3rd Annual AT Tax Time Thread

[CPA]

Mods, can we get a sticky please?

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 April 15th midnight filing, when you've finally filed it's better than sex! So, without further delay, I give you:

The 3rd Annual Anandtech Tax Time Thread!!!

First order of business, the legal mumbo jumbo:

All responses to questions (primarily from myself and EagleKeeper) 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.


Secondly, this is important people:

Please post all tax questions in this thread! I will NOT, I repeat, WILL NOT, respond to other threads. Additionaly, I strongly encourage all members to post your questions here for the benefit of others. Unless I know you and I like you, I will NOT respond to PMs (that's right, I discriminate - sue me!). 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.

Now, if you're an ambitious one, you can always trudge through the IRS website for help

--------------------------------------------------------------------------------------
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 dispell that myth please.

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.

Corporate return (S-Corps and other Corporations) - Wednesday, March 15, 2006

Sole Proprietorship return (normal, LLC or otherwise) - Monday, April 17, 2006*

Partnership return (normal, LLC or otherwise) - Monday, April 17, 2006*

Individual return (1040, 1040A or otherwise) - Monday, April 17, 2006*

*Because April 15 falls on a weekend, IRS does not require a postmark date until the following business day

Fortunately, or unfortunately depending on how you look at things, there weren't many tax changes this year. The biggest probably is the fact that the SUV loophole was closed for businesses. For 2005 you are only allowed to expense $25,000 for an SUV used in a business. edit - also, the car donation has changed. Now you can only deduct the value for what it was sold or the FMV if it was actually given to the needy. Most other changes were normal what I consider Cost of Living changes - normal changes for exemptions, deductions, rates, etc.

---------------------------------------------------------------------------------------------
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. I am not about to keep up with 43 different state codes. Therefore, I won't be answering 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. I think EagleKeeper and I 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 you actually do your taxes online. Even the IRS website has the ability for you to file online with simple filings.
-Help propugate any illegal tax schemes. Look, I like my CPA license. I don't have intent on losing it by helping you get around any tax law. 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.


Well, sorry for the long thread, but just like the IRS code, it takes a lot to do something simple. Now, let the questions begin.

 

[sniperruff]

good job. everyone's waiting for you to ask you questions =)

 

[GT1999]

I had an internship that started January of 2005. I accidentally filled out a form and they didn't take out any taxes for my first paycheck. This internship was also in a different state than where I currently reside. However, I claimed 0 exemptions on the rest of my ~12 paychecks. How will this affect my filing?

 

[dug777]

Kudos to you mate

Our EOFY is mid-year

 

[SarcasticDwarf]

Here's a somewhat related question. Next year I will be turning my sole proprietership into a 501(c)(3). I know that due to the complexity I will need to hire someone to do the taxes. How does one go about finding someone who can do it at a reasonable cost (I doubt it will bring in more than about $8k next year)?


For this year as a SP I just picked up TurboTax Premier with all the Schedule C guides, which I think will work.

 

[Ramma2]

Question

I've done quite a bit of selling on eBay this year, about $3000 worth. The majority of the items I sold were things I already owned, and sold them to get rid of it. About $700 of that money was from items that I bought with the sole purpose of selling for a profit.

What do I need to do for claiming this income? $2300 of the money I made was from selling stuff at a loss, does that somehow offset the items I sold for a profit?

And thank you so much for doing this thread every year, it is very useful!

 

[CPA]

Originally posted by: Geekish Thoughts
I had an internship that started January of 2005. I accidentally filled out a form and they didn't take out any taxes for my first paycheck. This internship was also in a different state than where I currently reside. However, I claimed 0 exemptions on the rest of my ~12 paychecks. How will this affect my filing?

That's hard to say. Dependent on your situation. Only way to really know is put in the numbers. Either way, though, it's too late to change anything. You will probably be fine, though, if you are worried you underpaid. I doubt that will be the case.

 

[MikeyIs4Dcats]

Originally posted by: Ramma2
Question

I've done quite a bit of selling on eBay this year, about $3000 worth. The majority of the items I sold were things I already owned, and sold them to get rid of it. About $700 of that money was from items that I bought with the sole purpose of selling for a profit.

What do I need to do for claiming this income? $2300 of the money I made was from selling stuff at a loss, does that somehow offset the items I sold for a profit?

And thank you so much for doing this thread every year, it is very useful!

shhhh! don't ask don't tell.

 

[iamwiz82]

What can be written off from the closing costs on a new house purchased this year? Points only?

 

[Maetryx]

I owned a rental property in another state and had been depreciating it as allowed (and depreciating some capital improvements like the roof and a replacement refrigerator).

But then, in a flury of activity, I sold my main home (of 3 years) and moved into the rental property mid-year. I incurred moving costs (of course) but was moving to take a job in the rental house's location.

Can you give me some hints as to what this all means? I think my capital gain on my main house is tax-free, and I think I can deduct my moving expenses. I suspect that turning a rental into a main home means only having profit/loss on it for half the year. Am I missing something important?

 

[DaveSimmons]

Some radio DJ said something about all cash donations to charities made after August being fully deductible because of Katrina.

1. Is this true?
2. Do you have to itemize (and give up your standard deduction) to claim this?

 

[Vincent]

My parents gave me some money to help out with the down payment for a house. Is there any tax-related paperwork I have to worry about? Thanks.

 

[HeroOfPellinor]

Here's one I wonder about every year.

I'm not self-employed but I work from home 50% of the time from a home office, that's my official work schedule. I always see that blurb on TurboTax about a home office deduction and experimented with some numbers but it seemed to have no appreciable impact. Can I take advantage of that deduction somehow?

 

[brtspears2]

I bought a home in November. I'm currently renting out a room in my home. How do I count this income? What kind of depreciation deductions can I take for renting this room out?

Also, if I paid a corrected property tax bill which is due Jan 2006, but paid it this month, could I deduct the payment?

 

[everman]

:music:
It's the most
Wonderful time
Of the year
:music:

oh wait...

 

[CPA]

Originally posted by: SarcasticDwarf
Here's a somewhat related question. Next year I will be turning my sole proprietership into a 501(c)(3). I know that due to the complexity I will need to hire someone to do the taxes. How does one go about finding someone who can do it at a reasonable cost (I doubt it will bring in more than about $8k next year)?


For this year as a SP I just picked up TurboTax Premier with all the Schedule C guides, which I think will work.

A question that does not have a simple answer. The best thing to do is ask acquantances or start cold-calling out of the yellow pages. Ask for references and explain your size and requirements. Get some bids and choose. Depending on their size, expertise and volume of work you will probably pay somewhere between $200 and $600/month.

 

[MikeyIs4Dcats]

c'mon Mods, make CPA sticky!

 

[CPA]

Originally posted by: Ramma2
Question

I've done quite a bit of selling on eBay this year, about $3000 worth. The majority of the items I sold were things I already owned, and sold them to get rid of it. About $700 of that money was from items that I bought with the sole purpose of selling for a profit.

What do I need to do for claiming this income? $2300 of the money I made was from selling stuff at a loss, does that somehow offset the items I sold for a profit?

And thank you so much for doing this thread every year, it is very useful!

you generally do not claim loss on sale of personal assets. And if you are not in the business, or show the intent of having a business to generate income on an ongoing basis, then you don't necessarily need to file for those that you sold and made a profit. In addition, you could argue that the profit you did make could be offset by the loss of the other products, if you were ever questioned.

Scroll about half way down this article for a discussion of intent.

 

[CPA]

Originally posted by: iamwiz82
What can be written off from the closing costs on a new house purchased this year? Points only?

points, prepaid interest and prepaid taxes. All other closing costs are added to the basis of your home (for selling purposes). You may get a statement from your mortgage company showing the amount paid.

edit: this is all moot if you can't itemize.

 

[gordita]

Question:

my wife got laid off last month and her previous employer sent her a letter stating she has about $2900 in her 401k account which she should take a lump sum payment to either a) self or b) rollover.
I've decided to rollover to a new traditional IRA with my discount brokerage.
so far so good.

now, she currently is taking a single grad level course at a university which is very much accredited.
the bill for that course is $3000.
I understand that with IRA's, I don't have to pay the 10% early distribution penalty if I use the $$$ for higher education.
so, as soon as the rollover is complete, can I withdraw all the IRA money and pay for this tuition?

I do understand that I will owe uncle Sam the fed and state taxes on the $2900 that I withdraw, but this will be when I file the 2006 return in 2007, which I am fine with.

the main question is, how do I show the IRS that I indeed used the distribution to pay for the tuition, assuming I'm going to give the university a personal check.

I would call my cpa but he is abroad on a 3-week holiday!!
any help would be greatly appreciated!

 

[CPA]

Originally posted by: Maetryx
I owned a rental property in another state and had been depreciating it as allowed (and depreciating some capital improvements like the roof and a replacement refrigerator).

But then, in a flury of activity, I sold my main home (of 3 years) and moved into the rental property mid-year. I incurred moving costs (of course) but was moving to take a job in the rental house's location.

Can you give me some hints as to what this all means? I think my capital gain on my main house is tax-free, and I think I can deduct my moving expenses. I suspect that turning a rental into a main home means only having profit/loss on it for half the year. Am I missing something important?

Moving expenses are not deductions, they are adjustments to your AGI. You must meet certain tests, but from the surface it looks as if you have. You are also allowed only to "deduct" for certain items. Easier, those that can't be deducted are meals, house-hunting costs and temporary living expenses, among others.

Depending on your gain. But my guess is that it wasn't $250K for a single, $500K for married and it's your first sale.

Rental propery - correct.

 

[AccruedExpenditure]

Did they patch the AMT?

 

[CPA]

Originally posted by: Vincent
My parents gave me some money to help out with the down payment for a house. Is there any tax-related paperwork I have to worry about? Thanks.

No.

 

[CPA]

Originally posted by: AccruedExpenditure
Did they patch the AMT?

F*** No. I'm still waiting and I'm going to get burned this year on it too, if I can't find anymore business deductions. sumuvabitch.

 

[CPA]

Originally posted by: HeroOfPellinor
Here's one I wonder about every year.

I'm not self-employed but I work from home 50% of the time from a home office, that's my official work schedule. I always see that blurb on TurboTax about a home office deduction and experimented with some numbers but it seemed to have no appreciable impact. Can I take advantage of that deduction somehow?

technically, you must use that portion of your home exclusively for business. It doesn't seem like that is the case.