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before preparing return

Note new rules for 1994
before preparing return

It’s tax time again. If you’re like me, you still haven’t prepared your 1994 tax returns. As the April 17th deadline (we get two extra days this year since the 15th falls on a Saturday) quickly approaches, here are a few changes to keep in mind for this year’s returns.
Charitable contributions Beginning with the ’94 tax year, taxpayers must substantiate charitable contributions of $250 or more (cash and non-cash contributions) by obtaining a written acknowledgment from the charitable recipient. A canceled check no longer will do for deducting these contributions (though it still works for contributions under $250).
Separate payments generally are not added together in determining whether the $250 threshold has been met. However, payments may be aggregated in the IRS’ view in circumstances where taxpayers attempt to circumvent the substantiation requirements by, for example, writing three $100 checks to the same recipient on the same day.
While charities are not required to provide written acknowledgments, most will (or have); if you haven’t already received an acknowledgment for a contribution of $250 or more that you made during 1994, you should contact the charity to obtain one.
Moving expenses Deductible moving expenses have now been limited to the cost of moving household goods and personal effects from the old to the new residence, and traveling (including lodging) expenses incurred in moving to the new residence. The cost of meals while moving, premove house-hunting expenses, and meals and lodging while occupying temporary quarters incurred in taking the new job no longer are deductible.
In addition, a taxpayer who moves his residence because of a new job or business can now deduct the moving expenses incurred only if the distance from the new job or business to the taxpayer’s old residence is at least 50 miles more than the distance from the taxpayer’s old job or business to the old residence. Previously, only an increase of 35 miles was required.
On a bright note, moving expenses are now deductible above the line, on Line 24 of Form 1040, thereby allowing the deduction regardless of whether you itemize or use the standard deduction. Form 3903 must be attached to your return.
Travel expenses A deduction no longer is allowed for the travel expenses of a spouse accompanying the taxpayer on a business trip unless the spouse is an employee of the taxpayer, accompanying the taxpayer for a bona fide business purpose, and the expense otherwise would be deductible by the spouse. Previously, only a bona fide business purpose for the spouse’s presence was required. The same change applies for the travel expenses of other individuals accompanying the taxpayer.
Meal and entertainment expenses The amount allowed as a deduction for business meal and entertainment expenses has been reduced from 80 percent to 50 percent for the ’94 tax year. That means that if you take a client out for a $100 dinner, only a $50 deduction is allowed. Fortunately, taxes and tips still may be included as part of the expense, thereby allowing a deduction for 50 percent of those costs as well.
Club dues As all country club members undoubtedly know by now, a deduction no longer is allowed for club dues. This limitation includes business, social, athletic, luncheon, sporting, airline and hotel clubs. Business meals incurred at a club, however, may still be partially deducted if they meet the requirements of that deduction.
Deferred ’93 taxes Taxpayers whose ’93 taxes increased solely because of the increase in the ’93 tax rates were given the option to elect to defer and pay the increase in ’93 taxes in three installments. The election was made by filing Form 8841 with the ’93 tax return. If you made this election, don’t forget that an installment is due by April 17th, whether or not you extend the time for filing your 1994 return. The amount due is one-half of the amount shown on Line 16 of Form 8841.
If you miss this due date, the whole deferred amount becomes due and payable, so don’t miss the deadline! The payment generally is mailed separately from your ’94 return, with the voucher that should have been sent to you by the IRS in January. Alternatively, any ’94 refund may be applied to this payment by marking Line 62 of Form 1040 “93 OBRA Install” so long as your ’94 return is filed in time, including extensions.
Conclusion Make sure you read this year’s tax return instructions carefully when preparing your return. For further information regarding any of these changes, as well as other changes that may affect you, you should contact your personal tax adviser. And remember, if you cannot file by April 17th, you can obtain an automatic extension until Aug. 15 by filing Form 4868. This extension, however, only defers the time to file, not to pay; you still have to pay any tax owing by April 17th.
(Michael McEvoy is a partner in the law firm of Harter, Secrest & Emery, where he concentrates his practice on tax matters. He was assisted in the preparation of this article by his associate, Christopher Potash.)


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