The power of deductive logic
By Bob and Brad
 

Bob: Instead of answering a reader's question, this column focuses on Brad's sleuthing between the lines of Form 1040 for tax year 2002. So what have you got for our tax-smart frogs, Sherlock?

Brad: First, smart frogs should know there is plenty of evidence that the evil professor Moriarty is alive and well, my dear Watson. And it looks like he's deep inside the IRS; there are just too many clues! Look at this one: The IRS says that the fees credit card companies charge to allow you to pay federal income taxes with plastic are not deductible. Just about any other expenses associated with paying your federal income taxes are--from preparation fees to postage. Now that's diabolical!

Bob: Are there other signs of evil genius?

Brad: Well, what about this! There is a new line 23 on the front side of Form 1040 labeled "educator expenses." On this line, educators supposedly can deduct up to $250 worth of teaching-related expenses from their gross income and thus lower their taxable income. But what makes it diabolical is that the term "educator expenses" refers to items purchased for classroom supplies, such as paper and pencils, poster paper, maps and computer programs for the students' use. Real educator expenses such as professional books and journals, professional travel, union dues, uniforms, fingerprinting and other professional expenses still have to be deducted on Schedule A, where they are subject to the 2 percent of adjusted gross income threshold.

Bob: So, Sherlock, what you are describing smacks of the master of disguise! They call it "educator expenses" to confuse the general public, but what it really is about is giving a deduction to teachers who make donations to make up for school supply budget shortfalls.

Brad: Precisely, and not much of a deduction at that. An educator in the 27 percent tax bracket spending $250 of his or her hard-earned salary on classroom supplies would receive a "generous" tax refund of $67.50. That's a pretty good deal--for the government.

Bob: So who exactly among our educators is eligible to receive this deduction?

Brad: Elementary, my dear Watson--and for that matter--kindergarten and secondary teachers and administrators who work full time during the school year as well. But community college and other higher education professionals are excluded from a deduction on line 23. For them, things are unchanged. They still have to file Schedule A and, in many cases, Form 2106, Unreimbursed Employee Expenses, to receive any deductions for items purchased for their classrooms.

Bob: But is this really the work of the evil Moriarty? What about the promises of tax simplification we heard so much about during the last elections?

Brad: Come, let's take a look at Form 1040. Are there more lines in 1040 for 2002 than before, or fewer? Are there more worksheets to file with forms that accompany 1040, or fewer? Are there more taxpayers filing the Alternative Minimum Tax Form, or fewer? In every case, the correct answer is "more."

Bob: Anything else our smart frogs need to know for 2002 and 2003?

Brad: If they have adult children who are just starting careers, it might be a good idea to see if the children qualify for the Saver's Tax Credit. A $2,000 IRA contribution can lead to a $1,000 credit toward taxes owed. That's a nice bonus to help get started for retirement. And with compound interest, the earlier a person starts an IRA, the more money it will accumulate.

Brad Glanville and Bob Fischer are professors at California State University-Chico, AFT members and authors of Educators' Tax Guide, 2003 Edition, which locals can purchase at volume discount prices. Contact the authors at Tax Talk, c/o ETPS, 2260 St. George Lane, Suite #5, Chico, CA 95926 or e-mail at etps@aol.com, or visit their Web site at www.etpsbooks.com/.