4th Annual Tax Thread - 2006

[Garet Jax]

This is not really a tax question, but it is not really not a tax question either

Each year I seem to get money back from the Feds - this year it looks to be greater than $4,000. I want to change my deductions so this doesn't happen, but the last thing I want is to owe money come tax season.

Last year my deductions for fed were 3 for half the year and 6 for the other half. I own a house and pay around $11,000 mortgage interest annually. I have two children who I file as dependants (they are 4 and 1) and a wife who is a homemaker (has no salary) so I file jointly with her. I have been maxing out 401K, but will be moving the vast majority of that to a ROTH IRA so will get little tax deferral benefit this year. What should I set my fed deductions to this year to minimize tax back, but also ensure I do not owe taxes next year.

Thanks.

 

[Garet Jax]

Originally posted by: cw42
I'll be graduating college in the next year, and need to learn how to take care of my finances/budget once I move into my own place and work full-time. At this point, it seems like I plan on living in NJ and commuting to NY to work. Right now i'm trying to get an idea of how much money i'd take home by using this calculator: http://www.paycheckcity.com/copaycycle/netpaycalculator.asp

I'm not sure how accurate it is. From there, i'd get a better idea of how much rent I can afford, save, etc... Anyways, if I live in NJ and commute to NYC to work - do I have to pay any kind of special taxes?

I usually do my own taxes, but the year I moved from CA to MD (worked about half in each State), I paid to have someone do it for me. It just wasn't worth the extra time and effort to me.

If you plan on working in State different than where you live, I would suggest a cost to include in you budget is a couple hundred dollars for tax prep.

 

[EagleKeeper]

Originally posted by: Garet Jax

Originally posted by: cw42
I'll be graduating college in the next year, and need to learn how to take care of my finances/budget once I move into my own place and work full-time. At this point, it seems like I plan on living in NJ and commuting to NY to work. Right now i'm trying to get an idea of how much money I'd take home by using this calculator: http://www.paycheckcity.com/copaycycle/netpaycalculator.asp

I'm not sure how accurate it is. From there, I'd get a better idea of how much rent I can afford, save, etc... Anyways, if I live in NJ and commute to NYC to work - do I have to pay any kind of special taxes?

I usually do my own taxes, but the year I moved from CA to MD, I paid to have someone do it for me. It just wasn't worth the extra time and effort to me.

If you plan on working in State different than where you live, I would suggest a cost to include in you budget is a couple hundred dollars for tax prep.

According to correspondence with the Big 3 Tax S/W, they can handle multiple states (w/ certain exceptions - check their web sites for which states would have problems).

You will have to purchase additional State S/W packages if you do them offline.
I do not use on-line, therefore, I can not provide info on how the fees are setup for multi-state W2 online.

 

[EagleKeeper]

Originally posted by: Garet Jax
This is not really a tax question, but it is not really not a tax question either

Each year I seem to get money back from the Feds - this year it looks to be greater than $4,000. I want to change my deductions so this doesn't happen, but the last thing I want is to owe money come tax season.

Last year my deductions for fed were 3 for half the year and 6 for the other half. I own a house and pay around $11,000 mortgage interest annually. I have two children who I file as dependants (they are 4 and 1) and a wife who is a homemaker (has no salary) so I file jointly with her. I have been maxing out 401K, but will be moving the vast majority of that to a ROTH IRA so will get little tax deferral benefit this year. What should I set my fed deductions to this year to minimize tax back, but also ensure I do not owe taxes next year.

Thanks.

Quick and dirty rule of thumb.
Take your refund and divide it by the amount each dependant is worth.
That will be the additional number of exemptions you can safely increase your W4 by. It is safer to increase by one less incase something changes.

By switching from a 401K to a Roth, follow the same logic however, decrease the number of exemptions by that amount.

If your employer has a matching with the 401K, at least fund the 401K to get the maximum matching.

 

[techfuzz]

I think I read somewhere that the IRS would not begin accepting certain tax returns until Feb. 2nd IF (I can't remember which of these are true) your return included student loan interest or the deduction for college tuition. The reason for this was because the IRS had to update their systems because the laws governing these deductions weren't passed until the current Congress session began. Did I imagine reading that or is there some truth to that?

techfuzz

 

[dmw16]

I dont have my tax stuff in front of me, so I can't try it now, but I went thru and did my taxes in tax cut last night and it never asked me for how much was withheld from my pay for medical benifits. Is there supposed to be a line for that? It's driving me crazy and I work till 6 so its gonna nag at me all day.

 

[Garet Jax]

Originally posted by: EagleKeeper

Originally posted by: Garet Jax
This is not really a tax question, but it is not really not a tax question either

Each year I seem to get money back from the Feds - this year it looks to be greater than $4,000. I want to change my deductions so this doesn't happen, but the last thing I want is to owe money come tax season.

Last year my deductions for fed were 3 for half the year and 6 for the other half. I own a house and pay around $11,000 mortgage interest annually. I have two children who I file as dependants (they are 4 and 1) and a wife who is a homemaker (has no salary) so I file jointly with her. I have been maxing out 401K, but will be moving the vast majority of that to a ROTH IRA so will get little tax deferral benefit this year. What should I set my fed deductions to this year to minimize tax back, but also ensure I do not owe taxes next year.

Thanks.

Quick and dirty rule of thumb.
Take your refund and divide it by the amount each dependant is worth.

Makes sense, but how do I know the value of each dependant?

I must be missing something.

 

[Garet Jax]

Originally posted by: jfall
I really feel like I do not have a handle on my taxes this year. If anyone could offer me any assistance or point me in any direction I would really, really appreciate it.

I'm a Canadian Citizen, living in Canada. 100% of the work I do is remote work for a web hosting company based in the USA. They claim me as an independent contractor and send me checks.

What steps should I take to ensure that I am filing my taxes properly in Canada and/or the US (if necessary)? Was I suppose to register a business name or tell the Canadian and/or US government that I am an independent contractor in some way? As it stands right now, neither government has any idea what I am doing. Canada just sent me T1 special tax package this year based on the previous year when I was actually working for a Canadian company.

I am a Canadian who lives in the States. The first year I was here, I had to deal with this. As long as Canada sees you as a resident, you will be taxable by them on your worldly income (money you make from anywhere in the world). America and Canada have a tax treaty that effectively says you will not be taxed in both places on the same income. As a result, my guess is that since Canada's taxes are higher than the State's taxes, you will end up not paying any American tax.

The IRS has phone numbers you can call to confirm with their experts. Search their website and hold until you get one of these people. The wait shouldn't be too bad at this time of year. They will explain everything you need to do to satisfy American taxes - I believe you will need to submit a copy of your Canadian taxes.

As far as Canada is concerned, I think it should be business as usual for your taxes.

 

[EagleKeeper]

Originally posted by: Garet Jax

Originally posted by: EagleKeeper

Originally posted by: Garet Jax
This is not really a tax question, but it is not really not a tax question either

Each year I seem to get money back from the Feds - this year it looks to be greater than $4,000. I want to change my deductions so this doesn't happen, but the last thing I want is to owe money come tax season.

Last year my deductions for fed were 3 for half the year and 6 for the other half. I own a house and pay around $11,000 mortgage interest annually. I have two children who I file as dependants (they are 4 and 1) and a wife who is a homemaker (has no salary) so I file jointly with her. I have been maxing out 401K, but will be moving the vast majority of that to a ROTH IRA so will get little tax deferral benefit this year. What should I set my fed deductions to this year to minimize tax back, but also ensure I do not owe taxes next year.

Thanks.

Quick and dirty rule of thumb.
Take your refund and divide it by the amount each dependant is worth.

Makes sense, but how do I know the value of each dependant?

I must be missing something.

Form 1040
Line 42 shows the value of a dependent.

Wives are more valuable, but that is not indicated as such.

 

[EagleKeeper]

Originally posted by: techfuzz
I think I read somewhere that the IRS would not begin accepting certain tax returns until Feb. 2nd IF (I can't remember which of these are true) your return included student loan interest or the deduction for college tuition. The reason for this was because the IRS had to update their systems because the laws governing these deductions weren't passed until the current Congress session began. Did I imagine reading that or is there some truth to that?

techfuzz

IRS - FAQ

IRS Plans Feb. 3 Start Date for Processing Extender Claims

IR-2007-03, Jan. 8, 2007

Washington ? The Internal Revenue Service plans a Feb. 3 start date for processing tax returns that claim key tax provisions enacted in December.

The IRS announced today that it will begin processing both e-file and paper tax returns on Feb. 3 that include claims for the major ?extender? provisions, including deductions for state and local sales taxes, higher education tuition and fees, and educator expenses. Any other tax returns for individuals that do not claim the extender provision can be filed as normal this month.

 

[EagleKeeper]

Originally posted by: dmw16
I dont have my tax stuff in front of me, so I can't try it now, but I went thru and did my taxes in tax cut last night and it never asked me for how much was withheld from my pay for medical benifits. Is there supposed to be a line for that? It's driving me crazy and I work till 6 so its gonna nag at me all day.

Expenses for Medical bills & insurance only come into play if you itemize by using Schedule A.
The total of those expenses must exceed 7.5% of your AGI to be of any value.

 

[dmw16]

Originally posted by: EagleKeeper

Originally posted by: dmw16
I dont have my tax stuff in front of me, so I can't try it now, but I went thru and did my taxes in tax cut last night and it never asked me for how much was withheld from my pay for medical benifits. Is there supposed to be a line for that? It's driving me crazy and I work till 6 so its gonna nag at me all day.

Expenses for Medical bills & insurance only come into play if you itemize by using Schedule A.
The total of those expenses must exceed 7.5% of your AGI to be of any value.

That is for bills, what about the money withheld from my pay each week to pay for my medical insurance?

 

[EagleKeeper]

Originally posted by: dmw16

Originally posted by: EagleKeeper

Originally posted by: dmw16
I dont have my tax stuff in front of me, so I can't try it now, but I went thru and did my taxes in tax cut last night and it never asked me for how much was withheld from my pay for medical benifits. Is there supposed to be a line for that? It's driving me crazy and I work till 6 so its gonna nag at me all day.

Expenses for Medical bills & insurance only come into play if you itemize by using Schedule A.
The total of those expenses must exceed 7.5% of your AGI to be of any value.

That is for bills, what about the money withheld from my pay each week to pay for my medical insurance?

Pre-tax money can not be used on the Schedule A
That money is already removed from your taxable income by the employer.

Look at the SS# vs the Fed income on your W2. They will probably be different.

 

[Garet Jax]

Originally posted by: Garet Jax
This is not really a tax question, but it is not really not a tax question either

Each year I seem to get money back from the Feds - this year it looks to be greater than $4,000. I want to change my deductions so this doesn't happen, but the last thing I want is to owe money come tax season.

Last year my deductions for fed were 3 for half the year and 6 for the other half. I own a house and pay around $11,000 mortgage interest annually. I have two children who I file as dependants (they are 4 and 1) and a wife who is a homemaker (has no salary) so I file jointly with her. I have been maxing out 401K, but will be moving the vast majority of that to a ROTH IRA so will get little tax deferral benefit this year. What should I set my fed deductions to this year to minimize tax back, but also ensure I do not owe taxes next year.

Thanks.

Am I eligible to fill jointly?

I played the what if scenario and looked at filing separately from my wife and also filing head of household and the difference was dramatic.

 

[EagleKeeper]

Originally posted by: Garet Jax

Originally posted by: Garet Jax
This is not really a tax question, but it is not really not a tax question either

Each year I seem to get money back from the Feds - this year it looks to be greater than $4,000. I want to change my deductions so this doesn't happen, but the last thing I want is to owe money come tax season.

Last year my deductions for fed were 3 for half the year and 6 for the other half. I own a house and pay around $11,000 mortgage interest annually. I have two children who I file as dependants (they are 4 and 1) and a wife who is a homemaker (has no salary) so I file jointly with her. I have been maxing out 401K, but will be moving the vast majority of that to a ROTH IRA so will get little tax deferral benefit this year. What should I set my fed deductions to this year to minimize tax back, but also ensure I do not owe taxes next year.

Thanks.

Am I eligible to fill jointly?

I played the what if scenario and looked at filing separately from my wife and also filing head of household and the difference was dramatic.

You can file jointly even if the spouse has no income.
Filing as HOH is only when there is no spouse around at the end of the year and there are dependants.

 

[techfuzz]

Many thanks for all the help EagleKeeper.

techfuzz

 

[Garet Jax]

Originally posted by: EagleKeeper

Originally posted by: Garet Jax

Originally posted by: Garet Jax
This is not really a tax question, but it is not really not a tax question either

Each year I seem to get money back from the Feds - this year it looks to be greater than $4,000. I want to change my deductions so this doesn't happen, but the last thing I want is to owe money come tax season.

Last year my deductions for fed were 3 for half the year and 6 for the other half. I own a house and pay around $11,000 mortgage interest annually. I have two children who I file as dependants (they are 4 and 1) and a wife who is a homemaker (has no salary) so I file jointly with her. I have been maxing out 401K, but will be moving the vast majority of that to a ROTH IRA so will get little tax deferral benefit this year. What should I set my fed deductions to this year to minimize tax back, but also ensure I do not owe taxes next year.

Thanks.

Am I eligible to fill jointly?

I played the what if scenario and looked at filing separately from my wife and also filing head of household and the difference was dramatic.

You can file jointly even if the spouse has no income.
Filing as HOH is only when there is no spouse around at the end of the year and there are dependants.

Thanks for the prompt responses EagleDude

 

[abc]

IT professional under w2 salary situation, has to periodically work from home.

Has broadband connection, buying 2,000.00 laptop.

half of PC usage is for work, half personal.


Therefore, 1k of the laptop allowed for tax deduction.

Does this 1k fall under misc deductions?

MISC is subject to 2pct of AGI.. that is, misc balance remaining after subtracting your 2pct of AGI.... can be deducted... I'm told.


Must this laptop fall under MISC??? I was told adamantly yes.

I didnt get into what i also heard about depreciating the laptop as well.


how about the broadbandconnection, how best to deduct that? thanks again this yr.

 

[EagleKeeper]

Originally posted by: abc
IT professional under w2 salary situation, has to periodically work from home.

Has broadband connection, buying 2,000.00 laptop.

half of PC usage is for work, half personal.


Therefore, 1k of the laptop allowed for tax deduction.

Does this 1k fall under misc deductions?

MISC is subject to 2pct of AGI.. that is, misc balance remaining after subtracting your 2pct of AGI.... can be deducted... I'm told.


Must this laptop fall under MISC??? I was told adamantly YES.

I didnt get into what i also heard about depreciating the laptop as well.


how about the broadbandconnection, how best to deduct that? thanks again this yr.

Broadband falls under same as the lappy - sorry
However, if you use the laptop for work related activites on your own time and/or items related to your field of work, then those costs & time also fall under your favorite MISC section in Schedule A on the Form 2106:gift:

 

[Turin39789]

I've just started to go back to college after a few years break. I received tuition reimbursement from my employer for the first time for the spring semester. What if any tax credits can I take for this?

My tuition for half time school came out to $1600, my employer's reimbursement is $1500 a year. They gave that to me in a check, no taxes came out of it, and I received no documentation or paperwork for it. I just got my 1098 from my school in the mail today, and it lists my tuition at $2400. It appears that they included the charge for one of my current spring semester classes since I signed up for it and was billed for it in December.

It looks like the Hope credit is out, as I am not in my first two years of school. Will I meet the reqs for lifetime learner? If so how much do I list?

I also received a 1099-G for a $99 tax refund I received last year for my 2004 taxes that were filed late. Does this get added in as additional income that I am going to be taxed on since I received it in 06 instead of 05?

Also I received a piece of printed paper with my w-2 from my employer showing a HSA contribution of $500 from them, and my contribution of $50 - I was playing around with one of the free e-file services and it couldn't handle HSA information. Do you know of any of the free e-files that will do this?

Now I just need my other w-2 and I can get this stuff out of here. Any idea on what kind of turn around time E-File has on getting refunds returned?

 

[EagleKeeper]

Originally posted by: Turin39789
I've just started to go back to college after a few years break. I received tuition reimbursement from my employer for the first time for the spring semester. What if any tax credits can I take for this?

My tuition for half time school came out to $1600, my employer's reimbursement is $1500 a year. They gave that to me in a check, no taxes came out of it, and I received no documentation or paperwork for it. I just got my 1098 from my school in the mail today, and it lists my tuition at $2400. It appears that they included the charge for one of my current spring semester classes since I signed up for it and was billed for it in December.

It looks like the Hope credit is out, as I am not in my first two years of school. Will I meet the reqs for lifetime learner? If so how much do I list?

Use the LLC with the amount of the tutition shown by the school less the amount reimbursed by the employer.

I also received a 1099-G for a $99 tax refund I received last year for my 2004 taxes that were filed late. Does this get added in as additional income that I am going to be taxed on since I received it in 06 instead of 05?
If you itemized for your '05 taxes, you wil need to lists this under Misc income.
If you did not itemize, then ignore it

Also I received a piece of printed paper with my w-2 from my employer showing a HSA contribution of $500 from them, and my contribution of $50 - I was playing around with one of the free e-file services and it couldn't handle HSA information. Do you know of any of the free e-files that will do this?

The HSA contribution of yours shows up as before tax - it affects your Federal income.
the Empoyer contribution has no bearing

Now I just need my other w-2 and I can get this stuff out of here. Any idea on what kind of turn around time E-File has on getting refunds returned?

E-file will usually generate a direct deposit within 2- 4 weeks. Experience has shown 2 Fridays after submittal and acceptance.

 

[overclock]

Here's one for ya...

I have 2 foster kids that have lived with me for more than 6 months. Do I get to claim them as dependents? I have received monthly reimbursements from the state and the state is the placement agency.

Thanks!

 

[EagleKeeper]

Originally posted by: overclock
Here's one for ya...

I have 2 foster kids that have lived with me for more than 6 months. Do I get to claim them as dependents? I have received monthly reimbursements from the state and the state is the placement agency.

Thanks!

IRS FAQ - QualifyingChild
IRS FAQ - EIC for children

An eligible foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

 

[Turin39789]

I also received a 1099-G for a $99 tax refund I received last year for my 2004 taxes that were filed late. Does this get added in as additional income that I am going to be taxed on since I received it in 06 instead of 05?

So if I just realized that I went through the same situation last year, where I got a late refund for my 03 taxes(I promise I file on time now) and IIRC I included that 1099 even though I've never itemized, should I look over the taxes and refile? Where can I read up on how to do that.

 

[EagleKeeper]

You will need to file a 1040X for each year that you made a mistake.

It will require recalculating your taxes based on the new AGI.
The 1040X MUST be mailed in - the IRS web site has the form for downloading.
The 1040X form does not change between years.