Even if you have always prepared your own tax returns, you would be wise to get the help of an expert if you recently sold a house.
Q-I prepare my own tax returns. I sold a home for the first time in 1994, so I’m not sure which tax forms I will have to fill out this year. Do you have any advice?
A-My best piece of advice is that you should get the help of a good accountant.
Selling a house involves a host of complicated tax issues that will affect the return you are about to file and also the returns that you will fill out in the years to come. The tiniest of mistakes now could cost you thousands of dollars later, because the future taxes you will owe on property that you sell years from now will be based largely on the profits you declare on your “original home”-the property you sold in 1994.
A professional will take full advantage of existing laws to keep taxes on those profits to a minimum.
If you insist on preparing your own return, you will obviously have to fill out a basic IRS Form 1040 for your 1994 earnings and deductions. In addition, you must attach a Schedule A to deduct any mortgage-interest charges that you paid last year. You will also have to complete Form 2119, “Sale of Your Home.”
The IRS publishes some helpful free booklets that you can pick up at its nearest field office or can order by calling toll-free, 1-800-829-3676. Ask for a copy of Publication No. 530, “Tax Information for Homeowners,” and for Publication No. 523, “Selling Your Home.” Reading the booklets won’t be as helpful as consulting a tax expert for advice, but will at least give you some basic information about all the complex issues that are involved.
Q-I live in a condominium, and I serve on the board and donate about 10 hours of my time each month to its meetings. Can I take a deduction for the value of the time I spend in those meetings?
A-Sorry, but the value of the time you “donate” to your homeowners association is not tax-deductible. The Internal Revenue Service wouldn’t even let you take such a deduction if you instead spent 10 hours a month working for a nonprofit charitable organization, such as the Red Cross or Salvation Army. Although Ben Franklin said that “time is money,” the IRS says it isn’t worth a write-off.
Q-o you know anything about fire extinguishers? DI would like to get one or two fire extinguishers for my home, but have no idea what kind.
A-Some small models can be purchased for about $10, although larger ones typically cost between $25 and $50.
Extinguishers are grouped by the type of fire they are designed to fight, and their classification is listed on the side or top of their tank. “A” fires involve ordinary combustibles, such as wood, paper, cloth or upholstery. Theses fires are the only kind you can fight safely with water.
“B” fires involve flammable liquids, such as cooking grease, paint solvents and gasoline. Never fight these fires with water, because water can make the flames spread.
“C” fires involve electrical equipment, such as fuse boxes, television sets and electrical outlets.
If you can afford only one extinguisher, purchase a unit marked “A:B:C.” It can be used on any type of blaze.
However, you might want to spend a few extra dollars and purchase a second “B:C” extinguisher to keep by your stove. Most “B:C” units contain a powder that smothers and then blankets grease, which makes them more effective in fighting most cooking-related fires than their general-purpose counterparts.
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Write to David Myers at P.O. Box 2960, Culver City, Calif. 90231-2960.
