4th Annual Tax Thread - 2006

[EagleKeeper]

Originally posted by: Mermaidman
CHARITABLE DONATIONS - CASH

Is it too late to donate money to a non-profit for TY 2006? We didn't donate much $ last year, and I was going to right before New Year's, but proscrastination . . .

Cash/Merchandise is on the date donated; Checks are considered based on the date of the check

 

[EagleKeeper]

Originally posted by: newb111
Firstly, thanks EagleKeeper for this great help. Second, could you explain the below situation for someone who is not a dependent? This year I am not a dependent so I should get to deduct my tuition/expenses now correct? If you could detail it a little, I would be grateful.

Originally posted by: chambersc
I'm a student. Do I have to fill out anything to get some money back from my tuition (or anything that I've spent on my university, frankly)? Since I'm a dependent, do I not have to worry about anything and that's my parent's responsibility?

For those that are NOT classified as a dependant (in terms of filing), some tuition expenses and tuition loan interest may be deductible for post HS education. There are line items on the tax return to enter these amounts. They are a percentage of the tuition and interest with some factoring of the income level.

 

[RMSistight]

Thanks again EagleKeeper and CPA for offering your services.

Here is my situation:

For 2006 I've worked three jobs. I'm considered a regular employee for two of them and an independent contractor for the third. Here is a run down:

Job 1 - Worked for school (part time employee)
Total wages earned is going to be more or less around $8,000. I've already paid about $600 dollars in federal taxes and I'm unsure about the rest (state, etc...well you guys only handle federal so I'll leave it at that)

Job 2 - Worked for a broadcasting company (part time employee)
Total wages were around $2,300 with federal taxes to be about $250-$300 already paid. The company is closing up shop and I stopped working there pretty much around October of last year.

Job 3 - Worked for a winery as a IT assistant
Total wages are about $15,335 (or subtract $850 depending if it's added with last year or this year because the pay period ended on 12/29 but I'm being paid that amount this coming Friday). I've been paid with checks with no taxes deducted and I have not paid any taxes from this job to Uncle Sam. I haven't received my 1099 form yet.

I'm 23 years old and I know for a fact I will NOT be claimed as a depedent on my parents tax return. I will be filing under single. I paid tuition for community college which is around $300. There is no point in taking an itemized deduction so I'll go ahead with the standard deduction of $5,150.

How do I figure about how much I owe and what do I need to do to correctly file my taxes?

Normally I wouldn't have this problem because it would just be wages and I can figure it out from there. But this whole indepdent contractor stuff is the part that gets confusing. Thanks again for your help.

 

[EagleKeeper]

Originally posted by: RMSistight
Thanks again EagleKeeper and CPA for offering your services.

Here is my situation:

For 2006 I've worked three jobs. I'm considered a regular employee for two of them and an independent contractor for the third. Here is a run down:

Job 1 - Worked for school (part time employee)
Total wages earned is going to be more or less around $8,000. I've already paid about $600 dollars in federal taxes and I'm unsure about the rest (state, etc...well you guys only handle federal so I'll leave it at that)

Job 2 - Worked for a broadcasting company (part time employee)
Total wages were around $2,300 with federal taxes to be about $250-$300 already paid. The company is closing up shop and I stopped working there pretty much around October of last year.

Job 3 - Worked for a winery as a IT assistant
Total wages are about $15,335 (or subtract $850 depending if it's added with last year or this year because the pay period ended on 12/29 but I'm being paid that amount this coming Friday). I've been paid with checks with no taxes deducted and I have not paid any taxes from this job to Uncle Sam. I haven't received my 1099 form yet.

I'm 23 years old and I know for a fact I will NOT be claimed as a Dependant on my parents tax return. I will be filing under single. I paid tuition for community college which is around $300. There is no point in taking an itemized deduction so I'll go ahead with the standard deduction of $5,150.

How do I figure about how much I owe and what do I need to do to correctly file my taxes?

Normally I wouldn't have this problem because it would just be wages and I can figure it out from there. But this whole independent contractor stuff is the part that gets confusing. Thanks again for your help.

That independent contractor status can be a blessing or a curse.
As a blessing; you can dig for expenses that could be in anyway related to the type of work.

As a curse, it sounds like you took the money and did not put away any for Uncle.

Tax S/W will help you through all the steps; you need to find everything that could be considered an expense for the 1099 job. Think about your daily routine and what all you touch related to the work. This includes special clothing, books & materials, transportation & expenses, tools, etc.

Because the position is related to IT; then any computer equipment/costs that you can identify could be classified as pure expense.

If you are taking courses at the school that are related to the IT slot; then the complete tuition could be considered an expense along with any additional educational expenses and transportation (vehicle payments, insurance, maintenance, mileage, etc).

Be careful when working with the vehicle(s) - you can using maintenance costs or mileage for a given vehicle - not both. You also get depreciation on the vehicle - the S/W will handle that for you.

 

[RMSistight]

Originally posted by: EagleKeeper

Originally posted by: RMSistight
Thanks again EagleKeeper and CPA for offering your services.

Here is my situation:

For 2006 I've worked three jobs. I'm considered a regular employee for two of them and an independent contractor for the third. Here is a run down:

Job 1 - Worked for school (part time employee)
Total wages earned is going to be more or less around $8,000. I've already paid about $600 dollars in federal taxes and I'm unsure about the rest (state, etc...well you guys only handle federal so I'll leave it at that)

Job 2 - Worked for a broadcasting company (part time employee)
Total wages were around $2,300 with federal taxes to be about $250-$300 already paid. The company is closing up shop and I stopped working there pretty much around October of last year.

Job 3 - Worked for a winery as a IT assistant
Total wages are about $15,335 (or subtract $850 depending if it's added with last year or this year because the pay period ended on 12/29 but I'm being paid that amount this coming Friday). I've been paid with checks with no taxes deducted and I have not paid any taxes from this job to Uncle Sam. I haven't received my 1099 form yet.

I'm 23 years old and I know for a fact I will NOT be claimed as a Dependant on my parents tax return. I will be filing under single. I paid tuition for community college which is around $300. There is no point in taking an itemized deduction so I'll go ahead with the standard deduction of $5,150.

How do I figure about how much I owe and what do I need to do to correctly file my taxes?

Normally I wouldn't have this problem because it would just be wages and I can figure it out from there. But this whole independent contractor stuff is the part that gets confusing. Thanks again for your help.

That independent contractor status can be a blessing or a curse.
As a blessing; you can dig for expenses that could be in anyway related to the type of work.

As a curse, it sounds like you took the money and did not put away any for Uncle.

Tax S/W will help you through all the steps; you need to find everything that could be considered an expense for the 1099 job. Think about your daily routine and what all you touch related to the work. This includes special clothing, books & materials, transportation & expenses, tools, etc.

Because the position is related to IT; then any computer equipment/costs that you can identify could be classified as pure expense.

If you are taking courses at the school that are related to the IT slot; then the complete tuition could be considered an expense along with any additional educational expenses and transportation (vehicle payments, insurance, maintenance, mileage, etc).

Be careful when working with the vehicle(s) - you can using maintenance costs or mileage for a given vehicle - not both. You also get depreciation on the vehicle - the S/W will handle that for you.

For my daily routine, every time that I go to work for the 1099 job, it's 17.2 miles. I've counted up everything and so far I've made about 137 trips (I guess 137 days of work) based on my paycheck information. I can't take into account insurance because my parents pays for it. I can't get depreciation on the vehicle since my parents own the vehicle correct? I've purchased a lot of Cisco networking books online so I guess I can take that into account. I guess can I take the tuition from community college as a full expense of about $350.

I also attended a full time university but the the tuition was completely paid for with grants so that's out the window. What about rent? I had to pay for rent using college loans and sometimes with money made from the 1099 job.

Once I figure out my expenses, what if this in the end is lower than my standard deduction? I might as well go with the standard deduction right? Also, how do I figure out how much I owe in taxes once everything is all said and done?

Lastly, which tax software should I get based on my situation? There are so many versions out there I wouldn't know what to get. Thanks again for your patience.

 

[EagleKeeper]

Originally posted by: RMSistight

Originally posted by: EagleKeeper

Originally posted by: RMSistight
Thanks again EagleKeeper and CPA for offering your services.

Here is my situation:

For 2006 I've worked three jobs. I'm considered a regular employee for two of them and an independent contractor for the third. Here is a run down:

Job 1 - Worked for school (part time employee)
Total wages earned is going to be more or less around $8,000. I've already paid about $600 dollars in federal taxes and I'm unsure about the rest (state, etc...well you guys only handle federal so I'll leave it at that)

Job 2 - Worked for a broadcasting company (part time employee)
Total wages were around $2,300 with federal taxes to be about $250-$300 already paid. The company is closing up shop and I stopped working there pretty much around October of last year.

Job 3 - Worked for a winery as a IT assistant
Total wages are about $15,335 (or subtract $850 depending if it's added with last year or this year because the pay period ended on 12/29 but I'm being paid that amount this coming Friday). I've been paid with checks with no taxes deducted and I have not paid any taxes from this job to Uncle Sam. I haven't received my 1099 form yet.

I'm 23 years old and I know for a fact I will NOT be claimed as a Dependant on my parents tax return. I will be filing under single. I paid tuition for community college which is around $300. There is no point in taking an itemized deduction so I'll go ahead with the standard deduction of $5,150.

How do I figure about how much I owe and what do I need to do to correctly file my taxes?

Normally I wouldn't have this problem because it would just be wages and I can figure it out from there. But this whole independent contractor stuff is the part that gets confusing. Thanks again for your help.

That independent contractor status can be a blessing or a curse.
As a blessing; you can dig for expenses that could be in anyway related to the type of work.

As a curse, it sounds like you took the money and did not put away any for Uncle.

Tax S/W will help you through all the steps; you need to find everything that could be considered an expense for the 1099 job. Think about your daily routine and what all you touch related to the work. This includes special clothing, books & materials, transportation & expenses, tools, etc.

Because the position is related to IT; then any computer equipment/costs that you can identify could be classified as pure expense.

If you are taking courses at the school that are related to the IT slot; then the complete tuition could be considered an expense along with any additional educational expenses and transportation (vehicle payments, insurance, maintenance, mileage, etc).

Be careful when working with the vehicle(s) - you can using maintenance costs or mileage for a given vehicle - not both. You also get depreciation on the vehicle - the S/W will handle that for you.

For my daily routine, every time that I go to work for the 1099 job, it's 17.2 miles. I've counted up everything and so far I've made about 137 trips (I guess 137 days of work) based on my paycheck information. I can't take into account insurance because my parents pays for it. I can't get depreciation on the vehicle since my parents own the vehicle correct? I've purchased a lot of Cisco networking books online so I guess I can take that into account. I guess can I take the tuition from community college as a full expense of about $350.

I also attended a full time university but the the tuition was completely paid for with grants so that's out the window. What about rent? I had to pay for rent using college loans and sometimes with money made from the 1099 job.

Once I figure out my expenses, what if this in the end is lower than my standard deduction? I might as well go with the standard deduction right? Also, how do I figure out how much I owe in taxes once everything is all said and done?

Lastly, which tax software should I get based on my situation? There are so many versions out there I wouldn't know what to get. Thanks again for your patience.

1) Side trips of any sort that is anyway related to IT. checking out equipment sales at BB, etc?

2) If your parents gifted you the vehicle and gifted you (up to 20K) the insurance costs, then you can declare the vehicle as an expense. If you "rent" the vehicle from your parents; then that can become an expense along with the maintenance costs.

3) Rent/utilities can be proportional to the area used as related to the IT job. If you have a dedicated bedroom for IT, then use the percentage of number of bedrooms. Otherwise figure the square footage of the room vs the rest of the "house".

4) I would expect that your standard deduction will be better than itemization. The itemization that we are talking about is for the Schedule C, not the Schedule A. This way the expenses are not taxable at all.

5) Any of the Tax S/W that is mentioned in the OP will do the job for you. When you have finished the first pass, there will be a number displayed in terms of your Federal Tax. Then you should printout the Schedule C worksheets and start thinking long and hard about all the clues/information/activities that would relate, that you may have overlooked.
Take a look at your bank statement, checkbooks, etc to see what things you may have paid/purchased that could be related to IT.

When you are happy with the Federal, the state should be a piece of cake. No real extra work

I personally would shy away from using the online S/W due to the inability to quickly get to the section I want and the time lag when doing non trivial returns. Others may choose to disagree with this opinion.

 

[RMSistight]

I spend a lot of money (the reason I'n in debt) on computer parts in general. But most of these purchases have been for personal use and not for my job. So in the end it's not an expense right?

I think I'll just go with the standard deduction. In the end, that's going to be the better option. Thanks again EagleKeeper for your time and patience.

 

[EagleKeeper]

Originally posted by: RMSistight
I spend a lot of money (the reason I'n in debt) on computer parts in general. But most of these purchases have been for personal use and not for my job. So in the end it's not an expense right?

I think I'll just go with the standard deduction. In the end, that's going to be the better option. Thanks again EagleKeeper for your time and patience.

Your call.

However, the learning experience for the computer parts has a postiive impact on your 1099 job.

If you do not expense some of the 1099 you are facing at least a $1500-$2000 tax bill to the Feds for that income plus another $500 or more for your state.

As stated, the standard deduction has no bearing on the 1099 income. Do not mix apples and oranges. What you are calling the standard deduction is relevant to the Schedule A. We are talking abouit the Schedule C - business income. The amount of 1099 income requires you to file it with your 1040

 

[techfuzz]

What's the deal with this one-time tax refund for long-distance telephone service that we have been paying since the 1800s? What's the best way to maximize this refund?

TIA,
techfuzz

 

[EagleKeeper]

Originally posted by: techfuzz
What's the deal with this one-time tax refund for long-distance telephone service that we have been paying since the 1800s? What's the best way to maximize this refund?

TIA,
techfuzz

Individual taxpayers can take a standard amount from $30 to $60 based on the number of exemptions claimed on their tax return. For those claiming:

one exemption, the standard refund amount is $30
two exemptions, the standard refund amount is $40
three exemptions, the standard refund amount is $50
four exemptions or more, the standard refund amount is $60

The instructions to the 2006 1040 tax forms will provide more information on how to determine the correct number of exemptions. (Because the term ?exemptions? does not appear on Form 1040EZ, people who fill out this form should follow the instructions carefully.)

The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects taxes paid on long-distance or bundled service by similarly sized families or households. Using this amount may be the easiest way for taxpayers to get their refund and avoid gathering 41 months of old phone records.

 

[RMSistight]

Originally posted by: EagleKeeper

Originally posted by: RMSistight
I spend a lot of money (the reason I'n in debt) on computer parts in general. But most of these purchases have been for personal use and not for my job. So in the end it's not an expense right?

I think I'll just go with the standard deduction. In the end, that's going to be the better option. Thanks again EagleKeeper for your time and patience.

Your call.

However, the learning experience for the computer parts has a postiive impact on your 1099 job.

If you do not expense some of the 1099 you are facing at least a $1500-$2000 tax bill to the Feds for that income plus another $500 or more for your state.

As stated, the standard deduction has no bearing on the 1099 income. Do not mix apples and oranges. What you are calling the standard deduction is relevant to the Schedule A. We are talking abouit the Schedule C - business income. The amount of 1099 income requires you to file it with your 1040

So you're saying that the standard deduction is completely separate of my expenses from my 1099 job?

 

[EagleKeeper]

Originally posted by: RMSistight

Originally posted by: EagleKeeper

Originally posted by: RMSistight
I spend a lot of money (the reason I'n in debt) on computer parts in general. But most of these purchases have been for personal use and not for my job. So in the end it's not an expense right?

I think I'll just go with the standard deduction. In the end, that's going to be the better option. Thanks again EagleKeeper for your time and patience.

Your call.

However, the learning experience for the computer parts has a postiive impact on your 1099 job.

If you do not expense some of the 1099 you are facing at least a $1500-$2000 tax bill to the Feds for that income plus another $500 or more for your state.

As stated, the standard deduction has no bearing on the 1099 income. Do not mix apples and oranges. What you are calling the standard deduction is relevant to the Schedule A. We are talking abouit the Schedule C - business income. The amount of 1099 income requires you to file it with your 1040

So you're saying that the standard deduction is completely separate of my expenses from my 1099 job?

Have a .

Ignoring that distinction will be a very expensive lesson.

 

[Engineer]

Thanks Eaglekeeper. I was going to ask a question on distributions for excess contribution from a 401k plan because of HCE (Highly Compensated Employee) discrimination test rules and whether it was subject to the 10% tax penalty, but because of you linked the FAQ to the IRS site in your first post, I found it rather easily. Thanks.

Oh, and no, you do not have to pay a 10% penalty on the excess contribution.

Thank you!

 

[BlancoNino]

I deliver pizzas. Can I write off car payments and gas?

 

[EagleKeeper]

Originally posted by: BlancoNino
I deliver pizzas. Can I write off car payments and gas?

No & Yes.


But... (always a but)

If they pay you as a W2 (employee) you will have to use the Form 2106 and the Schedule A. That requires itemization and the Form 2106 has 2% of your overall income deducted.

If they pay you as a 1099; then you should use the Schedule C and you can easily deduct the depreciation of thevehicle, maintenance, gas, insurance, etc.

 

[techfuzz]

I take the standard single person deduction because I don't itemize (no mortgage). I have a 401(k) and I've got the college tuition credit. What are some other ways to reduce my tax burden/increase my refund that are commonly missed or overlooked?

techfuzz

 

[EagleKeeper]

This year you get the telephone credit.

Check if you can also have an IRA. You have until tax day to fund it.

For 2007:
You can try to do some consulting (1099) or start you own business on the side for extra income and some write offs via Schedule C

Purchase a house and/or rental property.

Only other way easy way, based on your income level, is to start collecting some dependents.


Enjoy....

 

[techfuzz]

Originally posted by: EagleKeeper
some write offs via Schedule C

What are some examples of write offs that could go on a Schedule C?

Originally posted by: EagleKeeper
Only other way easy way, based on your income level, is to start collecting some dependents.

I doubt my fiance is ready to start collecting yet. Too bad our cat doesn't count

Thanks for the tips.

techfuzz

 

[EagleKeeper]

Getting married in 2007 will help.

Any expenses that could be related to extra income that is identified via a 1099 may be deducted from the 1099 income.

The amount of the expenses could exceed the 1099 income itself.

 

[Savarak]

I started a new job in may 2006, moved to a new state, and got my own insurance... This month I am buying a house... my dad gave me 24k in 2006 for a downpayment on a house(gift letter provided), and will give me another 24k(for the second half of downpayment, with gift letter provided) within two weeks or so(my closing date is Jan 31st)... each parent in 2006 can only give 12k a year as a gift(thus 24k) without incurring a "gift tax"... I shouldn't have to pay taxes on these as the giftee right? Oh, and since I'm closing on the house this Jan 31st, I can't claim to be a homeowner for 2006, is that correct?

Thanks

 

[EagleKeeper]

Originally posted by: Savarak
I started a new job in may 2006, moved to a new state, and got my own insurance... This month I am buying a house... my dad gave me 24k in 2006 for a downpayment on a house(gift letter provided), and will give me another 24k(for the second half of downpayment, with gift letter provided) within two weeks or so(my closing date is Jan 31st)... each parent in 2006 can only give 12k a year as a gift(thus 24k) without incurring a "gift tax"... I shouldn't have to pay taxes on these as the giftee right? Oh, and since I'm closing on the house this Jan 31st, I can't claim to be a homeowner for 2006, is that correct?

Thanks

1) The giftee (you) is nto responsible for the tax. It is the giftor(parents) that could be responsible. by them breaking up the funds as described; they are staying within the letter of the law and will owe no gift tax.

The house is not yours until you close - therefore you obtrain no tax benefits from it in 2006.

You can use the Form 3903 to handle the expenses related to the move that came out of your own pocket.

 

[TUKIN18S]

Question:

Can I still claim EIC if the child didn't live with me for the year? The situation is we are separated never married parents. Under the arbitration agreement, she gets to claim him on odd tax years and I get to claim him on even tax years. Thanks for the help, I'm sure I will be back again before this is over. It's my first time doing my taxes with a dependent and don't want uncle sam reaming me if I screw up.

 

[EagleKeeper]

Originally posted by: TUKIN18S
Question:

Can I still claim EIC if the child didn't live with me for the year? The situation is we are separated never married parents. Under the arbitration agreement, she gets to claim him on odd tax years and I get to claim him on even tax years. Thanks for the help, I'm sure I will be back again before this is over. It's my first time doing my taxes with a dependent and don't want uncle sam reaming me if I screw up.

IRS Tax topics - EIC

For tax years 2002 and later, if two or more persons have the same qualifying child, they can choose which one will claim the credit using that child. If more than one actually claims the credit using the same qualifying child, only one will be entitled to claim the credit using that child, as follows:

The parents, if they file a joint return,
The parent, if only one of the persons is the child's parent,
The parent with whom the child lived the longest during the tax year, if two of the persons are parents of the child,
The parent with the highest AGI if the child lived with each parent for the same amount of time during the tax year, or
The person with the highest AGI, if none of the persons is the child's parent.

The bolded section indicates that you lose.

 

[TUKIN18S]

Originally posted by: EagleKeeper

Originally posted by: TUKIN18S
Question:

Can I still claim EIC if the child didn't live with me for the year? The situation is we are separated never married parents. Under the arbitration agreement, she gets to claim him on odd tax years and I get to claim him on even tax years. Thanks for the help, I'm sure I will be back again before this is over. It's my first time doing my taxes with a dependent and don't want uncle sam reaming me if I screw up.

IRS Tax topics - EIC

For tax years 2002 and later, if two or more persons have the same qualifying child, they can choose which one will claim the credit using that child. If more than one actually claims the credit using the same qualifying child, only one will be entitled to claim the credit using that child, as follows:

The parents, if they file a joint return,
The parent, if only one of the persons is the child's parent,
The parent with whom the child lived the longest during the tax year, if two of the persons are parents of the child,
The parent with the highest AGI if the child lived with each parent for the same amount of time during the tax year, or
The person with the highest AGI, if none of the persons is the child's parent.

The bolded section indicates that you loose.

Thanks, and I think you meant lose. thanks again for all your help.

 

[EagleKeeper]