
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, March 28, 1994                   TAG: 9403250121
SECTION: MONEY                    PAGE: A-10   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

MAKING DO WITHOUT W-2 FROM EMPLOYER

Q: Last year, my daughter was employed for approximately six months in another state. She still has not received her W-2 form from this firm. We have made several phone calls and received various excuses, but still no W-2. Whom might we contact to apply some pressure to these people?

A: Your daughter may call the IRS toll-free number, (800) 829-1040. This is the Problem Resolution Office.

She will be asked the employer's name, address, telephone number and, if known, the Federal Employer Identification number. She will also be asked her address, Social Security number, her daytime telephone number, dates of employment, and her best estimate of her total wages and tax withholdings.

Assuming she still has not received a W-2 when it is time to file, she should obtain IRS Form 4852, which functions as a substitute for Form W-2.

This form asks for essentially the same information the IRS will request when she calls, but is filed with her tax return.

To ensure proper Social Security credit, she should also send a copy to the nearest Social Security Administration office if the employer is out of business or has filed for bankruptcy.

Answered by Terrence M. Clem of Miller, Morgan & Company.

Figuring municipals

Q: I would appreciate answers concerning municipal bonds and how they are handled on federal tax forms.

1. On a municipal tax-exempt bond which you buy at a premium, it is my understanding that you must amortize the premium and decrease your basis in the bond by the amount of the amortizable bond premium. How is this amortization done and when is it reported? Where and how is this reported on the tax form? For example, if I purchase a $5,000 bond July 1 and pay a premium of $400, or $5,400. The bond pays 5 percent interest and has a maturity of 20 years.

2. Is accrued interest reported anywhere on federal tax forms? If I buy a $5,000 bond and pay $37.24 accrued interest, it is my understanding that I receive this accrued interest back on my next interest payment. When this bond is redeemed or called, what do I show as the cost of the bond to me? Is there any other entry that has to be made on the tax forms?

3. Is the discount taxable on tax-exempt bonds that are not an original issue? If so, how is this treated?

A: When you buy a municipal bond at a premium, you must amortize the premium and reduce your basis in the bond each year. This calculation must be done and kept for your files only, because none of the amortization is deductible on your income tax return.

If you hold the bond to maturity, amortization of the premium becomes irrelevant. However, if you sell the bond before it matures, you must compute the amortization for the time that you held the bond in order to know your basis in the bond and be able to compute the gain or loss on the sale.

If you purchased the bond after September 1985, you must compute amortization based on your yield to maturity, as determined by your basis in the bond and the compound interest rate. A detailed discussion of this method is beyond the scope of this article.

Basically the annual amortization is the difference between:

The amount of interest you actually received, and

The interest computed using actual yield percentage computed using the actual amount paid for the bond, less any amortization already computed.

Accrued interest purchased with a bond is deductible from the first interest payment that you receive.

If the interest is taxable, you should report the entire amount of interest received on Schedule B of your income tax return. On the next line of Schedule B, show the amount of purchased interest as a subtraction. If you bought the bond at face value plus the accrued interest, your basis in the bond will be the face value.

A discount on a bond that is not an original issue is not deductible. Your basis in this bond will be the amount you paid for the bond. Your basis will remain the same during the entire period that you hold the bond.

If the bond matures or is sold, you will report a capital gain or loss on the difference between the proceeds from the transaction and your original cost.

Whenever a bond is called or sold, you should report the proceeds on Schedule D. Show the amount you received for the bond and your basis in the bond determined by the rules outlined above.

Answered by Melinda Chitwood of Brown, Edwards & Company.

by CNB