STATE TAX CREDITS IMPROVE; CALIFORNIANS SHOULD TAKE ADVANTAGE OF EXEMPTIONS, ELECTRONIC PAYMENT SYSTEM.
As you wrap up your financial affairs for the year, take note of new or improved state tax credits to whittle away your tax bill for 1998, according to the California Franchise Tax Board.
The state tax collector also unveiled an electronic payment system to be used for the first time in 1998 to make filing taxes less painful.
``We're here to help,'' said Denise Azimi, spokeswoman for the Franchise Tax Board in Sacramento.
But an association of certified public accountants believe these are just small concessions when the state had the opportunity to grant bigger relief. This year, a state bill that would have changed many California tax laws to mirror the tax breaks on the federal level didn't pass, according to the California Society of CPAs.
``It would have conformed a lot of the really neat (federal) tax changes featured in the IRS Restructuring and Reform Act of 1998 that we don't get for California,'' said David Flamer, a Woodland Hills CPA and taxation committee member of the California Society of CPAs.
The failed bill, AB 1469 by former Assemblywoman Deborah Ortiz, D-Sacramento, would have protected innocent spouses in tax audits, erased time limits for tax refunds for the mentally disabled, increased the capital gains exemption allowed in home sales, given relief to destitute taxpayers and added a flexible rollback feature on Roth IRAs, among other perks now available federally.
However, the tax relief effort for Californians isn't dead. A similar senate bill was introduced this month.
As for improvements in 1998, the state dependent exemption credit will be raised from $68 to $253 for each dependent. That means dependents - generally children but it could be an elderly parent - can save you a lot more money in 1998. For a family of five, the savings is more than $500.
The Renter's Tax Credit is back after a six-year hiatus. Single taxpayers can take a $60 credit if they have adjusted gross incomes of $25,000 or less. Married couples with adjusted gross incomes of $50,000 or less can take a $120 credit. But if the credit reduces taxes to below zero - say, you owe $40 but with a $60 credit the state now owes you $20 - you won't get money back. Before, you'd get refunds.
Now, the bad news. Californians would have been able to take a lot more federal tax breaks if AB 1469 had passed.
For example, the ``innocent spouse'' provision would protect a divorced partner from unfair treatment in a tax audit if the other spouse took care of all the taxes and made the majority of the money in the household. For the mentally disabled, such as Alzheimer's sufferers, federal law gets rid of a time limit within which they can get refunds from the government if they inadvertently overpaid in taxes. The state doesn't give this protection.
Another federal perk that the state does not give relates to capital gains in the sale of a home. Under federal law, if the homeowner is forced to sell his or her home within a short period of time due to job changes or health reasons, they won't qualify for the full capital gains discount, but they do get a partial break. State laws don't offer the partial discount.
Ortiz's bill also would have given the Franchise Tax Board flexibility to cut a deal with delinquent taxpayers who don't have any money to pay - a power the IRS now holds.
And while state tax laws do conform to most of the federal Roth IRA provisions - tax deductions aren't allowed but withdrawals are not taxed - it is less flexible about when to take Roth IRA income to be taxed after being rolled over from other retirement accounts.
Other changes for 1998 include the ability to pay electronically.
In the past, folks who filed their state returns through the Internet and by phone had to mail in their checks. But this year, the Franchise Tax Board will allow taxpayers to authorize their financial institutions to electronically pay the state. For refunds, folks who file electronically will get them faster - within 10 days, or even sooner with direct deposit.
|Printer friendly Cite/link Email Feedback|
|Publication:||Daily News (Los Angeles, CA)|
|Date:||Dec 29, 1998|
|Previous Article:||CUT TO: SCREEN SUCCESS; BEFORE SENDING OUT YOUR SCRIPT, GIVE IT THE TALKY TREATMENT.|
|Next Article:||BRIEFLY : CRASH KILLS DRIVER TRYING TO AVOID VAN.|