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CNN Saturday Morning News
Income Tax Filing Deadline Draws Near
Aired April 07, 2001 - 09:39 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: Well, the deadline this year is April 16. We know that date -- the dreadful deadline.
And you know what we're talking about: tax day.
NELSON: We are taking your e-mail questions for our guest. He is John Battaglia, a tax specialist with the national accounting firm Deloitte and Touche. And John joins us now from New York.
And before we get to questions and phone calls, John -- first of all, thank you for being here -- I got a couple of questions for you. This last year, a lot of people lost a lot of money on the stock market. Is any of that tax deductible?
JOHN BATTAGLIA, TAX SPECIALIST, DELOITTE & TOUCHE: Yes, it is. What you have to do is fill out Schedule D, and do an accounting of your short-term capital gains and losses and long-term capital gains and losses. And on Schedule D, this does it for you. On the top is the short-term section, on the bottom is the long-term. And if you held assets for one year or less, it's short term, over a year, it's long term.
And when you net all your capital gains and losses, if you come up with a net loss, you're able to deduct $3,000 in the current year against ordinary income, such as wages, and the balance gets carried forward.
NELSON: That may have an impact on the country's deficit right there.
Now, the other question is, the -- as you know, the Senate and the House are nearing agreement on a Bush tax cut. They've got to go into a conference committee. But assuming there is going to be some kind of a tax cut, what do people have to do now as they prepare their taxes?
BATTAGLIA: Basically what you need to do is look at, when you're finished with your 2000 return, you need to look at your tax. Because what's going to happen is, your 2001 estimated tax payments or withholding, to avoid a penalty, you ache to pay in either if your AGI is less than $150,000, 100 percent of the 2000 tax or, if AGI is above $150,000, 110 percent of the 2000 tax.
Now, if there's going to be a tax cut for -- you know, it's either the lower of that -- those figures or 90 percent of your 2001 tax. So being a tax cut, you really want to look at that, and maybe not pay in the prior year's tax but pay in based on the current year's tax, especially if your taxes are going to be lower.
NELSON: But, I'm sorry, just to clear that up, don't you have to pay all of the money that you owe the government by the 15th?
BATTAGLIA: No, I'm talking about 2001 estimated tax payments. That's how the tax cut will affect your 2000 tax return.
NELSON: Oh, I got it, yes. The advance payments you make this year.
BATTAGLIA: Exactly, you're required...
NELSON: I got it.
BATTAGLIA: ... to make estimated tax payments throughout the year, either through withholding or quarterly payments.
NELSON: OK. Kyra?
PHILLIPS: All right, why don't we check out some e-mails? I got a couple here. This one, you kind of touched on this a little bit, John, "If you have a stock that's been declared worthless, do you have to take the loss in that year? Or can you wait, since technically you've not sold the stock?"
BATTAGLIA: Well, if it's worthless, completely worthless, you could take it on your current year's tax return. You just got to make sure it is, in fact, worthless. And worthless is not being, you know, it's worth, like, 5 cents. Worthless is that you cannot sell it in an open market.
PHILLIPS: All right. You want to take a phone call?
NELSON: Yes, let's talk to Clyde, who's in Indiana. He's got a question for you. But go ahead, Clyde.
CALLER: Yes, I have -- I sold some mutual funds, not a lot, for my kids. And I want to know if I can deduct that off my personal -- my personal gains I sell from some other mutual funds this year?
BATTAGLIA: Clyde, if I understand the question correctly, it's losses on your kids' accounts, which basically you will not be able to take losses on your kids' accounts on your personal tax return.
PHILLIPS: That's because it's in their name, is that right?
BATTAGLIA: Yes.
PHILLIPS: OK, all right.
BATTAGLIA: Yes, that's correct.
PHILLIPS: Here's another e-mail, this one from Mike. "I received a personal injury award last year. Do I have to report that?"
BATTAGLIA: Well, it depends. You need to check with your attorney to make sure what type of award it is, because some types of damages are taxable, some are not.
PHILLIPS: Like what type, John?
BATTAGLIA: Basically, if it's loss of wages it wouldn't be taxable.
PHILLIPS: OK.
BATTAGLIA: You basically have to check with your attorney.
PHILLIPS: All rightie. Brian?
NELSON: OK, we've got another call for you, James is calling from the beach in Destin. James, go ahead.
CALLER: Yes, hi. I have a question on a nonbusiness bad debt on Schedule D. Where would I enter that?
BATTAGLIA: You would enter that on -- as a short-term capital loss on the top of Schedule D.
PHILLIPS: Well, that's easy. All right, here we go, another e- mail, this one from Will Dennis in Niceville, Florida. "Should my 18- year-old daughter, who has worked part time while going to school and earned $2,516, file a separate tax return to get back the $174 taken out in taxes? If so, can we still claim her on our taxes if she still meets the requirements of dependency?"
BATTAGLIA: The question is yes, you should file the return to get the money back. And there -- you'll get the whole thing back. And two, yes, you can still claim her if you meet the requirements for dependency.
PHILLIPS: All right.
NELSON: OK. John, we got a call from Tampa. Here's Dan. Go ahead, Dan.
CALLER: Yes, thank you. I work for a consulting firm, and they've been unable to reimburse me for travel expenses due to a lack of revenue. Currently they owe me over $14,000. Can I deduct those from my income?
BATTAGLIA: Yes, you could, if they're unreimbursed, they're ordinary, necessary to the business on -- if you're -- are you a salaried employee? Well, if you're a salary employee, you would deduct it on Schedule A, on 42106, who floats a Schedule A, miscellaneous itemized deduction. If you're independent contractor and have your own business, you can deduct it on Schedule C.
NELSON: John, we're going to wrap it up here, but I have one question for you. What is the most common mistake that people tend to make on their taxes, and what can you do to sort of help them avoid that?
BATTAGLIA: Well, what I read about is people tend to not include their Social Security number or put down the wrong Social Security number for themselves, their spouse, their dependents. So it's important that your Social Security number is correct, your address is correct.
Another common error, if you're doing a return by hand, is that it -- you're making a math mistake. So make sure that mathematically your return is correct.
NELSON: OK, and especially if you're expecting a refund, get that address in there correctly.
Thank you very much, John Battaglia. Appreciate your being with us.
BATTAGLIA: You're welcome, thank you.
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