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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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18 Thursday, March 27, 1997 Pahrump Valley Gazette Count down to T-day April 15... As tax time rapidly approaches, one tries to find some humor in the seriousness of the annual collection of our taxes. After 1,683 years of taxation, in one form or another, The Chicago Tribune has culled some moments of humor that may help with a smile or two during the midnight hours of tax preparation. For the more serious side of the taxing trauma the editors hope that Tax 7ps 1997 will be of some assist 20 essential but frequently overlooked tax savings opportunities Certain deductions, credits and tax "elections" are frequently overlooked, costing you many dollars in extra taxes. Here are 20 common ones. (A tax election is a choice you make on your return that affects the amount of taxes you will have to pay. Your choice of filing sta- tus is one example) 1. Single parents may file as head of house- hold-- If you were single at the end of 1996 and had a dependent child (or other dependent) living with you for at least half the year, you may qualify for lower tax rates by claiming "head of household" as your filing status rather than "single." 2. Widowed spouses may still enjoy mar- ried-filing jointly rates. If your spouse died in 1994 or 1995, and you have a de- pendent child living with you, you may file as a "surviving spouse" and be taxed at "married-filing-jointly" rates (which you may graduate to in the third tax year after your spouse dies). If your spouse died in 1996, you still may file as married. 3. Claim parents as dependents- If you fur- nish more than half of the support of your parents, you may be entitled to claim them as dependents on your return. (If you fur- nish less than one-half, but the combined support given by you and your siblings ex- ceeds one-half, you may be able to arrange to designate one of you as eligible to claim the deduction.) 4. Additional standard deduction if you are blind or 65 or older - If you are unable to itemize and you are blind or 65 years of age or older, you are entitled to take an extra $800 (or $1,600 if both blind and (65) above the normal standard deduction for your filing status. 5. Most of your Social Security may be tax free---Social Security is tax free unless you have other income that puts you into the mid to higher income brackets. Then a portion of it may be taxed. So, be sure to treat your Social Security benefits as sepa- rate from other income. 6. Earned income credit--This credit is available if your "earned" income is low. Investment income, Social Security and other income does not count. If you earned less than $25,078 and have one dependent child ($28,078 for more than one child and $9,500 with no dependent children), you may be entitled to the credit. 7. Contributions to IRAs--You may be en- titled to deduct up to $2,000 for contribu- tions to an individual retirement account (IRA). And you may still do this up to April 15. (If you are part of an employer-spon- sored retirement plan and your income ex- ceeds certain limits you may not get this deduction.) 8. Collect overpaid Social Security tax if you worked for more than one employer - If you worked for more than one employer, each took Social Security taxes out of your paycheck based on what they paid you. If your combined income exceeded $62,700, you overpaid. You may claim a refund of the excess on your return. 9. Employee education--If you took courses to improve your skills in your line of work you may be able to deduct them. Education to go into a new line of work is not deduct- ible. 10.Home business expenses - If you run a busi- ness in your home, you may be entitled to deduct the cost of your office and equip- ment. Special rules apply to prevent you from deducting personal expenses, but you shouldn't forego legitimate deductions be- cause of this. 11.Health insurance for self-employed - Em- ployees can receive health insurance from their employers tax free so self-employees may deduct 25 percent of their health in- surance premiums "above the line." This means that you get the deduction even if you can't itemize. 12.Half of self-employment taxes are deduct- ible - Another attempt to put the self-em- ployed on an equal footing with employees is the deduction for half of your self-em- ployment tax (Social Security tax). You pay the self-employment tax, but deduct half of the amount from your income. 13.Disasters and other causalities or theft - If you had one of these losses in 1996, be sure to claim a deduction. 14.Don't report state tax refund as income if you took standard deduction- State taxes are deductible, but if you get a refund you usually have to report state tax refunds as income. This rule does not apply if you didn't get a "tax benefit" from the taxes that were refunded to you. This means that if you took the standard deduction in the year you would have deducted the state taxes, you don't have to report it when you get the refund. 15.Don't overlook medical expenses - Of course you may deduct insurance premi- ums, doctors' fees hospital expenses, as long as they were not covered by insurance. But did you know that you may deduct for items that are not normally covered by health in- surance, such as glasses and transportation and lodging related to out-of-town medical procedures? 16.Don't pay the nanny tax if you don't have to - If you have a household employee whom you paid more than $1,000 in 1996, you are required to pay their Social Secu- rity tax (Schedule H of your 1040). This was in the news a lot in recent years and the law was changed to establish thee $1,000 mark as a "reasonable" place to start col- lecting this tax. With the new limits, the IlLS is in a position to actually enforce the law. But don't pay this if you don't have too. If you are paying someone who is under the age of 18, it's not required. And it's not re- quired if you are going through an agency and the worker is technically employed by the agency. 17.Mutual funds-Mutual funds make different kinds of distributions during the year (which they report to you at year's end). Don't make the mistake of treating capital gains distri- butions as the same as dividend payments. Capital gains distributions may not be taxed at more than 28 percent. If you are in a higt/er bracket for ordinary income, the mis- take could cost you. 18.Take advantage of lost deductions from other years - If you lost out on some de- ductions last year because your taxable in- come was not sufficient to absorb them all (or other technical reasons), you may be able to use them this year. Don't overlook the possibility. Business losses, investment losses and charitable contributions are all items that may be "carried over" to later years if they are not fully used for the year they occur. 19.You can deduct investment fees - Check to see if you can deduct fees for financial planning, investment advice, subscriptions to investment publications, custodians, safe deposit boxes and other items related to your investments. You need to exceed 2 percent of your adjusted gross income (together with job-related expenses and other miscel- laneous deductions) to qualify for this de- duction. But the more you find, the more likely it will be that you will be able to de- duct. These go on Schedule A. 20.Remember to deduct return preparation fees - Finally, whatever you paid to have your tax return prepared last year also is de- ductible. This belongs in the same category as item 19, but I thought I'd mention it sepa- rately so that you will feel a little better when you dish it out again this year. EDITORS NOTE: Stephen D. Froiden has been writing about taxes and personal finance since 1984. He has written many tax guides focusing on families, business, expenses, benefits, and es- tate planning, real estate and year-end strate- gies. Froikein recently designed and produced IRS Hot Buttons, a multimedia CD-ROM on the subject of federal tax audits (available from CCH Incorporated) Hot Buttons was named Editor's Choice by Accounting Technology magazine in its August 1996 issue. t CHILl BOWL S1.95 FISH BURGER S2.75 Phone Orders Welcome 727-4300 Hours 10 am to 7 pm Hwy 160 Valley View Plaza PAHRUMP VALLEY '] TEMPORARY LABOR SERVICE 727-4144  "