- The Washington Times - Friday, April 26, 2002

Amendments to the tax law and stock market losses resulted in a record high average tax return for Americans of $1,937, or nearly $150 billion in total, the Internal Revenue Service said yesterday.
The record beats last year's average refund of $1,714 by 13 percent.
"This is happening because of the rate reduction, the rebate from the summer," said Sam Serio, IRS regional spokesman. "Those folks who didn't get the full amount or any amount had the opportunity this year to lower their tax liability by $300, $500 or $600, so that's a big reason why."
Changes in the tax law last year also increased the earned-income tax credit and the child-tax credit, so many Americans were able to claim higher deductions. Other tax cuts took effect in 2002, including lower income-tax rates, a new deduction for higher education and higher limits for contributions to both 401(k) plans and individual retirement accounts.
Other taxpayers benefited from an economic-stimulus bill Congress passed this year. Small businesses, partnerships and others paying individual rather than corporate income taxes could deduct current-year losses from taxes paid up to five years ago, resulting in big refunds.
Tax advisers instruct clients to plan so they don't get big refunds, arguing that the refunds amount to an interest-free loan to the government of money the taxpayer could use during the year. They recommend adjusting the amount of taxes withheld or structuring tax payments so that taxpayers and the IRS come out roughly even.
Yet the economic downturn and bearish stock market disrupted those plans for some. Many investors had capital losses that offset their taxable gains, while others paid too much in estimated taxes. Some had spent thousands of dollars to get accountants to smooth out their tax picture, only to have it unexpectedly altered by economic circumstances.
"One of the main reasons [for the record refunds] is that we had such an awful year in the market, so capital gains went down and refunds went up," said James E. Cantwell, certified public accountant with TaxSavers in Silver Spring.
Layoffs also can be a factor in bigger tax refunds. A worker earning enough to pay taxes at last year's 27.5 percent rate would have far too much withheld that person is laid off.
"I saw the typical refund about as much as the prior year," said Carol Zirkle, an independent certified public accountant in Herndon. Most of the refunds she calculated ranged between $1,200 and $1,500.
Not all accountants saw their clients get money back.
"It depends on what market you're in," said Scott Webb, a CPA with Stokes & Co., on K Street NW. "There are individuals who are not seeing a lot of refunds."
Mr. Webb, whose clients are mainly wealthy persons, said he has seen fewer refunds this year. Mostly his clients have been negatively affected by changes in the tax law and have had to pay large amounts to IRS.
The IRS reported these new records from this year's tax-filing season:
More than 77 million refunds worth $150 billion.
About 45.8 million returns filed electronically through April 19, compared with 40.2 million during all of last year. The 9.1 million returns filed by taxpayers on home computers was 37.6 percent more than 2001.
About 626,000 payments were made electronically, an increase of 8 percent over last year. Credit-card payments were down, however, by about 15,000.
The IRS Internet site recorded 1.97 billion hits during the tax season, an increase of 28 percent over last year. A new daily record was set on April 15, when 78 million hits were recorded.

This article is based in part on wire service reports.

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