ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, February 19, 1996 TAG: 9602200021
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: DAVE SKIDMORE ASSOCIATED PRESS
Before you go through the pain and agony of doing your own taxes, you'll want to find out if you can skip the chore in the first place.
That's no small task. The rules on who must file are complex and depend on the interaction of many factors, including your income, age, marital status, whether you have children and whether you're someone else's dependent.
Even if you're not required to file, you may want to anyway, to claim the earned income credit or get a refund of any amount withheld from your wages.
Publication 501 or your tax package has all the details, but here are the basic filing thresholds:
SINGLE: $6,400 in gross income if younger than 65 on Jan. 1, 1996, and $7,350 if 65 or older. This includes divorced, legally separated and many widowed people.
HEAD OF HOUSEHOLD: $8,250 if younger than 65 and $9,200 if 65 or older. This status, which carries a lower tax rate than single status, is for unmarried people who provide a home for an unmarried child or grandchild or a dependent married child or grandchild, parent, grandparent, aunt, uncle, niece, nephew and most in-laws. The parent need not live with the filer, but any other relative must. Some married people who lived apart from their spouse during the last six months of 1995 also are eligible.
MARRIED, FILING JOINTLY: $11,550 if both spouses are younger than 65, $12,300 if one spouse is 65 or older, and $13,050 if both spouses are 65 or older. If you file jointly but did not live together at the end of the year, the threshold is $2,500.
MARRIED, FILING SEPARATELY: $2,500, any age.
QUALIFYING WIDOW or widower with dependent child: $9,050 if younger than 65, $9,800 if 65 or older. To qualify, your spouse must have died in 1993 or 1994, you must not have remarried in 1995 and you must have paid over half the cost of keeping up a home for yourself and a dependent child who lived with you all year.
DEPENDENTS: The thresholds are lower for dependents and vary depending on marital status, whether or not the dependent is blind or 65 or older and on the type of income involved, earned or unearned.
Children younger than 14 don't have to file separately if their parents include their income in their own by using Form 8814.
The child's income must have come entirely from interest and dividends, the income must be less than $5,000, and the child must have had no tax withheld from income and made no estimated tax payments.
This could be an expensive option, though, because with a few exceptions the child's earnings will be taxed at the parents' top rate. That could be as high as 39.6 percent; most children who are taxed normally pay a top rate of 15 percent.
On What Form?
Once you know you need to file a return, you must choose a form. The basic return for all taxpayers is the1040. But there are two simpler alternatives - the1040A and 1040EZ - for people who don't itemize deductions and whose income was less than $50,000 after subtracting their exemption and standard deduction.
To use the 1040EZ, you must have no dependents and your filing status must be single or married filing jointly. Also, you must be younger than 65 and not blind, you must have had no more than $400 of interest income, and the rest of your income must come entirely from wages, salaries, tips, scholarships or unemployment compensation. This is the first year that those receiving unemployment compensation can use 1040EZ.
You can use the 1040EZ to claim the earned income credit if you did not have a qualifying child. You can't use it if you received advance earned income credit payments through your employer.
The 1040A allows more income sources than the 1040EZ, adding to the list: pensions, annuities, Social Security benefits, Individual Retirement Account withdrawals, interest in excess of $400 and dividends.
Unlike the 1040EZ, the 1040A allows you to deduct IRA contributions, claim the credit for child care expenses and the credit for the elderly and disabled. You can also use it to claim the earned income credit.
TODAY: Changes in the tax law. Who must file and on what form.
FEB. 26: What is - and isn't - reportable income.
MARCH 4: Deductions you shouldn't overlook.
MARCH 11: How to calculate taxes on Social Security. Filing by computer or phone.
MARCH 18: Handling the costs of child and dependent care. Earned income tax credit.
MARCH 25: Tax problems of divorce.
LENGTH: Medium: 95 lines ILLUSTRATION: GRAPHIC: color.by CNB