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SIX SMART TAX TRICKS FOR 1992

 SIX SMART TAX TRICKS FOR 1992
 NEW YORK, Feb. 4 /PRNewswire/-- Now that 1992 is underway, KPMG Peat


Marwick advises taxpayers to start the new year right by getting serious about resolutions that will save taxes this year. Here are some tips that may help improve your situation on April 15, 1993.
 Enroll in an Employer-Sponsored 401(K) Plan.
 A 401(K) plan allows you to invest your pretax dollars in a tax-free account that will not be taxed until the money is withdrawn. Because the contribution is not taxed, you can invest a greater amount and still end up with the same disposable income.
 Funds you invest in a tax-free account will accumulate more quickly than comparable taxable investments. The drawback is that an early withdrawal (generally one made before you reach age 59-1/2) is subject to a 10 percent penalty tax. Use only dollars you can invest for the long term.
 Enroll in an Employer-Sponsored Dependent Care Program or Medical Reimbursement Plan.
 This plan will allow you to pay dependent care, child care and medical care expenses with pretax dollars. Under such a plan, your employer will withhold the amount you specify (not more than $5,000 a year for dependent and child care) from your wages; these funds will not be subject to income tax or Social Security tax withholding. You will not be taxed when you draw from this account to cover appropriate expenses. However, these are "use or you lose it" plans - that is, if you can't claim reimbursement, you won's get you dollars back.
 Get a Home Equity Loan to Consolidate Other Loans.
 Since you may no longer deduct "personal interest," get a home equity loan and use it to consolidate other loans you have for personal purposes, such as auto loans and credit cards with outstanding balances. Home equity loans are commonly available as straight second mortgages or as lines of credit secured by the residence.
 Individuals are still allowed to deduct interest incurred to purchase or improve a principal residence and one other residence (generally up to $1 million of total indebtedness.) They are also allowed to deduct interest on up to $100,000 of other debt secured by a principal residence or one other residence. The total "qualified residence" indebtedness cannot exceed the fair market value of the secured property at the time the debt is incurred.
 Bunch Payments of Your Family's Medical Expenses Into One Year.
 You are allowed to deduct medical expenses only to the extent they exceed 7.5 percent of your adjusted gross income (AGI), a steep threshold that might be easier to surmount if you accumulate expenses and pay for more than one year's care. The time of payment, not the time of care, generally determines when the deduction is allowed. Paying the expenses in a year you have a loss that will reduce your AGI will also help.
 Remember that standard health insurance plans may not reimburse you for many deductible items such as eyeglasses or dental care; additionally, the cost of health insurance itself is deductible. You can also deduct related transportation expenses, including a flat nine cents per mile for automobile use and lodging costs up to $50 per night for each individual who is away from home primarily for medical care. Be sure to keep accurate records.
 Negotiate to Have More of Your Expenses Reimbursed.
 If you are an employee with sizable unreimbursed business expenses, negotiate with your employer - maybe even accepting a lower wage - to have more of these expenses reimbursed. An individual employee's unreimbursed business expenses are deductible only to the extent that they, and some other miscellaneous deductions, exceed 2 percent of your AGI.
 When properly substantiated by the employee, reimbursement of business expenses is not counted as income. Some balance between a reduced salary and larger reimbursement will likely give you an overall tax benefit and satisfy your employer.
 Freelancers, Determine Whether You are Better Off as an Employee or Independent Contractor.
 Self-employed individuals must pay Social Security taxes at double the tax rate an employee pays because they are, in effect, their own employers. In 1992, the tax rate will be 15.3 percent on the first $55,000 of earnings (7.65 percent for employees.) Any employee wages subject to Social Security tax directly reduce the amount of earnings subject to self-employment tax. One half of the self-employment tax you pay is deductible in computing income tax.
 There are many other considerations, however, that will help you determine whether you should be an employee or independent contract. For example, a self-employed person's business expenses are not subject to the 2 percent AGI limitation. In addition, the self employed person can design his or her retirement plan and deduct 25 percent of medical insurance premiums paid.
 Through 135 offices in the United States, KPMG Peat Marwick provides industry-specific professional services to a broad range of businesses, including banks, thrifts, insurance, mutual funds and investment banks, high technology, manufacturing and health care companies, as well as government, education, and other not-for-profit institutions. KPMG has more than 76,000 people worldwide and operates in 125 countries. In 1991, the firm posted worldwide revenues of $6.0 billion.
 -0- 2/4/92
 /CONTACT: Lisa Meyer of KPMG Peat Marwick, 201-307-7763/ CO: Peat Marwick ST: New York IN: SU:


SM-AH -- NYTFNS7 -- 6464 02/04/92 07:17 EST
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Date:Feb 4, 1992
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