3rd Annual AT Tax Time Thread

[drewdogg808]

Originally posted by: CPA

Originally posted by: drewdogg808

Originally posted by: CPA

Originally posted by: drewdogg808
my preparer gave me an option of claiming the student loan interest that my wife and i paid as business interest since our combined income is over the limit (102k) that allows deducting the full amount (we paid ~10k in loan interest). he says since we're both independent contract optometrists, the loan was related to our business/profession. he says he didn't find anything that said we could or couldn't do that. is this allowed or would it raise a flag for an audit?

is you schooling related to your occupation?

yes, it was optometry school.

A quick look came up with two observations.

First, the IRS makes a distinction on how to expense school loan interest. That fact would indicate they take a hard line stance on the methods allowed to deduct school loan interest, which is the $2500 per year IF you don't hit the income ceiling.

Second, the IRS allows business expenses only if they are ordinary and necessary to the business. You would be hard-pressed to prove that your personal school loan interest for classes taken before you were an optometrist are ordinary and necessary expenses. (BTW, this should have been in my first response since I knew this already. sorry.)

Thanks so much, CPA. I felt it seemed a little shady, and I don't think its worth the ~5K savings to get audited by going that route.

Do you have an office in Katy? I could use a CPA in the future.

 

[Doggiedog]

Originally posted by: CPA

Originally posted by: Doggiedog

Originally posted by: CPA

Originally posted by: Doggiedog
My wife and I file our taxes jointly.

If we get divorced, what happens to our capital loss tax credits? Do they get split evenly?

Is the stock owned jointly?

We have a whole bunch of tax losses from the bubble together. Its a significant amount. It was in a joint account.

The splitting of the loss will depend on you state's laws regarding ownership of propery. Since New Jersey is a Common Law state and both of your names are on the account, you would split it evenly. For your case, this would also be true in the Community Property states.

Thanks CPA!

 

[CPA]

Originally posted by: drewdogg808

Originally posted by: CPA

Originally posted by: drewdogg808

Originally posted by: CPA

Originally posted by: drewdogg808
my preparer gave me an option of claiming the student loan interest that my wife and i paid as business interest since our combined income is over the limit (102k) that allows deducting the full amount (we paid ~10k in loan interest). he says since we're both independent contract optometrists, the loan was related to our business/profession. he says he didn't find anything that said we could or couldn't do that. is this allowed or would it raise a flag for an audit?

is you schooling related to your occupation?

yes, it was optometry school.

A quick look came up with two observations.

First, the IRS makes a distinction on how to expense school loan interest. That fact would indicate they take a hard line stance on the methods allowed to deduct school loan interest, which is the $2500 per year IF you don't hit the income ceiling.

Second, the IRS allows business expenses only if they are ordinary and necessary to the business. You would be hard-pressed to prove that your personal school loan interest for classes taken before you were an optometrist are ordinary and necessary expenses. (BTW, this should have been in my first response since I knew this already. sorry.)

Thanks so much, CPA. I felt it seemed a little shady, and I don't think its worth the ~5K savings to get audited by going that route.

Do you have an office in Katy? I could use a CPA in the future.

No, I don't do taxes for a living. I work for a Fortune 500 company. I just do this as a way to give back to the ATOT community. I'll keep you in mind, though, as a future client if I ever venture on my own.

 

[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.

any word on this?

my CPA that tells me there are no tax send me this link, http://www.irs.gov/faqs/faq-kw91.html and said only #1 and #2 applies to me.

thank you

Okay, well, California is a Community Property states, so your mom is in the clear. You on the other hand don't seem to be. When you were added to the deed (and your father was alive), you received a Gift Deed. Your basis in the property is what it was when he purchased the home (plus any improvement costs). Because you didn't inherit - as you were part owner - the property you do not receive a step-up in your basis (what your friend was referring to, I think).

As for your CPA, again the property was not inherited, unless I misunderstood your original post, so I don't see how the link pertains to you.

As for your CPA friend, if he is referring to Involuntary Conversions, again I don't see how your situation fits. Involuntary Conversions deal with situations not in control of the owner like destruction of the property.

Here's a Q and A I found that seems to be similar to your situation:

Q: What is your opinion on a parent deeding a home to his children and paying no rent until death? They will pay the property taxes and mortgage payments.

A: I don't like that idea at all. There aren't any real advantages for the parent, but lots of disadvantages for everyone.

I presume you are referring to adult children at least age 18. A major disadvantage for the children is, as gift donees, they take over the parents' usually low-adjusted cost basis. They forfeited the "stepped-up basis" market value they would receive if they instead inherit the property.



Notice that the children (you) take ownership of the home (put your name on deed) at the original basis of the property($130K). And under the current home sales rules you must live in the house for 2 years to be eligible for the home-sale deduction.

 

[Hossenfeffer]

Trying to tackle my taxes and wondering what my best bets are.

Time-wise, I'm wondering if going to a "tax professional" isn't a bad option for me.

I've got 5 W-2's and a 1099-MISC from acting work last year and I think I'm $500 over the qualified performing artist threshold. Feh. In a preliminary entering of data into Taxcut, I'll owe $500 or so.

To add to the complication, I was separated from my wife from June 2005 and we filed divorce papers in November.

Planning on getting bank and credit card statements to track expenditures and such.

Anyway, assuming that I'm not going to be able to do them myself, are there recommendations for any tax preparation folks? What should I expect to pay for the service?

 

[CPA]

Originally posted by: Hossenfeffer
Trying to tackle my taxes and wondering what my best bets are.

Time-wise, I'm wondering if going to a "tax professional" isn't a bad option for me.

I've got 5 W-2's and a 1099-MISC from acting work last year and I think I'm $500 over the qualified performing artist threshold. Feh. In a preliminary entering of data into Taxcut, I'll owe $500 or so.

To add to the complication, I was separated from my wife from June 2005 and we filed divorce papers in November.

Planning on getting bank and credit card statements to track expenditures and such.

Anyway, assuming that I'm not going to be able to do them myself, are there recommendations for any tax preparation folks? What should I expect to pay for the service?

I can't really help you much other than to call a few up or ask some acquintances. It's crunch time, though, so if you find one who will take your filing you may be paying a premium.

BTW, what is "qualified performing artist threshold"? can't say I've ever heard of it.

 

[Kelemvor]

Hey CPA, since the POLL threads get locked because this thread exists, add a poll to the OP so people can post what they are getting back or owing for both state and federal. Most people should be pretty close to being done by now I'd hope since we're only 2 weeks away.

 

[LordSnailz]

Just started my taxes last night and I had a few questions --
I got married last year and I'm not sure if we should file jointly or seperate? The only reason I can think of, of filing seperate is that our combine income is $154k which bumps us over the $150k limit for max Roth IRA contribution. What are some pros and cons between the two?

The other question is, since we cannot put in the full amt in our Roth IRA, can we do a traditional IRA as well?

Also, which is better to max out first 401k or Roth IRA? Oh btw, we're around 27-28 right now.

Thanks in adv!

 

[CPA]

Originally posted by: LordSnailz
Just started my taxes last night and I had a few questions --
I got married last year and I'm not sure if we should file jointly or seperate? The only reason I can think of, of filing seperate is that our combine income is $154k which bumps us over the $150k limit for max Roth IRA contribution. What are some pros and cons between the two?

The other question is, since we cannot put in the full amt in our Roth IRA, can we do a traditional IRA as well?

Also, which is better to max out first 401k or Roth IRA? Oh btw, we're around 27-28 right now.

Thanks in adv!

You live in a community property state. Everything is considered equal anyway - you would each have to file half of the income no matter how much you earned individually, so might as well file jointly.

In your case, I would suggest the 401K because it does not have the income limit per se. It has a contribution limit, though.

 

[LordSnailz]

Thanks guess it doesn't matter too much whether we file jointly or seperately.

How much should I put in my 401k before putting in my IRA? I had it at 13% but the increased to 17% but the max is 50%, how do you calc. or find the sweet spot between the two?

 

[AStar617]

Hey guys...

I am finishing my degree part-time with an 80% reimbursement through my employer.

1) TurboTax is asking me about tuition spent, NOT including any books that you have to buy from the school as a requirement for enrollment. I understand this to mean my tuition of $1680 (2 x $825 classes, 1 x $30 registration fee) and none of my books etc., since technically you are welcome to attend the class and fail if you choose against buying the book Is that accurate?

2) TurboTax then asks about TAX-FREE employer assistance... but my employer doesn't cut a standard expense check like they do when they pay for my business trips... they instead roll the reimbursement into my next regular biweekly paycheck :| Does this mean that they do not qualify as tax-free assistance, since all of the tax/401k/etc witholdings are drawn from those salary funds collectively? Or is that the very method they use to eventually refund you the tax?

3) Should the tax-free assistance amount only reflect money paid for eligible tuition in the eyes of the tax code (i.e., the answer to my #1 above), or all money paid? To clarify, they also reimbursed 80% toward my class books, and some CLEP tests as well. Here's the exact "help" info:

Employer-Provided Assistance

Some employers provide education benefits to their employees. This includes payments for tuition, fees, books, supplies and equipment required by the educational institution. If you paid the expense and your employer reimbursed you, enter the reimbursement here.

Regarding the books etc., do they have to pass the same test of school enrollment requirement? There's no mention made about that.

Thanks...

 

[azilaga]

I'm going to owe a big chunk of money come April 15. Does anyone know if I can still prepay, even though it's already 3/31, some of it to avoid the underpayment penalty?

 

[CPA]

Originally posted by: LordSnailz
Thanks guess it doesn't matter too much whether we file jointly or seperately.

How much should I put in my 401k before putting in my IRA? I had it at 13% but the increased to 17% but the max is 50%, how do you calc. or find the sweet spot between the two?

The max is $15,000 for 2006, so that is the number you have to plan to.

 

[CPA]

Originally posted by: azilaga
I'm going to owe a big chunk of money come April 15. Does anyone know if I can still prepay, even though it's already 3/31, some of it to avoid the underpayment penalty?

Since the IRS uses cash basis instead of accrual basis for tax purposes, they only count what was paid by the end of 2005. You can't prepay to avoid the underpayment penalty. That would in essence eliminate the underpayment penalty for everyone who owed.

 

[CPA]

Originally posted by: AStar617
Hey guys...

I am finishing my degree part-time with an 80% reimbursement through my employer.

1) TurboTax is asking me about tuition spent, NOT including any books that you have to buy from the school as a requirement for enrollment. I understand this to mean my tuition of $1680 (2 x $825 classes, 1 x $30 registration fee) and none of my books etc., since technically you are welcome to attend the class and fail if you choose against buying the book Is that accurate?

2) TurboTax then asks about TAX-FREE employer assistance... but my employer doesn't cut a standard expense check like they do when they pay for my business trips... they instead roll the reimbursement into my next regular biweekly paycheck :| Does this mean that they do not qualify as tax-free assistance, since all of the tax/401k/etc witholdings are drawn from those salary funds collectively? Or is that the very method they use to eventually refund you the tax?

3) Should the tax-free assistance amount only reflect money paid for eligible tuition in the eyes of the tax code (i.e., the answer to my #1 above), or all money paid? To clarify, they also reimbursed 80% toward my class books, and some CLEP tests as well. Here's the exact "help" info:

Employer-Provided Assistance

Some employers provide education benefits to their employees. This includes payments for tuition, fees, books, supplies and equipment required by the educational institution. If you paid the expense and your employer reimbursed you, enter the reimbursement here.

Regarding the books etc., do they have to pass the same test of school enrollment requirement? There's no mention made about that.

Thanks...

Are you using Hope Credit or Lifetime Learning Credit?

The employer is correctly adding the reimbursement to you through Payroll. Tuition reimbursement is a taxable event to you. It's not the same is buying lunch for your staff and getting reimbursed, because your education is sticking with you for the rest of your life. Therefore, there is benefit to you beyond that to the company.

Also, just because they are reimbursing you for all costs (taxable to you) doesn't mean you can deduct all costs, which I think you've figured out.

Did you have to pay for the books as condition of enrollment or attendance? My thinking is not, which means you can't deduct those, which you correctly assumed.

 

[Rumpltzer]

My wife became a US permanent resident in late-December and applied for her Social Security card in mid-January. We were told it would take about 60 days to arrive, it's not here yet, and I'm getting nervous.

She has no income (domestic or foreign), but I'd like to file as married to increase my refund. I'll be getting a refund even if I claim that I'm single.

My question is: What happens when it comes April 14, 15, 16, etc. and I have no SSN for her? Can I file as single and correct it later, or file for an extension??

There are a lot of warnings about her being on permanent resident status and how she can lose the status if she doesn't take care to file her tax reports during the next two years. I really don't want to screw things up.

Thanks!

 

[AStar617]

Originally posted by: CPA

Originally posted by: AStar617
Hey guys...

I am finishing my degree part-time with an 80% reimbursement through my employer.

1) TurboTax is asking me about tuition spent, NOT including any books that you have to buy from the school as a requirement for enrollment. I understand this to mean my tuition of $1680 (2 x $825 classes, 1 x $30 registration fee) and none of my books etc., since technically you are welcome to attend the class and fail if you choose against buying the book Is that accurate?

2) TurboTax then asks about TAX-FREE employer assistance... but my employer doesn't cut a standard expense check like they do when they pay for my business trips... they instead roll the reimbursement into my next regular biweekly paycheck :| Does this mean that they do not qualify as tax-free assistance, since all of the tax/401k/etc witholdings are drawn from those salary funds collectively? Or is that the very method they use to eventually refund you the tax?

3) Should the tax-free assistance amount only reflect money paid for eligible tuition in the eyes of the tax code (i.e., the answer to my #1 above), or all money paid? To clarify, they also reimbursed 80% toward my class books, and some CLEP tests as well. Here's the exact "help" info:

Employer-Provided Assistance

Some employers provide education benefits to their employees. This includes payments for tuition, fees, books, supplies and equipment required by the educational institution. If you paid the expense and your employer reimbursed you, enter the reimbursement here.

Regarding the books etc., do they have to pass the same test of school enrollment requirement? There's no mention made about that.

Thanks...

Are you using Hope Credit or Lifetime Learning Credit?

The employer is correctly adding the reimbursement to you through Payroll. Tuition reimbursement is a taxable event to you. It's not the same is buying lunch for your staff and getting reimbursed, because your education is sticking with you for the rest of your life. Therefore, there is benefit to you beyond that to the company.

Also, just because they are reimbursing you for all costs (taxable to you) doesn't mean you can deduct all costs, which I think you've figured out.

Did you have to pay for the books as condition of enrollment or attendance? My thinking is not, which means you can't deduct those, which you correctly assumed.

Thanks, that cleared things up. Unfortunately, I don't believe I qualify for either Hope or Lifetime Learning, because my 2005 AGI is roughly $53.3k, three hundred bucks over the max. :|:|

 

[CPA]

Originally posted by: Rumpltzer
My wife became a US permanent resident in late-December and applied for her Social Security card in mid-January. We were told it would take about 60 days to arrive, it's not here yet, and I'm getting nervous.

She has no income (domestic or foreign), but I'd like to file as married to increase my refund. I'll be getting a refund even if I claim that I'm single.

My question is: What happens when it comes April 14, 15, 16, etc. and I have no SSN for her? Can I file as single and correct it later, or file for an extension??

There are a lot of warnings about her being on permanent resident status and how she can lose the status if she doesn't take care to file her tax reports during the next two years. I really don't want to screw things up.

Thanks!

You might want to call the Social Security Administration to see what the status of her number is. You could file as single and correct later, but it might be a good idea to check with the IRS to see if there is a workaround - like sending a copy of the application.

 

[Rumpltzer]

Okay, I've got another question:

My company hired me in January, moved my stuff, paid for some mileage, and put me up in a hotel and paid me a per diem as part of the move package. I stayed in the hotel for about two weeks while looking for a place to live.

My company paid the hotel bill directly. However, they paid out the per diem and mileage as part of my salary and they took out taxes and whatnot for the amount they paid for the hotel stay.

In total, let's say it's about $4200 additional that was taxed and is being reported as part of my income. The problem is that I don't have any documentation that says it's relocation expense. Should I work to get that? Does this situation count as relocation expense for tax purposes?

 

[CPA]

Originally posted by: AStar617

Originally posted by: CPA

Originally posted by: AStar617
Hey guys...

I am finishing my degree part-time with an 80% reimbursement through my employer.

1) TurboTax is asking me about tuition spent, NOT including any books that you have to buy from the school as a requirement for enrollment. I understand this to mean my tuition of $1680 (2 x $825 classes, 1 x $30 registration fee) and none of my books etc., since technically you are welcome to attend the class and fail if you choose against buying the book Is that accurate?

2) TurboTax then asks about TAX-FREE employer assistance... but my employer doesn't cut a standard expense check like they do when they pay for my business trips... they instead roll the reimbursement into my next regular biweekly paycheck :| Does this mean that they do not qualify as tax-free assistance, since all of the tax/401k/etc witholdings are drawn from those salary funds collectively? Or is that the very method they use to eventually refund you the tax?

3) Should the tax-free assistance amount only reflect money paid for eligible tuition in the eyes of the tax code (i.e., the answer to my #1 above), or all money paid? To clarify, they also reimbursed 80% toward my class books, and some CLEP tests as well. Here's the exact "help" info:

Employer-Provided Assistance

Some employers provide education benefits to their employees. This includes payments for tuition, fees, books, supplies and equipment required by the educational institution. If you paid the expense and your employer reimbursed you, enter the reimbursement here.

Regarding the books etc., do they have to pass the same test of school enrollment requirement? There's no mention made about that.

Thanks...

Are you using Hope Credit or Lifetime Learning Credit?

The employer is correctly adding the reimbursement to you through Payroll. Tuition reimbursement is a taxable event to you. It's not the same is buying lunch for your staff and getting reimbursed, because your education is sticking with you for the rest of your life. Therefore, there is benefit to you beyond that to the company.

Also, just because they are reimbursing you for all costs (taxable to you) doesn't mean you can deduct all costs, which I think you've figured out.

Did you have to pay for the books as condition of enrollment or attendance? My thinking is not, which means you can't deduct those, which you correctly assumed.

Thanks, that cleared things up. Unfortunately, I don't believe I qualify for either Hope or Lifetime Learning, because my 2005 AGI is roughly $53.3k, three hundred bucks over the max. :|:|

The book issue only relates to the Hope Credit and Lifetime Learning Credit. If the schoolwork was necessary for your job then you could deduct it as a itemized deduction.

 

[CPA]

Originally posted by: Rumpltzer
Okay, I've got another question:

My company hired me in January, moved my stuff, paid for some mileage, and put me up in a hotel and paid me a per diem as part of the move package. I stayed in the hotel for about two weeks while looking for a place to live.

My company paid the hotel bill directly. However, they paid out the per diem and mileage as part of my salary and they took out taxes and whatnot for the amount they paid for the hotel stay.

In total, let's say it's about $1600 additional that was taxed and is being reported as part of my income. The problem is that I don't have any documentation that says it's relocation expense. Should I work to get that? Does this situation count as relocation expense for tax purposes?

What box of your W2 was the $1600 reported in - Box 1 or box 12? If you don't see anything in box 12 then it was included in box 1.

 

[RMSistight]

I know this is a little early. But I need to plan ahead for next year.

I recently got hired as an independent contractor for a winery doing IS helpdesk stuff. I got my first paycheck and my boss told me that I should store away about 25-30% of every paycheck into a separate checking account for tax purposes. I work three jobs and two of them I'm an employee so taxes are taken care of for me.

My question is: How do I determine how much tax I will have to pay when tax time rolls around 2007? I've already finished filing my taxes for this year. What about stuff like FICA, Medicare, state taxes and stuff....like taxes employers normally take out if I was an employee?

Just to clarify, when I signed up for the job, they specifically stated I was an indepedent contractor and would not handle any of the taxes. Thanks guys for your help.

 

[MrsBugi]

Where can I find my tax information from last year if it has not been saved online? (amount from federal and state)

I am doing my taxes via HR Block and need the Payer's name (for state/federal taxes), address, etc. in addition to the amount received.

 

[EagleKeeper]

Originally posted by: Rumpltzer
My wife became a US permanent resident in late-December and applied for her Social Security card in mid-January. We were told it would take about 60 days to arrive, it's not here yet, and I'm getting nervous.

She has no income (domestic or foreign), but I'd like to file as married to increase my refund. I'll be getting a refund even if I claim that I'm single.

My question is: What happens when it comes April 14, 15, 16, etc. and I have no SSN for her? Can I file as single and correct it later, or file for an extension??

There are a lot of warnings about her being on permanent resident status and how she can lose the status if she doesn't take care to file her tax reports during the next two years. I really don't want to screw things up.

Thanks!

File for a filing extension using paper.
Indicate that you are filing jointly
In the location for the spouse SSN, put "applied for".
That will buy you the time to get the SSN. Tben just submit the 1040 form as normal using the proper SSN.

 

[EagleKeeper]

Originally posted by: MrsBugi
Where can I find my tax information from last year if it has not been saved online? (amount from federal and state)

I am doing my taxes via HR Block and need the Payer's name (for state/federal taxes), address, etc. in addition to the amount received.

Any of the information that you have identified will be included on any documentaiton that you recieve.

Unless you use the information from the previous year using a saved copy of the filing information, you will have to enter the information again.

Most online places will be able to access the information IF you sign on using the same account information.

Other than that, unless the payer subscibes to the electronic e-file retrieval system, you are SOL in avoiding having to re-enter the info.