Last minute que$tion$ & answer$

 and $ome good advice...

Most of you probably realize that April 17, 2000, is the last day on which you can mail your 1999 income tax returns without incurring the wrath of the IRS and the Indiana Department of Revenue. You have until midnight to get a valid postmark on your tax returns.

If you plan to wait until the last minute, be sure you go to a post office that is open and accepting tax returns. Placing your returns in a mailbox at a closed post office, where the returns won’t get postmarked until tomorrow, will result in tax returns that are filed late.

In Indianapolis, the post offices that are remaining open until midnight are the downtown post office, the Nora branch, and the Southport branch. There will be postal employees waiting outside to accept your tax return envelopes from your car window, so you can just drive up and drop off your returns. Be sure you put proper postage on the envelopes before you attempt to drop them off at post office – the late night postal workers picking up returns on the streets will not be selling stamps.

Valuing old clothes

How much should I claim for a box of clothes I donated to the Salvation Army? I wrote down how many of each item (shirts, pants, pajamas, etc.) that I donated, but I have no idea of the value and I was just given a vague receipt.

T.T., Indianpolis

Many people have asked me how to value donations of used clothing and household goods that are given to charity. The places that accept such donations do not attempt to value the items, nor does the IRS provide guidelines.

But here’s some good news. The Salvation Army has taken the mystery out of this valuation process with their helpful valuation guide, which is available at their Internet web site: http://www.salvationarmy-usaeast.org/find/locations/valuation_guide.htm.

The list provides a range of values. For example, a men’s suit is valued at $15 to $60, nightgowns are $4 to $12, a child’s coat is $4.50 to $20.00, a blanket is valued at $2.50 to $8. You can make your own determination of where in the valuation range your donation falls. Clothing that is newer or that shows little wear will be worth more. Items donated to charities in large cities might be valued higher than items donated in small towns if the charity stores can get a higher price for the items in a larger city.

Last minute extension

What form do I need to file an extension of my federal tax return?

B.P., Greencastle

You need Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The form needs to be filed by midnight, April 17. Keep in mind that filing the extension form does not extend your time to pay the tax; it is only an extension of time to fill out your tax return. The total tax payment is still due on April 17.

If you can’t pay the entire amount due with your tax return, you can request that the IRS put you on the installment plan. Do this by attaching Form 9465, Installment Agreement Request, to your tax return. On this form you will enter the amount you are paying with your tax return, and an amount that you will agree to pay on a monthly basis. You should plan to pay the entire amount of tax due in no more than three years. The IRS will notify you if they accept your installment request, or they may make some changes to the plan.

Be aware of the fact that requesting an installment agreement does not abate the penalties and interest that you will owe if you do not pay your entire tax on time.

Money from retirement funds

I took an early withdrawal in 1999 from my 401(k) fund for a hardship cause, and I need to know how to declare the money. I was not sent a 1099.

S.B., Indianapolis

You should have received a 1099-R form for your withdrawal, and this form might have been disguised as a letter instead of a regulation IRS form. But you don’t need the 1099-R form to enter the information properly on your 1040.

Enter the amount you withdrew on line 16(b) of your 1040. The amount you withdrew may not be subject to the early withdrawal penalty due to the rules that permit certain penalty-free withdrawals from your retirement fund.  Early distributions from a 401(k) plan that are not subject to the penalty include distributions for deductible medical expenses (even if you can’t itemize your deductions), and distributions that occur in connection with a disability.

If your distribution is subject to a 10% penalty for early withdrawal, multiply the taxable amount of the distribution by 10% and enter the result on line 53 of your 1040.