A hoary journalistic tradition requires that year-end columns review significant developments in the year just past, and look ahead to changes expected in the next year. A year ago, I could have made an action list for Congress of matters that most knowledgeable observers would have considered extremely urgent:

· Providing adequate enforcement and training resources to the Internal Revenue Service;

· Restructuring or eliminating the alternative minimum tax;

· Raising enough taxes to actually cover the federal deficit;

· A thorough cleaning-out of special, gimmicky tax provisions (last done in 1986).

None of these happened in 2005, and I am not optimistic about 2006.

What happened instead fell into two groups. First is the usual accretion of still more special-interest tax provisions, such as the special tax credit for the manufacturers of energy efficient dishwashers, clothes washers and refrigerators, or the nonconventional fuel production credit becoming an elective general business credit. I would make a "Ten Worst" list, but some are so complex or obscure that I doubt that I understand their full implications.

The second group was the announcement of several grand tax "reform" schemes, none of which has the faintest possibility of enactment into law. At best, these served to give the illusion of action on complex issues. Most were really either entirely impractical or a façade hiding still more tax cuts for the wealthy, or both.

On a less grand level, though, some specific tax changes for 2005 and 2006 are important to know about.

Split Year Changes

Two deductions can be calculated using published rates rather than your actual costs. Both of these rates normally change each year.

One involves automobile use. Many of you use the IRS's standard mileage rate rather than calculating your actual cost-per-mile. This rate normally changes at the beginning of each year, and a year ago the IRS announced that the 2005 rate would be 40.5 cents per mile. This rate (unlike many other IRS rates) is supposed to be based on reality, so when gasoline prices spiked this fall, they took the unusual step of raising the rate to 48.5 cents per mile for the last four months of 2005. Fuel costs have now subsided a bit, and the IRS recently announced that the 2006 rate will be 44.5 cents per mile.

The other involves the expenses for meals when traveling out of town on business. You can claim your actual expenses (subject to some obscure and rarely enforced limits) or use a per diem rate for that locality from a published table. This table is not actually created by the IRS, but rather by the General Services Administration as an expense allowance for government employees. That rate change always happens during a tax year, because the GSA tables are based on the federal government's fiscal year, which begins on October 1.

Most years, the mid-year effective date makes little difference: rates would change by a dollar a day, and a few cities would go up or down a tier. This year, though, the differences are substantial. The minimum rate went from $31 a day to $39. That's a significant increase, considering that it really only covers small towns and rural areas. The middle tiers increased similar amounts, such as $39 to $44, and $47 to $54.

The biggest increase, however, came with the creation of a new top tier. It covers the big cities that are typical business stops for PerformInk readers, including Los Angeles, San Francisco, Washington DC, Boston, New York City, Las Vegas and Seattle. The rates for those destinations rose from $51 to $64 a day. Do not be surprised, then, when your tax return preparer asks for the specific dates you were there, and not just how many days.

Retirement Savings

Almost any American taxpayer has some sort of tax-advantaged retirement savings plan available, whether an employer-sponsored plan (like a 401k) or an individual retirement account (IRA). The maximum amount one can contribute each year has been increased in recent years, and will continue to increase.

A participant in a 401k plan can set aside ("defer" in tax jargon) a maximum of $15,000 for 2006, up from $14,000 in 2005 and a mere $10,000 a few years ago. Most employers will keep the deferral amount the same from one year to the next unless specifically instructed to make a change. If you want to bring the amount up from last year's, you need do give those instructions right now, as the change must be made before the beginning of the tax year involved.

Similarly, the maximum IRA contribution for both 2005 and 2006 is $4,000. It had been raised to $3,000 in 2002, after having been at $2,000 for decades. Again, many people have coasted along putting the same amount in each year rather than increasing it to take advantage of the higher limits. But unlike a 401k plan, you can still do something about your IRA contribution for 2005. They need only be made by the April 17, 2006 due date of your 2005 tax return.

Both types of retirement plans have special "catch-up" provisions for those who have turned 50 years old and are willing to admit it. The 2006 extra amount for a 401k plan in 2006 is $5,000, and $500 for an IRA in both 2005 and 2006.

(I won't preach the sermon about the importance of retirement savings here, since you have heard it before. Consider yourself nagged.)

For the Procrastinators

The IRS has finally dropped any pretense that they care why individuals need second extensions of time to file. Until the 2004 tax year, first extensions were automatic and good for four months. The second extension, for an additional two months, required a reason on the application and approval by the IRS. Starting with 2005 tax returns, the first extension will be the only one: an automatic six months.

And in Other Financial Non-Events

Other things widely predicted for 2005 that did not occur, and are again widely predicted for 2006, include skyrocketing interest rates, the collapse of the housing market, pervasive identity theft, United Airlines' emergence from bankruptcy and the end of civilization as we know it. We'll see.

Are there money or tax questions you would like to see discussed in this column? Let me know, at 2835 N. Sheffield, Suite 311, Chicago, IL 60657, or call 773/525-1778 (888/525-1778 toll-free outside the Chicago area) or e-mail greg@gregmermel.com.