10th Annual Tax Thread - 2012

[EagleKeeper]

When I am doing the Taxes Taxact is asking for my wife's Business, she gets paid on a 1099. Do I just use her name, and then it asks for type of business (she buys gold and silver) and Activity codes not sure what to put here. Thanks

Use her name or leave it blank - makes no difference.

You will have to use their IRS provided search list to determine the proper code or use a catch all.

I suspect that the code is used to help filter in/out returns for review that have a Schedule C associated with them.

 

[slsmnaz]

Can I use an FSA for child care expenses and claim the child and dependent care credit for expenses over the $5k FSA limit?

Childcare cost for our one child is $600/mo = $7200. We use an FSA to cover $5000 of that. Can I then claim the $2200 on my taxes or can we only use one?

 

[yelo333]

Original post here: #418

Best to treat the house as a rental. When did the contract get signed. Considered it a rental from the month prior until sold.
It is better to not take the depreciation - it has to get recaptured when sold and it not worth the hassle.

While a rental; any expenses that you did to the property (directly or indirectly) can be expended off.

Maintenance costs
Vehicle usage related to the property becomes expenses.
Utility costs.
Phone costs proportional to related to the property.
Fees related to property, etc.

Mortgage payments, interest, taxes, insurance paid from start to real sale are written off using the Schedule E.

Income from the property would be what they actually paid you.

Much thanks for this. While filling out the forms, I also called the IRS hotline. They said since I have proof I was trying to sell, I could simply count it as "other income". Do you think what they told me makes some sense? If so, I think it would make things much easier for me. Notes from the call:

It remained a personal residence because I never intended to rent it. (contract w/ realtor and sales contract show it)
tax-wise, better as a personal residence because I can exclude the gain from the sale, if rental, then I can't exclude the gain

He asked me test questions to see if it was a rental - Did I intend to rent it?
publication 523 "selling your home"

Questions: advance rent: no Lease cancellation fee: no personal use: no intent to make a profit: no, just covered mortgage, real estate taxes etc.

I can count the rental income, even if it wasn't a rental property (example: printing company accepts rent on a printing press from someone, still a printing company, not a machinery rental company)

rental income is taxable, don't use schedule E, just report as "other income"
3 expenses: Insurance premiums are deductible, but only for the months that it was rented
same for the mortgage interest and real estate taxes

not part of schedule E - report income on line 21 (other income)
for those 3 expenses - report on the misc Itemized deductions line on sched A (subject to 2% limitation, that is 2% of adjustable gross income)
can itemize other income in other places not subject to the 2% limitation

 

[Dubb]

I had a 1982 series EE savings bond reach final maturity last year. I know I need to pay taxes on it for 2012, but I didn't get around to cashing it in until yesterday. I've got a slip from my back that lists the interest earned, though I'm not sure the 1099-int will show up in time. It looks like I can enter this into turbotax easy enough, I assume that box 3 (U.S. Treasury int) is where the interest will show up, but I'm not sure what I should put in the "received from" field - the bank that cashed it or "U.S. Treasury"?

 

[dbk]

Let's say an employer had its newly hired employee fill out a w-4 upon hiring. The employee received pay net of withholding for taxes throughout the year. End of the year comes around and the employee is handed a 1099-MISC instead of a w-2. The employer decides to refund the full year's amount of calculated withholding to the employee.

Is there anything wrong with this practice? Doesn't the w-4 establish and require that the employee receive a w-2 at the end of the year, by law?

What if the amount refunded to the employee is less than the calculated withholding for the entire year (employer kept it)?

 

[EagleKeeper]

Original post here: #418

Best to treat the house as a rental. When did the contract get signed. Considered it a rental from the month prior until sold.
It is better to not take the depreciation - it has to get recaptured when sold and it not worth the hassle.

While a rental; any expenses that you did to the property (directly or indirectly) can be expended off.

Maintenance costs
Vehicle usage related to the property becomes expenses.
Utility costs.
Phone costs proportional to related to the property.
Fees related to property, etc.

Mortgage payments, interest, taxes, insurance paid from start to real sale are written off using the Schedule E.

Income from the property would be what they actually paid you.

Much thanks for this. While filling out the forms, I also called the IRS hotline. They said since I have proof I was trying to sell, I could simply count it as "other income". Do you think what they told me makes some sense? If so, I think it would make things much easier for me. Notes from the call:

It remained a personal residence because I never intended to rent it. (contract w/ realtor and sales contract show it)
tax-wise, better as a personal residence because I can exclude the gain from the sale, if rental, then I can't exclude the gain

He asked me test questions to see if it was a rental - Did I intend to rent it?
publication 523 "selling your home"

Questions: advance rent: no Lease cancellation fee: no personal use: no intent to make a profit: no, just covered mortgage, real estate taxes etc.

I can count the rental income, even if it wasn't a rental property (example: printing company accepts rent on a printing press from someone, still a printing company, not a machinery rental company)

rental income is taxable, don't use schedule E, just report as "other income"
3 expenses: Insurance premiums are deductible, but only for the months that it was rented
same for the mortgage interest and real estate taxes

not part of schedule E - report income on line 21 (other income)
for those 3 expenses - report on the misc Itemized deductions line on sched A (subject to 2% limitation, that is 2% of adjustable gross income)
can itemize other income in other places not subject to the 2% limitation

the only problem with declaring the rental income as other; is that you will have the SS taxes on it.
Interest and taxes are deductible either way - comes out in the wash.


From my POV
The Capital gain would be the difference in the value of the property from the time you put it on the market until sold.

In other words; treat is as if it was sold to yourself and then you turned it into a rental prior to sale to the current owner. That would seem to be the capital gains.

Or if you want to ignore the rental aspect as the IRS stated; then pay the taxes on the rental income.
Figure between State, Federal, SS you will have close to 40%

 

[EagleKeeper]

I had a 1982 series EE savings bond reach final maturity last year. I know I need to pay taxes on it for 2012, but I didn't get around to cashing it in until yesterday. I've got a slip from my back that lists the interest earned, though I'm not sure the 1099-int will show up in time. It looks like I can enter this into turbotax easy enough, I assume that box 3 (U.S. Treasury int) is where the interest will show up, but I'm not sure what I should put in the "received from" field - the bank that cashed it or "U.S. Treasury"?

simple answer

 

[EagleKeeper]

Let's say an employer had its newly hired employee fill out a w-4 upon hiring. The employee received pay net of withholding for taxes throughout the year. End of the year comes around and the employee is handed a 1099-MISC instead of a w-2. The employer decides to refund the full year's amount of calculated withholding to the employee.

Is there anything wrong with this practice? Doesn't the w-4 establish and require that the employee receive a w-2 at the end of the year, by law?

What if the amount refunded to the employee is less than the calculated withholding for the entire year (employer kept it)?

Report to the IRS. in both cases

This is illegal and a way for the employer to avoid the employer mandated taxes to the Federal Government and state.

 

[AustinInDallas]

So I just accepted a new job. I am a Independent contractor that works solely from home. My company reimburses things like my internet, and any print supplies I have to buy. Curiously they said they couldn't reimburse a plane ticket to a convention, but they said they would just pay me the cost, and I would have to claim it on my taxes.
I have tons of questions, so where is a good place to start reading up on this stuff?(please dont say irs.gov)

 

[dbk]

So I just accepted a new job. I am a Independent contractor that works solely from home. My company reimburses things like my internet, and any print supplies I have to buy. Curiously they said they couldn't reimburse a plane ticket to a convention, but they said they would just pay me the cost, and I would have to claim it on my taxes.
I have tons of questions, so where is a good place to start reading up on this stuff?(please dont say irs.gov)

What do you mean when you say, "..they would just pay me the cost..." Isn't that basically saying that you would be reimbursed?

 

[AustinInDallas]

What do you mean when you say, "..they would just pay me the cost..." Isn't that basically saying that you would be reimbursed?

from my understanding...
i usually receive checks for work. then once a month i get a separate check for reimbursements.
They said that reimbursement for airline/hotel/etc would just be added to my pay, and at the end of the year, I would have to deduct it from my taxes

 

[Xcobra]

from my understanding...
i usually receive checks for work. then once a month i get a separate check for reimbursements.
They said that reimbursement for airline/hotel/etc would just be added to my pay, and at the end of the year, I would have to deduct it from my taxes

That means that on top of the income they are paying for the work, they would include the reimbursements they pay to you (i.e. 1,000 a month + 250 for flights is 1,250, etc.). Then in turn, you can deduct these as expenses (remember to use Schedule C) on your returns.

It is essentially a wash but remember to deduct any other expenses you incur in relation to the contract work.

 

[AustinInDallas]

That means that on top of the income they are paying for the work, they would include the reimbursements they pay to you (i.e. 1,000 a month + 250 for flights is 1,250, etc.). Then in turn, you can deduct these as expenses (remember to use Schedule C) on your returns.

It is essentially a wash but remember to deduct any other expenses you incur in relation to the contract work.

where can i find info on what all i can deduct? independent contractor with at home office.

ps. so basically everything they pay me is considered taxable income (even if it is like a reimbursement for ink/paper/etc) and I just need to submit every receipt from everything?(cable bill/etc)

 

[EagleKeeper]

where can i find info on what all i can deduct? independent contractor with at home office.

ps. so basically everything they pay me is considered taxable income (even if it is like a reimbursement for ink/paper/etc) and I just need to submit every receipt from everything?(cable bill/etc)

With the exception of meals/sleeping arrangements when at home; anything that is directly related to the creation of income and proportionally indirectly related is fair game.

Until you get used to doing this; keep a log of EVERYTHING that you spend (to the last $). This does not just need to be work related expenses.

Code each item under 1 of four categories.
1) Not spent if not for work
2) Used both for work and for personal
3) Used for personal, but supports work
4) Personal use only.

Recommend at the end of each month, you re-evaluate #2,3,4 to see if they can be bumped up.

Spreadsheets are nice. split up into the Schedule C line items up front.
Assign your item in Category #1, 2, 3.

At the end of the year, determine the percentage applicable for items in Categories #2,#3

I scan receipts and save as a PDF file; In my spreadsheet, I indicate the file name for the item.
Avoids having to keep track of paper.
Spreadsheet gets burned onto a CD after tax time.

 

[AustinInDallas]

Thanks for advice. Do you have a fee (PayPal?) For a short phone conversation if I have more questions?

 

[EagleKeeper]

Advice here on AT is always offered as a way to help all.

Also, I have an ulterior motive, prevent the government from getting extra money that it does not deserve.

 

[highland145]

Advice here on AT is always offered as a way to help all.

Also, I have an ulterior motive, prevent the government from getting extra money that it does not deserve.

Death tax, they're gonna get it.


Thanks for your help/work/effort/etc.

 

[EagleKeeper]

Death tax, they're gonna get it.


Thanks for your help/work/effort/etc.

Spend it first at the last minute

 

[steppinthrax]

Do you depreciate rental property each year.

In turbo tax I entered in the Cost, Land and prior depreciation of a rental property for last year. It carried everything over into the next year, almost like your doing this each year. Is this normal?

 

[EagleKeeper]

Do you depreciate rental property each year.

In turbo tax I entered in the Cost, Land and prior depreciation of a rental property for last year. It carried everything over into the next year, almost like your doing this each year. Is this normal?

The depreciation is a fixed amount for each year. Unsure of exact formula, but below is rough examples

300,000 total cost.
10% land cost
270,000 building value

IRS says building good for 27 years.
That means every year the building looses 10,000 that is a loss to write off.

The rate is fixed, not accelerated

 

[Pardus]

this may of been asked already, however, if someone is going to work independently as a sales person for a company and uses there own vehicle and laptop as part of the business, can the person deduct the following:

monthly car payment or lease
cost of gas
cost of car repairs/breakdown
tolls
cost of laptop and printer
paper, pens, ink, etc.
cell phone and cell phone plan
clothes--suits, etc.

is there a list of what's allowed and not allowed for deductions.

thanks.

 

[EagleKeeper]

this may of been asked already, however, if someone is going to work independently as a sales person for a company and uses there own vehicle and laptop as part of the business, can the person deduct the following:

monthly car payment or lease
cost of gas
cost of car repairs/breakdown
tolls
cost of laptop and printer
paper, pens, ink, etc.
cell phone and cell phone plan
clothes--suits, etc.

is there a list of what's allowed and not allowed for deductions.

thanks.

with exception of clothing, your are covered.

Dig through previous Tax threads for additional ideas that have been posted.

 

[steppinthrax]

The depreciation is a fixed amount for each year. Unsure of exact formula, but below is rough examples

300,000 total cost.
10% land cost
270,000 building value

IRS says building good for 27 years.
That means every year the building looses 10,000 that is a loss to write off.

The rate is fixed, not accelerated

Yep, I did some research and this is what I"m seeing. My basis was 160 and there were some other numbers put in there, so it comes to around 4K per year depreciation. How does this play when I go to sell the place, I will pay this depreciation back?

 

[EagleKeeper]

Yep, I did some research and this is what I"m seeing. My basis was 160 and there were some other numbers put in there, so it comes to around 4K per year depreciation. How does this play when I go to sell the place, I will pay this depreciation back?

You are supposed to declare the recapture of depreciation on your taxes the year you sell it if it still has been used as a income.

However, the IRS expects that the building will be worth less due to age and that you may be selling it for a loss.

The loss would offset the recapture - fat chance

You begin to depreciate your rental property when you place it in service for the production of income. You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first.

You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events.

You sell or exchange the property.

You convert the property to personal use.

You abandon the property.

The property is destroyed.

the above indicates when you can stop depreciating.

I have yet to discover the rules for what happens when a depreciated rental is converted to personal

 

[Dubb]

I had a 1982 series EE savings bond reach final maturity last year. I know I need to pay taxes on it for 2012, but I didn't get around to cashing it in until yesterday. I've got a slip from my back that lists the interest earned, though I'm not sure the 1099-int will show up in time. It looks like I can enter this into turbotax easy enough, I assume that box 3 (U.S. Treasury int) is where the interest will show up, but I'm not sure what I should put in the "received from" field - the bank that cashed it or "U.S. Treasury"?

one more question on this. I've got everything wrapped up and entered in to turbotax, but it keeps throwing an error because the date of sale is 2013 instead of 2012. Will the irs have any problem with this or is it a simple matter of turbotax not understanding that the taxes are due for the year of final maturity?