News

Tax

Brave New (e-file) World

You may have heard something about our kinder, gentler IRS deciding that taxpayers need to climb on the e-file bandwagon, and you may be wondering just what this e-filing has to do with you. Or, perhaps you are one of the lucky 33 million taxpayers who received a strange e-file postcard in the mail last December and are wondering what, if anything, you are supposed to do with that card, not to mention wondering where you put it.
Tax

Calculate Tax To See If Gain Warrants Quarterly Payment

I sold a lot in 1997 as well as a small house I was renting to my son. Should I make an estimated tax payment before tax time? R.W., Indianapolis
Tax

Pair Can Deduct Mortgage Interest On Two Non-Rental Homes

My wife and I own our principle home in Seymour, IN. I work in Seymour. My wife works for a company in Indianapolis. Last April we purchased a condominium in Indianapolis. I understand only part of the closing costs are allowed as a tax deduction. My question is about the interest expense. Can we deduct the interest expense for both homes? R.R., Seymour, IN
Tax

IRA Amount Converted To Roth Will Count As 1998 Income

In the instructions for IRS Form 1040A, reference is made for an Estimated Tax Penalty. Under "Exceptions to the Penalty," it states that if a tax is owed with the tax return, no penalty will be owed if there was no tax liability for the prior year. I want to make sure this applies to us. My wife and I are retired and will have no tax liability for 1997. We plan to either make a sizable withdrawal from our IRAs (approximately $60,000), and/or convert our present conventional IRAs (approximately $300,000) to the new
Tax

Tax Act Begot Above-the-Line Deduction For Student Loan

I have some questions regarding the tax credit available for interest payments on student loans as provided in last year' s tax reform bill. When does the credit take effect? What are the ceilings for each year? Is it an above-the-line deduction? How many years can you receive the credit? Are there any exceptions (especially for loans taken out for a graduate or professional degree)? M.M.P., Indianapolis
Tax

Scandal Presents Players With Tax Pitfalls, And Opportunities

Taxing Information for Those Making News in Washington This week's column is devoted to providing answers to questions that haven't yet been asked, but that I know are on the minds of all Americans. In light of the recent controversy surrounding our president and his alleged dalliances, have you stopped to consider the tax consequences of all of this confusion? Well, you can be sure the IRS is paying careful attention to the events as they unfold. Quarterly estimated payments:
Tax

Social Security On Self-Employed Is Burden At First Look

I just filled out my tax return and find myself in a state of shock. I started my own consulting business last year. My net income on my Schedule C is approximately $50,000. I itemize my deductions to the tune of about $11,000. I'm single with no dependents. The way I see it, my income tax is about $6,000. But when I fill out the forms on my computer, I keep getting something called self-employment tax which is even more than the income tax! What's going on here? Surely this can't be right? C.K., Indianapolis
Tax

IRS Publication Provides Answers To Tough Tax Questions

In a recent column regarding the Barrett Law ("Cost of switching from septic to sewer system is deductible," December 1, 1997), you said that the interest expense relating to a switch from septic to sewer is deductible as real estate taxes. The IRS telephone representatives I spoke with weren't knowledgeable about this rule. Can you point me in the direction of IRS documentation for this deduction? M.D., Indianapolis Information regarding deductions for interest paid on
Tax

IRS Has Strict Rules For Figuring Home Office Deductions

I split my bedroom between office space and sleeping quarters. It's the only place where I work. I've been told I have to use the room for business only if I'm going to try to take a home office deduction. Is this true? K.S., Carmel, IN. It's okay to claim a home office deduction for the part of your bedroom that qualifies as office space, you don't have to set aside an entire room for your workspace. There must, however, be a clear definition of what space is used for work and what space is used for personal purposes.
Tax

Stock Spin-Offs Get Unusual Tax Treatment

I have owned 1200 shares of "Company A" stock for several years. I bought this stock for $26 per share. Last May there was a spin-off, and I received 600 shares of stock in the new company, "Company B." On the day of the spin-off, Company A was quoted at $31 per share and the new company at $17.50 per share. If I should want to sell my shares in the Company B stock, what would be my acquisition cost for determining capital gain or loss? W.H., Indianapolis
Tax

Lawmakers Cut Gains Taxes, But They Didn't Make It Easy

This week's column features a multiple choice question. If you own stock and sell the stock at a gain, at what rate will the gain on the stock be taxed? 10%, 15%, 20%, 25%, 28%, 31%, 36%, 39.6%, If you guessed any one of the above rates, you may have the right answer. That's right. Depending on factors such as the amount of non-capital-gain income you earned and the date on which you sold your stock, any one of the above rates might be the one for you.
Tax

Symphony Tickets Provide No Deductions Due to Benefit Of Music

I own season tickets to the Indianapolis Symphony. If I donate money to the Symphony I can take a tax deduction. Does part of the cost of my tickets qualify as a tax deduction too? The person I called at the Symphony office said, no, but I thought I'd check with you before foregoing a deduction. T.A., Indianapolis
Tax

Tax Law Limits Contribution To $500 For Education IRA

A new, little-advertised feature of the tax law this year is the Education IRA. Here's how this little baby IRA works. Starting in 1998, you can contribute up to $500 per year to an IRA established for the benefit of a child who will eventually attend college. Sounds simple, right? No way. The establishment of this new IRA raises nearly as many questions as there are picky rules accompanying this tax "break."
Tax

Here Are A Few Suggestions For Eleventh Hour 1040 Filer

Several years ago I was a participant in a bizarre conversation in which a friend asked me if I had picked up my new license plate yet (this must have been the year the "Amber Waves of Grain" plates were unleashed), and I replied that my plates weren't due for renewal until March. My friend asked when I expected to get my plate, and I continued to insist that I didn't need to get my plate until March.
Tax

Amount not covered by car insurance may be deductible

I was in a car accident recently and my insurance only paid for part of the damage. Does the casualty loss deduction apply to this situation? B.P., Crawfordsville
Tax

Last minute rush to post office is party for tax procrastinators

Were you at the post office on April 15th? Those long midnight lines seem to get longer each year, and our Indianapolis post offices, along with the Indianapolis policemen and sheriffs who provide traffic control, just take it all in stride.The downtown post office as well as the Nora and Southport branches, provided convenient curb service for tax procrastinators on the 15th, greeting taxpayers as they drove by and collecting the envelopes from the street."We were extremely busy.
Tax

Save charitable giving receipt, and salvage your tax bill

We always donate our giveaway items to Goodwill, Salvation Army, and other such organizations. However, I've never really known how to calculate the charitable cash value for tax deduction purposes. Are there any rules regarding this type of charitable giving? J.S., Indianapolis
Tax

IRS and states provide tax information & forms online

Do you know if there is a web-site where I can get IRS publications? B.B., Indianapolis As backwards as the IRS sometimes seems, they are right up there in the world of high technology when it comes to a presence on the Internet. You can download tax forms, publications, and recent tax news from the IRS' s own web site at http://www.irs.ustreas.gov/prod/cover.html.
Tax

You can work more hours, but you'll share more with Uncle Sam

I have an opportunity to work a lot of overtime this year, which will generate more money for me. If I shoot into a new tax bracket (over $50,000 in income), should I go ahead and work the overtime and get more money, or would I get taxed so much that it wouldn't be worth my while? S.P., Indianapolis
Tax

Medical insurance reimbursement shows up on next year's return

We took a deduction for medical expenses on our 1997 tax return. This Spring we received a medical insurance reimbursement and part of the money we received was for medical expenses we deducted. Should we amend last year's tax return? L.S., Zionsville You don't have to amend your 1997 tax return, leave it filed as is. However, you're not completely off the hook.

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