With Tax Season Come Questions

I'm so proud of my husband. He has assembled all of our tax documents, and we've already dropped them off at our accountant's office.

This, my friends, is a first. This tax season we (okay, mostly he) won't be scrambling at the last minute to get our return done.

If you're doing the same -- getting your tax returns ready now -- I thought you might benefit from seeing the answers to some questions that folks recently sent in during an online discussion I had with James Dupree, the media-relations specialist in the Baltimore field office for the Internal Revenue Service.

For the past several years, Dupree has answered questions from readers either in the regular online chats I host or via an electronic newsletter I produce each week. (By the way, if you want to subscribe to the newsletter, go to http://www.washingtonpost.com/ . The e-mail newsletter, delivered every Thursday, will help you stay on top of the week's leading personal finance stories. I also offer tips and links to useful Web sites.) The first tax question comes from a mother in Mount Pleasant, S.C. She asked: "My son is a college student with unsubsidized Stafford loans. He pays the interest on the loans quarterly so it is not added to the loan. . . . We claim him as a dependent. He has some income from wages, interest and dividends. Can he deduct the interest on the Stafford loans from his 1040A?"

Dupree says the son cannot claim a student loan interest deduction for any year in which someone else claims him as a dependent. In addition, Dupree explained, the maximum deductible interest on a qualified student loan is $2,500 per return. Depending on your income, the deduction may be reduced or not allowed.

A reader from Arlington asked: "My husband has made some money this year doing handyman-type work. He always receives cash. How do we include these earnings on our taxes?"

Dupree didn't say this, but I will: Bravo to this couple for claiming the cash income. Many people wouldn't.

Anyway, use Schedule C or Schedule C-EZ to report the business earnings from this self-employment income, says Dupree. The C-EZ can be used if this man's business expenses are less than $5,000 and if he uses the cash method of accounting, does not have an inventory, does not have a net loss from his earnings, had no employees, does not use depreciation and is not taking any deduction for business use of his home.

In addition, if his net earnings are more than $433.13, he must file Schedule SE to pay Social Security and Medicare tax on these earnings.

During the chats, there have been increasingly more questions about the alternative minimum tax. The AMT is a separately figured tax that eliminates many deductions and credits. It was created to make sure the insanely rich don't get off without paying some taxes. But many middle- and upper-income people are being hit with the AMT.

Here's one worried taxpayer. "Are there any general guidelines for who is covered by the AMT? I'm single, no dependents, and made around $65,000 last year. I also have heavy deductions, including over $15,000 in medical expenses."

You may owe the AMT if, among other things, you claimed itemized deductions such as state and local income and property taxes, interest on home equity loans used for nonresidential purposes, medical expenses, and miscellaneous job and investment expenses.

The IRS has created a simple online tool with a list of questions to help you determine if you have to pay the AMT. You can find the "AMT Assistant" by going to http://www.irs.gov/ .

Now, what if you've already filed and you're waiting for a refund? One Arlington reader is wondering what's taking so long.

"I have e-filed for years and got my refund very quickly, so almost three weeks is driving me batty!"

Here's the IRS's official word on refunds. If you file a complete and accurate paper return and you are due a refund, it will be issued within six weeks of the date the agency receives it. If you file electronically, refund checks are generally issued within three weeks of the date you get electronic notice that the return has been received. (The IRS sends electronic proof of receipt within 48 hours.)

To check the progress of your current year refund, go to http://www.irs.gov/ and search for "Where's My Refund" or call the refund hotline at 800-829-1954.

There are several reasons for delayed refunds, according to Dupree. They include a name listed on the tax return that does not match the name on file with the Social Security Administration or a failure to either sign the return or include necessary attachments such as your Form W-2 or schedules.

Before sending off your return, you may want to read IRS Tax Topic 303 for a checklist of common errors people make when preparing their tax returns.

And remember that tax time is a great time to reassess your financial state of affairs.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.

· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

· By e-mail:singletarym@washpost.com.

Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.