Tax Tip

All is not lost for taxpayers who realize they neglected to claim a deduction on a previous year's return, as long as they don't wait too long. "Tax returns don't close until three years after the due date," said Joe Equale, a partner in Equale & Cirone, certified public accountants in Danbury, Conn. That means you have until April 15 to amend your return for the 2000 tax year. Not surprisingly, most people don't submit a 1040X form if they forgot to include some income or wrongly claimed a deduction, he said.

THIS TIME of year, the grousing gets pretty heavy about paying income taxes by April 15. Tax collectors are not very popular.While most of the ire is aimed at the Internal Revenue Service, the comptroller's office in Annapolis gets its share of brickbats.Into this furor strolls Yvonne Daugherty, an 11-year veteran of Louis L. Goldstein's shop, who has managed to do the impossible: satisfy inquiring taxpayers.Ms. Daugherty, 62, handles the department's electronic mail. That is not an idle job. This spring, the comptroller's office is receiving 120 e-mail inquiries a day about how to fill out tax forms or interpret complex tax language.

If you had any capital gains or dividends in 2003, you'll want to pay close attention to your broker statements, thanks to a tricky set of new rules. Capital gains for stocks held more than one year will be taxed at two different maximum rates: 20 percent for sales before May 6, 2003, and 15 percent for sales on or after that date. And for taxpayers in the lowest brackets - 10 percent or 15 percent - the tax rate on long-term capital gains drops to 5 percent. You will need to check your records for when you bought and sold a stock because broker statements won't tell you how long you held it, which you need to know to determine whether you qualify for the new capital gains rate.

Personal income-tax filers looking to reduce their tax burden can take advantage of several ways to lower adjusted gross income regardless of whether tax returns are itemized. "Contrary to popular myth, the IRS does want you to take legal deductions," said Jackie Perlman, who researches tax law for H&R Block Inc. in Kansas City, Mo. "It's the illegal ones they don't want you to take." These deductions are allowed as adjustments to your total income. But you must wade through the full 1040 form to get the advantage.

Parents with children in college have a few choices when it comes to claiming tuition expenses on their personal income tax returns. Tax experts said filers can choose between education credits and deductions. The difference? Tax credits lower the amount of taxes you owe, while deductions lower the amount of income you are taxed on. You'll have to choose one. You can't claim a credit and a deduction for the same expense. This week we'll talk about tax credits. Although tax experts recommend choosing a credit over a deduction, you'll want to take a deduction if your income knocks you out of taking a credit.

The deadline for filing your personal income tax return is less than three months away. For the weeks leading up to April 15, Your Money will provide tax tips designed to help you file your 2003 return. Here is the first.Sometimes the simplest things can trip up your tax return, and none is as common as a muddled or missing Social Security number. It's one of several common clerical errors, including bad math and unsigned returns, that can delay your refund if you're owed one. Incorrect or missing Social Security numbers accounted for the most frequent math or data entry errors on 2002 returns.

Who foots the college tuition bill and whether the student can be claimed as a dependent are determining factors in claiming a tuition deduction. If you paid for your 25-year-old son who lives at home to attend college full time, you can't get the tuition deduction because he does not qualify as a dependent. He, however, can get the deduction as long as he meets the modified adjusted gross income requirement, even if he didn't pay a cent. If your 19-year-old daughter paid her own way, then you get to lay claim to the credit, as long as she can be claimed as your dependent, even if she files her own return.

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q: Last year I sent in estimated taxes but I ended up getting a refund because of a loss on some bonds I bought. Is this refund taxable?A: A federal income tax refund is not subject to federal or Maryland income tax. And a Maryland income tax refund is not subject to Maryland income tax. However, all or part of a Maryland income tax refund may be subject to federal income tax. If, in the year you paid the state income tax, you did not itemize your deductions on Schedule A of your federal income tax return, none of your Maryland refund is subject to federal income tax. To determine if, and how much, of your state refund will be taxed on your 1994 return, see the work sheet on the bottom of Page 16 of your Form 1040 instruction booklet.