European Stars And Stripes (Newspaper) - February 20, 1987, Darmstadt, Hesse                                Facts on taxes associated press he Lucky taxpayer lies a return gets a refund and forgets in. About 1.3 million couples and individuals will me this year get a refund and soveral to Olhs later a notice that they Oro being audited. Some of the unlucky taxpayers will fall victim to the Luck of the draw their returns will be site clod at random. Most will be audited because a computer program determined that their returns had a Good Chance of containing inflated deductions or understated income. Thera is nothing you can do to avoid being picked at random Lor an audit. And although claiming an itemized deduction that is unusually Large in relation to your income May set Oft an irs computer experts agree an Honsl taxpayer should not forfeit legitimate deductions just to avoid an audit. Your Chance of being audited increase in you receive tips or Cash toes report tosses from tax shelter investments ail to report All your interest and dividends or it you had to pay More tax As a result of an earlier audit. Even it you avoid an audit any refund is Likely to be Dola de by mistakes on your return. Surprisingly the internal Revenue service says the most common mistake year in and year out is looking at the wrong line on did lax lab los to determine Tola tax liability. Ii you make that mistake leave Oft your social Security number fail to sign Trie return or write the Correct figure on Tho wrong line the irs usually will Send Tho return Back to you to Correct. Now that the irs is capable of Matching 100 percent of tax returns against supporting information documents such As w-2 forms for wages and 1099 forms for interest it will be much More difficult to get away with under reporting income. You May be Able to do so and stiff get your refund on time. But chances Are that sometime within 20 months after you Lite the irs will Send you a form letter asking Lor an explanation. If the evidence indicates the under reporting involved interest or dividends the notice will include a Bill for a negligence penalty and interest on the Penally. Some other reminders As you Complete your return keep tax records at least three years those relevant 1o the Purchase or Sale of properly should be retained permanently. If you buy merchandise from a charitable organization you May deduct the part of the Price that exceeds the value of the product. For example deduct $3 in you give $5 and Gat $2 world of merchandise. Chances of making a mathematical error probably will be reduced if you round off All figures to whole dollars. Joint returns must be signed by both spouses oven in one had no income. If one spouse is unable to sign because of illness the other May sign on his or her behalf and attach a note of explanation. Use the Peel Oft Label from the packet the iks sent you it will expedite processing. The irs says there 13 nothing to recurring rumours that the Label contains coded information that could Lead to an audit there s a limit to How far you can go in using your lax return to protest something about the Federal government. Unless you Supply sufficient information so that your lax liability can be determined and sign on the proper line without altering the under penalties of perjury statement you can be hit with a $500 penalty Lor tiling a frivolous return. Can t get All your papers in order by the april 15 tiling deadline Don t neglect to file that will mean a penalty. File a form 4868. Which will win you a four month reprieve. But you still most estimate How much tax you will owe and include your Check with the 4b68. Of you tile and then discover you failed to claim a deduction or made some other error die an amended a Iturri. Form 1q40x. Fife As Carty As possible if you Are due a refund ii you owe there s no reason to file until near the deadline. Audi Roulette new Law zaps income Shields by Marybeth Nib lev associated press eople accustomed to finding ways to shrink their taxable income should Start changing their habits. The new tax Law Marks a Retreat from using the Federal tax code Lor social and economic engineering. So it offers few credits and deductions. Aimed at enticing taxpayers to pay for goals deemed appropriate for the Public Good. Methods some taxpayers have used to create losses and thereby shield income would be abolished congressional reformers targeted the abusive Type of tax shelter that the internal Revenue service has been battling for years. Master recordings of films or books exotic nut plantations Gold mines in new Jersey and Orange Groves in Alaska. Those things Are dead and gone and Good  said David a Bronson adjunct professor of taxation at new York University. But less exotic More productive ways of writing off income also would be wiped out or sharply curtailed. Everyone will have to rethink their whole investment strategy said John l Norman jr., National director of the Pannell Kerr Forster accounting firm in Washington. A lot of traditional tax shelters no longer make  tax sheltering would be radically transformed because losses from most passive pursuits could be deducted from other income including salaries Stock dividends and Bond interest payments. Passive shelters Are defined As limited or general partnerships in which the investor does not actively participate in management. The passive loss provision would go into effect gradually and would a fully phased in by 199t. Starling in 1987. The legislation would permit taxpayers to use 65 percent of the losses they could deduct under current Law. Shelters As we be come to know them will be gone said James Godbout a lax partner with the Ernst & Whinney accounting firm in Washington. What he Means that protecting part of one s salary or most other income from Uncle Sam s tax Bita would be much More difficult but perhaps unnecessary Lor Many people because of a lower tax rate. The Purchase of tax free municipal Bonds would be one of the few shelters left largely unchanged. The ability to Luck dollars into individual retirement accounts to defer taxation would be curbed. David j. Kautter director of he National group of Tho Arthur Young & co. Accounting firm said a new Alra Teg with or liability Abb might i Ventur id toss or Nawy by Coli and ill direct tag estate once a allows for Inci one shelter once Ali somali Counsi of Tente acc oui the. Eco Raj Page 14 the stars and stripes Friday Debrui