Answers to your Tax Season Questions

Can I average my income for the last three years?  I made more last year than in the previous years and I was told by a friend that there was something called income averaging that could reduce my reporting wage.  I usually do my own taxes and would have a professional do it if it would help. Thanks. T.R.via e-mail

Many years ago the IRS allowed taxpayers to use an averaging method of figuring their tax. This method was especially nice for students fresh out of college who had worked part-time during school and then found themselves faced with the reality of taxes on a full-time job.  

The income averaging method was removed from the tax laws in the 1980s, but has just resurfaced recently in a new form. There is now a special three-year income averaging provision available - the catch is that you have to be a farmer. 

If you farm for a living, you may choose to average your farm income over a period of three years. Farm income is the income less expenses reported on Schedule F, "Profit or Loss from Farming," which gets filed with your tax return. Farmers who want to calculate their taxes using the averaging method should acquire Schedule J, "Farm Income Averaging," and include that with their tax return as well.  

These forms are available at the IRS Web site, www.irs.gov, or by calling the IRS at 1-800-829-3676.  

If you do not have income from farming, there is no option for averaging your income.  

My husband and I regularly volunteer at our church (for example, teaching Sunday School). Is the mileage to and from church deductible? If so, what type of documentation should we keep? T.F. via e-mail

Yes, you can deduct the mileage for your trips back and forth to church when you are volunteering for charitable activities. The IRS values this mileage at 14 cents per mile. Alternatively, you can deduct the actual cost of gas and oil relating to driving your car for charitable purposes, but if your trips are short ones, it's probably easier just to track the mileage.  

You are also entitled to deduct any cost of parking or tolls incurred on your trips back and forth to church.  

The records you should keep when using your car for the purpose of donating your services for a charitable organization should be in writing, and they should include the name of the organization, each of the dates on which you performed charitable services, and the number of miles you drove.  

I have tried numerous forms on IRS E-file on line, and cannot figure out which form do I use to show four different W2's and an unemployment 1099G?!? I have come up with three different totals. F.T. via e-mail

The form you should use depends on your filing status, your age, and how much income you have. Here are the rules, in a nutshell:  

• Use Form 1040EZ if you are single or married filing jointly, are under age 65, have no dependents, have interest income below $400, and have total income below $50,000.  

• If you don't qualify for 1040EZ, you can use Form 1040A if your total income is below $50,000, you have no gains or losses from selling stocks or mutual funds, the only adjustments to your income, if any, are from an IRA contribution or interest paid on student loans, and you do not itemize deductions.  

• If you don't meet the qualifications for the 1040EZ or the 1040A, you must use Form 1040.