4th Annual Tax Thread - 2006

[CupCak3]

Originally posted by: EagleKeeper

Originally posted by: CupCak3
This is actually a question on the best way to deal with my situation for this coming tax year. I have a bunch of old computers parts I had which I am selling. Can I deduct the amount I originally paid for them even if it was not in the tax year I sold them? How would this change if I bought the parts in the same tax year? I?ve already started selling my stuff but I thought I?d ask before I go too far. If needed to start a small business to best take advantage of the tax deductions, would sales I made before the ?start? of small business apply for any deductions?

Thank you very much for all your help. Your advice really helped me with my 2006 returns!

If you are doing this as a hobby or "yard sale" you do not need to worry about reporting the sale and profit/loss.

If you actually intend of buying/selling parts for a profit, then you should take the fair market value of the parts when you transfer them to the business to determine the cost basis.

Well I guess my problem is that I have a couple thousand dollars of stuff I'm selling over ebay. (some antiques, DVDs, music, electronics, some old computer stuff) I don't want any red flags going off.

Now that I'm seeing how much all this old stuff is bringing in, I'm thinking about making it into more than a hobby from going to garage sales and auctions. I have no problem paying the government what is due, but is there a justifiable way for me to sell my personal assets with no charge but then pay taxes on the stuff I bought and sold for profit?

Thanks again!

 

[EagleKeeper]

Originally posted by: MustISO
Got a question about this section:

Returns and Allowances

• Granted as discounts to customers

If we give discounts for services does that amount get entered here or is it only discounts on items purchsed by customers?

Items that are discounted have a fixed cost basis. therefore providing a discount adjusts that basis.

Services do not, you just are promoting good will by lower the fees charged.

 

[EagleKeeper]

Originally posted by: abc

a relative of mine outside the US got rid of land for $.

I'm going to be given about $100k USD after currency conversion.


How to I minimize my tax hit?/maximize recving 100k USD?


how the heck do i get it over here, wire, check?

In theory, if the funds never come into the US, it will not be taxed.

Funds of that amount, should be wire transfered or a bank certified check.

 

[EagleKeeper]

Originally posted by: lather164
My wife and I got married July 29 2006 in a kind of sudden marriage (las vegas style). We are both in our last year of college and basically being supported by our parents and loans still. She made a little over $4k last year and I made a little over $8k. We claim zero through our employment.
First, can our parents still claim is as dependents since for the better part of the year we were, and they are still supporting us somewhat financially.

Second, filing jointly or separately but married is probably something that cannot be determined with this basis of information, but is there an obvious way to go about doing this?

Being married do we need to actually tell our employers anything different about our situation because mine has not changed through the amount of taxes they withhold or anything. Is this wrong?

1) Check to see if each of you can be claimed using the dependency test required by the IRS. If so, the one that is able to be claimed as a dependant by the parents, needs to file a tax return with a dependand status selected. If a person can not meed the dependency rules, then that person should file as single for this year.

2) Using Tax S/W will enable you to easily detemine which way to file.
Married/Seperately or jointly is just a matter of dropping in the numbers and seeing what pops out best for the family unit.

As a dependant, you need to check the rules (as previously stated) and then look at what the nubmers provide. If tuition costs come into play, the family unit with the largest income will usually do better with the person being considered part of the unit.

3) Your employers do not need to know anything about the filing status. However, they should be informed of the marriage due to the insurance and survivor benefits.

 

[EagleKeeper]

Originally posted by: CupCak3

Originally posted by: EagleKeeper

Originally posted by: CupCak3
This is actually a question on the best way to deal with my situation for this coming tax year. I have a bunch of old computers parts I had which I am selling. Can I deduct the amount I originally paid for them even if it was not in the tax year I sold them? How would this change if I bought the parts in the same tax year? I?ve already started selling my stuff but I thought I?d ask before I go too far. If needed to start a small business to best take advantage of the tax deductions, would sales I made before the ?start? of small business apply for any deductions?

Thank you very much for all your help. Your advice really helped me with my 2006 returns!

If you are doing this as a hobby or "yard sale" you do not need to worry about reporting the sale and profit/loss.

If you actually intend of buying/selling parts for a profit, then you should take the fair market value of the parts when you transfer them to the business to determine the cost basis.

Well I guess my problem is that I have a couple thousand dollars of stuff I'm selling over ebay. (some antiques, DVDs, music, electronics, some old computer stuff) I don't want any red flags going off.

Now that I'm seeing how much all this old stuff is bringing in, I'm thinking about making it into more than a hobby from going to garage sales and auctions. I have no problem paying the government what is due, but is there a justifiable way for me to sell my personal assets with no charge but then pay taxes on the stuff I bought and sold for profit?

Thanks again!

If you choose to go this route, sell your personal items seperately from the business.

Keep accurate records of each.

Business expenses and profilts go on the Schedule C; keep your personal sales away from the business, treat them as hobby.

 

[hypeMarked]

I didn't realize this thread can be used to answer questions until my thread is locked (*duh*). Anyways, I have a question that needs to be answer. I've sold some of my options in 2006 and it is reflected in the W-2. But on the 1040 form, it has a section for "sold stocks/options". It said to use the one of the 1099 form that I got from the broker (e-trade). But the form from e-trade does not have any taxed on it, so if I included it in, would that means I got taxed 2x? Or I shouldn't put it in? Thanks,

 

[EagleKeeper]

If the information is included on the W2, then you do not need to duplicate it from the 1099.

Make sure that any info that you need from the 1099 is used if needed.

Fern posted some issues to be aware of in the locked thread.

 

[hypeMarked]

One more question, if I did some consultant jobs, does that counts towards having a business? because that's the only appropriate place that I found to put in the information.

 

[EagleKeeper]

Originally posted by: hypeMarked
One more question, if I did some consultant jobs, does that counts towards having a business? because that's the only appropriate place that I found to put in the information.

Depending on the amount, it is classified as Misc income on the 1040 or use the Schedule C. Using the Schedule C allows you to write off expenses to reduce the tax impact of the additional income.

 

[I4AT]

This is my first time filing taxes, so bear with me if this is a retarded question. I'm entering my 1099 info right now, and I just have a question about the "Payer's Name".

HSBC BANK USA, N.A.

Should I include the ", N.A." or just put "HSBC BANK USA"? Would getting that wrong potentially screw things up?

 

[EagleKeeper]

Originally posted by: I4AT
This is my first time filing taxes, so bear with me if this is a retarded question. I'm entering my 1099 info right now, and I just have a question about the "Payer's Name".

HSBC BANK USA, N.A.

Should I include the ", N.A." or just put "HSBC BANK USA"? Would getting that wrong potentially screw things up?

Based on your question, you are using tax S/W.

The payee name is used for reference only when you choose to printout detailed documentaion/worksheets for your records only.

The Payee# is the only information that actually matters if the return is e-filed.

 

[I4AT]

Originally posted by: EagleKeeper

Originally posted by: I4AT
This is my first time filing taxes, so bear with me if this is a retarded question. I'm entering my 1099 info right now, and I just have a question about the "Payer's Name".

HSBC BANK USA, N.A.

Should I include the ", N.A." or just put "HSBC BANK USA"? Would getting that wrong potentially screw things up?

Based on your question, you are using tax S/W.

The payee name is used for reference only when you choose to printout detailed documentaion/worksheets for your records only.

The Payee# is the only information that actually matters if the return is e-filed.

Thank you Eagle, sorry about the PM, just wanna get this thing over and done with and this thread moves kinda slow.

 

[Tifababy]

My wife and I owed quite a bit this year in taxes. Part of the problem was that my wife was claiming 3 or 4 exemptions on her W4 and we have no kids, so she was barely paying any federal taxes. And then we transfered a death benefit from my father-in-law to CDs, so we had to pay taxes on the interest from the life insurance.

So now it says that we have to pay estimated quarterly taxes. But my wife has fixed her W4 to claim only 1 exemption and we won't have the large interest from the life insurance. Do we still have to pay the estimated quarterly taxes?

 

[EagleKeeper]

Originally posted by: Tifababy
My wife and I owed quite a bit this year in taxes. Part of the problem was that my wife was claiming 3 or 4 exemptions on her W4 and we have no kids, so she was barely paying any federal taxes. And then we transfered a death benefit from my father-in-law to CDs, so we had to pay taxes on the interest from the life insurance.

So now it says that we have to pay estimated quarterly taxes. But my wife has fixed her W4 to claim only 1 exemption and we won't have the large interest from the life insurance. Do we still have to pay the estimated quarterly taxes?

the estimated quarterly taxes is an advice so you do not get hit with a big tax bill and/or penalties for under payment from the IRS next year.

Because you have identified the problem and adjusted for it via your withholdings, then you should not have to worry about quarterly taxes.

Are you sure that you need to pay taxes on the interest on the insurance policy?

If you "inherited" the policy, the cost basis should include the interest that accumulated during the life of the policy.

If you do not expect to need the funds received from the policy when the CDs mature, you may choose to reclassify the some/all of the CDs as individual IRAs to reduce the tax bite.

 

[Tifababy]

Originally posted by: EagleKeeper

Originally posted by: Tifababy
My wife and I owed quite a bit this year in taxes. Part of the problem was that my wife was claiming 3 or 4 exemptions on her W4 and we have no kids, so she was barely paying any federal taxes. And then we transfered a death benefit from my father-in-law to CDs, so we had to pay taxes on the interest from the life insurance.

So now it says that we have to pay estimated quarterly taxes. But my wife has fixed her W4 to claim only 1 exemption and we won't have the large interest from the life insurance. Do we still have to pay the estimated quarterly taxes?

the estimated quarterly taxes is an advice so you do not get hit with a big tax bill and/or penalties for under payment from the IRS next year.

Because you have identified the problem and adjusted for it via your withholdings, then you should not have to worry about quarterly taxes.

Are you sure that you need to pay taxes on the interest on the insurance policy?

If you "inherited" the policy, the cost basis should include the interest that accumulated during the life of the policy.

If you do not expect to need the funds received from the policy when the CDs mature, you may choose to reclassify the some/all of the CDs as individual IRAs to reduce the tax bite.

After my father-in-law passed away the life insurance was put in a Met Life account and we only paid taxes on the interest accumulated while in the Met Life account under my wife's name. We received a 1099-INT, so I'm assuming we need to pay taxes on the interest.

Thanks for the tip on reclassifying the CD to an IRA once they mature and thanks for the quick and speedy response to my question about the estimated quarterly taxes.

 

[EagleKeeper]

Originally posted by: Tifababy

Originally posted by: EagleKeeper

Originally posted by: Tifababy
My wife and I owed quite a bit this year in taxes. Part of the problem was that my wife was claiming 3 or 4 exemptions on her W4 and we have no kids, so she was barely paying any federal taxes. And then we transfered a death benefit from my father-in-law to CDs, so we had to pay taxes on the interest from the life insurance.

So now it says that we have to pay estimated quarterly taxes. But my wife has fixed her W4 to claim only 1 exemption and we won't have the large interest from the life insurance. Do we still have to pay the estimated quarterly taxes?

the estimated quarterly taxes is an advice so you do not get hit with a big tax bill and/or penalties for under payment from the IRS next year.

Because you have identified the problem and adjusted for it via your withholdings, then you should not have to worry about quarterly taxes.

Are you sure that you need to pay taxes on the interest on the insurance policy?

If you "inherited" the policy, the cost basis should include the interest that accumulated during the life of the policy.

If you do not expect to need the funds received from the policy when the CDs mature, you may choose to reclassify the some/all of the CDs as individual IRAs to reduce the tax bite.

After my father-in-law passed away the life insurance was put in a Met Life account and we only paid taxes on the interest accumulated while in the Met Life account under my wife's name. We received a 1099-INT, so I'm assuming we need to pay taxes on the interest.

Thanks for the tip on reclassifying the CD to an IRA once they mature and thanks for the quick and speedy response to my question about the estimated quarterly taxes.

Interest was earned on the account after the death while under your control - therefore it is taxable. I did not fully understand the original information.

You can reclassify the CD immediately (before the 17th) to have it count for the 2006 taxes. Talk the the institution that issued the CD. It is just paperwork and possible a minor fee. You can also take additional funds (possibly from within the CD itself) and fund the 2007 IRA balances at the same time.

 

[KoolAidKid]

I am trying to figure out what I can deduct as unreimbursed business expenses. Here is the situation. My wife and I were on a business trip for 6 months. During this time we received the federal per diem rate for lodging, meals, and incidental expenses, 7 days a week for 6 months. We drove our personal autos while we were there and were not reimbursed for this. Which of the following items are an appropriate deduction?

-Security features installed in our home because we were going to be leaving it unattended for 6 months (e.g., alarm system, motion-sensing lights)
-Lawn maintenance while on business travel (had to pay someone to do it, would do it myself otherwise)
-Business clothes that we were forced to purchase to meet the dress code of the business trip site
-Mileage for all miles traveled during the 6 month period, including miles traveled to and from my house to the business trip site

Thanks in advance!

 

[kyparrish]

okay, I don't think this has to do with the TT software, but I just printed to review before e-filing, and the front page says:

"your return also indicates the following estimated tax payments are to be paid using Form 1040-ES" then it lists 4 payments of $271 (we owed $1041 this year b/c my wife's employer didnt' withhold enough).

Do we HAVE to maket these estimated tax payments on 4/17, 6/15, 9/17, and 1/15/2008? What would happen if we didn't send in payment with these vouchers? We should be getting back a refund next year.

 

[EagleKeeper]

Originally posted by: KoolAidKid
I am trying to figure out what I can deduct as unreimbursed business expenses. Here is the situation. My wife and I were on a business trip for 6 months. During this time we received the federal per diem rate for lodging, meals, and incidental expenses, 7 days a week for 6 months. We drove our personal autos while we were there and were not reimbursed for this. Which of the following items are an appropriate deduction?

-Security features installed in our home because we were going to be leaving it unattended for 6 months (e.g., alarm system, motion-sensing lights)
-Lawn maintenance while on business travel (had to pay someone to do it, would do it myself otherwise)
-Business clothes that we were forced to purchase to meet the dress code of the business trip site
-Mileage for all miles traveled during the 6 month period, including miles traveled to and from my house to the business trip site

Thanks in advance!

Disclaimer:
Comments are based on previous interaction experience with the IRS - they are not directed as a slap against you. You could attempt to write off the items, however, my comments are what a IRS auditor might think/rule.
comments are also based that your wife was not required on the trip as a business necessity.

-Security features installed in our home because we were going to be leaving it unattended for 6 months (e.g., alarm system, motion-sensing lights)
NO - Specifically called out as a nogo in Pub 563 relating to the Form 2106

-Lawn maintenance while on business travel (had to pay someone to do it, would do it myself otherwise)
NO There is no guarantee that you may not have already been using a lawn service.

-Business clothes that we were forced to purchase to meet the dress code of the business trip site
No... - Special uniforms/safety gear/covering is acceptable as a clothing business expense if the clothes are not something that you could use for another occasions outside the business trip.
Business dress requirements going from sneakejeans/T shirts/sleeveless blouse to dress shoes, pleated skirts, pantsuits, dress slacks, suit ties would not constitute an exception to the rule. It just means that you get to rub shoulders with a different type/class of people that you previously may not have interacted with.

-Mileage for all miles traveled during the 6 month period, including miles traveled to and from my house to the business trip site
YES - Form 2106/Schedule A

 

[KoolAidKid]

Originally posted by: EagleKeeper

Originally posted by: KoolAidKid
I am trying to figure out what I can deduct as unreimbursed business expenses. Here is the situation. My wife and I were on a business trip for 6 months. During this time we received the federal per diem rate for lodging, meals, and incidental expenses, 7 days a week for 6 months. We drove our personal autos while we were there and were not reimbursed for this. Which of the following items are an appropriate deduction?

-Security features installed in our home because we were going to be leaving it unattended for 6 months (e.g., alarm system, motion-sensing lights)
-Lawn maintenance while on business travel (had to pay someone to do it, would do it myself otherwise)
-Business clothes that we were forced to purchase to meet the dress code of the business trip site
-Mileage for all miles traveled during the 6 month period, including miles traveled to and from my house to the business trip site

Thanks in advance!

Disclaimer:
Comments are based on previous interaction experience with the IRS - they are not directed as a slap against you. You could attempt to write off the items, however, my comments are what a IRS auditor might think/rule.
comments are also based that your wife was not required on the trip as a business necessity.

-Security features installed in our home because we were going to be leaving it unattended for 6 months (e.g., alarm system, motion-sensing lights)
NO - The security feature is not required for the business trip. Also, your wife was not required to join you.

-Lawn maintenance while on business travel (had to pay someone to do it, would do it myself otherwise)
NO There is no guarantee that you may not have already been using a lawn service.

-Business clothes that we were forced to purchase to meet the dress code of the business trip site
No... - Special uniforms/safety gear/covering is acceptable as a clothing business expense if the clothes are not something that you could use for another occasions outside the business trip.
Business dress requirements going from sneakejeans/T shirts/sleeveless blouse to dress shoes, pleated skirts, pantsuits, dress slacks, suit ties would not constitute an exception to the rule. It just means that you get to rub shoulders with a different type/class of people that you previously may not have interacted with.

-Mileage for all miles traveled during the 6 month period, including miles traveled to and from my house to the business trip site
YES - Form 2106/Schedule A

Thanks for the quick response. I should make clear that both my wife and I were employed by the same company and sent (as employees) on the business trip together. LMK if this changes anything.

 

[EagleKeeper]

Originally posted by: kyparrish
okay, I don't think this has to do with the TT software, but I just printed to review before e-filing, and the front page says:

"your return also indicates the following estimated tax payments are to be paid using Form 1040-ES" then it lists 4 payments of $271 (we owed $1041 this year b/c my wife's employer didnt' withhold enough).

Do we HAVE to make these estimated tax payments on 4/17, 6/15, 9/17, and 1/15/2008? What would happen if we didn't send in payment with these vouchers? We should be getting back a refund next year.

1) It is not the employer's fault that not enough tax was withheld. They withhold based on the information that you provided to them.

2) If you choose to not pay the complete tax bill, the 1040-ES is a request from you to the IRS to pay the amounts owed in installments.
If you choose not to pay, after signing the form, the IRS could become upset with you for breaking your contract.

3) You could ask the IRS to send you a payment schedule, sign it and then follow up.

4) The IRS is not going to automatically wait until next year for the money that you owe. What you think may be a refund could easily change due to employment or tax laws adjustments.

5) If you owe back taxes when you file your 2007 taxes, the IRS will grab any refund for coming tax years to pay the back taxes. You will also be paying interest to the government on the back taxes and possibly some penalties, especially if the IRS felt there was under withholding going on.

 

[kyparrish]

Originally posted by: EagleKeeper

Originally posted by: kyparrish
okay, I don't think this has to do with the TT software, but I just printed to review before e-filing, and the front page says:

"your return also indicates the following estimated tax payments are to be paid using Form 1040-ES" then it lists 4 payments of $271 (we owed $1041 this year b/c my wife's employer didnt' withhold enough).

Do we HAVE to make these estimated tax payments on 4/17, 6/15, 9/17, and 1/15/2008? What would happen if we didn't send in payment with these vouchers? We should be getting back a refund next year.

1) It is not the employer's fault that not enough tax was withheld. They withhold based on the information that you provided to them.

2) If you choose to not pay the complete tax bill, the 1040-ES is a request from you to the IRS to pay the amounts owed in installments.
If you choose not to pay, after signing the form, the IRS could become upset with you for breaking your contract.

3) You could ask the IRS to send you a payment schedule, sign it and then follow up.

4) The IRS is not going to automatically wait until next year for the money that you owe. What you think may be a refund could easily change due to employment or tax laws adjustments.

5) If you owe back taxes when you file your 2007 taxes, the IRS will grab any refund for coming tax years to pay the back taxes. You will also be paying interest to the government on the back taxes and possibly some penalties, especially if the IRS felt there was under withholding going on.

Thanks for all of the incredible help! I went back and found a section that let me update new W4's to give to our employers to that we will be good now. This seemed to satisfy my requirement to pay estimated taxes. Thanks!!!!!!!!!!!!!!!!!!

 

[aldamon]

I started IRAs today for me and my wife and arranged for funding. Should I wait a few days before submitting my return at TaxAct or can I do it right now?

 

[Parrotheader]

I did a rough draft of my taxes back in January and thought I had everything fairly well tied-up. But I just realized a 1099 from a company I did some freelance for is wrong (the number is actually too low by a considerable sum.) I know I need to contact the company, but what's the best way to remedy that this late in the game? I noticed there's a checkbox at the top that says "Corrected (if checked)" but I wasn't sure what the procedure is for that.

 

[Slew Foot]

Crap, I sent in my return already but now my Dad gives me notice that a joint account we had has dividends in my name that I didnt include. How exactly do I fill out to 1040x form? DO all the dividends (Ordinary, qualified, and capital gain) go onto line 6?