"Take an unmarried couple that has
a household that includes a child that is the biological
child of only one of the adults," says Luscombe.
"In addition, one of the adults is the sole wage
earner for the household.
"Under the previous support test,
the wage earner could claim head of household status.
But now, using the relationship test, the exemption
would apply to the biological parent in the house, who
in this case has no earnings.
"And the other adult, who does have income, now
loses the $3,200 exemption."
If you have a similar living arrangement and share
custody with another parent or live with several adults
who contribute to a child's upbringing, read the new
definition carefully to make sure you and other taxpayers
involved in the child's care take full and appropriate
advantage of the new definition.
Increased IRA contribution amounts
Thanks to a tax-law change enacted years ago, contribution
limits on retirement accounts have been steadily increasing.
For 2005, you can put up to $4,000 into an IRA. Persons
age 50 and older can contribute an added $500.
The $4,000 limit remains in 2006, but older filers
this year can contribute an added $1,000.
Changes in the filing process
Finally, changes in ways to file your 1040 will make
some computer-competent taxpayers happy, upset those
who preferred a phone to a PC and delight the millions
of procrastinators who don't want to think about taxes
until they absolutely have to.
The IRS again is offering some taxpayers
the opportunity to prepare and e-file their returns
at no charge through the Free
File Alliance. Nineteen software companies have
made their services available at the IRS Web site, and
taxpayers who make $50,000 or less should be able to
find at least one company that will let them file for
The IRS has, however, done away with its
TeleFile program that allowed taxpayers with less-complicated
returns to file over the phone. These filers will now
have to go back to pen and paper or try the Free File
program, for which they are automatically eligible.
If you just can't get your taxes done, whether online
or on paper, for free or by paying a professional, it's
easier this year to delay the task. Now, instead of
filing a request in April for a four-month extension
and then another in August seeking two more months,
the IRS says you just have to ask once.
4868, used previously to make the first extension
request, now will give you an automatic six-month delay.
File it and you don't have to worry about your 1040
until Oct. 16.
One thing hasn't changed, though. Form 4868 will only
get you more time to file your tax form. If you owe
Uncle Sam money, you still have to come up with that
amount or a close approximation of it by April 17 or
face possible penalties and interest.
In addition to the changes wrought by
these 10 laws, many pre-existing laws have had new dollar
amounts added. See "Old
tax laws remain, but effective amounts change."
Freelance writer Kay
Bell writes Bankrate's tax stories from her home in
Austin, Texas, and blogs each day on tax topics at Don't
Mess with Taxes.