Tax News Archive:

New Offerings From the IRS for 1999

Capital Gain Distribution - Schedule D Not Necessary for All
You may not have to file Schedule D to report capital gain distributions for your client any more if all three of the following criteria apply to him:
  1. The only amounts he has to report on Schedule D are capital gain distributions from box 2a of Forms 1099-DV or substitute statements.
  2. None of the Forms 1099 or substitute statements have an amount in box 2b (28% rate gain), box 2c (unrecaptured section 1250 gain), or box 2d (section 1202 gain).
  3. If you are filing Form 4952 (relating to investment interest expense deduction), the amount on line 4e of that form is not more than zero.

If all three of the above apply, enter your client's capital gain distributions on line 13 and check the box on that line. Also, be sure you use the Capital Gain Tax Worksheet to figure his tax.

Child Tax Credit
For 1999, you may be able to claim this tax credit for your client for as much as $500 for each of his qualifying children under the age of 17.

Interest on Student Loans
You may be able to deduct up to an increased limit of $1,500 for interest paid on a qualified student loan by your client. The deduction is claimed on line 24 of Form 1040 or line 16 of Form 1040A. In 2000, the limit will increase to $2,000.

IRA Deductions
You may be able to take an IRS deduction for your client if he was covered by a retirement plan and his modified adjusted gross income is less than the amounts that follow:

  • Single, head of household or married filing separately and he lived apart from his spouse for all of the year - $41,000
  • Married and filing jointly or a qualified widow(er) - $61,000

Tax From Recapture of Education Credits
If youur client claimed an education credit on last year's tax return and received a refund of tuition and related expenses or received tax-free educational assistance this year, he may owe this tax.

Self-Employed Health Insurance Deduction
The part of your client's self-employed health insurance premiums has been increased for 1999 to 60%.

Earned Income Credit
The maximum income your client can earn and still be able to qualify for an earned income credit has increased in 1999. Following are the newly increased income maximums:

  • One's earned income is no more than $26,928 and have one child
  • One's earned income is no more than $30,580 and have two or more children
  • One's earned income is no more than $10,200 and have no children, are between the ages of 25 and 65 and cannot be claimed as a dependent on anyone else's tax return

Foreign Earned Income Exclusion
The amount of foreign income that your client can exclude has been increased to $74,000 in 1999.

Business Standard Mileage Rate
The rate for business use of a vehicle has decreased in 1999. Prior to April 1, 1999, the business standard mileage rate is 32½ cents per mile. The rate after March 31st, 1999 is 31 cents per mile.

Stop Smoking Program
Costs incurred for prescriptions and programs related to a stop smoking mission can now be included in deductible medical expenses.

Exemption Amounts
Your client is now entitled to a $2,750 deduction for each qualified exemption he may have. If your client has a high income, this exemption amount could be phased out.

Limits on Itemized Deductions
Some itemized deductions may now be limited if your client's income is higher than $126,600 if filing jointly or $63,300 if filing separately.

Social Security and Medicare Taxes
The maximum wages subject to social security taxes in 1999 has been increased to $72,600. All wages are subject to Medicare taxes.