16 Thursday, March 27,A997 Pahrump Valley Gazette
DON'T OVERLOOK
TAX CREDITS
As originally reported in
a copyrighted article in
the Salt Lake Tribune,
"Tax credits often don't
get the attention that de-
ductions do, but don't
overlook them. Credits
are even more powerful."
That's because deductions
reduce your taxable in-
come, and the savings is
only a percentage equal to
your tax rate. Credits re-
duce your actual tax bill--
dollar for dollar.
So, if you're in the 28
percent tax bracket, a
$100 deduction would
save only $28. A $100
credit would lop off the
full $100.
Moreover, some credits
are A "refundable"--
which means you get the
money even if you don't
owe tax--and some are
payable in advance. To get
these credits, however,
you must file a tax return.
Among the credits worth
investigating, these affect
the most taxpayers: The
earned-income credit--
the credit for the elderly
or disabled, for people
older than 65 or those who
are permanently and to-
tally disabled. (See IRS
Publication 524)--The
children dermndent-care
credit, for people who
must pay for such services
so they have time to work
(See IRS Publication
503)--The foreign-tax
credit, for people who
face double taxation in the
United States and abroad.
(See IRS publication
14)---The mortgage-in-
erest credit, for people
issued a qualified mort-
gage credit certificate by
a state or local govern-
ment. (See IRS Publica-
tion 17.)
see next
week' S
edition for
more
TAX TIPS
Frequently Asked Questions
About Our Request for Tax
Return
(FTB 4600-MEO)
I sold my personal
residence in Califor-
nia, Do I need to
report this sale of real
property ?
If you are a California
resident and had a gain
on the sale (or are defer-
ring a gain) of your per-
sonal residence of more
than $10,000 (single fill-
ing status) or $20,000
I (married filing joint sta-
tus), you must file a tax
return showing the gain.
If your gain (combined
with your taxable in-
come from all other
sources) is less than this
amount, attach a com-
pleted IRS form 2119
"Sale of Your Home" to
form FTB 4600-MEO
and return it to us.
If you are a nonresident
of California, you must
file a California return if
you had any California-
source income (such as
a gain on the sale of real
property) and your gross
income from all sources
Is more than $10,000
(single filing status) or
$20,000 (married filing
joint), or if you owe $1
or more of tax. If you
gain was less than the
above amounts and does
I not result in a tax liabil-
[ ity, attach a completed
[ IRS Form 2119 to form
"* I FIB 4600-MEO and re-
I
[turn it to us.
I worked in California,
but have retired and
live in another state.
Since I no longer live
in California, why am I
receiving this notice?
Income from California
sources, including pen-
sion, is taxable to Cali-
fornia. If only a portion
of your career was spent
in California, then the
taxable amount of your
pension may be prorated
based on a ratio of the
amount of years worked
in California to the
amount of total years
worked towards the pen-
sion.
I have notfiled my
1995federal income
tax return either. What
should I do ?
We will be providing
your income information
to the Internal Revenue
Service (IRS). Please
note that federal law re-
quires, for each tax year,
a return be filed by a U.S.
citizen or a resident alien
who has a specified mini-
mum amount of gross in-
come, as provided by In-
ternal Revenue Code
section 6012. You should
file the appropriate in-
come tax returns as soon
as possible. Tax returns
should be sent to: Inter-
nal Revenue Service,
P.O. Box 12626, and
Fresno CA 93788.
10 Reasons to consider
hiring a pro
Reprinted with permission
from the Salt Lake Tribune
1. If you marry, sepa-
rate or divorce or
your spouse dies.
2. If you inherit real
estate or securities
(preferably before
you sell any).
3. If you are self-em-
ployed.
4. If you have a SEP-
IRA or Keogh re-
tirement plan, or
want to set up one
5. If you move into a
new state.
6. If your work takes
you outside the
United States, you
pay foreign taxes
or own an invest-
ment that owes
foreign as, such
as an interna-
tional mutual
fund.
7. If either you or
your spouse is a
non-resident
alien.
8. If you suffer or
loss from a natu-
ral disaster.
9. If you are a
trustee, executor,
legal guardian or
conservator.
10. If you win a prize
or sweepstakes
whose declared
tax value is in-
flated.
SOURCE: California Society
of CPAs.
State Farm
Sells
Life Insurance.
JEFF BANSER
Off751-1515 131 1 S. ttwy 160
Fax 751-1616 Rcs 751-2474
TAX CHANGES FOR 1996
Nobody is calling it tax "reform" as indi-
cated in this week's Lowesline, as they did
in 1986. It didn't have the sweep of 1993.
But 1996 did give Americans three signifi-
cant pieces of legislation that contained some
650-tax changes--the most since 1988.
Those changes aren't monumental to tax-
payers as whole. But if one of them affects
you, you'll probably consider it a big deal.
Here are the highlights that will shape your
1996 return any your tax planning for 1997
and beyondmplus a few probably consider
it a big deal.
Here are the highlights that will shape your
1996 return and your tax planning for 1997
and beyond--plus a few promises that
proved too good to be true.
NEW FOR 1996 as reprinted with permis-
sion of the Salt Lake Tribunal
--Identification numbers required. Con-
tinuing its crackdown on fraud, the Internal
Revenue Service now wants ID numbers for
everyone you list on your tax return who was
born before December 1996. If you don't
have lds, the IRS can automatically disal-
low dependency exemptions, the child-care
credit and the earned-income credit--and
assess the difference without notice.
Non-residents, resident aliens and illegal
aliens who aren't eligible for a Social Secu-
rity number must send off for a brand-new
type of individual taxpayer identification
number, or "ITIN." If you need one, get
cracking. There's already a lot of confusion
and delay--and it probably will only get
worse as April 15 nears.
--A squeeze on the earned-income credit.
Qualifying taxpayers can get a bigger fed-
eral credit, and more military folks stand to
get one. But for the most part the credit will
be harder to get. It's not available to anyone
who lacks a Social Security number (the new
ITINs aren't enough), and the eligibility rules
and income limits have been tightened. (See
Page 13G).
--Employer-assisted education is back. It
took longer than most experts expected, but
lawmakers retroactively reinstated a tax
break that allows employees to exclude up
to $5,250 from their pay if it's used for quali-
fying education costs. The break was revived
for classes that begin between Dec. 31, 1994,
and July 1, 1997. However, the federal break
no longer applies to graduate courses that
started after June 30, 1996. Now comes the
hassle of getting refunds from last year.
---Greater protection for taxpayers. The
Taxpayer Bill of Rights 2 expands on laws
that hold the IRS to higher standards of fair-
ness, accuracy and timely responses to tax-
payers. Among other things, it provides more
protection from IRS levies and appoints a
national taxpayer advocate who will moni-
tor and evaluate IRS systems and give and
give Congress closer oversight of what prob-
lems occur most frequently, determine the
causes and suggest how to fix them.
--More automated filing. Through
SiliconValley tech types might snicker, the
IRS is boasting about how it is making high-
tech inroads with its TeleFile programs. The
agency has expanded the number of taxpay-
ers eligible to file their returns over a touch-
tone phone.
--More death benefits taxed. The first
$5,000 of death benefits paid by and em-
ployer-purchased insurance policy used to be
exempt from federal tax. Starting with death
after Aug. 20,1996, all the money is taxed.
But California still exempts the first $5,000.
--Inflation adjustments. To keep pace with
inflation, there are higher exemptions, stan-
dard deductions, mileage rates and thresh-
olds for how much income you can make
before you must file or before itemized de-
ductions are phased out. On the other hand,
• more income also is exposed to Social Secu-
rity tax.
--Indexing error corrected. Qualifying tax-
payers long have been able to exclude the
interest from certain Series EE savings bonds
if they used the money for tuition and a broad
range of hills for higher education. The prob-
lem is, the inflation index was set to the
wrong year, limiting the number of people
who were eligible. The index has been reset
retroactively, raising this year's income ceil-
ings sharply and making many eligible for
refunds if they amend their 1993, 1994, or
1995 returns.
--Direct deposit is even easier. Last year,
you needed to complete a special form if you
wanted your refund deposited automatically
into your account. This year, you can handle
it on the 1040 form itself.
--Business filings get Ezier. About 400,000
more small businesses will be eligible to file
the streamlined Schedule C-EZ because the
$25,000 limit on gross receipts has been lifted
and the cap on business deductions increased
to $2,500.
--Business use of your home. If you regu-
larly store product samples in your home, the
so-called Amway exception may allow you
to write off certain home expenses.
--Gifts from foreign countries. Starting
August 20, 1196, taxpayers must report re-
ceiving gifts exceeding $10,000. Failure to
do so could qpst you a penalty up to 25 per-
cent of the gift.
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