Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
The first question is reprinted from Tuesday to correct erroneous information that was given in the answer.
Q: I purchased a Series EE for $10,000 in 1986 and redeemed it in 1996 for $20,888. Is the net gain of $10,888 all figured at the full tax rate for 1996?
A: Unless you elected to report the interest income each year as earned, starting in 1986, you will have to report the full $10,888 as interest income from U.S. obligations on your 1996 federal income tax return. You will also have a subtraction from income on your Maryland tax return because states do not tax income from U.S. obligations.
Q: If I have capital gains on some stocks I sold this year, do I have to send in quarterly payments or can I wait until I file my 1997 return?
A: The need for quarterly estimates is predicated on several factors. A taxpayer must consider the level of his taxable income that has not been subject to withholding. In addition, the taxpayer may be able to avoid paying estimates depending upon the prior year's tax liability. With respect to the taxpayer with the capital gains, if his/her withholding on wages or pensions, etc., will equal or exceed either last year's tax liability or 90 percent of their 1997 tax liability, quarterly payments are not required. If the taxpayer's 1996 adjusted gross income was in excess of $150,000, the taxpayer must remit 110 percent of their prior year tax balance (if they are relying on the prior year safe harbor rule). Maryland has the same estimated tax requirements and safe harbors with the exception of not having the 110 percent rule for high-income taxpayers.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
Readers can find an archive of tax questions answered thus far plus links to other tax information on The Sun's Web site -- www.sunspot.net.
Pub Date: 4/08/97