NEWS BRIEFS
	SPRING 1994

1993 TAX LAW CHANGES

Many new changes were made in 1993 that will affect most of us. A brief list of the changes includes:

	Married persons with no dependents may now be able to use the 1040EZ tax form. Only single taxpayers could use this form before.
	The exemption amount was raised to $ 2,350 per exemption.
	The standard deduction was increased. The amount is based on your filing status, if you are 65 or older, blind or claimed as a dependent by someone else.
	The Earned Income Credit was increased to $ 2,364 for qualifying persons with income less than $ 23,050.
	Some estimated tax penalties may be waived if the penalty is due to the 1993 tax law changes.

Higher income persons will also be affected by some of the new provisions:

	Phase out of deductions and exemptions above certain threshold incomes.
	New tax rate brackets of 36% and 39.6%.
	The "safe harbor" rate for estimated tax payments will now be 110% of your 1993 tax liability.
	Some of the tax liability due to the tax law changes can be deferred to future years.

WHAT'S AHEAD FOR 1994

Many of the tax law changes from 1993 actually take effect in 1994:

	The deduction for business meals and entertainment will be reduced from 80% in 1993 to 50% in 1994.
	Expenses you pay for a spouse or dependent that accompanies you on business trips is no longer deductible in most cases.
	The Earned Income Credit amount will increase but some credits will not be included.
	Many charitable deductions will require written confirmation from the charitable organization. If you received anything in return (e.g. dinner, small gifts) then your deduction will be reduced by the value of the items received.
	Many moving expenses will not be deductible. Your new job must also be 50 miles further from your old home than your new home.
	The taxable portion of Social Security benefits will be computed using an 85% rate in 1994 vs. the 50% rate used in 1993.
	The standard mileage rate increases to 29 cents per mile.

GOOD RECORD KEEPING IS IMPORTANT

Nobody likes to pay tax. Complete and well-organized records can reduce your tax liability at year end and are important in proving your deductions. Major categories of records you should have include:

	Copies of previous years tax returns.
	Records concerning your home showing purchase price and expenses, improvement costs and other adjustments.
	Divorce or Separation documents and Support agreements.
	Employee expense documents.
	Charitable contributions and donated time.
	Receipts or proofs of payment for itemized deductions.
	Bank statements and canceled checks.
	Credit card statements and slips.

Most records should be kept as least six years. Some records should be kept much longer. Some of the records you should keep for extended periods are:

	Records concerning home purchase, sale and improvement.
	All items relating to an IRA, retirement plan, or annuity.
	Statements from brokerage activity, mutual funds and other investments.

DID YOU KNOW.......

Only 1% of returns are ever audited. Much of the income received today is reported to the Internal Revenue Service by employers, businesses, banks and brokerage houses. You generally receive a copy of this information as your W-2, 1099, 5498 and other statements. This information is entered into a computer and cross referenced to your return when it is filed. Your chances of being audited are increased by the following factors:

	Income exceeding $ 100,000 per year.
	Unreported income from W-2 and 1099 statements.
	Self-employment income from independent contracting and consulting.
	Deductions for business use of the home.
	Unusually large itemized deductions relative to income.
	Mathematical errors in return preparation.

A small percentage of returns is selected each year for intense scrutiny by the I.R.S. in an effort to evaluate overall compliance. These returns are audited for every line item. It
is highly unlikely that someone will be selected for this type of audit but a brief list of some of the requirements highlights the importance of meticulous record keeping:

	Birth Certificates for self, spouse and dependents to prove nationality.
	Social Security cards.
	Marriage license or other proof of marriage.
	All W-2 statements to support income claimed.
	All 1099 and 1099-R statements.
	Bank statements.
	Receipts for each line item deduction.
	Mileage records for car usage.
	Doctor and prescription receipts for medical deductions.

OVERLOOKED DEDUCTIONS

Many people often have deductions available to them that are not used. In many cases they do not keep the receipts or do not know they are entitled to use the expenses as a deduction. These expenses cover a wide variety of topics:

Medical Expenses

	Acupuncture treatments
	Air conditioner for allergy relief
	Alcoholism treatment
	Ambulances
	Artificial limbs
	Birth control pills
	Braille books and magazines
	Drugs -- Prescription
	Dyslexia training
	Eye examinations
	Eye glasses
	Guide animals
	Halfway houses
	Health club dues -- prescribed by Doctor

Employee / Self-Employed

	Accounting fees
	Attorney fees
	Automobile expenses
	Business cards
	Business conventions
	Car expenses
	Commissions
	Dues to professional organizations
	Hotel and motel expenses
	Insurance costs
	Musician clothing
	Office supplies
	Passport fees
	Professional books and magazines
	Refuse removal
	Rent
	Repairs
	Safe Deposit box
	Telephone
	Tips (while traveling)
	Tools
	Travel costs
	Utilities

General

	Alimony payments
	Automobile costs -- Charitable or Medical
	Career counseling costs
	Child care / Daycare costs
	Gambling losses
	Labor union dues
	Mortgage prepayment penalties
	Moving expenses
	Tax preparation costs
	Theft losses
	Uniforms for work
	Work shoes -- steel tipped

TAX HELP TELEPHONE NUMBERS

I.R.S. - General 800-829-1040
I.R.S. - General - Cleveland 216-522-3000
I.R.S. - Forms Ordering 800-829-3676
I.R.S. - Hearing Impaired 800-829-4059
I.R.S. - Teletax Refund Information 800-829-4477
I.R.S. - Teletax Refund Information - Cleveland 216-522-3037
Ohio - General 800-282-1780
Ohio - General - Cleveland 216-787-3135
Ohio - Forms Ordering 800-282-1782
Ohio - Hearing Impaired 800-750-0750
Ohio - Refund Information 800-282-1784
Ohio - F.A.S.T. Refund Information 216-787-5218

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