Used at Home but Claimed As Business Example, Does Not Trigger an Audit, Though Stories Are Tux Laws Iire: Expenses) Are Particularly Strict
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MAN(^HKKTKR HERALD, Thursday. Dfc. 13. 1984 MANCHESTER FOCUS SPORTS WEATHER BUSINESS Vocational teachers WFSB sing-along has Ray Page winner Cloudy tonight with Avoid tax audit triggers when preparing return nix pact 556 to 126 sign-along for deaf in debut with East freezing rain likely ... page 4 ... page 13 ... page 9 ... page 2 If you loiith an Internal Revenue Service tax audit, lor business automobiles is now limited to St,000. TO TAL GROSS RECEIPTS OF $100,000 OR MbRE: you can overcome the fear through a rational On Form 1040 business returns. Total Gross Receipts understanding of the tax-audit process. You needonly CASUALTY AND LOSSES: A casualty is required (TGR) computed by adding Schedule C gross receipts follow the proper filing techniques in this series to Y o u r to be "sudden, unexpected and unusual in nature." and Schedule F gross receipts. protect yourself. The meaning of those terms often engenders dispute. M o n e y 's The method of computing casualty losses has TOTAL POSITIVE INCOME (TPI) OF $50,000 OR The Internal Revenue Service has suffered a 5 changed. MORE: On Form 1040 non-bu.siness returns. Total percent cutback in staff since 1977. and with the W o rth Positive Income (T P I) includes wages, interest, severe shortage of work force cannot hope to audit Sylvia Porter HOME OFFICE DEDUCTIONS: Expenses in dividends, Schedule C and Schedule F net profits, and more than 1 percent to 2 percent of all returns filed curred in using a residence as an office are generally certain other income and distributions. annually, says Susan Z. Frayman. Miitthew Bender disallowed. You must meet stringent requirements to Bender also eradicates many rumors about audits, M nm htB kr Tax Staff editorial executive. "If taxpayers under take advantage of this deduction. The Tax Reform Act acknowledging not only what triggers an audit,■‘ but stood more about how the system works, preparing a of 19K4 especially scrutinizes business expenses IrralJi what does not trigger an audit. Submitting a return Manchester, Conn. — A City of Village Charm return could become a less stressful process." claimed in the home. Rules on items such as Friday, Dec. 14, 1984 — Single copy: 25<t write-otls. without the preprinted name and address label, for The top to audit triggers to be avoided under the t984 computers (used at home but claimed as business example, does not trigger an audit, though stories are tux laws iire: expenses) are particularly strict. widespread — particularly in the New York metro EXCESSIVE TRAVEL A.M) ENTERTAINMENT area — that the lack of a label will result in EXPENSES: Keep a diary and supporting receipts HOBBY LOSSES: Refers to losses from activities punishment. Poor math is anotherelement commonly R K T LR N S P R K P A R E D BY P R E PA R E R ON THE for travel and enlcrtainnient expen.ses not practiced for profit. Deductions allowable only to believed to be a trigger, but the IRS corrects “ PROBEEM P R E P A R E R ’S M ST” : District IRS extent of income derived from such activity. mathematics on more than 7 million returns annually, offices hiive "Return Preparer's Programs " inefiect, before submitting them for computer screenings. Wholesale which are aimed at preparers who clearly violate the BUSINESS AUTOMOBILE EXPENSES: An espe BARTER INCOME: Covers situations where l;iw. Be certain that the professional you use has an income is received in the form of goods and/or Matthew Bender's Dictionary of 1040 Deductions for intact reputation. cially audit-sensitive area; proper documentation must lie maintained. You will he required toapportion services, From swapping of services between 1985, designed for easy usage by consumers and business and personal use. Because of the Tax Reform individuals to "organized bartering," these ex professionals, sells for $32 and may be ordered by TAX-SHELTER AC TIVITY: Returtis that reflect Act ol t!IH4, depreciation and expensing are le.ss changes are elements of the "underground econ calling (800) 223-1940; in New York state call (212) tax-shelter activity, particularly shelters with high favorable than in the past, and investment tax credit omy " Greatly disturbing to IRS. inflation up 370-0531. Many Americans can benefit in November Tax reform likely to bring boons to bondholders By Denis G. Gulino 5.8 percent and poultry prices United Press International jumped 3.3 percent. The figures By Mary Tobin of accelerated (lei)recialion, iti- an II percent yield is worth 22 largely untuunded. " private bonds issued by hospitals bonds more important, especially were adjusted to compensate for United Press International veslmenl tax credit l)cnefils and percent in taxable equivalent Hueglin said proposals which and colleges, he said. in high-lax states like New York WASHINGTON - Wholesale routine seasonal price bank deductions foi" carrying retu I 'l l . " effectively eliminate most tax "Even if all of these are not and California. prices rose 0.5 percent in No fluctuations. NEW YORK - The Hat-lax tnunici|)als: If an investor's bracket drops to shelters and severely reduee the eliminated a third of supply could Although tax reforms will proba vember, the most in 10 months, as Except for some supply shor (U'oposals unveiled by the Tretis- — Prohibition of sonic tax-lree 35 percent, taxable etpiivalent appeal of real estate as an be cut off," Hueglin said. bly not become law until 1986 or meat costs went up sharply, the tages for chicken the increases ury Department could have a niuniciiial bonds now being issued; yields fall and the advantage ot investment are "most iiosilive" Proposals to eliminate deducti 1987, "changes affecting long-term Labor Department said today. were mainly triggered by sharply dramtitic impact on all securities — Treatment of capital gains as municipals diminishes. for municipal bunds. bility of state and local taxes also bonds will be anticipated by the The acceleration in prices was increased demand, a department markets, but the otttcome of ordinary income witli gains ad "But this w ill be ofl.set liy other Many issuers will be adversely will havmajor impact on bond market in the coming month.s. an abrupt change from the pre analyst said. debate on the proposals will be justed for inflation teatures in the plan and by aflecled. "Sure to go are tax- holders. "People in the 50 percent "It's impossible to assess the vious seven months, of which six especially significant lor munici Hueglin said the only real pro|)osals to restrict various types exempt corporate bonds. Tax- bracket won't get half price on final impact of the.se changes." he saw prices either failing or stand But prices went down sharply for pal bonds. negative for bondholders is tlie ot municipals which make up more exemiit housing bonds are almost st.ite and local taxes anymore. " he said. "But for now. we still feel ing still. eggs, fresh fruits and vegetables. "Out of the multi-sided debate propo.scd reduction in the income than hall of total volume certainly out." Hueglin said. said. For example, for someone comfortable with longer-term, But because of the modest The overall food index wasupO.7 which will ensue between the tax maximum to 3.5 percent "The municipal market is more Other issues likely to be elim i currently in the 42 percent bracket. high-quality, call-protected mu increases earlier, the November percent, the most since July. White House, Treasury, Congress, "Municipal yields now range sensitive to changes in supply than nated from the tax-exempt sector $1 of state taxes could cost $1 nicipals, The.se types of securities report brought the rate of inflation The Producer Price Index for state and local governments, and from 7 percent to II percent changes in lax rates, " Hueglin said are student loan bonds, public in.stead of .58 cents as before. will best survive tiny market at the wholesale level up only to an November is 292.3, equivalent to a an array of lobbyists and special depending on maturity. " Hueglin in a tele|)hone interview. "Fear |)ui-|)ose industrial bonds such as But this in turn will make state dislocations caused liy changes in extremely moderate 1.9 percent cost to business of $2,923 for goods interests, significant tax reforms said "In Hie 50percent tax liracket that lower taxes will hurt it are those issued for stadiums, and and local exemptions on municipal the tax structure. " for the first if months of 1984. that cost $1,000 in 1967. I seem sure to emerge, " said Steven The Producer Price Index mea The index dropped 0.2 percent in ,J. Hueglin. partner in Gabriele. sures changes in the prices of October and September. A revised Huegbn & ('ashman a Wall Street nearly 3,400 commodities, from figure showed a flat zero for bond hou.se which just completed a raw materials to products ready August, like those in June and study, "Flat Tax and the Munici for sale at retail. April, instead of a previously pal Bond Market. " The general trends at wholesale reported decline. Until November "But despite the well-publicized usually carry through to the the only increase since March was ■ Herald photo by Tarquink) negatives for the municipal CARTER’S ANNUAL Consumer Price Index but this in July, at 0.3 percent. market," Hueglin said, "the real year consumer prices have risen Energy prices went up 0.6 Games people play sleepers in the proposals are faster than wholesale prices, positive lor bondholders." percent in November, less than climbing at a rate of 4.2 percent half the 1.5 percent increase in Talk at the Army and Navy Club The issue is important for through October.