THB, Banditos, Wayward and more confirmed for Cosmic Cocktail!

Members of the Maryland Association of Certified...


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

Q. I am a 74-year-old widow. At the end of 1995, I forgot to make my minimum IRA withdrawal. I took it out on 2/1/96. My accountant still put the withdrawal on 1995 (even though I reminded him I didn't have a 1099). Now, at the end of 1996, I got the 1099 for the stated amount. Common sense tells me that I will have to put this amount on my 1996 return as I know the IRS gets a copy of the 1099. Do I have to amend my 1995 return? Do I have to pay a penalty for 1995? Can I be excused from the penalty? If so, how do I do that?

A. Yes, an amended 1995 return is required. A penalty of 50 percent of the shortfall is due. However, the penalty may be waived for resonable cause. Pay the penalty and attach an explanation of delinquency and the date of the actual withdrawal. If approved, the IRS will refund the penalty paid. Maryland does not have a similar penalty.

Q. Almost every advertisement for a home equity loan or second mortgage carries a disclaimer saying that the interest may be deductible. When is the interest not tax deductible? Does it depend on what you use the money for?

A. If the debt proceeds are used to buy tax-exempt investments or if your debt exceeds certain borrowing limits, or if you do not itemize, the interest is not deductible.

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 Web site --

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

Pub Date: 2/25/97

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad