Members of the Maryland Association of Certified Public...

Tax questions

February 05, 1997

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q. My daughter has been a resident of France for the past nine years, although she still retains U.S. citizenship. Her sole income is generated in the United States -- approximately $200 a year from a mutual fund. Does she need to file a U.S. tax return based on what she earned? Can she open an IRA here based on what she earns in France? She's planning to return here in the next three or four years.

A. If her sole income is just $200, then she will not need to file an income tax return since it is below the minimum amount required for filing. However, if she made $200 income form a mutual fund and this is her only U.S. income while she also earned money in France, she is required to report all of her income, no matter where generated, on her Form 1040. Assuming she is single, she must file a 1996 return if her gross income exceeds $6,550. (Up to $70,000 of foreign-earned income may be excludable on her U.S. tax return, subject to certain limitations and timely filed election.). As to the second part of your question, she will be able to open an IRA in the United States if she has earned income that is taxed on her U.S. return.

Q. In 1996, I contributed about $500 to my church and about $250 worth of clothing to a charity. Can I use that deduction on a short form?

A. No. Charitable contributions are considered part of "itemized deductions," which must be reported on the "long" Form 1040 Schedule A, not on a short form (1040A or 1040EZ). To determine if you should report itemized deductions and use the long form, you should compare your total itemized deductions with the standard deductions for your filing status. If the standard deduction is higher, and you meet the other requirements for filing the short form, then take the standard deduction. On the other hand, if you determine that claiming itemized deductions is advantageous, be sure you have written records, not just canceled checks. Contributions of $250 or more must be supported by a written letter from the qualified charitable organization stating that no goods were received in exchange for the donation.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To ask a tax question, call Sundial at (410) 783-1800. Call 268-7736 in Anne Arundel County, 836-5028 in Harford County and 848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after you hear the greeting.

Readers also can e-mail questions through The Sun's Website -- www.sunspot.net. Visitors to the Website will be able to access an archive of the questions and answers as well as other useful tax information and links.

Selected questions will be answered in the Business section. No questions will be answered by phone.

Pub Date: 2/05/97

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