Income tax tips for senior citizens

Amiable John Bullis, with 40 years as a Certified Public Accountant, has some important income tax hints for us this year.

"A lot of folks prepare their own returns," Bullis said. "The IRS issues publications concerning some common mistakes people make when doing their own taxes such as their math doesn't add up, they used the wrong tables, or forgot to sign the return.

"If a person is paying to have his or her taxes done, it is important to look at prior years to see if things in 2008 are similar and will help to gather information. Itemized deductions may be the same or he may have forgotten to claim certain items. Don't forget contributions of food or clothing to charitable organizations may be deductible.

"The taxpayer may have taxes withheld from salaries, he may pay an estimated tax spaced throughout the year or he may pay the entire sum all at once at tax time. There are exceptions to the rule for reasonable cause. The IRS can and does sometimes understand. In a return of $1,000 or more there is a penalty of about three and a half percent for not paying.

"We send out a tax organizer package to my clients to help them collect the documents and figures they'll need when they come to an appointment. Some of the items are to list anything new that has happened during the past year " any special events such as purchase of a hybrid vehicle, energy improvements on a home, a death, or a sale of a home " there are all kinds of credits available.

"When you make donations to charity you should have a receipt and some kind of list of items containing the estimated cost of what it would sell for today " something written out at the time. Some people take photos of donated items, but nothing under a $500 deduction needs proof sent to the IRS."

Even though it seems impossible for the novice to learn all the rules and regulations, Bullis said he has a few clients who prepare their own taxes the best they can, then bring them to an appointment along with their questions.

Medical expenses may not benefit anything greater than seven and a half percent of gross income including travel expense at designated cents per mile, and do not qualify as a deduction. Travel for volunteers doing charitable work can help sometimes, but the volunteer must keep a record as the year goes by and should not wait until the end.

Other expenses to consider for tax deductions are sales tax deductions, teacher's classroom expenses, energy saving devices, solar improvements, and higher education tuition.

About required distribution of IRAs at 70 and a half years of age " if you are planning to donate funds to a charity have part or all of your IRA distribution paid directly to that charity and it will be tax free.

Bullis offered a few final hints for saving on taxes in 2009:

- Something to think about for 2009 is the sale of a home. If a person owns a house and rents it, then lives in it himself for a while, and finally sells it, there are special new rules.

- Gift annual tax exclusion limits will change from a limit of $12,000 in 2008 to $13,000 per person in 2009. No tax will be charged if the gift goes directly to education fees, hospital or doctor bills or medical insurance for the recipient.

- IRS audits very few clients, but an agent could look at the information you have. Save all documents " returns indefinitely and the forms you used to compute the information about five years. Your returns are open for audit for three years.

- The required distribution for IRA at 70 and a half years of age (in 2009 only) will be zero. You don't have to take anything out.

- Finally, if you have a problem paying your mortgage, do not hide, don't run. Talk to your lender who probably will be able to rewrite your mortgage to make it possible for you to pay more readily. You will eventually have to pay, but you can stay in your home.

Bullis stresses being honest and truthful and to back up your figures with facts. Be calm and don't panic.

The IRS is not all bad and will be understanding and fair. When in doubt, consult with a reputable tax preparer.

For information, call 882-4459.