With an unstated sense of achievement, the Internal Revenue Service asserts that "for the second year in a row taxpayers will be filing returns under relatively unchanged tax law." For the Americans who will file 113 million tax returns this year, the real achievement may be in understanding the changes that were made in prior years.
Some leading tax accountants across the nation agree that there are no significant changes for individual taxpayers. Still, they say that not all of you will get through the tax season without making mistakes or overlooking matters of importance. Consider these tips before you complete your return in April:
* "One of the common mistakes is pure mathematics -- subtracting when you should have added," warns Alan E. Weiner, certified public accountant (CPA), of Long Island, N.Y. "Will you pay a penalty? That depends on the type of mistake and whether you're due a refund. Certain penalties are presumptuous penalties -- for example, if you omit a dividend item from your statement of income."
Taxpayers who own tax-exempt bonds or mutual funds should not forget to declare interest that doesn't come from their home state, Weiner cautions. "If you buy New Jersey bonds, not federally taxable but taxable in New York, you mustn't overlook this income. The states are now working together, via computer, and getting reports from mutual funds and the brokerage houses on out-of-state interest payments."
Weiner also suggests you talk to an accountant about the passive activity rules, which many taxpayers find confusing. "You may be taking too much of a loss or not carrying forward the right amounts," he says.
* "Take a close look at personal interest expense," suggests Jack Oppenheimer, CPA, of Orlando, Fla. "The deductible portion dropped from 20 percent to 10 percent. Also be aware that the IRS has changed the rules on reimbursable expenses. If an accountable plan is in place, the employer has to include all the reimbursements as part of the employee's W2 and they are subject to Social Security and income tax withholding."
You may cheat yourself by grossly undervaluing property you donate to a thrift shop or to Goodwill, Oppenheimer points out.
"Sometimes a client tells me she gave five bags of old clothes to Goodwill and suggests I deduct $50," he says. "Think about how many garments you can get in five bags. I suggest you record the original value and deduct a percentage of that. Consider that Goodwill probably will resell the garments for $4 or $5 each."
* "Since 1987 many people use the standard deduction, but those who don't generally are aware of what they can deduct," says Howard W. Dragutsky, CPA, of North Hollywood and Encino, Calif. "In some states where there are personal property taxes, be aware that the bulk of your auto registration fee may be personal property tax that can be deducted."
Pay attention to your charitable contributions. "If you attend a dinner for a charity, part of your check may be to pay for the dinner. That part doesn't qualify as a donation. It's important not just to have canceled checks, but evidence of what they were for," he says.
"When they changed the tax laws a few years ago in connection with Individual Retirement Accounts, some taxpayers failed to notice that under certain conditions, and when either the husband or wife is covered at work by a qualified retirement plan, they get no deduction for their IRA," Dragutsky says. "Better than continuing to pay into their IRA, these people should invest in municipal bonds."
"Doing your 1990 tax return is just recording history," says Robert M. Pielech of New Bedford, Mass. "It's too late to do planning for 1990. But it's time to begin planning for next year's return. Talk with your tax professional now about ways to minimize your taxes for 1991."