Tax Changes Will Net Some Happy Returns

Just as retailers are coping with gift returns, it is time for most individuals to start dealing with returns of another kind: tax returns.

Starting this week, Americans will begin to receive their federal and state tax forms, signaling the beginning of the traditional tax filing season. And there are some changes that taxpayers should be aware of before they file their 1990 returns.

Both the Internal Revenue Service and California’s Franchise Tax Board have altered their basic “short” forms--the federal 1040A and California’s 540A--to allow elderly people with pension and retirement income to use the simpler return.

In the past, the 1040A and the 540A forms could not accommodate retirement income, so pensioners had to file the longer, more complex 1040 and 540 forms--complete with schedules, itemized deductions and copies of other tax returns filed that year. But this year, both the federal and state governments added lines to include retirement income, deductions and credits that primarily affect the elderly.

That should allow about 500,000 older Californians and about 4.5 million retirees nationwide to use the less-complex form. The catch: The forms are now just a touch more complex for everyone else.

“We don’t call it the short form any more because it’s longer than last year,” said Jim Reber, spokesman for the Franchise Tax Board in Sacramento. “We could have called it the longer-than-last-year’s but-still-relatively-short form, but that seemed a little excessive.”

Reber said the California form is now about five lines longer. The federal form has a whole new schedule, said Jan Gribbon, an IRS spokeswoman in Los Angeles.

Personal interest deductions have also fallen to 10% on federal tax returns. That means that the interest you pay on credit card debt and car and boat loans, among other things, is only 10% deductible for 1990 taxes. The deductions will be phased out completely next year.

Other changes on the federal tax forms primarily have to do with indexing for inflation. Among them:

* The personal exemption--the amount exempted from tax for you, your spouse and dependents--increases to $2,050 per person from $2,000.

* For those who do not itemize deductions, the standard deduction jumped for single taxpayers to $3,250 from $3,100 and to $5,450 from $5,200 for married couples.

* Tax tables have also been indexed for inflation, so you can earn a bit more in 1990 without jumping into a higher tax bracket.

* Those who use their cars for business and don’t get reimbursed for gasoline expenses will find that the IRS has gotten a bit more generous here too. Previously the government allowed you to deduct 25.5 cents per mile for the first 15,000 miles and only 15 cents a mile for additional miles. Now the standard mileage rate is 26 cents and it applies to all mileage, no matter how far you go for business.

Changes affecting Californians:

* Senior citizens aged 62 and older, who now get the state’s $58 tax credit, will have an extra box to check. This box allows them to give that $58 to finance political lobbying efforts, conduct meals-on-wheels programs and other senior-oriented organizations. The $58 is the taxpayers’ money, however. (It is not like checking the box on your federal return that instructs the federal government to give $1 to finance political campaigns. In this case, if you give, it reduces your refund by $58.)

* The Franchise Tax Board will also be assessing a bad check fee for the first time in its history. Starting Jan. 1, if your check to the board bounces, you’ll be socked with a penalty amounting to $15, or 2% of the total tax owed.

Meanwhile, both state and federal tax authorities are urging individuals to take advantage of their automated filing programs. These programs allow taxpayers to file their returns via computer, which allows them to get their refunds more quickly. California authorities are guaranteeing a two-week turnaround time for automated filers, while federal officials say refunds would go out within three weeks.

Those who file paper returns generally have to wait between four and 10 weeks for refund checks.

You generally must consult a tax adviser to fill out an automated return. However, some Volunteer Income Tax Assistance programs offer computerized filing. The VITA program provides free tax assistance to those who need it. Many colleges and community organizations sponsor the service.

Notably, the tax filing season is starting a few days later than usual this year. The IRS said it got into the holiday spirit and asked the Post Office to delay sending out the forms until this Friday--two days later than the typical mailing date the day after Christmas .

“We were just trying to give people a breather between Christmas and getting their tax forms,” Gribbon said.