Tax tips can lessen the sting
• It's not too late to utilize a CPA's insights Ñ some of which might be surprising
You are fast running out of time to prepare your 2001 individual income tax return. But before you start putting numbers on the forms, take time to make sure you are considering everything possible to ensure you pay no more than your fair share of taxes.
• Filing status Ð For tax purposes, your marital status is determined as of the last day of the year. Even so, you may have choices about the filing status for your return. If you're married, and one of you has lower income and high medical expenses or a casualty loss, your tax liability may be lower if you file separate returns. If you are married but your spouse was not a member of the household for the last six months of 2001 and you have a child at home who will be a dependent on your return, you may use the more favorable head of household status. You also may be eligible to file as head of household if you are single and a child or other person lives with you and is your dependent.
• Dependents Ð Many of us no longer live in the traditional mom-dad-and-the-kids household, so give some thought to anyone living with you whom you support financially. You are entitled to claim as a dependent any person who has earned less than $2,900 if you provide more than half their support for the year and they live in your home as a member of your household. The income limitation does not apply for children still in school.
• Last year's return Ð Take a few minutes to look over last year's return. There may be carryovers you need to report this year. Look for overpayments of tax you credited to 2001, net operating or capital losses, installment sales, contributions, investment interest expense, vacation home rental losses, home office deductions and a 1998 Roth IRA conversion four-year income spread.
• Adjustments to income Ð Self-employed persons may deduct 60 percent of the cost of health insurance. You may not use this deduction if you or your spouse is eligible for employer-paid health benefits.
If you are self-employed, you still have time to set up a Simplified Employee Pension, or SEP-IRA. You may make tax-deductible contributions to your SEP of up to $35,000. The deadline for establishing and contributing to a SEP is April 15, or the extended due date of your return. You must contribute for your employees, so check out the employee eligibility rules before you set up your SEP.
More Americans can contribute to traditional IRAs this year because Congress raised the income-eligibility limits. If you are covered by your employer's retirement plan, you are eligible for at least a partial IRA deduction if you file a joint return with gross income of less than $63,000 (single under $43,000). If only your spouse is covered by an employer plan, you are eligible for at least a partial deduction if your adjusted gross income is less than $160,000 on your joint return.
There are income limits for Roth IRAs too. No contribution is allowed if your joint return reports gross income over $150,000 (single returns over $95,000).
The maximum contribution for both traditional IRAs and Roth IRAs remains $2,000.
• Federal advance tax rebates Ð During the summer and fall of 2001, the federal government mailed an extra refund check. You do not have to report this payment as income on your federal or Oregon return. You should fill out the worksheet included with your federal return instructions to make sure you received the correct amount.
• Filing your return Ð In lieu of filling in the blanks on paper forms, you can speed up and simplify filing by using TeleFile or e-file.
With TeleFile, you can file both your federal and Oregon returns over the telephone. You may use TeleFile if you received a special TeleFile tax package from the IRS, your tax situation is very simple and you meet certain qualifications such as living at the address printed on your TeleFile tax record.
For faster, more accurate processing of your federal and Oregon returns, consider e-filing. When you e-file, your federal and Oregon returns are transmitted directly to the IRS computers. With e-filing, the IRS will verify receipt of your tax return, process it more quickly and accurately and send your refund check in as few as eight days. To learn how to e-file your return, see the IRS Web site.
• Tax extensions Ð If you need more time to put everything together, you can get an extension of time to file your returns. To extend your federal income tax return, file IRS Form 4868. You must mail the extension form, with a check for any tax due, by April 15.
No separate extension is required for Oregon unless you owe tax. To pay tax due for an extended Oregon return, file IRS Form 4868. Write across the top 'For Oregon Only' and send the form with a check for the amount you expect to owe.
For more information, check out these useful Web sites:
• Internal Revenue Service: www.irs.gov
• Oregon Department of Revenue: www.dor.state.or.us
• AskMe.com: www.askme.com
• WorldWideWeb Tax Directory: www.wwwebtax.com
• Oregon Society of CPAs: www.orcpa.org