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Tax Tips 2002

Aired December 26, 2002 - 13:48   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.


KYRA PHILLIPS, CNN ANCHOR: All the after-Christmas bargains are not necessarily at the stores. You can add quickly so you can save money on your 2002 taxes.
CNN's Sean Callebs is here now to tell us how to do it.

Sean, we are very excited.

SEAN CALLEBS, CNN CORRESPONDENT: Indeed, you should be. Now's the time a lot of people are thinking about ways they can stretch their money, go a little bit further. Kyra, maybe one way, a lot of people do know about right now is by giving to charity. That is one thing you could do toward the end of the year. It's very simple. You can give anything of value to charity, whether it be clothes, whether it be cash, but if you give a large ticket item, like say you are going to donate an old car or something of that nature, the IRS mandates now that if you donate something more than $5,000 that it must be appraised and you must mail in that appraisal with your tax form.

Also a couple of other things that folks can do, but you have to have a certain degree of cash, a certain degree of money to do something like this. You can defer income until next year, and then you don't have to claim that, obviously, until next year.

And also if you're in the position where you can pay your January mortgage right now, before the end of December, that is a way you can also save a few bucks and, of course, the tax will not be effective until next year.

PHILLIPS: All right. Capital losses, we can write those off. That's a big one, right?

CALLEBS: Right. Of course, we've heard a lot about capital gains over the last several years. Of course, those of always supposed to be for the wealthy. But not people making money on taxes on the stocks these days. So if you lost money on stocks, you can actually write that off against income, up to $3,000, but this loss cannot just be on paper. You must have the transaction. You must have sold the stocks, but if you lost a great deal of money, say, $8,000, $10,000, something like that. You can not only write off the $3,000 for this year, but you can write off the additional money in the next tax year, say 2004, $3,000 there as well, 2005, up to 3,000, and so on and so on. So if you did take a big hit, again, this is money you can write off against income.

PHILLIPS: There's some year-end advice. Now let's talk 529 plan.

CALLEBS: 529, if you haven't heard of those, that is the big buzz word for this year. It's not necessarily going to offer you any break this year. 529, of course, if you're saving money for your children or grandchildren to go to college, you can put that money in a 529 account and you are not taxed on the money that that makes over the years. And say, you put this away for seven, eight years, and theoretically, you could double your money in that time. That, Kyra, could be a huge savings, but all 50 states have a different plan for the 529, so tax accountants urge us to go out, you talk with an attorney, some kind of tax accountant, so you find out what kind of program you will put your money in, what is the best way to save money there.

PHILLIPS: All right, for the famous procrastinators like me, what about penalties with regard to filing? Has any of that changed?

CALLEBS: It really hasn't changed terribly, but the big thing is you are really penalized if you don't file on time, by April 15th. Say, you look at your W-2 very late in the year, end of March, and you realize all of a sudden, you're hit with a big bill, something you simply can't afford by April 15th. Tax accountants say what you should do, get your 1040 in there on time, make sure you file on time, and then you can work out some kind of deal with the IRS. Remember, this is supposed to be a kinder, gentler, IRS, some kind of payment plan down the road, and the IRS willing to work with you on that. It's very clear, just contact them and say I don't have the money, I want to pay, what's the best way I can do this without getting the biggest hit?

PHILLIPS: Kinder gentler, I thought there would be like 50,000 random audits this next year.

CALLEBS: Exactly, but the IRS really came under a congressional crackdown several years ago. Since then, they've been trying to change the image that they're somewhat heavy handed, but they have been doing random audits, but not as many as in years past, so they're not bringing in the revenue they used to. So at the end of this past November, the IRS announced they are going to do the 50,000 random audits. So they'll be out there again, and they're going to looking for tax cheats.

PHILLIPS: Yes, have all of the receipts in order. Sean Callebs, thanks so much. Great insights.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






Aired December 26, 2002 - 13:48   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: All the after-Christmas bargains are not necessarily at the stores. You can add quickly so you can save money on your 2002 taxes.
CNN's Sean Callebs is here now to tell us how to do it.

Sean, we are very excited.

SEAN CALLEBS, CNN CORRESPONDENT: Indeed, you should be. Now's the time a lot of people are thinking about ways they can stretch their money, go a little bit further. Kyra, maybe one way, a lot of people do know about right now is by giving to charity. That is one thing you could do toward the end of the year. It's very simple. You can give anything of value to charity, whether it be clothes, whether it be cash, but if you give a large ticket item, like say you are going to donate an old car or something of that nature, the IRS mandates now that if you donate something more than $5,000 that it must be appraised and you must mail in that appraisal with your tax form.

Also a couple of other things that folks can do, but you have to have a certain degree of cash, a certain degree of money to do something like this. You can defer income until next year, and then you don't have to claim that, obviously, until next year.

And also if you're in the position where you can pay your January mortgage right now, before the end of December, that is a way you can also save a few bucks and, of course, the tax will not be effective until next year.

PHILLIPS: All right. Capital losses, we can write those off. That's a big one, right?

CALLEBS: Right. Of course, we've heard a lot about capital gains over the last several years. Of course, those of always supposed to be for the wealthy. But not people making money on taxes on the stocks these days. So if you lost money on stocks, you can actually write that off against income, up to $3,000, but this loss cannot just be on paper. You must have the transaction. You must have sold the stocks, but if you lost a great deal of money, say, $8,000, $10,000, something like that. You can not only write off the $3,000 for this year, but you can write off the additional money in the next tax year, say 2004, $3,000 there as well, 2005, up to 3,000, and so on and so on. So if you did take a big hit, again, this is money you can write off against income.

PHILLIPS: There's some year-end advice. Now let's talk 529 plan.

CALLEBS: 529, if you haven't heard of those, that is the big buzz word for this year. It's not necessarily going to offer you any break this year. 529, of course, if you're saving money for your children or grandchildren to go to college, you can put that money in a 529 account and you are not taxed on the money that that makes over the years. And say, you put this away for seven, eight years, and theoretically, you could double your money in that time. That, Kyra, could be a huge savings, but all 50 states have a different plan for the 529, so tax accountants urge us to go out, you talk with an attorney, some kind of tax accountant, so you find out what kind of program you will put your money in, what is the best way to save money there.

PHILLIPS: All right, for the famous procrastinators like me, what about penalties with regard to filing? Has any of that changed?

CALLEBS: It really hasn't changed terribly, but the big thing is you are really penalized if you don't file on time, by April 15th. Say, you look at your W-2 very late in the year, end of March, and you realize all of a sudden, you're hit with a big bill, something you simply can't afford by April 15th. Tax accountants say what you should do, get your 1040 in there on time, make sure you file on time, and then you can work out some kind of deal with the IRS. Remember, this is supposed to be a kinder, gentler, IRS, some kind of payment plan down the road, and the IRS willing to work with you on that. It's very clear, just contact them and say I don't have the money, I want to pay, what's the best way I can do this without getting the biggest hit?

PHILLIPS: Kinder gentler, I thought there would be like 50,000 random audits this next year.

CALLEBS: Exactly, but the IRS really came under a congressional crackdown several years ago. Since then, they've been trying to change the image that they're somewhat heavy handed, but they have been doing random audits, but not as many as in years past, so they're not bringing in the revenue they used to. So at the end of this past November, the IRS announced they are going to do the 50,000 random audits. So they'll be out there again, and they're going to looking for tax cheats.

PHILLIPS: Yes, have all of the receipts in order. Sean Callebs, thanks so much. Great insights.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com