“This credit is the only new line on the basic tax forms. Taxpayers should read its instructions carefully so they get the proper benefits,” said IRS Commissioner Charles O. Rossotti. “Errors can delay processing and we want everyone due a refund to get it as quickly as possible.”

Some taxpayers are putting their Advance Payment amount on the credit line, when they should be leaving the line blank. If you have already received the maximum amount for your filing status, just skip the Rate Reduction Credit line on your tax form.

The maximum amounts are:
$300 for a single person or a married person filing separately;
$500 for a head of household;
$600 for a married couple filing jointly or a qualifying widow(er).

   Other taxpayers, who should claim a credit amount, are leaving the line blank. These people received less than their filing status maximum amount as an Advance Payment and their 2001 income — generally higher than it was in 2000 — entitles them to claim the credit on their return.

The credit and the Advance Payments are how the new law gives one of its main benefits for 2001 — a 10 percent tax rate. Instead of having people wait until they file their 2001 tax returns to get a larger refund, the law provided for Advance Payments to be made last year, based on the returns for 2000. If the 2001 income and filing status would give a larger benefit than the Advance Payment, the taxpayer may claim the difference as a Rate Reduction Credit on the 2001 return.

Dependents were not eligible for Advance Payments or the Rate Reduction Credit, but they may get the benefit of the lower tax rate by completing the “Tax Computation Worksheet for Certain Dependents” in the tax instructions.

Taxpayers who made an error related to this credit on their returns should wait to see if the IRS catches it during processing. If the IRS does not contact them by the time they receive their refund, they may file an amended return to correct the error.