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Income Tax Bulletin Board

March 07, 1999|LIZ PULLIAM

Tax Tips

* Avoid the most common filing errors. Double-check Social Security numbers, and include Social Security numbers for all dependents claimed. Check your math. Sign and date your return. Don't claim an exemption if you or your spouse is claimed as a dependent on someone else's return. Send the federal return to the IRS address in Fresno and the state return to the California Franchise Tax Board address in Sacramento.

* Include all income reported on W-2s and 1099s; tax agencies match these forms against the amounts employers report. If you have an incorrect W-2, first call the employer for a corrected form. If that doesn't work, contact the IRS. If you are reporting income that is different from that on 1099, note the 1099 amount, make the necessary adjustment and attach a letter explaining the adjustment.

* Charitable deductions of more than $250 require a written receipt from the charity. Donations of items worth more than $5,000 must have an independent appraisal.

* Gambling winnings must be included as income but can be offset by gambling losses. You cannot deduct losses in excess of your winnings on your federal tax return.

* Don't deduct any employee business expenses that were or could have been reimbursed by your employer.

* Your chances of audit increase if you are self-employed, make more than $100,000 or less than $25,000, are employed in a cash-based business, or reported a loss on your self-employment income.

* If your modified adjusted gross income is less than $26,473 and you are employed, you may qualify for an earned income credit. If you qualify, you should file a tax return even if your income is too low to require filing because the credit can result in a refund.

* If you can't complete your tax return on time, file a Form 4868, Application for Automatic Extension, with the IRS by April 15 to get a four-month extension. (The state extension will be granted automatically when you file the form.) If you owe, you still must estimate and pay your taxes by April 15, even if you take longer to file.

* Some or all of last year's state tax refund may be taxable on this year's federal return if you itemized in 1997. If you claimed the standard deduction, however, your state refund is not taxable.

* When figuring how much you owe on a stock or mutual fund you sold in 1998, don't forget to add the dividends you reinvested to your purchase price. Reinvested dividends increase your tax basis, or the amount you subtract from the sale price to determine your taxable profit.

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