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Pahrump Mirror
Pahrump, Nevada
April 3, 1997     Pahrump Mirror
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April 3, 1997

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Pahrump Valley Gazette, Thursday, April 3, 1997 17 Ask the Expert Questions and answers SUBJECT: Charitable Deductions Q: What's the best way to calculate noncash, charitable contributions for deduction purposes on a 1040 Schedule A tax form? A: Noncash contributions generally are deductible at the fair market value of the property at the time you give it. Charities are required to give you a written acknowledg- ment of any contributions of $250 or more. This acknowl- edgment should contain a statement of the value of your gift. These are ultimately reported on Schedule A, but if the value of the girl exceeds $500, you also have to file Form 8283. If the contribution exceeds $5,000, you have to have an appraisal. -' Here's a nice little tax planning tip. Make your noncash contributions in appreciated stocks or bonds or other in- vestment property. You get a deduction for their full value (in most cases) and you get to skip the capital gains tax. SUBJECT: Moving Expenses Q: I just moved from Michigan to Pahrump at the begin- ning of last June. My wife and I have been separated wait- ing till she gets a job here in Pahrump. What deduction can we make as we pay for our expenses such as rent and food? A: There are two qualifications for deducting moving expenses. First, your new job has to be 50 miles more distant from your old home than your old job. Moving from Michigan more than qualifies. Second, you have to stay in the new job for 39 weeks. Since you started here in June, you must be just finishing that time period about now. The real question for you, however, is how much? You may have both moving expenses and job-related travel ex- penses. These are two different deductions. Moving expenses are limited to the cost of moving your household furniture and property to Pahrump and of get- tmg your family here (including lodging but not meals). These are deducted on Form 3903 and are taken as an "ad- justment to gross income" This means you may deduct them whether you itemize or not. Travel expenses are costs of travel, lodging, and meals for time spent at ,a temporary work location away from home. You will have to be the judge of whether you have expenses like this. Many people do have these types of ex- penses around the time of a move. Travel expenses would be a job related itemized deduction, so you wouldn't get it if you don't itemize. A final question I have for you: did your employer reim- burse any of your expenses? The form will ask you this but, basically, you don't get to deduct expenses that were reim- bursed. IRS Provides Tax Assistance The time of year is upon us when decisions must be made about preparing tax returns. The good news is that you may be able to take advantage of free tax prepa- ration services in your area. The Internal Revenue Ser- vice provides tax assistance by phone and through many Je publications. The IRS runs a Volunteer In- come Tax Assistance Pro- gram, designed to help the elderly, those with disabili- ties, non-English speaking or low income cir. The IRS also operates a program, Tax Counseling for the Elderly, which is specifically de- signed to assist those over 60 years of age. Call your local IRS office at 1-800-829,1040 to ask about these programs or to receive other assistance. Many happy returns. Managing Debt According to Nevada At- torney General Frankie Sue Del Papa, if 1997 finds you with more bills than your monthly income will cover, you probably need to reduce your debt level. Begin by listing to whom you are in- debted, and how much you owe. Decide how much you can pay back and when, then set up a payment plan and discass it with your creditors. Control your spending by sticking with your plan until all debts are repaid. Review your plan periodically to see if you are keeping up with your debt and your daily liv- ing expenses. If there is a change in your income, you may need to revise monthly payments. It is never too late to improve management of your finances. By imple- menting these steps now, you may end the year in better shape financially. I could go on and on about this, but it's difficult without information about your situation. I suggest you get IRS Publication 521 from the IRS website or the local IRS of- fice or public library. It will give you a lot more detail on' how to deduct your moving expenses. Welcome to Pahrump. SUBJECT: Withholding Q: My husband's employer neglected to take an)' Fed- eral taxes out of his paycheck. When he questioned this, the), told him that it was okay. Now we owe a lot of money to the government. How can we avoid paying penalties? A: If your husband worked as an employee, his employer violated the law and could be reported. An employer is re- quired to withhold federal income tax and social security tax and pay both, along with its own share of social secu- rity tax to the IRS. This means you could be short on both types of taxes. Even thought the problem started out as the employer's fault, the IRS will hold you responsible for not paying up during the year. If you end up owning more than $500, you prob- ably will owe a penalty. The IRS does have limited authority to waive the penalty for hardship, but it would be unlikely in a case like this. Re- questing this, of course, amounts to turning in your husband's employer. But that sounds like a good idea in any case. SUBJECT: Earned Income Credit Q: I have a friend who hasn't filed for several years. Does one correct the problem by using Form 1040X or the actual forms for unfiled years? How many years can one go back to collect the earned income credit when returns were not filed? A: For 1040X is used to correct or "amend" a return you filed. Your friend didn't file a return that needs to be amended. The proper this is to get forms for the years in question and file them as soon as possible. At the moment, you can claim refunds for 1994 through 1996. When April 16 rolls around, you'll lose the right to claim a refund for 1994. Your friend's situation is pretty typical. One of the big- gest groups of nonfilers is low-income wage earners who are entitled to tax refunds. Many of these are entitled to the earned income credit but don't take advantage. In addition to getting your friend to file for years past, you might suggest that he notify his employer that he may be entitled to an advance refund of the credit. This works like withholding, but in reverse. It'll mean a bigger pay check immediately. SUBJECT: Missing W-2 Q: I am in situation where my employer went out of busi- ness and will not supply me with a W-2. What do you do in this circumstance to get credit for taxes withheld? Is there a substitute W-2form tofile with your return? A: Of course the best thing would be to persuade your old employer to issue the W-2. It's always best to file with a W-2. Employers face penalties for not doing this, but an out-of-business employer may have a lot of other problems to deal with. If you really can't get it, you have to use your own records. The best place to start is your paystub. If that reports a year- to-date figure, the last one for the year should get you pretty close to the correct figure. If not, you'll have to look at all of them for the year. You're going to have to figure the taxable portion of your gross wages (that is, your wages adjusted for exclusions for certain benefits you contributed to that would not nor- mally appear on your tax return because the employer fig- ures it out for you) and the amount that was withheld. It might be a good idea to attach a letter to your return, explaining how you figured this out and telling the IRS that your employer refused to furnish the W-2. That might not be the end of it, but you will have done the best you can. And that should protect you from trouble. SUBJECT: IRS notice--tax return not received Q: The IRS recently sent me a notice stating they did not receive my tax return for last year. I have an extra copy and am prepared to send it right away. However, what prob- lems, if any, can I expect from this oversight? I should point out that the IRS did receive my tax payment and I did file for an extension last year. What is the best way to handle this problem? A: Call the IRS and tell them you filed. The phone num- ber should be on the letter you received. How do you know the IRS received your tax payment? Do you have a cancelled check? Did you send the check with the return? If so, the IRS data entry person may have typed the wrong date when entering your return into the system. This can happen with off-season filings. Your 1995 return might have been in a pile with some 1994s. The computer thinks you didn't file a 1995 and you get a letter. And you can send them a copy of the return, but don't re- sign or re-date the return unless you get professional advice. EDITORS NOTE: Stephen D. Froikin has been writing about taxes and personal finance since 1984. He has writ- ten many tax guides focusing on families, business, expenses, benefits, and estate planning, real estate and year-end strat- egies. Froikin recently designed and produced IRS Hot But- ton, 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 maga- zine in its August 1996 issue. Workin' for the Government The day each year you get to start keeping your hard-earned dough The cost of government is just that--the cost imposed upon each individual taxpayer for services provided by the government. The Cost of Government Day is the day of the calendar year, counting from January 1, on which the average American worker has earned enough gross income to pay off his or her federal, state and local government-imposed financial obligations. The exact date is calculated each year by the fun folks over at the Americans for Tax Reform Foundation and includes all government spending (federal, state, and local) and an estimate of the cost of government regulations: Cost of Government Day: 1980-1996 The day of the year when you start earning money for yourself. 1,980 II July 7 11981 !1 ............ July 8 ri-l ............................................................... july 17 00july 14 119114 II ................ July 4 July8 i00l[ July1 July 1 July7 July 12 July 16 July I 1 July 9 If, II --July ' ........ 3 i i ABI Smavzces LAVEDA & BONNIE 351 S. Fraz RD, Pmmw, NzrAz 89048 Paom- (702) 727- 0404 FAX (702) 727- 0404 Accoowzs. o & I00con TAx W on, . L E C -- I TAX FILING lulmllmnmml Cxrl Ex! nn Rlmraamn I FntznmY 1 n10% Dxsc.  Sm:n:ou unuuunnnun,uu, u