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Tax Tip of the Week
For the week of
March 11, 2002

Be sure your child doesn't miss this new tax break

Last year's tax law created a new 10% income tax bracket and a lot of confusion. The lowest tax rate dropped from 15% to 10%. Most taxpayers received the benefit of this rate drop through an advance refund check last summer or through a tax credit on their 2001 returns. So the IRS didn't build this 10% rate into the tax tables used to calculate 2001 taxes. As a result, dependents who also file their own tax returns (typically working high school or college students) have to take special steps to benefit from the 10% tax rate.

Children claimed as dependents on your 2000 and 2001 tax returns don't qualify for either the rebate check or the related tax credit. Instead, they must complete a special worksheet to calculate the income tax on their 2001 returns. Since the new 10% rate applies to the first $6,000 of taxable income, your child could save up to $300 in taxes by completing this worksheet.

The IRS recently announced that it's received more than one million 2001 tax returns with errors relating to the advance refund checks and the rate credit. Be sure your child doesn't miss out on this new tax break.

If you have questions or need help in preparing your family's 2001 returns, please call our office.


Prior Tax TipsClick here to view previous tax tips.

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