Newspaper article THE JOURNAL RECORD

Complex Tax Changes Require Cafeful Preparations Now

Newspaper article THE JOURNAL RECORD

Complex Tax Changes Require Cafeful Preparations Now

Article excerpt

EDITOR'S NOTE: This is the last in a series of columns on tax strategies.

Once upon a time, if you were an average taxpayer you could pick up income tax forms and the instruction booklet and work out your own tax return in no more than a couple of hours.

Those times are gone, and so are average taxpayers. After several attempts to simplify the tax laws and forms, Congress and the Internal Revenue Service have made both more complex. Even professional tax preparers have difficulty.

If you are salaried and have no investments, I might once have told you to call the IRS itself if you need tax advice. But 20 to 30 percent of the answers the IRS gives to telephone inquiries turn out to be wrong. You're better off using the services of a tax preparer like H&R Block and safest using a certified public accountant.

Even though the April 15 filing date is months away, you are well advised to review your tax situation before year's end. Some of opportunities to save that are available now are closed off after December 31.

Don't assume that, because you are salaried and are not rich, calculating the taxes you owe (and the savings you can garner) is a simple task.

Steven Woolf, tax manager at Coopers & Lybrand, points out that Congress still has on its agenda proposals to lower the capital-gains tax. Should legislation pass later this year, it would be retroactive. Capital gains are now taxed as current income. By year's end, there may be a capital-gains tax differential that would keep dollars in your bank account. Even though you don't own stocks, you could incur the capital gains tax from employee benefits, mutual funds or the sale of your home.

Much basic tax information is misunderstood, says Eli J. Warach, the tax attorney for Prentice Hall Information Services. And, there are many convolutions in the regulations. Some people on pensions or living on Social Security believe they are exempt from filing. Not necessarily so. Pension income may be taxable, and so may be Social Security benefits.

If your wages or your pension income exceeds certain very low levels, you may owe money. You'll have to file if you are single, not a dependent, and have income of more than $5,100, or, if you're single and 65 or older with income of $5,850. …

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