Tracy, CA - November 9, 2004 - Ben Franklin famously said "... in this world nothing can be said to be certain, except death and taxes." The accepted wisdom for almost a century has been that the Boston Red Sox would never win the World Series.

TaxBrain Online, produced by Petz Enterprises, Inc., is pleased to report that two out of three isn't bad, as after October 27,2004, we still have to be concerned with death, and of course, taxes.

In 2005, Taxbrain Online, the largest independent online tax service in the United States, will again be the first to make filing taxes electronically available, opening for business on December 31st. During 2004, more than 60 million taxpayers filed electronically, and the trend to do more basic chores, like banking and shopping, continues unabated.

TaxBrain Online boasted outstanding growth in 2004, increasing the number of returns electronically prepared and filed. From April 15, 2003 through April 15, 2004, more than one million unique visitors came to the TaxBrain Online site, an increase of 40 percent. Paid federal returns prepared went up 37.3%, average per customer revenue increased by 11.7%. Revenues from paid preparation and filing rose 54.8%, and TaxBrain Online customers received more than $120 million in refunds, most within only several days after filing electronically.

WHAT'S NEWS FOR 2004/05 TAX SEASON:

Effects of the Jobs and Growth Tax Relief Reconciliation Act of 2003 and H.R. 1308, The Working Families Tax Relief Act of 2004

1. Closing a middle-class loophole means no cheap SUV

On October 4, 2004, President Bush signed into law H.R. 1308, The Working Families Tax Relief Act of 2004, which is the most sweeping tax bill of this administration. The Act provides more extensions to the sunset provision that were apart of the Jobs and Growth Tax Relief Reconciliation Act of 2003. For example, the $1000 child tax credit was to "sunset" to $700 per child in 2005. The new law extends the $1000 child tax credit through 2009.

However, the extension of many sunset provisions means that the lost revenue to the U.S. Treasury must be made up somewhere, hence an end to one popular middle class loophole.

The SUV loophole that so many Americans enjoyed has been phased out. Under the old law one could purchase a Ford Expedition or Dodge ¾ ton Pickup for $31,000 and take up to a total of $18,600 in first year depreciation, or deduct the entire $31,000 via a section 179 deduction. If a $31,000 Acura TL was purchased, the first year deduction would have been capped at a total of $10,710.

Under the 2004 law, one can longer deduct the entire $31,000 as a 179 deduction for the SUV or truck. In fact, the deduction has been limited to just $25,000.

2. Charity used to begin at home. Not after January 1, 2005.

Charitable giving of vehicles has also been addressed in this latest round of tax revisions. Like Priceline.com, donating a vehicle was simply coming up with price after it was given to the charity. It didn't matter to the taxpayer what the charity did with the vehicle. Now, The Working Families Tax Relief Act requires that charities police what is donated. Beginning January 1, 2005 the charity is required to inform the donor of the vehicle selling price. The charitable deduction cannot exceed the gross proceeds from the sale of the vehicle. If the vehicle is not sold but is used by the charity, it must produce an acknowledgement as to the value of the vehicle. To ensure everyone is on the same page, charities will be required to furnish the same documentation to both the donor and the IRS.

3. Surprise! The taxpayer can supplement medical expenses with a savings account providing a dollar-for-dollar deduction.

Through the use of a Health Savings Account (HSA), the taxpayer can contribute up to $5,150 for a family or $2,600 for an individual and deduct an equal amount on the tax return, barring any contributions made by the employer, or if an Archer MSA is being maintained.

Naturally, it's not as easy as it sounds. The taxpayer establishes an HSA much like an IRA or SEP account. And the current medical insurance policy must be defined as a High Deductible Health Plan (HDHP), with a minimum deductible of $2,000 for a family and $1,000 for an individual, and the deductible cannot include insurance premiums. Actually, this approach covers 85% of America's small businesses and employees, except for people over 65 who cannot contribute to an HSA. As medical bills come due now, or even in 10 years, the taxpayer can tap into the HSA to help cover medical expenses. Earnings, principal and interest continue to grow in tax-exempt status as long as contributions are for medical reasons.

4. The Alternative Minimum Tax (AMT)- the more things change, the more they stay the same

The only substantial change is the re-introduction of the General Limitation rule, changing how the non-refundable tax credits are applied against the regular tax. Last year, all of the non-refundable tax credits (Foreign Tax Credit, Child & Dependent Care Credit, Credit for the Elderly, Education Credits, Retirement Savings Credit, Child Tax Credit, and Adoption Credit, Mortgage Interest Credit) offset both AMT and Regular Tax.

For 2004, only the Adoption Credit, Child Tax Credit and Retirement Savings Credit can reduce the regular tax to the extent that regular tax exceeds the taxpayers Tentative Minimum Tax. This is not new, simply an old provision (prior to the 2000 tax year) that's back again, effectively minimizing the benefit of the non-refundable credits for taxpayers subject to the AMT.

The Exemption amount phases out for high-income taxpayers with Alternative Minimum Taxable Income (AMTI) over $150,000 for married filing joint taxpayers and surviving spouses, $112,500 for single taxpayers, and $75,000 for married individuals filing a separate return. The phase out is $.25 for each $1 of AMTI over the threshold. The threshold has not changed for 2004/05.

5. Sales Tax or State Income Tax -- Which to Write off?

The Working Families Tax Relief Act of 2004 gives taxpayers who previously had no obligation to pay state income taxes the option of now deducting their state sales tax. Taxpayers that had foreseen this law and saved their sales tax receipts for the year should have no problem verifying the amount of sales tax paid. For those taxpayers who did not foresee this coming will have to wait until the IRS publishes a table of deductible sales tax.

The criteria used by the IRS for a family of five living in Reno Nevada with an annual income of $55,000 vs. a family of five living in Wounded Knee South Dakota earning $55,000, is yet to be determined.

This law will benefit those taxpayers that live in states with high personal sales tax rates due to combined sales tax from both the counties/parishes and the state. It is conceivable that residents living in California, Connecticut, Mississippi, New York or Rhode Island -- states that all have sales tax greater than or equal to 7 percent -- could generate sales tax paid by the consumer exceed the personal income tax liability. Combine the additional local sales tax paid in these states with the state's sales tax and the consumer is truly faced with the question sales tax or state income tax, which to write off? A full comparison on a state-by-state basis is available directly from TaxBrain Online.

About TaxBrain® Online Tax Center
TaxBrain is a full service online tax center providing tax advice, tools, and resources all year to help taxpayers manage their tax burden with greater confidence and ease. TaxBrain is the only web-based tax solution that delivers online preparation, filing, professional assistance and representation for taxpayers in all 50 states. Launched in 2000, TaxBrain delivers the vision of a fully integrated tax center that accommodates the schedule and needs of the busy American lifestyle. In 2002, TaxBrain emerged as one of the most popular services for online tax preparation and filing available on the web. For more information, visit www.taxbrain.com.

About Petz Enterprises, Inc.
Petz Enterprises, Inc. (a closely held California corporation, PEI) is a leading provider of tax preparation and filing solutions for the professional and consumer markets helping to automate and simplify federal, state and local tax compliance. PEI's CrossLink® line of professional tax software products enable tax practitioners and service bureaus to accurately prepare and file large volumes of individual tax returns. Founded in 1974, and based in Tracy, California, PEI is dedicated to serving the needs of professional tax practitioners and individual taxpayers nationwide. For more information, visit www.petzent.com.