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TAX ALERT: STAYING OUT OF HOT WATER WITH THE IRS

 TAX ALERT: STAYING OUT OF HOT WATER WITH THE IRS
 JENKINTOWN, Pa., Feb. 10 /PRNewswire/ -- Even though the IRS now


audits less than 1 percent of all tax returns, said Andrew Zelenkofske of Zelenkofske, Axelrod & Co., Ltd., the Jenkintown-based accounting and consulting firm, it's not wise to become complacent.
 "The 'liberties' you take when preparing your return," Zelenkofske cautioned, "can still boomerang. Here's a short list of trouble spots to avoid."
 -- In 1991, the extra tax assessed on under-reported income, interest and miscellaneous income resulted in an additional $1.5 billion owed the IRS. So under-reporting, or complete failure to report income, does not work. The IRS audits and does track checks on secondary sources of income. To stay out of trouble, report all income from 1099 forms. Don't lump bank accounts together on your return. And if you do get a notice about matching of your income, respond promptly to avoid the collection process.
 -- To avoid a backup withholding of 20 percent on income received, be sure your Social Security number is properly reported to all your banks and financial institutions.
 -- Due to stipulations in the 1986 Tax Act, rental losses are not deductible in 1991, and in the years to come. However, taxpayers whose adjusted gross income is less than $150,000 may deduct some, or all, of their losses, if they actively participate in rental real estate. Be certain to calculate carefully when figuring the amount of rental loss deduction you are eligible for, since the IRS has made this a focal point for 1991 and 1992.
 -- In the area of interest expense deductibility, taxpayers should beware of trying to disguise interest incurred for personal debt, as home equity debt. The IRS will be scrutinizing this area with particular care.
 -- Miscellaneous business expenses: those claimed on Schedule A and Schedule C are also being watched. Be sure to document the business nature of each expense and use the proper reporting format for those expenses.
 -- If you are employed full time, but have a sideline business that generates income, be sure to pay the appropriate self-employment tax on the net income of your side business. Increased scrutiny here as well.
 "The thing to remember as you prepare your return," said Zelenkofske in conclusion, "is that the IRS is watching, despite the drop in auditing percentage. It pays not to take any 'liberties' when you file."
 For more information about the area of tax reporting the IRS is watching for 1991, call Zelenkofske at 215-572-7410.
 /delval/
 -0- 2/10/92
 /CONTACT: Ellen Toplin of Toplin & Associates, 215-886-4644, for Zelenkofske, Axelrod & Co./ CO: Zelenkofske, Axelrod & Co., Ltd. ST: Pennsylvania IN: SU:


KA-MK -- PH009 -- 8218 02/10/92 10:56 EST
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Date:Feb 10, 1992
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