Keeping Up with Tax Code Changes.

• Author: SCHNEPPER, JEFF A.

ACCORDING TO the Internal Revenue Service, it takes 12 hours and 51 minutes to do a simple 1040 tax form. Add a Schedule A and Schedule B (itemized deductions and interest/income) and it's another seven hours. That includes learning the rules, however, and they keep changing the law. Bet you didn't know there was a tax bill passed by Congress in 1999. Surprise! That was the 33rd year out of the last 36 in which Congress fiddled with the Tax Code. Most of the changes this time were minor, and many just technical, but if they affect you, they're important. Let's look at some of the most significant ones.

Alternative Minimum Tax. Congress extended additional relief to people hit by the AMT, which is imposed on people who take "too much" in targeted deductions. Those deductions are added back into your income--in effect, disallowed--and your enhanced income, less a declining exclusion, is subject to a flat tax of 26 or 28%. These "bad" deductions include (but aren't limited to) all taxes, part of your medical deductions, and all your miscellaneous itemized deductions.

Credits are dollar-for-dollar reductions in your tax. Normally, personal non-refundable items such as the dependent care credit, credit for the elderly or disabled, adoption credit, child tax credit, and Hope Scholarship and Lifetime Learning credit aren't allowed as offsets to your AMT.

For 1999, the new law extends a provision that allowed these credits to offset your regular tax liability in full (as opposed to just the amount which the regular tax exceeds the tentative minimum tax). For years 2000 and 2001, these personal nonrefundable credits may offset both the regular tax and the full minimum tax.

Extensions. The Exclusion of Employer Provided Educational Assistance of up to $5,250 each year was extended through Dec. 31,2001. The Research and Experimental Tax Credit was extended through June 30, 2004. The Work Opportunity Tax Credit was extended through Dec. 31,2001. The Welfare to Work Credit was extended through Dec. 31, 2001. The Tax Credit for First Time [Washington] D.C. Homebuyers of up to $5,000 of the amount of the purchase price has been extended through Dec. 31,2001.

Estimated safe harbor rules. Under prior law, you escaped any interest or penalties for underpayment of your income tax if you met certain safe harbors. For example, no interest or penalties are due if you have paid, in a timely manner, 90% of your total tax due for the year.

Because it is hard during...