The Salina Journal from Salina, Kansas on January 16, 1986 · Page 27
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The Salina Journal from Salina, Kansas · Page 27

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Salina, Kansas
Issue Date:
Thursday, January 16, 1986
Page:
Page 27
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The Salina Journal Thursday, January 16,1986 PageT? Retirees need to review tax status of their pensions Retirees receiving pension or annuity payments should carefully review the tax status of that income in order to decide whether to permit tax withholding on these payments. Federal income tax is now generally withheld from pension and annuity payments. However, this withholding is not compulsory; any person can apply for exemption. The payer of the pension or annuity payments will tell the retiree how to file for the exemption. To determine whether to have tax withheld, taxpayers should review the tax rules that cover pensions and annuities. A pension to which an employee contributed nothing during his or her employment, for example, is fully taxable in much the same way salaries and wages are during working years. The full ampunt must be reported as income on the line designated for fully taxable pensions and annuities on Form 1040. The 1040A and 1040EZ forms cannot be used to report pension income, the [RSsaid. On the other hand, a pension to which both the employer and employee contributed, while not fully taxable, is partially taxable and is subject to special tax reporting. If a retiree will recover his or her total contributions within 36 months after the first payment is received, then the pension or annuity payments are not taxed until the contributions are recovered. This is because the contributions were taxed while the person was employed. Those who will not recover their contributions within a 36-month period are entitled to exclude from taxable income a certain percentage of their pensions each year. Normally, the issuer of the pension will compute the exclusion percentage — the figure that determines how much of a pension can be excluded from income. The exclusion percentage, once computed, does not change. If the issuer of the pension does not compute this percentage, instructions can be found in the free IRS Publication 575, Pension and Annuity Income. This publication will have the answers to most questions on the tax treatment of pensions and annuities, and can be ordered by using the handy order form found in each tax package. U.S. gqverment retirees should get Publication 567, U.S. Civil Service Retirement and Disability. Some Social Security cash may be taxed Some higher-income taxpayers who received social security benefits in 1985 may have to pay federal income tax on part of their benefits. As much as one-half of a person's social security benefit is taxable if that amount, when combined with other income (including tax exempt interest), exceeds certain base amounts. The base amount is $25,000 if you are single, or married and do not file a joint return and you did not live with your spouse at any time during 1985. It is $32,000 for a married couple filing a joint return, and zero if you are married, lived with your spouse at any time during 1985 and are filing a separate return. In order to have adequate prepayment of tax, these individuals may need to pay quarterly estimated tax. Correct filing errors on an amended return In addition, for persons 60 years of age and over, free tax counseling is available through local IBS- coordinated Tax Counseling for the Elderly (TCE) programs. Through this program, specially trained volunteers provide tax assistance on such matters as tax credit for the elderly, special treatment of the gain on the sale of a home by those age 55 and over, Errors on previously filed tax returns can be corrected by filing an amended return, the Internal Revenue Service said. Those who discover they have failed to report some income or claim tax credits or deductions, and those who erroneously claimed deductions or credits to which they were not entitled, should file to correct these errors. However, the agency noted, it is not necessary to file an amended return to correct addition and subtraction errors. These are automatically corrected by computers at IRS service centers when the returns are processed. It is also not necessary to file an amended return if a required schedule was not submitted. If this is the case, IRS will write to request the schedule or attachment. The amended return is filed on Form 1040X, "Amended U.S. Individual Income Tax Return," and can be used to correct any previously filed Form 1040,1040A, or 1040EZ. Form 1040X must be filed within three years from the date of the original return or within two years from the time the tax was paid, whichever is later, the IRS said. the proper method of reporting certain pension income and paying tax on it when necessary, and other subjects of special interest and concern to older persons. The volunteers also help fill out tax returns. Those who are eligible, and need the assistance of this program, should call the IRS for information. ^ju Don't Have To Pay Through The Ifose. ..- Open An UndeIHA iremenb Account If you've held off opening an Individual Retirement Account because you thought it took a mammoth opening deposit, you're in for a pleasant surprise. With Uncle IRA, you can open an Individual Retirement Account for mere peanuts. Not only does it take a small minimum to open your account, but you can add as little or as much as you want up to $2,000 per year ($4,000 for working couples). All tax deductible with interest that accumulates tax deferred until retirement. Don't forget, it's never too soon to plan for your future. And the best answer to retirement security is right under your nose. Uncle IRA. Finding the most for you is our objective! We're equipped and ready to do your 1985 Income Taxes. We offer our client fast and accurate service without high costs. All returns are computer printed. '' We want to sign our name to your dotted line." UNCLE IRA Current Annual Yield Current Interest Rate 9.965% 9.50% 2055 S. Ohio Hours: Mon.-Thurs. 10-7 Friday 10-5, Sat. (H 823-9283 SECURITY SAVINGS AND LOAN ASSOCIATION 317 South Santa Fe • 825-8241 1830 South Ohio • 825-1306 SAUNA'S FINANCIAL INSTITUTION Member FSLIC, Salina. Kansas

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