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CNN Live Saturday

Interview With John Battaglia

Aired February 09, 2002 - 12:36   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: You can keep putting it off, but that doesn't make April 15 go away. It's that time of year again, yes indeed. Tax season. The deadline is just over two months away. And for some advice on how to best prepare to do your taxes on your own, perhaps, we turn to an expert.

John Battaglia is a director at Deloitte & Touche for a firm that provides everything from accounting to tax help. And if you have a question for John, I'm going to encourage you to call us at 404-221- 1855, or you can e-mail us at wam@CNN.com.

All right, John, it's kind of like, "Time to make the doughnuts." You know, this is the time of year that none of us want to get ready to do, so it's time to do our taxes. Getting our W-2s in check is one way to get started. How do you motivate us to get all the things that we need to get started?

JOHN BATTAGLIA, DELOITTE & TOUCHE: Well, Fredricka, the first thing you need to do is start early. Do not wait until the last minute, because it becomes much, much more difficult, and you may lose the chance to minimize your taxes. So the first thing you need to do is gather all the documents you received in the mail the last two weeks: the W-2s, the 1099-INTs reporting interest income, 1099 dividends reporting dividends, 1099-Ds reporting gross proceeds. If you sold securities, if you had income from retirement plans or IRA, you would receive a 1099-R.

It's very, very important that you get these documents, because later when you file your return, the IRS is going to check these documents to your return. And if they're not on the return, you're going to get a notice and there's a good chance you're going to be paying extra tax interest and penalties.

WHITFIELD: OK. Go ahead. I'm sorry.

BATTAGLIA: In addition, on the expense side, people will receive a form called a 1098, and this form reports mortgage interest. If you have a mortgage, it will tell you how much interest you can deduct. In addition, this form, if you paid your real estate taxes with you monthly mortgage payment, will also report the real estate taxes that you paid. And these two items are deducted on Schedule A.

In addition, you want to get your check register for 2001, go through it and get all the deductible items out of the check register, along with your charge card summary.

WHITFIELD: So, John, it sounds like you're aware that a lot of people are trying to do their taxes on their own now. They've got the Web sites, they've got the software in order to do it, and that's kind of what's precipitated a lot of our questions that we're already starting to get in from our e-mails.

So let's begin with the first one. A lot of questions we're finding about that $600 refund that many people experienced last year. So here's the first e-mail question: "Are those that received President Bush's tax relief fund last year supposed to report it and have it taken out of this year's refund?"

BATTAGLIA: No. The IRS just sent out -- actually, there was an article -- I believe it was in the "Wall Street Journal" -- talking about how people are making a mistake, and this -- it's called a rate reduction credit on line 47 of page two of 1040. And what's happening is, people that receive -- if you filed a joint return in 2000, it will be $600. If you filed a return filing single, it will be $300. People that already received this refund do not have to do anything on line 47. They just ignore it and just file their return as if they did last year.

Now, if you were a dependent in 2000, you didn't receive this rebate. And the dependents will receive the benefit of this 10 percent bracket on the 2001 return. And there's a work sheet when they calculate their tax that gives them this benefit. Again, the dependents will not file any -- put anything on line 47 of page two of 1040.

WHITFIELD: OK. And we've also got a phone call question now. And this is from Brett (ph), who has a question about the penalties -- Brett (ph).

CALLER: Boy he's right about not filing or not being ready, because I didn't file last year. And on a tax due of about $2,000 from last year I've already got $1,000 in interest and penalties. And my question is, is there -- is there any circumstance or way to get around that interest in penalties?

BATTAGLIA: Well, Brett (ph), did you file your return?

CALLER: I finally did, yes.

BATTAGLIA: OK. One form -- that maybe if you didn't file form 2210, so you may want to file that. That may reduce some of the penalties. Really, there's no way you're going to get interest abated. It's possible to get the penalties abated if you had a good reason for not filing. And you would have to indicate that in a letter.

WHITFIELD: All right. All right, John, let's go on to our next e-mailed question. And this is about senior citizens. And this is from a young lady who writes, "My mom is 74 and employed full time. Shouldn't she be able to get all the money she paid out in taxes back?" BATTAGLIA: Well, there are some tax breaks for elderly tax payers. But if her adjusted gross income is over $8,550 -- and if she's over 65 that would be the amount -- then she would have to file a return. And whether she's going to get all the taxes back depends on her (UNINTELLIGIBLE) deductions. If she itemizes or not, you know, medical expenses, mortgage, interest, and other real estate taxes and other types of deductions. So it really matters on how much she made and the deductions that she does -- is able to pay.

WHITFIELD: So, John, what happens in the case of a retired person who's now living off Social Security and benefiting from Medicare and they decide to take a part-time job. And they find that on their paycheck Social Security and Medicare are once again taken out, what can that person do?

BATTAGLIA: Well, there's nothing they really can do about. You know, they received their Social Security benefits, and depending on their income, will determine if any of that is taxable. But, you know, that's the way it is. Even though you put more into the system than you're taking out.

WHITFIELD: Catch-22, huh?

Martha (ph) of Florida is on the phone, and she's got a question about her loan money -- Martha (ph). Oh, maybe we lost Martha (ph) then. Let's go on to another e-mail question then, John.

BATTAGLIA: OK.

WHITFIELD: And this is about the marriage penalty, which is, "With the new tax laws now in place, is the so-called marriage penalty still in effect?"

BATTAGLIA: Yes. As of -- on filing your 2001 tax return, it's still in effect and will be in effect until 2005, when it starts getting what's called phased out, where the marriage penalty will get minimized and in few days after that will be fully phased out.

WHITFIELD: OK. Here's another e-mail question for you. My long-time girlfriend and I bought a house together last summer. What is the best way for an unmarried couple who are new homeowners to file their taxes? Is it possible and/or wise for us to file jointly? If not, does it matter which one gets the homestead exemption?

BATTAGLIA: OK. Well, first of all...

WHITFIELD: If you want to...

BATTAGLIA: ... if you're not married, you can't file jointly. So you'll be filing returns as a single status. And it depends on really who paid the mortgage and who paid the interest, who paid the real estate taxes, on who's going to get the deduction. And you both have to be liable, obviously, if you're boarding together. I assume that you are.

WHITFIELD: OK. We've got someone else on the phone. Janet (ph) in Indiana, what's your question to John?

CALLER: This is J.C. from Nashville (UNINTELLIGIBLE).

WHITFIELD: Let's try that one more time, J.C. (ph).

CALLER: Yes, I noticed that there was a 10 percent on capital gains effective, I believe, in 2002. Someone told me that was just for the oil well people. Or does that apply to real estate (UNINTELLIGIBLE) for over seven years?

BATTAGLIA: No. There's a 10 percent tax on -- first of all, the 10 percent capital gain tax applies to people that are in the 15 percent bracket. And that's for assets held more than one year. If you're in the 15 percent bracket and you have an asset held for more than five years, the actual rate will then be eight percent. For people above the 15 percent bracket, the long-term capital gain rate for assets held for more than one year is still 20 percent.

WHITFIELD: All right. All right, John, we've got another e- mail. This, about gambling. This comes from someone who writes, "I understand that I need to use a form 1040 to report gambling winnings. The problem is that I don't itemize deductions. Is there any way for me to deduct my losses against winnings if I don't itemize?

BATTAGLIA: Yeah that's a big problem. No, you can't. You have to itemize in order to deduct gambling losses. And gambling losses are deductible up until your winnings. So what I would suggest you to do is try to get Schedule A, look at all the itemized deductions. See if any of them apply to you in order to get enough to get up to your standard deduction to start taking those gambling losses.

WHITFIELD: OK. All right. Thanks, John, very much, for taking those e-mails and those callers' questions.

BATTAGLIA: You're welcome.

WHITFIELD: And I'm sure we're going to have a lot more questions and e-mails that will be coming over the next couple of weeks, so we'll try to invite you back. Thanks very much.

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