European Stars And Stripes (Newspaper) - February 17, 1987, Darmstadt, Hesse                                Facts on taxes focus on old Law when filing associated Pressw Hile the 1986 tax tarns closely resemble inc 1985 version officials Al the internal Revenue service Are Wied lha extensive publicity about the new lax Law May confuse people. Tho new Law which won into elect Jan. 1, dramatically alters Persona deductions and tax Rales. But that Law Whf net Albect the 1986 returns. In a letter or the front of the new forms. Irs commissioner Lawrence b. Gibbs cautions taxpayers to focus on the old Law when filling out then 1986 returns which Are duo apr 15.1987. You will find that your lax forms this year Are very similar to those you filed in the past to writes. This ii because most of the new tax changes do not take Ellel until Afler 1986 and therefore will no affect your 19s6  the ibs said it expects about 105 million individual tax returns will be filed Lor 1966. Last year 65 percent of taxpayers used the 1040 lorm to percent used the 1040a and the remaining 17 percent used the 1040ez. The biggest change in the 4986 form in t readily apparent it is lha adjustments made in the tax tables to eliminate so called bracket creep the phenomenon Hal pushed taxpayers into higher tax brackets because of pay raises received to keep up with dilation. For 1986, each of the tax brackets has been widened by 3.7 percent to Ollet the effects of inflation. This tax indexing also boosts the personal exemption to $1,080, up from $1,040, and raises the Standard deductions Lor people who Don l itemize the deduction Tor single taxpayers rises to $2,480, up from $2,390. While the Standard deduction for Coustas filing a joint return rises to $3,670, up irom $3.450. Other changes on the 1986 returns include taxpayers who Don l itemize will be allowed to deduct 100 percent a their charitable contributions up from so percent last year. This increase however expires Afler this year. The Tine for the residential Energy credit has been dropped reflecting the fact Hal this credit expired Al the end do lbs. Taxpayers who itemize Are directed to list the deduction Lor mortgage financing Points separately irom Home mortgage interest. Points or loan origination tech Are deductible Only if they Are they Are paid for the use of Money. Taxpayers who owe Money willbe asked to include a daytime Telephone number so the irs can Call them it there is a question about the payment. Report that the individual retirement account Ira to dead Are greatly exaggerated says a new Vork pension expert in a paraphrase of Mark Twain. If Las certainly have been wounded by the new lax. One of the most comprehensive revisions of the . Tax code in history but they definitely Are not dead according to Lee Waylin assistant vice president at 1he american savings Bank. For a preponderant number of americans seeking to Deler taxes on their incomes he says they remain a viable  the main thrust of the lax code revisions pertaining to iras Wallin notes is to return this retirement plan to its original purpose to provide a personal retirement income fund for lower to Middle income people who a tote not covered by pension plans at their workplaces and who up to thai time would have had to rely solely on social Security benefits. The initial Ira Law of t974, he explains provided that anyone under the age of 70 who was no an Active participant in a pension plan could enrol in a tax deductible Ira plan. However in 1982 the Law was changed to provide you name it it s taxable by Jim Luther associated Pressi f you lost your Job last year hit the state pottery sold your Home Tor a big profit or tutored the plumber s kids in Exchange for a new bathroom chances Are the irs wants to hear from you. Your lottery winnings Are taxable. Par of your employment compensation and Home Saje profits May be. And the internal Revenue service gets a piece of any barter arrangement you pay lax on what your new bathroom is Worth and the plumber is taxed on the value of your tutoring services. Those Are just some of the Many types of income thai must be reported when lax returns Ara filed. When the income tax was enacted in 1913. It was fairly simple applying to income from whatever source derived. " innumerable exceptions clarifications and special cases have been added Over the last three quarters of a Century so thai for a person of even average Means the most difficult part of tiling a lax return can be determining what income is taxable. It might be easier to is what is not taxable. According to i howls thai includes welfare benefits veterans administration benefits workers compensation benefits child support gifts and inheritances deals benefits from a life insurance policy and interest on certain stale and local government Bonds. Also you Are not taxed on employer paid health insurance premiums group Legal services or with limitations child care assistance refunds of Federal income taxes a limited amount of me insurance premiums paid by your employer and within limits scholarships to degree candidates. That leaves hundreds of types of income that must be reported on your 1040,1040a or 1moez. These Are included wages Lees salaries and lips. Your employer should report these to you on a form w-2. Interest earned on Bank accounts Bonds mortgages personal Loans. A Premium Given As an incentive for making a Long term Deposit is taxable. Interest on . Savings Bonds series e or be May be rezoned either annually or when they mature or Are cashed whichever is earlier. Dividends but the first �100 each year $200 Lor a couple filing a joint return is lax exempt. Slate and local tax refunds received last year if they resulted irom itemizing deductions. If the refund arose from your 1985 return the taxable part is limited to the refund or your 1985 excess itemized deductions schedule a line 26whichever is fess. Alimony or separate maintenance payments received see ibs publication 504 for some new rules affecting the definition of Alimony paid under Post-1984 agreements. Income from a business that is not a partnership or corporation. Report your income and business expenses on schedule c. Some Nel losses from your business can be used to reduce the amount of other income subject to tax. You la probably need help from that All taxpayers whether or not they wore covered by private pension plans could deduct Ira contributions Wallin adds. The Ira sections of the new tax Laws Are a combination of those in the original Ira fair and j additional provisions for fully deductible partially deductible and non deductible iras. 1 but while the new tax Law changes the rules on j deductibility it does not after taxpayers rights to defer payment of taxes on Ira earnings until they Are  under the new Law Wallin Points out. Taxpayers Noil covered by pension plans and those who pension Plant whose incomes Are under 125,000, if single and under $40,000, if married and Ming jointly will continue next year to be entitled to Lull deductibility of their Ira contributions. And even single taxpayers with incomes under �35,000 and married couples Ming jointly with incomes under $50,000 will be Able to Lake partial Ira j deductions. According to Gary Strum manager of pension services for e f. Mutton the tax overhaul will accelerate a five year trend in iras toward More aggressive investments such As Mutual funds and Sei directed iras. Mutual funds and self directed accounts Are the main ways that Ira investors can gel their Money into j stocks and Bonds says serum Lisl vice president Al Mutton i the main impetus for the Shih from such investments As certificates of Deposit cd to Mutual fund and brokerage House iras will continue to be the a Artl Lor higher returns he explains interest Rales on cd Nave dropped sharply in recent years. J As the amount of Money in an individual s Ira goes Over $10,000, it stands to reason thai Many investors will become More aggressive with Al least a portion of the fund Strum says. It s diversifying in search of great  publication 334. Farmers report their self employment i earnings on schedule of see publication 225. J capital gains profits from the Sale of assets Are reported on schedule d. If you had no gains in 1986 but did have some capital gains dividends from Mutual funds40 percent of the total is reported on Una 14 of form 1040 and schedule 0 is not necessary. In either Case see publication 544 Lor an explanation of this most Complex part of the tax Law. Withdrawals from individual retirement accounts usually Are fully taxable but if such a distribution significantly raises your income you May be Able to reduce the tax bite by income averaging. Get irs publication 506. A pension is fully taxable if you did not pay part of the cos Tor if you recovered your entire contribution before 1986. Unemployment compensation some or All is i taxable if your total income minus selected  exceeds $12,000 for a single person or $18,000 for a couple filing jointly. Social Security benefits May be taxable. You must count As income the smaller of Hafl your benefits or half the amount by which total income including tax i exempt interest exceeds $25,000 if single or $32,000 if a couple filing jointly. J miscellaneous income including interest the irs j paid because your refund Check was late gambling winnings in you itemize you May deduct All or part of your losses on schedule fees for jury duty reimbursed medical expenses thai you deducted in an earlier year and the value of services or goods receive in any barter arrangement. Page 14 the stars and stripes tue