include Federal, state, and local governments as well as organizations organized and operated only for charitable, religious, educational, scientific, or literary purposes. They might also be for the prevention of cruelty to children or animals.

If your contribution entitles you to a benefit of some kind, say merchandise, goods or services, then you may deduct only the amount exceeding the fair market value of the benefit you received.

When the contribution is at least $250, you may generally claim a deduction only if you get a written acknowledgment from the qualified organization. Generally, you may deduct a cash contribution, or the fair market value of any property you donate to qualified organizations.