European Stars and Stripes (Newspaper) - January 22, 1992, Darmstadt, Hesse                                Financial Plann Iii in Uncertain times do and done to guide to playing the irs game by Jim Luther the associated pass although in individual taxpayer has less  one  in 1 10 of lining subjected to .1 form ill ii dil by the internal Revenue service most of us undergo a computer audit of sorts very year. The irs ret gives from employers Banks and other payers almost 1 billion notices of income paid. These Little forms w-2 for wages and 1000 for interest dividends Etc go into irs computers which match them against tax returns. If fifth National Hank informs the irs it paid you $50 interest last year and your tax return does not show that there is lose to a 100 percent Chance you will get a Bill for additional taxis plus interest and penalties. In other words it is getting More difficult by the year to avoid lax on Legal income. Although your employer is supposed to Supply .1 w-2 record of your wages by Jan. 11, you Are obligated to Lile and pay even if you Don t re it Eive it. Ask the employer for the w-2 and if you still Don t have it by Tel. 1 7, Call the iks loll free Telephone number for your area. Some other ideas for your 199 1 return a it you can to Complete your return by the Midnight april i s deadline take advantage of the automatic two month Extension that comes with living abroad. For an additional time Extension file a form 4868. You will have to estimate How much you owe and include a Cheek for the total. A Don t ignore the filing deadline just because you 1 an l pay in full. Pay what you can and the irs will Hill you Lor the rest. Penalties for failing to file Are worse than Tor failing to pay. A some deductions known As adjustments May he claimed even without itemizing hut it usually top 10 taxpayer i a l errors j 1. Wrong social Security or employer identification number entered. 2. Did not claim Standard deduction. 3. Did not claim earned income credit when entitled. 4. Incorrect name entered. 5. Name line not updated when required. 6. Wrong entry for estimated payments 7. Did not enter total tax. 8. Male error in computing refund.9. Did not Check dependency status Box. 10. Duplicate return filed even though not required requires tiling a Long form l 4u. For example if you paid a Hank penalty Tor Early withdrawal of a savings certificate that penalty May be written off. So too May Alimony payments you made in 1 991 you must report the name and soc Ial Security number of the recipient these and other adjustments including deductible contributions to individual retirement accounts and expense s of producing rental income Are entered on Page i of form 1040. An Ira contribution also May he claimed on the Short form i040a. A if you have a Bone to pick with the Federal government think twice before using your tax return to make your Point. The Law imposes a $500 penalty for filing a frivolous return. Should you carry your tight into fax court you could be liable for another penalty of up to s25,000. A if alter filing your return you find a mistake file an amended return on form 1040x. A working for two or More employers last year May have caused you to overpay social Security and medic Are taxes. The first $53,400 of wages was subject to the 6.2 percent social Security tax hut up to $1 25,000 was subject to the 1.45 percent medicare tax. These used to he shown on your paycheck As one deduction. The maximum taxes social Security $3,310.80, medicare $ l ,940.40. Any ext Ess May he subtracted irom axes owed on 1040 i Ine 58 or 1040a line 28d. A unemployment compensation is Zulty taxable As is sick pay. Worker s compensation for Job related injuries is tax free. A keep your tax Roc ords Lor at least three years any rec Ord relevant to ownership of pm Perl especially your Home should lie retained permanently. A sometimes some expenses of using part of your Home for business May be deducted but limitations Are tight. As a starting Point the Home must lie your principal place of business for any of your trades or a place where customers Deal with you in lie Normal course of business. See irs publication 587. A you and your spouse both must sign the return if you Are filing jointly. If your child has to file hut cannot sign you must sign the child s name and add your own signature. A it the irs sends a bigger refund than you Are entitled to Don t Rush out and spend it until you Call the irs for an explanation. If the Check is smaller than you expected the irs May have caught a mistake of yours or made one of its  a kid ainu to what it used to Beby the associated press to ill was a 1imf when having a c Hild could just about wipe out your Federal income lax liability. Now a child is wort i .1 lax saving of Only $ 122.50 for the average1 american. Lust As current Law subjects a greater portion of earnings to tax compared with the original income lax in 191 3, it also is far Moo c Complex. As a general rule1, each dependent claimed allows $2, 50 of 1991 earnings to escape tax. Your c Hild under the age of i 9 May in it aimed As a dependent in you provided More than Hall his or Hei support last War. Hut then come a lot of ext options and qua Lilit alums is the dependent a students married i Iling a return and remember that if your int Ltd me is High enough the value of your exemptions is Leduc de and eventually eliminated. I o he t i aimed As a dependent a Poison must meet 11 be tests relationship. I be or she must have lived with you throughout 1 99 1 ext ept Lor being Lenix it warily absent due1 to set Hool. Military sen ii a a aeration or illness or must be a relative. That can be a child grandchild stepchild Parent grandparent brother sister Uncle aunt Uncle Nephew Niece or in Law. A live in Lover counts unless your state says it is illegal to have a live in Lover. Income. In general terms a dependent must have had 1991 Gross income under $2,150. That does not include tax exempt income such As welfare benefits and the nontaxable part of social Security. Is the dependent your child i Hen there is no income limit if a i the or she was under 19 at the end of 1991, or a t be or she was a full time student and under 24 at yearned. Full time Means a full class Load for at least live months of the year. A government supervised 011-Larm training course also counts. Citizenship the dependent must be a . Citizen or resident alien or a resident of Mexico or Canada. No joint return. You May not claim an exemption for any person who tile s a joint return with someone else. Support. You must have provided More than halt the dependents financial support last year. Ibis includes food shelter clothing transportation. Medic Al expenses education c Hild care services recreation and spending Money. Insurance premiums scholarships or social Security or income taxes that you paid for the person do not 1 out As support. If you and someone else a a sister for example a Combine to pay More than half the support of .1 dependent a such As an elderly Parent a hut nobody alone pays More than half you May claim the full exemption by c contributing More than i 0 pen ent. 1 he others Hen must sign form 2 i 20, a multiple support declaration giving up their right to he exemption. A divorced Parent who does not have 1 custody of a child May take an exemption if the other Parent agrees in writing to give up the claim or if the claim was authorized by a pre-1 985 c ourt order or agreement. Read irs publication 504 Lor details. You begin losing any tax saving from personal exemptions once your adjusted Gross income exceeds a certain level. For 1 991, the Benefit Lor a single person begins dropping after Agi passes $100,000 Tor a couple filing jointly the threshold is $150,000. The stars and stripes tax guide wednesday january 22, 1992