Thursday, March 30, 2000
Tax complaint may lead to change
Local man shows quirk in savings rule
BY DERRICK DePLEDGE
Gannett News Service
WASHINGTON With all the fuss over a new baby and the crush of the holidays, John Michel and his wife, Nora, forgot a promise.
After their first child, Ma deline, was born in early 1997, the Michels put $500 in an education savings account for college. They wanted to do the same when Trent came along in December 1998, but they didn't find time until January.
It was too late. The deadline for contributions expired at the end of December, unlike Individual Retirement Accounts, which typically allow donations by April 15 to count toward the previous tax year.
I thought it was very un usual, said Mr. Michel, a tax partner and accountant with Grant Thornton LLP in Cincinnati. It just adds complexity and confusion.
Mr. Michel thinks the quirk discourages parents from saving, so he asked Rep. Steve Chabot, R-Cincinnati, to amend the federal tax code on the basis of fairness. The House of Representatives is likely to vote today on Mr. Michel's request along with several other education incentives.
It made sense, Mr. Chabot said. Clearly this was hurting families. It was keeping families from saving for their kids' education.
Many families do not calculate their precise income or tax burden until the first few months of the year and may not know by December whether they qualify for education savings accounts. The accounts are reserved for people who earn less than $110,000 and file single tax returns or $160,000 for those who file joint returns.
Donations to the accounts are not tax deductible, but withdrawals are tax-free if the money is used to pay for books, school supplies or college tuition.
Mr. Michel said he and his wife expect to send their children to private schools. We're far from being wealthy, he said. It doesn't seem like the dollar amounts we're talking about five hundred a year will achieve our long-term objective.
Mr. Chabot also wants the contribution limit raised. You hear people say, "If you want to complain, write your congressman,' he said. Well, sometimes it works.
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