3rd Annual AT Tax Time Thread

[FAS284]

Great thread and especially generous of you guys to help fellow AT'ers with their tax questions!

Hopefully my question is not too complicated. I am currently a medical student and as such, I have not earned in a LONG time. my wife worked two years ago (2004) and had federal tax withdrawn (I'm forgetting how much) but the income was not enough to file for taxes last year, hence we did not file. Should we pursue filing for a previous tax year to reclaim the money?

She then started a PhD program last August which pays her a nice monthly educational stipend (it isn't a job per se, just a stipend that comes along with an educational program) and also has federal taxes withdrawn from her paychecks. After doing some calculations, we still won't meet minimum income for filing. When initially signing that employment sheet which asks whether you are exempt from tax, we put yes... but later changed it to no under advice from others. So should I file for taxes or no? What should I do? Thanks for your help in advance!

 

[FAS284]

oh and a quick question for my dad who is currently selling a house. The prospective buyer is asking for assistance with closing costs .. while I know you can itemize certain closing costs when you are buying a house, can you do the same if you pay some of the closing costs when selling your house?

 

[Bulldog13]

Quick question,

My pops started a small business this year and he thought he read somewhere about a $5,000 or $3,000 deduction either specifically for small businesses, or for one's in their first year. I found mention of it once on the internet, but haven't been able to find it since. Does it ring a bell at all ?

 

[Mayfriday0529]

Originally posted by: Jnetty99

Originally posted by: EagleKeeper

Originally posted by: gordita
yes, they still have the hope credit and the lifetime learning credit...I forget the difference between the two...

Hope Credit was intended to cover the first two years of post high school educations.
The credit is 50% of what is authorized.

The Lifetime Learning credit is intended for addional learning that does not fall under the Hope. That credit is 20% of what is authorized

The credit does to the primary taxpayer. If you are claimed as a dependant, you can not claim the credit.

For information on what is authorized - search the IRS site for details.

Thank you both,
I claim myself and i'm on my third year of school. i'll look on IRS.

It?s me again... I finally looked it up on the IRS website, I believe I qualify for Lifetime Credit since I?m a Junior In college; I also claim on my own.

I'm confused about two things though.
1) I use Taxact to file for free; will the software have the required form and wizard to file this? I looked up the form online and its Form 8863, the 2005 version is not available yet.

2) What can I claim? According to the IRS the following is allowed

The student may take into account only out-of-pocket expenses in calculating the Lifetime Learning Credit. Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an inheritance, or personal savings (including savings from a qualified state tuition program) are taken into account in calculating the credit amount. However, qualified tuition and related expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided educational assistance are not taken into account in calculating the credit amount.

I took a school loan for $10,000 and it?s not a government loan, I did it through a third party company and the loan was assigned to key bank. According to the above, I should be able to claim that or 20%. I also think I could claim book expenses but it would not matter because the cap is $2000.

What do you think?

 

[CPA]

Originally posted by: gopunk

Originally posted by: EagleKeeper
You should get a W2 or a 1099. The 1099 will allow you to use a Schedule C and write off expenses directly against income.

ok thanks! are they required to send it to me by a certain date? or do i have to request it... sorry i guess these are newbie questions

your newbie question was answered in the OP.

 

[CPA]

Originally posted by: FAS284
Great thread and especially generous of you guys to help fellow AT'ers with their tax questions!

Hopefully my question is not too complicated. I am currently a medical student and as such, I have not earned in a LONG time. my wife worked two years ago (2004) and had federal tax withdrawn (I'm forgetting how much) but the income was not enough to file for taxes last year, hence we did not file. Should we pursue filing for a previous tax year to reclaim the money?

She then started a PhD program last August which pays her a nice monthly educational stipend (it isn't a job per se, just a stipend that comes along with an educational program) and also has federal taxes withdrawn from her paychecks. After doing some calculations, we still won't meet minimum income for filing. When initially signing that employment sheet which asks whether you are exempt from tax, we put yes... but later changed it to no under advice from others. So should I file for taxes or no? What should I do? Thanks for your help in advance!

You can. My guess is that if she did not earn enough to have to file a return then what was withheld will probably be due back to her. Google search for a 2004 (or 03, whichever year she worked) 1040EZ. Fill it in and see what it says. You have 3 years to file for a refund.

Again, fill out a 1040EZ and see what you come up with. The stipend is most likely income to her, so make sure you are including it in your income calc.

Both of these should take you no more than 10 minutes each.

 

[CPA]

Originally posted by: FAS284
oh and a quick question for my dad who is currently selling a house. The prospective buyer is asking for assistance with closing costs .. while I know you can itemize certain closing costs when you are buying a house, can you do the same if you pay some of the closing costs when selling your house?

No, in fact, get this - In 1991, the rules changed that allows the buyer to deduct those points paid by the seller (your dad). It reduces the seller basis in the house when he turns to sell it, but with large exemptions a couple thousands dollars won't matter to the buyer. Your dad can't deduct squat. It sucks, I know.

 

[gopunk]

thanks eaglekeeper & CPA!

 

[CPA]

Originally posted by: Jnetty99

Originally posted by: Jnetty99

Originally posted by: EagleKeeper

Originally posted by: gordita
yes, they still have the hope credit and the lifetime learning credit...I forget the difference between the two...

Hope Credit was intended to cover the first two years of post high school educations.
The credit is 50% of what is authorized.

The Lifetime Learning credit is intended for addional learning that does not fall under the Hope. That credit is 20% of what is authorized

The credit does to the primary taxpayer. If you are claimed as a dependant, you can not claim the credit.

For information on what is authorized - search the IRS site for details.

Thank you both,
I claim myself and i'm on my third year of school. i'll look on IRS.

It?s me again... I finally looked it up on the IRS website, I believe I qualify for Lifetime Credit since I?m a Junior In college; I also claim on my own.

I'm confused about two things though.
1) I use Taxact to file for free; will the software have the required form and wizard to file this? I looked up the form online and its Form 8863, the 2005 version is not available yet.

2) What can I claim? According to the IRS the following is allowed

The student may take into account only out-of-pocket expenses in calculating the Lifetime Learning Credit. Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an inheritance, or personal savings (including savings from a qualified state tuition program) are taken into account in calculating the credit amount. However, qualified tuition and related expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided educational assistance are not taken into account in calculating the credit amount.

I took a school loan for $10,000 and it?s not a government loan, I did it through a third party company and the loan was assigned to key bank. According to the above, I should be able to claim that or 20%. I also think I could claim book expenses but it would not matter because the cap is $2000.

What do you think?

Taxact has the final version ready for download. While I've never used the form, I can't imagine that it's not in there.

You are correct on the loan issue, as long as the proceeds were used for qualified educational costs. Don't forget, though, you can claim any interest from that loan exclusive of the lifetime learning credit.

 

[CPA]

Originally posted by: Bulldog13
Quick question,

My pops started a small business this year and he thought he read somewhere about a $5,000 or $3,000 deduction either specifically for small businesses, or for one's in their first year. I found mention of it once on the internet, but haven't been able to find it since. Does it ring a bell at all ?

Sorta.

Before, companies had to amortize start-up costs. Now, a business can choose to elect a $5000 deduction for start-up costs incurred after October 22, 2004. Of course, if audited, he will need to prove those costs were for start-up.

 

[EagleKeeper]

Originally posted by: CPA

Originally posted by: Bulldog13
Quick question,

My pops started a small business this year and he thought he read somewhere about a $5,000 or $3,000 deduction either specifically for small businesses, or for one's in their first year. I found mention of it once on the internet, but haven't been able to find it since. Does it ring a bell at all ?

Sorta.

Before, companies had to amortize start-up costs. Now, a business can choose to elect a $5000 deduction for start-up costs incurred after October 22, 2004. Of course, if audited, he will need to prove those costs were for start-up.

IRS - FAQ Pub535 - Business Expenses See page #3

 

[Rumpltzer]

I found this form on the IRS Web site that helps to figure out how to fill out W4 forms. I think it's a lot more useful than the worksheet included on top of the paper W4 that employers hand out.

link

 

[Mayfriday0529]

Originally posted by: CPA

Originally posted by: Jnetty99

Originally posted by: Jnetty99

Originally posted by: EagleKeeper

Originally posted by: gordita
yes, they still have the hope credit and the lifetime learning credit...I forget the difference between the two...

Hope Credit was intended to cover the first two years of post high school educations.
The credit is 50% of what is authorized.

The Lifetime Learning credit is intended for addional learning that does not fall under the Hope. That credit is 20% of what is authorized

The credit does to the primary taxpayer. If you are claimed as a dependant, you can not claim the credit.

For information on what is authorized - search the IRS site for details.

Thank you both,
I claim myself and i'm on my third year of school. i'll look on IRS.

It?s me again... I finally looked it up on the IRS website, I believe I qualify for Lifetime Credit since I?m a Junior In college; I also claim on my own.

I'm confused about two things though.
1) I use Taxact to file for free; will the software have the required form and wizard to file this? I looked up the form online and its Form 8863, the 2005 version is not available yet.

2) What can I claim? According to the IRS the following is allowed

The student may take into account only out-of-pocket expenses in calculating the Lifetime Learning Credit. Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an inheritance, or personal savings (including savings from a qualified state tuition program) are taken into account in calculating the credit amount. However, qualified tuition and related expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided educational assistance are not taken into account in calculating the credit amount.

I took a school loan for $10,000 and it?s not a government loan, I did it through a third party company and the loan was assigned to key bank. According to the above, I should be able to claim that or 20%. I also think I could claim book expenses but it would not matter because the cap is $2000.

What do you think?

Taxact has the final version ready for download. While I've never used the form, I can't imagine that it's not in there.

You are correct on the loan issue, as long as the proceeds were used for qualified educational costs. Don't forget, though, you can claim any interest from that loan exclusive of the lifetime learning credit.

Interest paid on a loan 1098e, thats what you mean right? I havent paid anything on that loan yet, but i have for three other loans this past year, i already got two 1098e waiting on one more.

 

[Bulldog13]

Originally posted by: EagleKeeper

Originally posted by: CPA

Originally posted by: Bulldog13
Quick question,

My pops started a small business this year and he thought he read somewhere about a $5,000 or $3,000 deduction either specifically for small businesses, or for one's in their first year. I found mention of it once on the internet, but haven't been able to find it since. Does it ring a bell at all ?

Sorta.

Before, companies had to amortize start-up costs. Now, a business can choose to elect a $5000 deduction for start-up costs incurred after October 22, 2004. Of course, if audited, he will need to prove those costs were for start-up.

IRS - FAQ Pub535 - Business Expenses See page #3

Thanks alot !

 

[CPA]

Originally posted by: Jnetty99

Originally posted by: CPA

Originally posted by: Jnetty99

Originally posted by: Jnetty99

Originally posted by: EagleKeeper

Originally posted by: gordita
yes, they still have the hope credit and the lifetime learning credit...I forget the difference between the two...

Hope Credit was intended to cover the first two years of post high school educations.
The credit is 50% of what is authorized.

The Lifetime Learning credit is intended for addional learning that does not fall under the Hope. That credit is 20% of what is authorized

The credit does to the primary taxpayer. If you are claimed as a dependant, you can not claim the credit.

For information on what is authorized - search the IRS site for details.

Thank you both,
I claim myself and i'm on my third year of school. i'll look on IRS.

It?s me again... I finally looked it up on the IRS website, I believe I qualify for Lifetime Credit since I?m a Junior In college; I also claim on my own.

I'm confused about two things though.
1) I use Taxact to file for free; will the software have the required form and wizard to file this? I looked up the form online and its Form 8863, the 2005 version is not available yet.

2) What can I claim? According to the IRS the following is allowed

The student may take into account only out-of-pocket expenses in calculating the Lifetime Learning Credit. Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an inheritance, or personal savings (including savings from a qualified state tuition program) are taken into account in calculating the credit amount. However, qualified tuition and related expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided educational assistance are not taken into account in calculating the credit amount.

I took a school loan for $10,000 and it?s not a government loan, I did it through a third party company and the loan was assigned to key bank. According to the above, I should be able to claim that or 20%. I also think I could claim book expenses but it would not matter because the cap is $2000.

What do you think?

Taxact has the final version ready for download. While I've never used the form, I can't imagine that it's not in there.

You are correct on the loan issue, as long as the proceeds were used for qualified educational costs. Don't forget, though, you can claim any interest from that loan exclusive of the lifetime learning credit.

Interest paid on a loan 1098e, thats what you mean right? I havent paid anything on that loan yet, but i have for three other loans this past year, i already got two 1098e waiting on one more.

Depends, not all banks will send 1098s for loans. But it doesn't usually matter. You can still claim the interest, just send in a notice that you did not receive a 1098.

 

[49erinnc]

I apologize if this has been asked/answered but it's like finding a needle in a haystack....

I am hearing/reading conflicting info regarding student loan interest. According to something I read on the IRS website, it says that an individual cannot deduct student loan interest if he or she is filing "married but separate."

If this is true, what are my options? I've been legally separated since May 19th, 2005 and we are unable to divorce until May of 2006. We will be filing "Married but separate" unless I have another option here. I really hate to pass up the college loan interest deductions. I'd appreciate any clarity to this clause or any suggestions.

Thanks for all of this great info. Really helps out people like myself out.

 

[EagleKeeper]

Originally posted by: 49erinnc
I apologize if this has been asked/answered but it's like finding a needle in a haystack....

I am hearing/reading conflicting info regarding student loan interest. According to something I read on the IRS website, it says that an individual cannot deduct student loan interest if he or she is filing "married but separate."

If this is true, what are my options? I've been legally separated since May 19th, 2005 and we are unable to divorce until May of 2006. We will be filing "Married but separate" unless I have another option here. I really hate to pass up the college loan interest deductions. I'd appreciate any clarity to this clause or any suggestions.

Thanks for all of this great info. Really helps out people like myself out.

If you are living apart; then you can file as single.
If children are involved; the parent that has the children can use Head-of-Household

Married filing seperately is more intended for a married couples that have seperate incomes and expenses and also wish to keep their finances seperate.

 

[FAS284]

Thanks CPA!

 

[FP]

Simple question.

Do wages count towards the year they were earned in or the year they were paid?

If my Dec. '05 paycheck was given to me on Friday will it appear on my 2005 or 2006 w2s?

 

[CPA]

Originally posted by: binister
Simple question.

Do wages count towards the year they were earned in or the year they were paid?

If my Dec. '05 paycheck was given to me on Friday will it appear on my 2005 or 2006 w2s?

This is a good question that baffles a lot of people and, fortunately, has a very simple answer.

The IRS considers individual taxpayer to file using the cash basis. What that means is income is recognized in the year that it was PAID, not earned. So, in your case, if you received a check in January for work performed in December, it is 2006 wages. Now, you really shouldn't have to worry about this because your employer will send the correct income figures on your W2 to both you and the IRS. Adding income that's not on your W2 will kick out your return because now your 1040 income will not match what the IRS has.

Deductions are pretty similar except that there a couple of cases (contributions to an IRA, for example) that are allowed if they are paid in following year.

 

[Telgin]

Thanks for youe help again this year!!!!

Someone I know is an entertainer on a cruise ship of Bahamian registry. She gets paid in cash and, AFAIK, will not be receiving any type of W-2 or U.S. tax forms of any kind. Should she file, or should we just let sleeping dogs lie????

 

[EagleKeeper]

Originally posted by: Telgin
Thanks for youe help again this year!!!!

My daughter is an entertainer on a cruise ship of Bahamian registry. She gets paid in cash and, AFAIK, will not be receiving any type of W-2 or U.S. tax forms of any kind. Should she file, or should we just let sleeping dogs lie????

Legally she should file.
Without documentation from the employer, she should use a Schedule C and write off expenses.

By not filing, it will raise a red flag at a later date (within 3-5 years) if she ever wants to participate in the US economic system that requires tax returns for proof.

 

[Telgin]

Thanks!!!!!

 

[spidey07]

Can you deduct a commute of 150 miles round trip to work everyday under any circumstances at all?

I thought there were certain qualifications in order to do so.

 

[EagleKeeper]

No