Tax time an opportunity to set investment goals

Andrew Leckey

March 12, 1993|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Guess what many U.S. taxpayers haven't been doing as they listen intently to ongoing debate about proposed 1993 tax increases?

They haven't been doing their tax returns for the 1992 tax year, that's what.

Filings are running behind last year's pace. That's partly due to taxpayer expectations of smaller refunds thanks to withholding changes ordered by George Bush to stimulate consumer spending and partly due to pure procrastination.

Four out of 10 U.S. taxpayers will file their returns in April, one-third of them the week before the deadline.

But you should try to avoid the last-minute jitters that might botch the job and also use your tax return as a means of looking at all your financial dealings and setting an investment strategy for the future.

"The best you can do now on your 1992 taxes is damage control, so be organized and make sure you have all documentation," advised Robert Greisman, tax partner with Grant Thornton.

There still are moves you can make.

"Though it's the last minute for 1992 taxes, you're still eligible to make a contribution by April 15 to an individual retirement account [either deductible or nondeductible] or to an existing Keogh self-employed retirement plan," added Steve Weinstein, national director of personal financial planning for the Arthur Andersen accounting firm.

Many fill out their own return and take it to a tax service that will file it electronically for a fee. There's a new form, 1040PC, done on a personal computer. The IRS says taxpayers who use the computer form and are due a refund get their money a week sooner than normal.

Be sure to sign, date and keep copies of all your tax returns. A common mistake is putting federal forms in the state envelope and vice versa. Be careful not to miswrite your Social Security number.

Include appropriate attachments with your returns, such as W-2 forms. If you owe a balance, attach a check or money order that indicates the appropriate tax year and Social Security number.

There aren't a lot of 1992 tax-year changes, and individual tax rates remain the same for now. Among changes are tax tables that cover incomes up to $100,000, not just $50,000.

The standard deduction has been increased to $3,600 from $3,400 for a single person, to $3,000 from $2,850 for a married person filing singly, to $6,000 from $5,700 for a married couple filing jointly and to $5,250 from $5,000 for a head of household. That determines whether taxpayers itemize.

The personal exemption has been increased to $2,300 from $2,150 for 1992.

If claiming a residence interest deduction involving a seller-financed mortgage, the buyer must now include the seller's name, address and tax identification number on Schedule A. The seller must include the same information for the buyer on Schedule B.

The home-office deduction is disappearing for many taxpayers because of a U.S. Supreme Court decision that makes it more difficult to qualify. The site must have been used exclusively and regularly as the principal place of business, a place to meet customers or a separate structure in connection with the taxpayer's trade or business.

Investors in mutual funds must keep detailed records to track the tax basis, or purchase price, adjusted upward or downward. When you sell shares of a stock, fund shares or other securities at a profit, you owe tax on the difference between the sale price and your tax basis. You claim a tax loss when your basis is higher than the sale price.

Keep complete tax records throughout the year and start preparing early to permit adequate time for gathering pertinent data. Focus on yearlong financial planning, not just annual tax requirements. Deposits and expenditures of items such as borrowed funds must be documented or interest deductions could be lost.

"There's no time like the present to start keeping adequate tax records for 1993," said Nancy Anderson, manager of special tax projects for H&R Block. "Get in the habit of putting receipts into a folder for all things deductible or with tax effect."

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