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Pahrump Mirror
Pahrump, Nevada
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March 27, 1997     Pahrump Mirror
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March 27, 1997
 

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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. YROCK& 727-1490 High Quality Construction Materials Plaster Sands Masonry sands Top Soil , Type 2 (Brown or Grey) * Pit Run Reject Sand * Blow Sand * Concrete Sand .... Pea Gravel * 3/4 Rock (Brown or Grey) , Leach (Septic) Rock Oversized Rock ,LANDSCAPE DESIGN & PLACEMENT  '= SAVE MONBY DO IT YOURSELF It OPEN 7 DAYS A WEEK On Rachel Court, East of Vieki Ann, South of Manse l t