10th Annual Tax Thread - 2012

[EagleKeeper]

Well boys and girls it's that time of year again. While at times the thousands of regs and tens of thousands of cumbersome forms, worksheets and pages of codes seem infuriating, deep down you all know you love it. Whether it's keeping things in order all year for a quick mid-February filing or a knuckle-clenching, bullet sweating the current April 15th midnight filing, when you've finally filed it's better than sex! So, without further delay, we give you:

The 10th Annual Anandtech Tax Time Thread!!!

First order of business:
Gratutities can be sent to the Moderator beer fund for allowing this thread to be placed every year.:whiste:
That fund was very low last year. Some Moderators have made the supreme sacrifice by resigning to help reduce the overhead costs.

Now the legal mumbo jumbo:

All responses to questions (primarily from myself and CPA along with some other valued contributors) are based on our knowledge and understanding of the current tax code. That said, we do not expressly give permission to use our opinions and responses as sole binding measure for any user, the intended or not. Seek out a local expert and a second opinion with any tax inquiry. We will not be held liable for any audit, fine, penalty or other consequence due to any user basing a filing primarily on our responses. In other words, you're on your own.

Please understand that the service provided here is not to be considered as the final say in any tax related question or issue. We advise everyone to take caution with accepting the answers posted here and seek a good tax accountant or tax lawyer when necessary, especially those pesky complicated questions. Additionally Anandtech nor Anand have endorsed myself or the other benevolent responders in this thread. So please don't complain to them if you feel like you got a bogus answer. Finally, this thread is NOT meant to offer advice nor do your taxes for you. It is solely to help clear up questions, concerns or misunderstandings that you may have concerning the 2012 Tax Code. None of the responders take responsibility for your final tax preparation. You do!

Secondly, this is important people:

Please post all tax questions in this thread! We will not, REPEAT, WILL NOT, intend to respond to other threads. We strongly encourage all members to post your questions here for the benefit of others. We will NOT respond to PMs unless we request one from you or if there is personal information that can not be scrubbed to support a question. And finally, please, for the love of all that's good in the world, read through the thread, there is a good chance your question has already been asked and answered. We know that such is inconvenient, but you may also pick up unknown tidbits of useful information at the same time

Questions that have been answered, will be indicated as such, you will have to dig through the thread anyhow to find it. Should your question have been answered previously, anticipate that sarcasm will be the response. The other threads have been archived and the search function works (now we are on vB).

If the below saves one ATOT member from being a sucker, it will be worth the typing:

**** Warning - Snapshot of IRS Phishing E-Mail ****
IRS Privacy Page

PLEASE NOTE: Do not respond to unsolicited e-mails that claim to come from the IRS, or any e-mail from an unknown party asking you to submit personal, tax, or financial data. The Internal Revenue Service does not use e-mail to request this type of information. Forward suspicious emails to: phishing@irs.gov

If you E-File, the provider will inform you of the estimated time to have a refund issued.
If you mail, please allow a MINIMUM of extra 2 weeks for a refund to be processed.
A good rule is to allow an extra additional week in addition to above, for each month that you delay filing.
Allow an extra week if the funds are being mailed to you instead of being direct deposit.


Now, if you're an ambitious one, you can always trudge through the IRS website for help. Most of our technical answers will come from it

Oh, and again please, try not to PM us or any of the other responders unless you are asked to. Instead, post your question here for all to see, because chances are there is another member with a similar issue. The Mods have been requested to lock any/all other threads that show up dealing with tax issues.

---------------------------------------------------------------------------------------------
Okay, moving on. This thread is NOT intended to:

-Answer state tax questions. Sorry folks, states are their own beasts. They all have different rules and regs, heck 7 states don't even have income taxes. We are not about to keep up with 43 different state codes. Therefore, we won't be answering specific state questions. The best way to get an answer for a state question is to call up the State Treasury or Revenue Dept.

- Endorse any tax software. We can safely say that most of the software does it's job well. Without recommending any particular one, you can choose TaxAct, TaxCut, or TurboTax. Additionally, these and many more sites assist you in actually doing your taxes online. Even the IRS website has the ability for you to file online with simple filings.

-Help propagate any illegal tax schemes. Some of us do not appreciate the hospitality of the Federal Government. So keep your schemes out of this thread. Thanks for understanding.

- Start any arguments between the current system, flat tax, national sales tax or any other tax opinion. The thread is to help people, not debate, flame or troll. The Moderators will be asked to intervene for the latter items as needed.
- Some states have their own online filing - check before you pay for state filing.

We also very busy this year, so may not be responding to questions as fast as in the previous years. However, we have good knowledgeable people that will help to fill in the gaps.

There have been some changes which as we dig them out will be updated in this original post. The IRS no longer makes these easily identified in one common area.

• PMI - It is still able to be deducted - You need to request a new 1098 if not shown
• Energy Credit - It is still able to be deducted

For those of you who enjoy torturing yourself, We present the IRS Web Site. However, this site also has most of the answers also. Hard to find, but they will be there.


Previous ATOT Tax Threads for reference

• 2003
• 2004
• 2005
• 2006
• 2007
• 2008
• 2009
• 2010
• 2011

The two sites below have restrictions on their usage and any returns must be started through above links for them to be considered for no charge.
they are not available until mid-January

Federal/Intuit Tax Freedom
State/Intuit Tax Freedom

TaxAct states free filing using their online version for Federal.


H&R Block Product Comparison Chart: (not an endorsement)

Chart

All the three main biggies (TurboTax, TaxCut and TaxAct) do the job. Each has slightly different user interfaces and their quirks/irritations. They continually look at the competition and attempt to match them in features the following year. All three area able to import datafiles from each other.

Each attempts to sell you the Basic Federal package in fancier terms. What you get is added support/documentation.
The internal S/W is still the same - supports all forms that a person will need for themselves, investments (Stocks/bonds/Interest and rental property) and Small Business use.

Some will allow multiple Federal efiles for the same license.

All three have state filing.
However, if you have multiple states to work with, you MUST USUALLY purchase a copy for each state that you need to work with.


Some IRS and other Tax Links may not be fully operational until mid January or later



Okay, now that that stuff is out of the way, let's get to some helpful insight.

Deadlines (midnight of the date listed for filing deadlines)

W2 - Companies are required to have your W2 POSTMARKED by January 31st. It is NOT required that you have it in your hands by that date. Let's dispel that myth please.
If you do not receive it by mid February; for ex-employers, call the employer and ask for a copy to be Faxed to you. For current employers, contact your HR department.

1099 - Companies are required to have your W2 POSTMARKED by January 31st. It is NOT required that you have it in your hands by that date. If you do not receive it by mid February, call the employer and ask for a copy to be faxed to you or email a PDF. Note: 1099s do not have to be sent to you. Individuals that could receive a 1099 are responsible for tracking their own income.

Most Federal returns - 15 April 2013

IRS FAQ Index - contains links for below areas

• IRS Procedures
• Filing Requirements/Status/Dependents/Exemptions
• Itemized Deductions/Standard Deductions
• Interest/Dividends/Other Types of Income
• Pensions and Annuities
• Social Security Income
• Child Care Credit/Other Credits
• Earned Income Tax Credit
• Estimated Tax
• Capital Gains, Losses/Sale of Home
• Sale or Trade of Business, Depreciation, Rentals
• Small Business/Self-Employed/Other Business
• Aliens and U.S. Citizens Living Abroad
• Electronic Filing (e-file)
• Magnetic Media Filers
• Other (Alternative Minimum Tax, Estates, Trusts, Tax Shelters, State Tax Inquiries)
• Individual Retirement Arrangements (IRAs)

Free Filing - via IRS

Check back in January to file your 2012 Free File return.

EVERYONE is Eligible to Free File!

Let Free File do the hard work for you with brand-name software or online Fillable Forms. You can prepare and e-file your federal return for free. Participating software companies make their products available through the IRS. Some also support state tax returns (not always free).

Some useful tidbits accumulated from previous years.

Dependants:

Significant others are able to be declared as a dependent if you provide the support according to the IRS guidelines. (I would not push it with multiple SO at the same time ...)SO's children are now allowed based on a IRS notice of 3/08. This can also be used retroactively for the past 3 years.

You are a dependent of your parents if you are under 18 (24 if in school) unless:
You have stood on your own for more than 6 months. Just because you paid for your tuition costs does not mean that you are not a dependent.
Your parents have the option of not declaring you and letting you stand on your own.

If you cover more than 50% TOTAL of living expenses for a "legal" (per IRS definition +/- two generations) relative they can be declared as a dependent.

You can not claim a spouse as a Dependent if filing as Head Of Household

1099

If you get paid with a 1099, you have the option of filing it with your 1040/1040A under misc income or using the Schedule C. Use of the Schedule C (requires a 1040) and allows you to write off expenses directly and some portion indirectly related to that income before taxes. Previous tax threads have provided guidance on items that could be used as expenses in on capacity or another.
Income earned via a 1099 is also subject to the self employment tax as well as the normal expected W2 type taxes.

Mileage - (New numbers are posted)

55.5 cents per mile for business miles
23.0 cents per mile driven for moving purposes
23.0 cents per mile driven for medical purposes
14.0 cents per mile driven in service to a charitable organization

Commuting is not deductible expenses.
Commuting between two jobs is.
Mileage to/from school while working (if the education if not primary - ie it supports work) is a deductible expense on the Form 2106 (which requires 1040 and Schedule A).
If school can be considered as supportive of business income, the tuition, fees, books and mileage become a business expense on the Schedule C. Otherwise use the 2106
You can not claim mileage and expenses on the same vehicle.

Moving

Expenses incurred when changing work locations (for any reason) if the location meets the distance test of 50 miles is filed on the Form 3903 and does NOT require a schedule A.

Sales Tax (Still Valid for 2012)

Sales tax is still allowed as an itemized deduction this year. While it can be a little complicated, the main points of this deduction are:
a. Publication 600 is the main reference for this deduction and contains the tables for those of us who didn't keep your receipts all year long.
b. Anyone who itemized can take it, regardless of what state you are in, BUT, if you live in a state with local/state income tax you have to choose to use the sales tax or income tax deduction. You CAN'T have both.
Sales Tax Calculator

Interest Reporting

You are responsible to report interest /dividends over $1.
The payee is responsible for providing you a 1099 form when the payment is over $10.

Business Expense write offs.

Unless your have Self Employment income (use the Schedule C) expenses must fall under the Form 2106 using the Schedule A (Itemizations)

Expenses for clothing is not deductible, unless those items can not be worn out in public for normal use and/or private functions.
Example:
If you have to wear a suit for work, you can not deduct the cost of the suit and dry cleaning.
If you have a military or other Government service type uniform, it is deductible.

Students:

American Opportunity is for expenses. (Complex formula)
Hope Credit is for tuition for the first 2 years of college. = 50%
Lifetime Learning Credit is for any other type of educational advancement. = 20%
Note: If your parents claim you as a dependent, they get the Credits, no matter who pays the tuition.
Note: If filing separately, NO educational credits can be claimed for self.

Books, laptops, etc do not qualify. Those would have to be entered as expenses on the Form 2106 for those that use Schedule A.


No Double Benefit Allowed
You cannot do any of the following:

Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses.

Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student.

Claim a lifetime learning credit and a Hope credit based on the same qualified education expenses.

Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a covered education savings account (ESA) or qualified tuition program (QTP). See Coordination With Hope and Lifetime Learning Credits in Chapter 7 and Chapter 8 (QTP).

Claim a credit based on qualified education expenses paid with a tax-free scholarship, grant, or employer-provided educational assistance. See Adjustments to Qualified Education Expenses, later.

AMT

2011 AMT Exemption levels
Single $48,450
Married Jointly $74,450
Married Separately $37,225

2012 AMT Exemption levels
S $33,750
MJ $45,000
MS $22,500

Well, sorry for the long post, but just like the IRS code, it takes a lot to do something simple. We have tried to organize it for easier reading by using the quoting method to section areas off.

AGAIN
Questions already answered in the thread may be responded to as "all ready answered". If so, you will <gasp> actually have to read this thread


Everyone has heard about the fiscal cliff that we are heading toward because the GOVERNMENT can not get it's act together. So it is very possible that information may change.
If so; we will attempt to update this OP for references. Now, let the questions begin.

 

[SunnyD]

First!

Just wanted to preemptively say thanks for all the work you and CPA (and the others that I can't remember who tend to jump in from time to time) do in the annual thread. Valuable service that I can't believe you guys don't charge for. Or do you... :sneaky:

 

[Cal166]

Awesome!

I have a question about filling a W4 form as my wife recent got a new job. First time doing it as we got married recently and we're planning to file jointly for 2013 and was wondering if she should do Married with a 0 or Married but withhold at a higher Single rate with a 1?

TIA

 

[EagleKeeper]

First!

Just wanted to preemptively say thanks for all the work you and CPA (and the others that I can't remember who tend to jump in from time to time) do in the annual thread. Valuable service that I can't believe you guys don't charge for. Or do you... :sneaky:

See second paragraph in OP

 

[EagleKeeper]

Awesome!

I have a question about filling a W4 form as my wife recent got a new job. First time doing it as we got married recently and we're planning to file jointly for 2013 and was wondering if she should do Married with a 0 or Married but withhold at a higher Single rate with a 1?

TIA

Much depends on if you are using the government as a bank for a refund (no interest) or do you want the funds immediately.

If the sum of your withholding exemptions is # of people in household;

• # - you should come out with some refund.
• #+1 gets you extra every paycheck and you come close to even at end of the year.
• <# gets you a bigger refund

 

[rudeguy]

can we keep that CPA guy out of it this time? He always posts like he knows what he's talking about

 

[brianmanahan]

i cashed out all but one of my individual stocks this year in taxable, figured i would take the tax hit now. been meaning to move them to an index fund for a couple years anyway.

 

[olds]

Thanks for doing this again! We appreciate it.

Something I never considered till I have gotten older. Is a life insurance payout taxable?

I have term life insurance on myself and can add an accidental death policy through an organization I do business for fairly cheap.

Thanks again.

 

[EagleKeeper]

Thanks for doing this again! We appreciate it.

Something I never considered till I have gotten older. Is a life insurance payout taxable?

I have term life insurance on myself and can add an accidental death policy through an organization I do business for fairly cheap.

Thanks again.

Life insurance proceeds are not considered to be taxable. In life (advance payouts) or death.

Same for accident payouts for medical pain/suffering

 

[olds]

Thanks, sweetie.

 

[brianmanahan]

Thanks, sweetie.

thread jus got awkward

 

[Fingolfin269]

Built a house with the girlfriend, we live together in the house but are not married. I sold my place this year but she is still trying to sell hers. The house we built was one where we controlled the money, paid for everything, have all the receipts, etc. What's the best route for us to take at a high level? Would it be worth talking to a pro this year?

 

[EagleKeeper]

Built a house with the girlfriend, we live together in the house but are not married. I sold my place this year but she is still trying to sell hers. The house we built was one where we controlled the money, paid for everything, have all the receipts, etc. What's the best route for us to take at a high level? Would it be worth talking to a pro this year?

Either 50-50 for everything deductible or a percentage based on income.

Anything else becomes tricky if you have to explain it to Uncle. If you desire to throw away $$; consult a tax pro.

 

[CPA]

can we keep that CPA guy out of it this time? He always posts like he knows what he's talking about

As the venerable Sargeant Schultz used to proclaim - "I know Nothing"

 

[brianmanahan]

As the venerable Sargeant Schultz used to proclaim - "I know Nothing"

plus you are both nazis

jk, lol

 

[CPA]

Folks, just want to make one comment about the opening post. The AMT tax exemptions reverted to pre-2010 levels this year, which is NOT GOOD. Good news is that there has already been a committee recommendation to adjust AMT exemptions up to amounts slightly higher than 2011. This is regardless of what happens next week with the budget talks.

If it doesn't, many of us are screwed.

 

[CPA]

plus you are both nazis

lol

 

[Fingolfin269]

Either 50-50 for everything deductible or a percentage based on income.

Anything else becomes tricky if you have to explain it to Uncle. If you desire to throw away $$; consult a tax pro.

Thanks for the advice . Our incomes are pretty different so it may make more sense to go with the percentage split.

And we definitely have no desire to throw away $$.

 

[vshah]

question regarding 401k rollover to an IRA:

i finally got off my ass and started the process. I have the check from my 401k institution in hand, just need to either mail it or drop it off with fidelity. I know have 60 days to do this in order to avoid tax penalties - does the tax year ending in a few days have any impact on that?

Meaning - if I wait till 2013 to deposit the funds in an IRA, will they count as 2012 income? (The check is made payable to Fidelity Investments, I obviously won't be cashing it myself). I'm thinking the answer is no - it won't count as income since i'm not cashing the check, but I just wanted to be sure.

Thanks!

 

[CPA]

question regarding 401k rollover to an IRA:

i finally got off my ass and started the process. I have the check from my 401k institution in hand, just need to either mail it or drop it off with fidelity. I know have 60 days to do this in order to avoid tax penalties - does the tax year ending in a few days have any impact on that?

Meaning - if I wait till 2013 to deposit the funds in an IRA, will they count as 2012 income? (The check is made payable to Fidelity Investments, I obviously won't be cashing it myself). I'm thinking the answer is no - it won't count as income since i'm not cashing the check, but I just wanted to be sure.

Thanks!

No, just get it deposited within the 60 days.

 

[vshah]

No, just get it deposited within the 60 days.

excellent, thank you very much!

 

[EagleKeeper]

excellent, thank you very much!

Make sure Fidelity knows that this is for a 2012 account if you deposit in in 2013

 

[vshah]

Make sure Fidelity knows that this is for a 2012 account if you deposit in in 2013

I see...pardon my noobishness, but what difference does that make?

 

[EagleKeeper]

I see...pardon my noobishness, but what difference does that make?

If it get credited for 2013; you may be in violation of rolling over the distribution.

Best to not take chances. Just attach a sticky to the check stating that this is for the 2012 tax year.

 

[vshah]

If it get credited for 2013; you may be in violation of rolling over the distribution.

Best to not take chances. Just attach a sticky to the check stating that this is for the 2012 tax year.

got it - i plan to drop it off in person so I'll just tell them then. Thanks!