3rd Annual AT Tax Time Thread

[CptObvious]

w2 or 1099 question:

at my job i started off on straight salary and a w2. last month i was switched to billable hours pay contingent on the firm getting paid. i get a % of the hours i bill, but only after the funds come into the firm, either through the client or the other side. if the client doesnt pay or if we lose a case taken on a contingency basis, i dont get paid for the work i've done on that case.

im still on the w2 but i dont see how i can be considered an employee and not a contractor if i have to assume these risks (haven't been paid in 3 weeks). should i be asking my firm to switch me to 1099? would it beneficial for me to go 1099? i heard you can deduct a lot of work-related expenses under this, including bar fees, cle classes, etc. also, assuming i get switched, what's a good software that will help me keep track of my own taxes? thanks for helping a tax noob.

 

[CPA]

Originally posted by: 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.

Yes, the prize is ordinary income to the winner.

For the gifts, she would have to pay tax on $9k each (there is an 11k exemption per gift).

 

[CPA]

Originally posted by: CptObvious
w2 or 1099 question:

at my job i started off on straight salary and a w2. last month i was switched to billable hours pay contingent on the firm getting paid. i get a % of the hours i bill, but only after the funds come into the firm, either through the client or the other side. if the client doesnt pay or if we lose a case taken on a contingency basis, i dont get paid for the work i've done on that case.

im still on the w2 but i dont see how i can be considered an employee and not a contractor if i have to assume these risks (haven't been paid in 3 weeks). should i be asking my firm to switch me to 1099? would it beneficial for me to go 1099? i heard you can deduct a lot of work-related expenses under this, including bar fees, cle classes, etc. also, assuming i get switched, what's a good software that will help me keep track of my own taxes? thanks for helping a tax noob.

What you've heard is correct, but.......you still may be considered an employee, as opposed to a contractor. The IRS will look at how the company treats you - do you have an office, are you scheduled certain consistent hours, do you report to someone, etc.

You may be able to still deduct certain unreimbursed job expenses, but they are Schedule A deductions (itemized) and you can only deduct the amount over 2% of your AGI (Adjusted Gross Income).

 

[EagleKeeper]

Originally posted by: CptObvious
w2 or 1099 question:

at my job i started off on straight salary and a w2. last month i was switched to billable hours pay contingent on the firm getting paid. i get a % of the hours i bill, but only after the funds come into the firm, either through the client or the other side. if the client doesnt pay or if we lose a case taken on a contingency basis, i dont get paid for the work i've done on that case.

im still on the w2 but i dont see how i can be considered an employee and not a contractor if i have to assume these risks (haven't been paid in 3 weeks). should i be asking my firm to switch me to 1099? would it beneficial for me to go 1099? i heard you can deduct a lot of work-related expenses under this, including bar fees, cle classes, etc. also, assuming i get switched, what's a good software that will help me keep track of my own taxes? thanks for helping a tax noob.

If you can get the firm to switch you over; you would be better off.

Note that you will lose what ever benifits (if any) that you currently have available and also unemployment will no-longer be available from the state for you.

If they are having you work without being paid; then you should be able to be reclassified. You are the one taking the risk of the fruits of your labor; not them.

 

[CptObvious]

Originally posted by: CPA
What you've heard is correct, but.......you still may be considered an employee, as opposed to a contractor. The IRS will look at how the company treats you - do you have an office, are you scheduled certain consistent hours, do you report to someone, etc.

You may be able to still deduct certain unreimbursed job expenses, but they are Schedule A deductions (itemized) and you can only deduct the amount over 2% of your AGI (Adjusted Gross Income).

thanks for the response. i have an office inside the firm. i dont have scheduled hours per se, but i usually work the same hours every day for the sake of convenience. and my boss supervises most of the work i do. i help him with the cases he has and he sometimes supervises or takes over the cases that are referred to me.

someone mentioned to me that just the fact that i have to take a risk on getting paid for my work would prevent me from being considered an employee. but i'm not to speed on employment and tax law, unfortunately

 

[CptObvious]

Originally posted by: EagleKeeper
If you can get the firm to switch you over; you would be better off.

Note that you will lose what ever benifits (if any) that you currently have available and also unemployment will no-longer be available from the state for you.

If they are having you work without being paid; then you should be able to be reclassified. You are the one taking the risk of the fruits of your labor; not them.

thanks for the advice. i don't have any benefits at the moment (we had discussed health and an ira at one point, but nothing came of it). when they changed my pay arrangement, there was a disagreement between the office manager and my boss. the office manager wanted to change me to 1099 but my boss insisted on keeping me on w2. at the time i was clueless so i didnt object.

assuming i can get switched, can you recommend some user-friendly software that i can use to manage my taxes? thanks

 

[memo]

This is a bit OT, but still pertain a little bit to tax day. If it doesn't relate to the topic please let me know and maybe I'll make another thread. Anyhow, I have been thinking about starting a Roth IRA, and I have read reports online that you can still start one today, and have it reflect on last years taxes, is this a good idea? I made about 42k last year, and I pay close to nothing in rent, have no car payments, but paid off 9k in student loans What, if any benefit will I have for filing for a Roth now?

 

[CPA]

Originally posted by: CptObvious

Originally posted by: CPA
What you've heard is correct, but.......you still may be considered an employee, as opposed to a contractor. The IRS will look at how the company treats you - do you have an office, are you scheduled certain consistent hours, do you report to someone, etc.

You may be able to still deduct certain unreimbursed job expenses, but they are Schedule A deductions (itemized) and you can only deduct the amount over 2% of your AGI (Adjusted Gross Income).

thanks for the response. i have an office inside the firm. i dont have scheduled hours per se, but i usually work the same hours every day for the sake of convenience. and my boss supervises most of the work i do. i help him with the cases he has and he sometimes supervises or takes over the cases that are referred to me.

someone mentioned to me that just the fact that i have to take a risk on getting paid for my work would prevent me from being considered an employee. but i'm not to speed on employment and tax law, unfortunately

You may want to contact the Labor Board or the IRS and ask them their interpretation.

 

[CPA]

Originally posted by: memo
This is a bit OT, but still pertain a little bit to tax day. If it doesn't relate to the topic please let me know and maybe I'll make another thread. Anyhow, I have been thinking about starting a Roth IRA, and I have read reports online that you can still start one today, and have it reflect on last years taxes, is this a good idea? I made about 42k last year, and I pay close to nothing in rent, have no car payments, but paid off 9k in student loans What, if any benefit will I have for filing for a Roth now?

If you meet the requirements, you can contribute to an IRA by April 15th and reflect it on you 2005 tax filing.

 

[EagleKeeper]

Originally posted by: memo
This is a bit OT, but still pertain a little bit to tax day. If it doesn't relate to the topic please let me know and maybe I'll make another thread. Anyhow, I have been thinking about starting a Roth IRA, and I have read reports online that you can still start one today, and have it reflect on last years taxes, is this a good idea? I made about 42k last year, and I pay close to nothing in rent, have no car payments, but paid off 9k in student loans What, if any benefit will I have for filing for a Roth now?

The Roth allows you to build a nest egg and not have to pay taxes on it when you crack it open.
The normal IRA allows you to build the nest egg now and pay no taxes on it as you build it; just when you crack it.

You can fund a 2005 IRA until tax day 2006. There is no real benifit to funding the Roth for 2005 unless you expect to hit the income limitations for funding in 2006.

 

[maziwanka]

im getting somewhat confused with my federal taxes...

i know i used some education credit or deduction (either hope or lifetime learning or something) in my 2003 or 2004 returns.

does this preclude me from using another education credit or deduction for this years returns as i am now a law student? is there anything i can do with the education loans i've taken out?

thanks!

 

[EagleKeeper]

Originally posted by: maziwanka
im getting somewhat confused with my federal taxes...

i know i used some education credit or deduction (either hope or lifetime learning or something) in my 2003 or 2004 returns.

does this preclude me from using another education credit or deduction for this years returns as i am now a law student? is there anything i can do with the education loans i've taken out?

thanks!

The Hope is for college years #1 & 2

The LLC covers from then on.

The educational loan interest is referenced on 1040 Line 33.

 

[DVK916]

NOOOO

My fears have come true. My parents are being audited for the 2003 tax year. What will happen.

 

[EagleKeeper]

Originally posted by: DVK916
NOOOO

My fears have come true. My parents are being audited for the 2003 tax year. What will happen.

Buy stock in Vaseline.

Best that they can do is to locate all documents to backup/verify everything on their return.

There will be some questions on some numbers (unreported income or unusual expenses) if this is a courtesy audit.

The letter should indicate where the concerns are.

 

[DVK916]

Originally posted by: EagleKeeper

Originally posted by: DVK916
NOOOO

My fears have come true. My parents are being audited for the 2003 tax year. What will happen.

Buy stock in Vaseline.

Best that they can do is to locate all documents to backup/verify everything on their return.

There will be some questions on some numbers (unreported income or unusual expenses) if this is a courtesy audit.

The letter should indicate where the concerns are.

They letter said the conserns are the deducations. What if they no longer have all of their receipts.

 

[EagleKeeper]

Originally posted by: DVK916

Originally posted by: EagleKeeper

Originally posted by: DVK916
NOOOO

My fears have come true. My parents are being audited for the 2003 tax year. What will happen.

Buy stock in Vaseline.

Best that they can do is to locate all documents to backup/verify everything on their return.

There will be some questions on some numbers (unreported income or unusual expenses) if this is a courtesy audit.

The letter should indicate where the concerns are.

They letter said the conserns are the deducations. What if they no longer have all of their receipts.

By stock in vasalene. If they can not prove them, then they have a problem. The extent will depend on what side of the bed the examiner rolls out of.

 

[AznMaverick]

This year i would have my first full-time job, my starting salary is about $50k. To reduce what i owe, and optimize how much i can save for later in life, a coworker told me i could put money into an IRA and deduct for taxes. My question is what is the maximum amount per year? Also how much of the invested IRA amount can i deduct from my '06 taxes?

 

[Mark]

ive lost my w2 form that was given to me by my employer. whats the process of getting a replacement? and how long will it take?

 

[EagleKeeper]

Originally posted by: Mark
ive lost my w2 form that was given to me by my employer. whats the process of getting a replacement? and how long will it take?

Contact employer - 1-6 weeks

 

[EagleKeeper]

Originally posted by: AznMaverick
This year i would have my first full-time job, my starting salary is about $50k. To reduce what i owe, and optimize how much i can save for later in life, a coworker told me i could put money into an IRA and deduct for taxes. My question is what is the maximum amount per year? Also how much of the invested IRA amount can i deduct from my '06 taxes?

The IRS website will tell you how much you can deduct for an IRA each year.
The amount that you put in becomes income that is not taxed in that year.

You can also fund your 2005 IRA up until tax day 2006 and deduct that from your taxes.

 

[maziwanka]

thanks for the info eaglekeeper!

 

[Gooberlx2]

Question here:

Can a parent claim their incarserated child (31 years old), who's diagnosed with AIDs, as a dependant? AIDs is obviously a disability, this person is unable to walk and weighs about 120lbs (down from almost 220 when he was healthy), much less perform a minimum wage job. The parents acutally have to pay for just about everything the child is allowed (food, medications, doctor visits, hospitalizations, resitution, toothpaste....everything). According to turbotax he qualifies....but there was never a question about....prison.

 

[EagleKeeper]

Originally posted by: Gooberlx2
Question here:

Can a parent claim their incarserated child (31 years old), who's diagnosed with AIDs, as a dependant? AIDs is obviously a disability, this person is unable to walk and weighs about 120lbs (down from almost 220 when he was healthy), much less perform a minimum wage job. The parents acutally have to pay for just about everything the child is allowed (food, medications, doctor visits, hospitalizations, resitution, toothpaste....everything). According to turbotax he qualifies....but there was never a question about....prison.

There are enough grey areas that if the parents can document that they cover more than half the cost of the person's upkeep; then given the situation that the person is classified as disabled; it would seem to qualify.

Initially the residency test will fail; however this can be considered overridden by the temporary absence clause (depending on the length of the sentence)

 

[Gooberlx2]

Originally posted by: EagleKeeper

Originally posted by: Gooberlx2
Question here:

Can a parent claim their incarserated child (31 years old), who's diagnosed with AIDs, as a dependant? AIDs is obviously a disability, this person is unable to walk and weighs about 120lbs (down from almost 220 when he was healthy), much less perform a minimum wage job. The parents acutally have to pay for just about everything the child is allowed (food, medications, doctor visits, hospitalizations, resitution, toothpaste....everything). According to turbotax he qualifies....but there was never a question about....prison.

There are enough grey areas that if the parents can document that they cover more than half the cost of the person's upkeep; then given the situation that the person is classified as disabled; it would seem to qualify.

Initially the residency test will fail; however this can be considered overridden by the temporary absence clause (depending on the length of the sentence)

Hmmm....length of the sentence is life...and likely he will pass before chance of parole. Does that change anything? I'm setting this all up for someone else, and they're worried about being audited....but I'd like to get them a dependant deduction if I can...

 

[EagleKeeper]

Originally posted by: Gooberlx2

Originally posted by: EagleKeeper

Originally posted by: Gooberlx2
Question here:

Can a parent claim their incarserated child (31 years old), who's diagnosed with AIDs, as a dependant? AIDs is obviously a disability, this person is unable to walk and weighs about 120lbs (down from almost 220 when he was healthy), much less perform a minimum wage job. The parents acutally have to pay for just about everything the child is allowed (food, medications, doctor visits, hospitalizations, resitution, toothpaste....everything). According to turbotax he qualifies....but there was never a question about....prison.

There are enough grey areas that if the parents can document that they cover more than half the cost of the person's upkeep; then given the situation that the person is classified as disabled; it would seem to qualify.

Initially the residency test will fail; however this can be considered overridden by the temporary absence clause (depending on the length of the sentence)

Hmmm....length of the sentence is life...and likely he will pass before chance of parole. Does that change anything?

Therefore there is no legitimate reason to think that this incarceration can be considered as a temporary absense.
To claim him as a dependent would be fraud according to the IRS guidelines.