3rd Annual AT Tax Time Thread

[joelmold]

a friend asked me to research this question:

he's a full time undergrad student. not working, but he does receive gi bill money for school (about $13000 per year). is this considered taxable income? i suspect so.

also, he took a 100% distribution from his ira and uses this money to pay his living/education expenses. the distribution was about $8500. the real question is, he put about $10000 into the ira over the past few years but lost money so he ended up with less. can he claim this as a loss? does the penalty tax for early withdrawal apply in this case?

many thanks,
joel

 

[EagleKeeper]

Originally posted by: joelmold
a friend asked me to research this question:

he's a full time undergrad student. not working, but he does receive gi bill money for school (about $13000 per year). is this considered taxable income? i suspect so.

also, he took a 100% distribution from his ira and uses this money to pay his living/education expenses. the distribution was about $8500. the real question is, he put about $10000 into the ira over the past few years but lost money so he ended up with less. can he claim this as a loss? does the penalty tax for early withdrawal apply in this case?

many thanks,
joel

No help for him regarding the losses.
IRA withdrawl is taxable income with early withdrawl penalty to boot.
GI money is taxable.

Only bright spot is that at least he can get the educational credits against the tuition.

 

[joelmold]

Originally posted by: EagleKeeper

Originally posted by: joelmold
a friend asked me to research this question:

he's a full time undergrad student. not working, but he does receive gi bill money for school (about $13000 per year). is this considered taxable income? i suspect so.

also, he took a 100% distribution from his ira and uses this money to pay his living/education expenses. the distribution was about $8500. the real question is, he put about $10000 into the ira over the past few years but lost money so he ended up with less. can he claim this as a loss? does the penalty tax for early withdrawal apply in this case?

many thanks,
joel

No help for him regarding the losses.
IRA withdrawl is taxable income with early withdrawl penalty to boot.
GI money is taxable.

Only bright spot is that at least he can get the educational credits against the tuition.

thanks for the quick reply. i read above that ira distributions can be taken penalty free if the money is used for education using line 2 of form 5329. i know how to do this, but do you see any obvious problems doing this that i don't?

also, regarding the lifetime learning credit, the rules state:

"The credits aren't allowed for an expense that was claimed as an education deduction, and cannot be claimed in a year when the student receives any tax-exempt distribution from an education IRA."

does this mean if he takes the ira distibution penalty free that he can't take the lifetime learning credit?

thanks!

 

[EagleKeeper]

Originally posted by: joelmold

Originally posted by: EagleKeeper

Originally posted by: joelmold
a friend asked me to research this question:

he's a full time undergrad student. not working, but he does receive gi bill money for school (about $13000 per year). is this considered taxable income? i suspect so.

also, he took a 100% distribution from his ira and uses this money to pay his living/education expenses. the distribution was about $8500. the real question is, he put about $10000 into the ira over the past few years but lost money so he ended up with less. can he claim this as a loss? does the penalty tax for early withdrawal apply in this case?

many thanks,
joel

No help for him regarding the losses.
IRA withdrawl is taxable income with early withdrawl penalty to boot.
GI money is taxable.

Only bright spot is that at least he can get the educational credits against the tuition.

thanks for the quick reply. i read above that ira distributions can be taken penalty free if the money is used for education using line 2 of form 5329. i know how to do this, but do you see any obvious problems doing this that i don't?

also, regarding the lifetime learning credit, the rules state:

"The credits aren't allowed for an expense that was claimed as an education deduction, and cannot be claimed in a year when the student receives any tax-exempt distribution from an education IRA."

does this mean if he takes the ira distibution penalty free that he can't take the lifetime learning credit?

thanks!

does this mean if he takes the ira distibution penalty free that he can't take the lifetime learning credit?

Yes - the LLC can not be used.

i read above that ira distributions can be taken penalty free if the money is used for education using line 2 of form 5329. i know how to do this, but do you see any obvious problems doing this that i don't?

he took a 100% distribution from his ira and uses this money to pay his living/education expenses

You indicated that they were used for living expenses. That is why I stated that it becomes taxable.

 

[joelmold]

thanks for clarifying!

 

[joelmold]

okay, one more quick question: as part of a summer internship with a government lab, my friend got a weekly stipend (or living allowance) of $475, for a total of about $4000. he says taxes were not taken out and the lab told him it would not be reported to the irs as income.

he wants to do the right thing though. so the question is, does it count as income for tax purposes?
thanks.

 

[EagleKeeper]

Originally posted by: joelmold
okay, one more quick question: as part of a summer internship with a government lab, my friend got a weekly stipend (or living allowance) of $475, for a total of about $4000. he says taxes were not taken out and the lab told him it would not be reported to the irs as income.

he wants to do the right thing though. so the question is, does it count as income for tax purposes?
thanks.

If the lab does not want to treat it as a wage for income purposes; then he should not do so.

If he were to declare it; then he woudl use the Schedule C and itemize expenses incurred.

 

[joelmold]

Originally posted by: EagleKeeper

Originally posted by: joelmold
okay, one more quick question: as part of a summer internship with a government lab, my friend got a weekly stipend (or living allowance) of $475, for a total of about $4000. he says taxes were not taken out and the lab told him it would not be reported to the irs as income.

he wants to do the right thing though. so the question is, does it count as income for tax purposes?
thanks.

If the lab does not want to treat it as a wage for income purposes; then he should not do so.

If he were to declare it; then he woudl use the Schedule C and itemize expenses incurred.

okay here is the email direct from the lab. does what you said still apply?

==========
Around this time of year, many of you start wondering about your taxes
and maybe forgot what we said about this last summer (or spring or fall).

If you received your stipend from LBNL, you were not an employee of the
Laboratory and, therefore, will not receive a W2. Neither will you
receive a 1099 because you were not a contractor or consultant.
What you received was a stipend for your internship--like a fellowship.
Assuming you were here for the standard 10 week summer, you received
$4000 as "pure" stipend and $750 as housing supplement.
Because we don't give tax advice, I can't tell you whether this or any
portion is taxable (and I've heard every conceivable opinion). You
should check with your tax advisor or, cheaper, check out the IRS web
site. (www.irs.gov)
==========

 

[EagleKeeper]

The lab is stating that they do not care and have gotten conflicting opinions on this.
Therefore if one person in the government (probably IRS) says no tax and another says tax; go with what ever benifits you the most.

The IRS gives you options on how to choose how much tax should be paid and also allows you to donate additional funds for warm fuzzy.

 

[joelmold]

thank you!

 

[Icepick]

I was a part time student from September through December 2005. I paid for both of my classes in full last year with no government assistance or scholarships. Can my college tuition be deducted on my federal return? How about my state return? I live in New York state. Also, is there a special tax return form that I have to acquire in order to claim my tuition?

Thanks!

 

[Al Neri]

ok... i can't figure this out.

1. Subtract line 21 from line 16.

2. If the result in Step 1 is zero or more, you have no capital loss carryover. Stop here.

3. If the result in Step 1 is less than zero, you have a capital loss carryover.

line 16 is -3338
line 21 is ( 3,000 )

 

[CPA]

Originally posted by: Don Rodriguez
ok... i can't figure this out.

1. Subtract line 21 from line 16.

2. If the result in Step 1 is zero or more, you have no capital loss carryover. Stop here.

3. If the result in Step 1 is less than zero, you have a capital loss carryover.

line 16 is -3338
line 21 is ( 3,000 )

Can you be a little more specific? What led to the negative number in 16?

As a matter of basis, you are only allowed to take 3k as a capital loss to ordinary income per year. Anything over that will need to be carried forward up to 15 years, IIRC.

So if this is your first year of a capital loss and it is 3,338, you can take 3K this year and $338 next year. If you have any additional capital loss next year, you would add the $338 to it.

 

[CPA]

Originally posted by: Icepick
I was a part time student from September through December 2005. I paid for both of my classes in full last year with no government assistance or scholarships. Can my college tuition be deducted on my federal return? How about my state return? I live in New York state. Also, is there a special tax return form that I have to acquire in order to claim my tuition?

Thanks!

Hope or Lifetime Learning Credit can be taken.

We don't answer state questions here.

 

[CPA]

Originally posted by: Maximus96

Originally posted by: CPA

Originally posted by: Maximus96

Originally posted by: Maximus96
My dad passed away in the end of Nov 2005. Prior to his passing we all decided its best to add my name and my mom?s name to the deed of the house. The house was originally purchased for about $130k 15 years ago and is worth about $450k now. I?m getting conflicting answers as to how much tax I?ll have to pay if I sell the house.

My mom spoke to a lawyer or accountant that does a weekly radio show and thru some kind of voodoo math, he told her that I?ll be looking at about $40k in tax if I sell the house for $450k because I haven?t had ownership for 2 years since my name was recently added in Nov 05. I guess he accounted for the initial purchase price of $130k that somehow split amongst the 3 of us (me, mom and dad). I am not clear on the math because I heard it second-hand thru my mom and she?s not sure herself.

My buddy is a CPA and he tells me that?s nonsense and thru something called ?involuntary transfer?, the house has to be re-assessed no later than 6 month after my dad passed away. then the taxes, if any will be calculated from the sale price and the re-assessed value.

I?d like to seek a 3rd opinion. I?m not sure if it matters that the deed has all 3 of our names, but the title is only in my Dad?s name.

Thanks so much

any info on my question?

thanks

I'm going to have to look into this. It's a little out of my league. I'll let you know what I find.

thank you sir.

Sorry, still don't have an answer for you. Give me another day or two.

 

[trmiv]

Not sure if anyone will know this since it's just a state question, but does know if California teachers able to deduct what they spend buying supplies, books, etc for their classes? My wife spent almost $3000 this year doing just that. We recently had our taxes done and ended up getting $525 back from federal, but owning $416 to state taxes. The accountant told us we really couldn't deduct the almost $3000 my wife spent buying things for her class. Only thing we got was a $250 federal deduction.

Is there anyway that money can be worked in, so we can file an amended return to reduce that state tax a bit?

I just can't believe that the state can't fund education enough so teachers don't have to spend their own money, and then when they do, they can't even get a break? But that's neither here nor there.

 

[b0mbrman]

This is more a question for next year. If I am out of the country for most of the year on a deployment (11 mo+), can I claim a house a I own as a residence, even though I rented it out during the portion I was out of the country?

 

[gigapet]

Ok I E-Filed Last Thursday. I recieved my state refund Tuesday by Direct Deposit. How Confident Should i be in assuming I will recieve the Federal Return Tommorow by direct deposit?

 

[CPA]

Originally posted by: gigapet
Ok I E-Filed Last Thursday. I recieved my state refund Tuesday by Direct Deposit. How Confident Should i be in assuming I will recieve the Federal Return Tommorow by direct deposit?

I thought federal refunds generally take about 2 weeks when being direct deposited and using efile. You should be able to check the status of your refund at www.irs.gov.

 

[CPA]

Originally posted by: b0mbrman
This is more a question for next year. If I am out of the country for most of the year on a deployment (11 mo+), can I claim a house a I own as a residence, even though I rented it out during the portion I was out of the country?

I assume it would be no different than if you resided in the country, which is that you have to allocate based on the time you lived in the residence and that you rented.

 

[EagleKeeper]

Originally posted by: trmiv
Not sure if anyone will know this since it's just a state question, but does know if California teachers able to deduct what they spend buying supplies, books, etc for their classes? My wife spent almost $3000 this year doing just that. We recently had our taxes done and ended up getting $525 back from federal, but owning $416 to state taxes. The accountant told us we really couldn't deduct the almost $3000 my wife spent buying things for her class. Only thing we got was a $250 federal deduction.

Is there anyway that money can be worked in, so we can file an amended return to reduce that state tax a bit?

I just can't believe that the state can't fund education enough so teachers don't have to spend their own money, and then when they do, they can't even get a break? But that's neither here nor there.

Theory Only:

The excess supplies (over the Federal Limit) could be put on the Form 2106 - Business Expenses (requires a Schedule A)
That information may transfer over to some line item for CA.

You would be better off getting some Tax S/W and playing what if to see if something better could happen.

 

[Ornery]

Topic 605 - Education Credits

• ...Qualified expenses may include fees for books, supplies, and equipment only if the fees must be paid to the school for the student's enrollment or attendance...

Computer Requirements

• All incoming students at DAAP are required to purchase laptop computers...

Computer Requirements: Digital Design

• Incoming undergraduate students are required to purchase Apple Macintosh PowerBook laptops for their first year computer course. The college has arranged special academic pricing for these computers that meet the specifications for the demanding applications taught in the program.
  
  Purchasing is accomplished through the online Apple Store...

First of all I must say, God bless you guys for helping out with this miserable chore! :thumbsup:

I'm simply wondering how literally I have to take these IRS rules in this case? It plainly says, "...the fees must be paid to the school...", but the cost of the required PC is actually paid to Apple. How about them apples?

To further cloud the issue, I opted to buy extra RAM for the required PC from a third party. Can I add that extra $130.00 in good conscience?

 

[Corporate Thug]

section 1 of the tax code question:

Person X wins a 100k, she asks her it to be split 5 ways (4 ways goin to her children). 5 checks of 20k are issued. Is the 100K taxed or each of the 20k?

thanx

 

[EagleKeeper]

Originally posted by: Ornery
Topic 605 - Education Credits

• ...Qualified expenses may include fees for books, supplies, and equipment only if the fees must be paid to the school for the student's enrollment or attendance...

Computer Requirements

• All incoming students at DAAP are required to purchase laptop computers...

Computer Requirements: Digital Design

• Incoming undergraduate students are required to purchase Apple Macintosh PowerBook laptops for their first year computer course. The college has arranged special academic pricing for these computers that meet the specifications for the demanding applications taught in the program.
  
  Purchasing is accomplished through the online Apple Store...

First of all I must say, God bless you guys for helping out with this miserable chore! :thumbsup:

I'm simply wondering how literally I have to take these IRS rules in this case? It plainly says, "...the fees must be paid to the school...", but the cost of the required PC is actually paid to Apple. How about them apples?

To further cloud the issue, I opted to buy extra RAM for the required PC from a third party. Can I add that extra $130.00 in good conscience?

Technically, you lose on all accounts. You are not writing the check to the school itself.


Even in the Grey area; the extra RAM would not fly.

 

[EagleKeeper]

Originally posted by: Corporate Thug
section 1 of the tax code question:

Person X wins a 100k, she asks her it to be split 5 ways (4 ways goin to her children). 5 checks of 20k are issued. Is the 100K taxed or each of the 20k?

thanx

Person #1 responsible for the tax on the 100K. Plus the gift tax due to the $20K distribution to each child.

It makes no difference on who signs the $20K checks; the distribution of the funds is under person #1 control.