No excuse not to file tax return early

February 18, 1994|By Andrew Leckey | Andrew Leckey,Tribune Media Services

"I simply got caught up in the spirit and excitement of the Winter Olympics and haven't had a chance."

"I can't think about them because of all the suspense over the Academy Awards."

L "Only the passing of April Fool's Day seems to motivate me."

None of the above qualifies as a good reason to put off doing your 1993 income tax returns. Fear of having to pay higher taxes doesn't qualify either.

That's because only 1.2 percent of all taxpayers will be taxed at higher rates. The average taxpayer is basically in the same tax circumstances as 1992 and many will actually pay a bit less.

High-income individuals pay 36 percent on taxable income over $115,000 if single and $140,000 if married, up from a top rate last year of 31 percent. A rate of 39.6 percent kicks in at $250,000 for most taxpayers, at $125,000 if married and filing separately.

There is benevolence even in that increase. Under the new law, any higher taxes you incur for 1993 as a result of the tax-rate changes can be paid -- interest- and penalty-free -- in three equal tTC annual installments due April 15 of 1994, 1995 and 1996. So get out those records now and start figuring.

"When you start doing your taxes early, and it turns out you have a refund due, you can file early and claim the benefit of a refund rather than letting the government sit on your money without paying interest," said Robert Greisman, tax partner with Grant Thornton accounting group.

"If you owe money, it might give you more time to raise the money or do some digging for additional deductions."

Build perspective into your process.

"Look at last year's return to get a good focus on any differences this year and always prepare a rough draft in advance so that you're not stressed under a deadline," said Mike McGrail, a district spokesman for the Internal Revenue Service. "Use a cal

culator to avoid math errors."

When you send in your return, make sure there's a record of it.

"Your tax return, quarterly estimated tax payments and extensions should all be sent certified mail with a return receipt, so that you have a record from the U.S. post office," advised Steven Weinstein, national director of personal financial planning for Arthur Andersen & Co. accounting firm.

Due to a court ruling, the growing number of Americans working at home should reassess whether they qualify for a home-office deduction.

"The criteria now is to compare the home office to other places of business and determine whether the most important part of the job is performed there and whether a substantial amount of time is spent there," explained Nancy Anderson, manager of special tax projects for H&R Block in Kansas City, Mo.

Some tax tips from Arthur Andersen:

* Make deductible contributions to an individual retirement account by April 15. Establish a simplified employee pension (SEP) plan if you're self-employed. Contribute to a Keogh plan if you're self-employed, though the plan itself must have been established by Dec. 31, 1993.

* You may be able to save taxes already paid by filing an amended 1992 return if you were self-employed and lost the deduction for 25 percent of the cost of health-care coverage when that deduction expired on June 30, 1992, or your employer-paid education assistance was treated as taxable income to you after June 30.

* If you refinanced your mortgage in 1993, deductions for points paid must be amortized over the life of the mortgage. But if you refinanced for the second time or more, you may be able to claim a deduction for the balance of points paid on your previous mortgage that haven't yet been claimed as itemized deductions.

Meanwhile, an expected 14.6 million taxpayers nationwide will use electronic filing, up from 12.5 million last year.

The IRS promises refund checks to electronic filers within three weeks, compared with a four- to eight-week wait for filers of paper returns. Arrangements between tax preparers and banks can get you your money in just days. But you'll likely have to pay $20 to $40 to have your return electronically filed, with perhaps another $30 if you get a refund anticipation loan.

Computer software for doing your taxes is also growing in popularity, with TurboTax, Andrew Tobias' TaxCut, Parson's Personal Tax Edge and MacInTax among the most popular. Most sell for under $40.

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