This Act provides tax relief for persons affected by Hurricane Katrina. The provisions of the Act are explained in Publication 4492.

You no longer can use Telefile to file your tax return. There are other IRS e-file options you can use. See chapter 1.

You can now use Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, to obtain an automatic 6-month extension of time to file your tax return. See chapter 1.

A new definition of a qualifying child applies for each of the following tax benefits.

The standard mileage rate for the cost of operating your car increased to 40.5 cents a mile for all business miles driven before September 1, 2005. For business miles driven after August 31, 2005, the rate increased to 48.5 cents a mile. See chapter 26.

The standard mileage rate allowed for use of your car for medical reasons increased to 15 cents for miles driven before September 1, 2005, and to 22 cents for miles driven after August 31, 2005. See chapter 21. What's new: Medical and dental expenses Standard mileage

The standard mileage rate allowed for use of your car for determining moving expenses increased to 15 cents for miles driven before September 1, 2005, and to 22 cents for miles driven after August 31, 2005. See Publication 521. What's new: Moving expenses Standard mileage Moving expenses: Standard mileage rates

The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans.

Traditional IRA income limits. If you have a traditional IRA and are covered by a retirement plan at work, the amount of income you can have and not be affected by the deduction phaseout increases. The amounts vary depending on filing status. See chapter 17.

Limit on elective deferrals. What's new: Elective deferral amounts Pensions: Contributions: Elective deferral amounts Retirement plans: Contributions: Elective deferral amounts SIMPLE plans: Contribution limitsThe maximum amount of elective deferrals under a salary reduction agreement that could be contributed to a qualified plan increased to $14,000 ($18,000 if you were age 50 or older). However, for SIMPLE plans, the amount increased to $10,000 ($12,000 if you were age 50 or older).

IRA deduction expanded. The amount you, and your spouse if filing jointly, may be able to deduct as an IRA contribution will increase to $4,000 ($4,500 if age 50 or older at the end of 2005). See chapter 17.

If you donate a car, boat, or airplane or a patent or other intellectual property to a qualified organization, your deduction may be limited. See chapter 24.

There is a new deduction for domestic production activities. This deduction can be passed to you from a business. For more information, see Form 8903.

You may be able to exclude from income grants you use to mitigate (reduce the severity of) potential damage from future natural disasters that is paid to you through state and local governments. If you reported income from qualified disaster mitigation payments in previous years, you may be able to file a claim for refund. See chapter 12.

Some tax items that are indexed for inflation increased for 2005.

Earned income credit (EIC). What's new: Earned Income Credit Earned Income Credit: 2005 changesThe maximum amount of income you can earn and still get EIC increased. The amount depends on your filing status and number of children. The maximum amount of investment income you can have and still be eligible for the credit has increased to $2,700. See chapter 36. Earned Income Credit: Amount of earned income Earned Income Credit: Investment income, limit on

Standard deduction. What's new: Standard deduction Standard deduction: 2005 changes The standard deduction for taxpayers who do not itemize deductions on Schedule A (Form 1040) has increased. The amount depends on your filing status. See chapter 20.

Exemption amount. What's new: Exemption amount Exemption amount: 2005 changesYou are allowed a $3,200 deduction for each exemption to which you are entitled. However, your exemption amount could be phased out if you have high income. See chapter 3.

Limit on itemized deduction. What's new: Limit on itemized deduction Limit on itemized deduction: 2005 changes Some of your itemized deductions may be limited if your adjusted gross income is more than $145,950 ($72,975 if you are married filing separately). See chapter 29.

Tax benefits for adoption. What's new: Adoption benefits Adoption: Employer's assistance program The adoption credit and the maximum exclusion from income of benefits under an employer's adoption assistance program are increased to $10,630. See Adoption Credit in chapter 37.

Hope or lifetime learning credit income limits increased. What's new: Hope credit Lifetime learning credit Education credits: Hope credit; Lifetime learning credit The amount of income you can have and still receive a Hope or lifetime learning credit has increased. See chapter 37.

Social security and Medicare taxes. What's new: Social security and Medicare taxes Social security and Medicare taxes: 2005 changes The maximum wages subject to social security tax (6.2%) increased to $90,000. All wages are subject to Medicare tax (1.45%).

If you are filing a paper return, you may be mailing your return to a different address because the IRS has changed the filing location for several areas. If you received an envelope with your tax package, please use it. Otherwise, see Where to File near the end of this publication for a list of IRS addresses.

You may be able to claim a new tax credit for the purchase of qualified energy efficiency improvements to your existing home. You may be able to claim a tax credit for the purchase of residential solar water heating, photovoltaic equipment, or fuel cell property.

The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans.

Traditional IRA income limits. If you have a traditional IRA, are covered by a retirement plan at work, and are married filing jointly or a qualifying widow(er), the amount of income you can have and not be affected by the deduction phaseout increases. The amounts for other filing statuses are not changed.

Limit on elective deferrals. Pensions: Contributions: Elective deferral amounts Retirement plans: Contributions: Elective deferral amounts SIMPLE plans: Contribution limitsThe maximum amount of elective deferrals under a salary reduction agreement that can be contributed to a qualified plan increases to $15,000 ($20,000 if you are age 50 or older). However, for SIMPLE plans, the amount is $10,000 ($12,500 if you are age 50 or older).

IRA catch-up contribution. The catch-up contribution for persons age 50 or older at the end of 2006 is increased to $1,000. The maximum contribution for such person is $5,000.

The AMT exemption amount will decrease. The amount depends on your filing status.

Personal exemptions. The phaseout of the limitation on personal exemptions will be reduced by 1/3.

Itemized deductions. The phaseout of the limitation on itemized deductions will be reduced by 1/3.

You may be able to take a credit if you place an alternative technology vehicle in service during the year. See chapter 37. You no longer can take a deduction for clean-fuel vehicles.

To protect your privacy, social security numbers (SSNs) are not printed on the peel-off label that comes in the mail with your tax instruction booklet. This means you must enter your SSN in the space provided on your tax form. If you filed a joint return for 2004 and are filing a joint return for 2005 with the same spouse, enter your names and SSNs in the same order as on your 2004 return. See chapter 1.

Victim of identity theft. If you believe someone has assumed your identity to file federal income tax returns, or to commit other tax fraud, call 1-800-829-0433. Victims of identity theft who are having trouble filing their returns should call the IRS Taxpayer Advocates Office at 1-877-777-4778. You should also know that the IRS does not initiate communication with taxpayers through email. If you do receive this type of request, it may be an attempt by identity thieves to get your private tax information.

You must provide the taxpayer identification number for each person for whom you claim certain tax benefits. This applies even if the person was born in 2005. Generally, this number is the person's social security number (SSN). See chapter 1.

If you are a U.S. citizen with income from sources outside the United States (foreign income), you must report all such income on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or 1099 from the foreign payer. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties).

Citizens outside U.S.: Earned income exclusion Exclusions from gross income: Foreign earned income Foreign income: Earned income exclusionIf you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. For details, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

You can choose to include combat pay in your earned income for purposes of computing this credit. If you are married, each of you can make this election separately.

Form 8836. Form: 8836 If you received Form 8836, Qualifying Children Residency Statement, you have been selected to participate in the EIC certification program. See chapter 36.

If a qualifying child lives with you and you expect to qualify for the earned income credit in 2006, you may be able to get part of the credit paid to you in advance throughout the year (by your employer) instead of waiting until you file your tax return. See chapter 36.

You can choose to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Form 1040, Schedule A. See chapter 22.

If your taxable income is $100,000 or more, figure your tax using the Tax Computation Worksheet. The Tax Computation Worksheet is found near the end of this publication immediately following the Tax Rate Schedules. (The Tax Rate Schedules are shown so you can see the tax rate that applies to all levels of taxable income. Do not use the Tax Rate Schedules to figure your tax.)

Generally, both spouses are responsible for the tax and any interest or penalties on a joint tax return. In some cases, one spouse may be relieved of that responsibility for items of the other spouse that were incorrectly reported on the joint return. See chapter 2.

To promptly resolve any questions we have in processing your tax return, we would like to be able to call you. Please enter your daytime telephone number on your tax form next to your signature.

You can check the Yes box in the Third Party Designee area of your return to authorize the IRS to discuss your return with a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. It also allows your designee to perform certain actions. See chapter 1.

Credit cards: Payment of taxes Electronic payment options Payment of tax: By check or money order Payment of tax: By credit card Payment of tax: Payable to "United States Treasury"Make your check or money order payable to United States Treasury. You can pay your taxes by credit card, using the Electronic Federal Tax Payment System (EFTPS), or, if you file electronically, by electronic funds withdrawal. See chapter 1.

The IRS offers fast, accurate ways to file your tax return information without filing a paper tax return. You can use IRS e-file (electronic filing). See chapter 1.

You may be able to file your 2005 taxes online for free thanks to an electronic filing agreement. See chapter 1.

If you change your address, you should notify the IRS. See Change of Address, under What Happens After I File, in chapter 1.

You may be able to use a designated private delivery service to mail your tax returns and payments. See chapter 1.

If you were due a refund but you did not file a return, you generally must file your return within 3 years from the date the return was due (including extensions) to get that refund. See chapter 1.

Declaration of rights of taxpayers: IRS request for informationThe IRS Restructuring and Reform Act of 1998, the Privacy Act of 1974, and the Paperwork Reduction Act of 1980 require that when we ask you for information we must first tell you what our legal right is to ask for the information, why we are asking for it, how it will be used, what could happen if we do not receive it, and whether your response is voluntary, required to obtain a benefit, or mandatory under the law. A complete statement on this subject can be found in your tax form instruction booklet.

Taxpayer Assistance CenterThe Internal Revenue Service has expanded customer service for taxpayers. Through the agency's Everyday Tax Solutions service, you can set up a personal appointment at the most convenient Taxpayer Assistance Center, on the most convenient business day. See How To Get Tax Help in the back of this publication.

Telephones: Fraud or misconduct of IRS employee, number for reporting anonymouslyIf you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (1-800-877- 8339 for TTY/TDD users). You can remain anonymous.

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.