With Clinton program looming, it's the last simple tax season

STAYING AHEAD

March 07, 1993|By JANE BRYANT QUINN | JANE BRYANT QUINN,1993, Washington Post Writers Group

New York -- If President Clinton gets his way, this will be you last simple tax season for a while. By "simple," I mean that the tax rules haven't changed very much. If your circumstances haven't changed either, you can virtually copy your 1991 tax return, updated for last year's earnings and expenses. Not until next year will you have to address new strategic decisions.

Here's what's new for the 1992 tax year:

* The odds are that you will get a lower tax refund. As part of his plan to boost the economy, President George Bush reduced income-tax withholding. As a result, employees have had a few extra dollars in each paycheck. Now, there is less to return to you in a lump sum.

What's more, about 12 percent of the taxpayers who usually get refunds may find that they still owe some tax. This new withholding system is permanent. If you want a larger refund in 1994, file a new W-4 Form with your employer, raising the amount withheld from your pay.

* If you're self-employed (or own more than 2 percent of an S corporation), you can deduct from gross income up to 25 percent of the premium you pay for a qualifying health-insurance plan. But this tax break expired on June 30, 1992. So the write-off applies only to the payments made before then. President Clinton wants to restore this provision, retroactively. But that doesn't make your post-June payments deductible now.

* If your Individual Retirement Account is invested in a delinquent insurance company, and your funds are frozen, you owe no tax penalty for failing to take the distributions required of people over age 70 1/2 .

* If you worked for two or more employers last year, too much might have been withheld in payroll taxes. You paid excess Social Security taxes if your combined wages exceeded $55,500, and excess Medicare taxes if your wages exceeded $130,200.

* If you drive on business, the standard deduction for the use of your car is 28 cents a mile. If you drive while volunteering for a charity, your write-off is 12 cents a mile, plus parking fees and tolls.

* You no longer have to compute your tax if your taxable income falls from $50,000 to $100,000. Just look it up on the tax table, in the instruction book that comes with your income-tax return. Last year, the tax table went only as high as $50,000.

* Tax returns are indexed, to prevent inflation-driven wage increases from pushing you into higher brackets. This year, indexing has pushed the standard deduction (for people with few itemized deductions) to $3,600 for singles, $5,250 for heads of household and $6,000 for married couples or qualifying widows and widowers. The deductions are higher for people age 65 and up.

The personal exemption, for yourself and your dependents, rises to $2,300. It starts to phase out once adjusted gross income exceeds $105,250 for singles, $131,550 for heads of household and $157,900 for couples.

* Are you paying Social Security taxes for your in-home baby sitter for the first time? Get Form 942. You owe 15.3 percent of the wages paid in the calendar quarter -- half of it deducted from the sitter's earnings. If you pay the sitter's share, that amount must be added to his or her reported income. Social Security taxes are due at the end of the month that follows each calendar quarter, so your next payment date is April 30. In January, you will owe your employee a W-2 Form showing wages earned and taxes paid.

You do not owe Social Security taxes for every sitter, cleaning person or teen-ager who shovels your snow. You owe only for employees to whom you pay more than $50 in a calendar quarter. An employee is someone who works only for you (or perhaps just for you and one other person), at times and places you specify, using your equipment.

If the cleaners or sitters work for many different people, at their own discretion and using their own tools, they are self-employed and responsible for their own Social Security taxes.

* You face a complicated new calculation if your adjusted gross income (married or single) exceeds $105,250. There is a cap on most of your itemized deductions, but it's too complex for me to explain here. See the tax work sheet and weep.

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