The Last Word on IRA Deductibility

Question: Boy, I’ll bet your recent column about Individual Retirement Accounts drew some amazing response!

The last sentence in your column really threw me for a loop. My tax preparer was very explicit that I had lost my IRA deductibility because I am single with an income of about $90,000 a year. Although I showed her some of the articles I had collected that stated the same facts you did, she said she was positive that those writers were wrong.

So, when your column appeared, I called again. And now she says she is completely bewildered too. Good grief! The misinformation surrounding the status is just staggering.

Please perform a badly needed public service and get us all straightened out on this confusing subject: Can an individual with an income exceeding $35,000, whose employer does not provide a pension plan, still deduct for an IRA?

As you might imagine, I got killed on taxes this year (all I have is the interest and property tax on my house), so I am going to have to file an amended return if your answer is what I hope.--J.G.

Answer: There was a brief, abortive attempt made to call the latest tinkering with the federal income tax a “simplification.” When the laughter died down, Congress settled on “reform.” This was a “simplification” in about the same way that the stealth bomber is a simplification of Wilbur and Orville Wright’s original airplane design.

So, while we can sympathize with your tax preparer’s bafflement, both the IRS’s public affairs spokesman, Rob Giannangeli, and I will go on record here: As long as your employer doesn’t provide some sort of pension plan, you can still deduct your $2,000 IRA contribution regardless of your income. The income ceilings ($35,000 for a single person and $50,000 for a couple) prevail only if the employer provides pension coverage.

Be gentle with your tax preparer. These are confusing times.

Q: I have some 1975 Christmas stamps with a painting of a Madonna and child, but there is no amount (no letter, no number) on it, just “Christmas, U.S. Postage.” What are they worth?--K.S.

A: This question was prompted, no doubt, by our recent column devoted to the latest increase in postal rates and to the value of old A, B, C and D stamps.

Those 1975 Christmas stamps were a real freak, which some people, even to this day, think was an error on the part of the U.S. Postal Service.

Not so, according to the Postal Service’s public information officer, Dave Mazer. The Postal Service left the stamp undenominated for the simple reason that--just as with the most recent E stamp--the Postal Commission had requested an increase in the rate (which it has to do 10 months in advance), but it was unknown whether the rate would remain the same, 10 cents, or would go to 15 cents. Also unknown was when the rate would actually go into effect.

And, according to Frank Thomas, the Postal Service’s spokesman in Washington, “the traditional Christmas stamp is so popular--we start printing them, a billion of them, in August--that it was decided to go ahead and leave them undemonimated.

“As it turned out, though, the rate didn’t actually go into effect until Dec. 31, 1975, and so the Madonna stamp stood at 10 cents. After Christmas, Thomas said, they remained available for about another eight months but mainly for collectors. Anyone using them for regular postage after Dec. 31 had to add another 3-cent stamp.

Which, admittedly, is a long way around the barn to explain why that Madonna stamp you had is, today, worth 10 cents instead of 13 cents, which would normally be the case.

Q: I recently moved from San Pedro to El Toro, a distance of about 45 miles, or 1 to 1 1/2 hours driving time. My forwarded mail took a month to begin arriving at my new address, and forwarded mail that I still receive is dated about a month behind. I would feel better about the increase in stamp prices if I received better service!--M.B.

A: And the Postal Service’s Mazer couldn’t agree more with the cause of your frustration.

“She should have started receiving forwarded mail in about a week, and if, in two weeks, she still hadn’t gotten any, she should have filed an immediate complaint.”

There’s no real reason, or excuse, for what happened to you (and is, apparently, still happening to you), Mazer agrees. Distance itself has nothing to do with it--once an address change is received by your old post office, a notification is sent to your nearest computerized forwarding division office. The mail then goes to your new post office bearing that distinctive yellow forwarding label.

“The forwarding division office serving San Pedro and El Toro,” he adds, “is located in Long Beach, and it’s one of the busiest in the whole system.”

The Long Beach office, in fact, handles an average of 404,000 address changes a week (that’s 21 million address changes a year), which is comparable to the Los Angeles forwarding office.

“All of Southern California,” Mazer adds, “is made up of a pretty mobile society.”

A surprising number of people, however, still don’t notify the post office of their address change until the moving van is at the door, even though, in the vast majority of cases, they know full well when and where they are moving.

“Your old post office should really be notified a week or 10 days before the actual move and with some regular correspondents--your bank, mortgage company, utilities and so forth--we recommend notifying them about two to three weeks ahead of time,” he advises.

But you should also start squawking if, two weeks after you’ve moved in, nothing is showing up.