New Tax Law Changes

1.1 IRS Procedures: General Procedural Questions

What are the new changes for 2005?

For highlights of any tax changes for the current tax year please refer to the "What's New" section of the Form 1040 Instructions, the Form 1040A Instructions, or the Form 1040EZ Instructions. You may also refer to Publication 553, for Highlights of the Current Year Tax Changes. Remember, this information is effective for your current tax year.

2.3 Filing Requirements/Status/Dependents/Exemptions: Dependents & Exemptions

I am adopting a child and do not yet have a social security number for the child. How can I claim the exemption for the child?

Parents in the process of a domestic U. S. adoption who do not have and/or are unable to obtain the child's Social Security Number (SSN) should request an Adoption Taxpayer Identification Number (ATIN) in order to claim the child as a dependent and (if eligible) to claim the child care credit. Form W-7A (PDF), Application for Taxpayer Identification Number for Pending U.S. Adoptions , is used by qualifying taxpayers to obtain an ATIN.

3.3 Itemized Deductions/Standard Deductions: Gifts & Charitable Contributions

I donated a used car to a qualified charity. I itemize my deductions, and I would like to take a charitable contribution for the donation. Do I need to attach any special forms to my return? What records do I need to keep?

If you claim a deduction on your return of over $500 for all contributed property, you must attach a Form 8283 (PDF), Noncash Charitable Contributions, to your return. If you claim a total deduction of $5,000 or less for all contributed property, you need only complete Section A of Form 8283 (PDF). If you claim a deduction of more than $5,000 for an item or a group of similar items, you generally need to complete Section B of Form 8283 (PDF) which requires, in most cases, an appraisal by a qualified appraiser.

You will need to obtain and keep evidence of your car donation and be able to substantiate the fair market value of the car. If you are claiming a deduction of $250 or more for the car donation, you will also need a contemporaneous written acknowledgement from the charity that includes a description of the car and a statement of whether the charity provided any goods or services in return for the car and, if so, a description and estimate of the fair market value of the goods or services.

8.1 Earned Income Tax Credit: Qualifying Child Rules

My child was born and only lived 40 minutes. Can she be used as a qualifying child when figuring the earned income credit and the child tax credit?

If your child was born alive and died during the same year, and the exemption tests are met, you can take the full exemption. This is true even if the child lived only for a moment. Whether your child was born alive depends on state or local law. There must be proof of a live birth shown by an official document such as a birth certificate.

If you have determined that you are eligible to claim your child's exemption, you may also be eligible to claim the child tax credit.

8.3 Earned Income Tax Credit: Other EITC

Issues If both parents want to claim the earned income credit, who is entitled to it if there was no marriage?

If the child is a qualifying child of both parents, they may choose which one will claim the credit. If there are two qualifying children, each parent may claim the credit on the basis of one of the children or one parent may claim the credit with both children. If both actually claim the credit on the basis of the same child or children, the parent who is entitled to the credit is the parent with whom the child lived for the longest period of time during the tax year, or the parent with the higher adjusted gross income (AGI) if the child lived with each parent for the same amount of time during the year.

Can I get the earned income credit?

You may be able to take this credit if your earned income does not exceed a maximum dollar amount set by law. The maximum dollar amount is based on your filing status and whether you have qualifying children or not. Other rules apply.

17.4 Individual Retirement Arrangements (IRAs): Traditional IRA

I want to establish a traditional individual retirement arrangement (IRA) for my spouse, and I need additional information. What is the most I can contribute to a spousal IRA during the tax year?

If both you and your spouse work and both have taxable compensation, each of you can contribute to a separate traditional IRA. The amount that you can contribute to each IRA is subject to a limit. Refer to chapter 1 of Publication 590 for more information on these limits. Contributions can be made even if one spouse has little or no compensation, if you file a joint return. You can make a contribution to a separate IRA for your nonworking spouse if you file a joint return. Your total contribution to both your IRA and the spousal IRA for this year is limited by certain factors such as your taxable compensation, contributions to a traditional or Roth IRA and your age.