Are your finances pretty simple just wages, retirement contributions, a little investment income, and maybe a deduction for mortgage interest and taxes? Is your tax situation for '96 pretty much as it was in '95?
If so, you're a candidate for doing your own tax returns instead of waiting in line to pay a tax preparer. Get a hand calculator, your copy of last year's tax return, the instruction booklet that came with your tax form in the mail, and a box of chocolates, for strength.
I've found that the chocolates help, particularly.
Using last year's return as a model, fill in the same blanks on this year's return but with the numbers for 1996. Check the other blanks, just to see if there's something you should add.
As usual, there are a few new things to claim or deduct. Here are the principal ones, all of them small:
- Higher standard deductions. Singles can automatically deduct $4,000; married couples, $6,700; and single heads of household, $5,900. Itemize your deductions only if they exceed these amounts.
- Higher personal exemptions. You can write off $2,550 this year, for yourself and each dependent. This tax break phases out for couples with adjusted gross incomes higher than $176,950 and singles over $117,950.
- For some, a higher Social Security tax. You're taxed on your first $62,700 of earnings, up from $61,200 in 1995. Employees earning $62,700 or more owe an extra $93; self-employed owe an extra $186 (half of which is deductible).
- Identification numbers for dependents. You need a Social Security number for each dependent except for children born last December. For them, write in "12/96.''
- New identification numbers for those not eligible for a Social Security number. This covers any dependent living outside the United States and certain resident aliens. You'll need an Individual Taxpayer Identification Number (ITIN). To get one, file Form W-7. It usually takes about a month.
These ITINs are required if you're filing your own return or if you're claimed as a dependent on someone else's return.
- Higher earned-income credits for low-wage workers. You probably qualify if (1) you have no young children, earned less than $9,500 and you or your spouse are at least 25; (2) you have one child and earned less than $25,078; (3) you have more than one child and earned less than $28,495.
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