5th Annual Tax Thread - 2007

[Linflas]

Originally posted by: EagleKeeper

Originally posted by: Linflas
This question is more for tax year 2008. We have a house that was inherited from my father and left jointly to me and my 3 brothers. The way the will was done left the house for my mothers use and when we finished the probate the way it was set up is that my brothers and I are trustees and she is in control of the trust. We are planning on selling the house this year so I would like to know if there is anything we can do to minimize the tax impact once we sell it?

The cost basis of the house at death will be the determining factor.
Because it is left to the three of you, then when the place is sold, the capital gains will be the increased value of thehouse from that point.

There is nothing much that can be done regarding the tax impact - however, I do not think the place will jump 300-400K in value during that time. When the place is sold, each trustee wil be responsible for 1/3 of the capital gains

Does the basis on this work the same way as a primary residence? By that I mean does any money used for repair and improvements like replacing the roof etc. come into play? Also, since the house was willed to our mother for her use she has been renting it since our fathers death in 1994. Will that have any bearing on the taxes after the sale or will it still be a simple 4 way split among my brothers and I since we are the actual owners? We are not talking huge numbers here as this house is a small Cape Cod in a rural area of Maryland's eastern shore so I doubt it will sell for more than $120,000.

 

[dampeal]

I just filed mine with my accountant on the 20th and he said refund should be in my checking account on the 7th, not bad turn-around...

I also asked him about that stimulus plan, he told me it's a minimum of $300 per person in household, but can go higher depending on varying factors...

so it's me, my wife and three kids, so $1500 isn't to be to be getting back....

 

[JBT]

I ended up paying in last year
~$1800 to the feds and ~$500 to state I've been told I can use this as a deduction, I've gone through Turbo Tax Premium a few times and am only seeing where I can use the state for a deduction... Have I been missinfomred about being able to deduct this amount?

 

[Ns1]

Originally posted by: JBT
I ended up paying in last year
~$1800 to the feds and ~$500 to state I've been told I can use this as a deduction, I've gone through Turbo Tax Premium a few times and am only seeing where I can use the state for a deduction... Have I been missinfomred about being able to deduct this amount?

There is no deduction for federal income taxes paid, just state.

Unless you're talking about this...

Q: How many states allow a deduction for federal income taxes paid? How is this deduction calculated?

A: For tax year 2000, nine states allow their taxpayers the option of deducting some percentage of their federal income taxes on their state income tax forms. The following table lists these states and the formula by which the deduction amount is calculated. Of these nine states, only three (Alabama, Iowa, and Louisiana) allow all taxpayers to deduct the full value of all federal personal income taxes paid. Three states (Missouri, Oregon, and Utah) allow all taxpayers to deduct a portion of federal income tax liability, and the remaining three states (Montana, North Dakota, and Oklahoma) allow this deduction only to certain taxpayers.

Not sure about current tax law (ie which states now)

 

[JBT]

Originally posted by: Ns1

Originally posted by: JBT
I ended up paying in last year
~$1800 to the feds and ~$500 to state I've been told I can use this as a deduction, I've gone through Turbo Tax Premium a few times and am only seeing where I can use the state for a deduction... Have I been missinfomred about being able to deduct this amount?

There is no deduction for federal income taxes paid, just state.

Unless you're talking about this...

Q: How many states allow a deduction for federal income taxes paid? How is this deduction calculated?

A: For tax year 2000, nine states allow their taxpayers the option of deducting some percentage of their federal income taxes on their state income tax forms. The following table lists these states and the formula by which the deduction amount is calculated. Of these nine states, only three (Alabama, Iowa, and Louisiana) allow all taxpayers to deduct the full value of all federal personal income taxes paid. Three states (Missouri, Oregon, and Utah) allow all taxpayers to deduct a portion of federal income tax liability, and the remaining three states (Montana, North Dakota, and Oklahoma) allow this deduction only to certain taxpayers.

Not sure about current tax law (ie which states now)

thanks for the info! thats all I needed to know.

 

[Turin39789]

Originally posted by: EagleKeeper

Originally posted by: Turin39789

My only real question is about vehicle taxes, I didn't save my reciepts as I didn't know that they were deductible. Is there a way to look these up/get them from the county clerk or am I SOL because I didn't save them?

And now for a general rundown of my tax experience -

Ugh. I always run my taxes through two software programs, and I'm glad I did. I was originally using turbotax because I get it free from state farm. I then went through Taxact and my return went up about $300. Didn't like the discrepancy so I emptied the turbotax and started over, still wasn't getting it. Finally found that turbotax was counting my employer contribution to my HSA as taxable income. It never gave me the option to enter my 1099-sa that I saw, nor to check that I had a HDHP all year.

Finally got it straightened out. I was really fighting with the TurboTax because I thought I got free state efile through the statefarm connection, but finally figured out that it wasn't included. Another problem I had with Turbotax was on my tuition. After my employer reimbursement I had $798 of money out of my pocket to deduct. Bot turbotax and taxact wanted me to take it as a lifetime learning credit, but I actually got an extra $7 by taking it as a deduction(-$40 from federal and +$47 to state). Taxact gave me the option to run it as hope/lifetime/deduction and see for myself, I can't for the life of me figure out how to make turbotax take it as an income deduction. But now that I'm going to be printing the return anyway, taxact it is.

You can get a statement from the clerks office showing what the tax was.

TurboTax will only do your state free if 1) You are within certain states 2) You start through a certain portal - indicated in the OP of this thread 3) You meet certain income limits.

Tuition has actually 4 choices
a) Hope - first two years of post HS education
b) LLC - everythign afterwards - limitations
c) Tuition Expense - some crazy rules on using it vs the LLC
d) Itemized deduction using the Form 2106 and Schedule A

sigh.

last question I hope. I called the county clerk for the tax amounts, the clerk was less tha knowledgeable. If I can dig up the registration slips for the cars(sold one and might not have the slip anymore) I can get the tax off of there, or I can call back in with the vins and get the amounts over the phone, with no paper proof. Those were the two option she gave me.

I'm not going to be itemizing anyway - have I been spinning my wheels? I heard that since I'm in ky and we pay yearly tax based on vehicle value we're eligible to deduct and I just assumed it was a deduction in addition to the standard deduction(like and education deduction). Is this right, and if so should I worry about pressing for proof or just call in and get the numbers?

 

[Ns1]

Originally posted by: Turin39789

Originally posted by: EagleKeeper

Originally posted by: Turin39789

My only real question is about vehicle taxes, I didn't save my reciepts as I didn't know that they were deductible. Is there a way to look these up/get them from the county clerk or am I SOL because I didn't save them?

And now for a general rundown of my tax experience -

Ugh. I always run my taxes through two software programs, and I'm glad I did. I was originally using turbotax because I get it free from state farm. I then went through Taxact and my return went up about $300. Didn't like the discrepancy so I emptied the turbotax and started over, still wasn't getting it. Finally found that turbotax was counting my employer contribution to my HSA as taxable income. It never gave me the option to enter my 1099-sa that I saw, nor to check that I had a HDHP all year.

Finally got it straightened out. I was really fighting with the TurboTax because I thought I got free state efile through the statefarm connection, but finally figured out that it wasn't included. Another problem I had with Turbotax was on my tuition. After my employer reimbursement I had $798 of money out of my pocket to deduct. Bot turbotax and taxact wanted me to take it as a lifetime learning credit, but I actually got an extra $7 by taking it as a deduction(-$40 from federal and +$47 to state). Taxact gave me the option to run it as hope/lifetime/deduction and see for myself, I can't for the life of me figure out how to make turbotax take it as an income deduction. But now that I'm going to be printing the return anyway, taxact it is.

You can get a statement from the clerks office showing what the tax was.

TurboTax will only do your state free if 1) You are within certain states 2) You start through a certain portal - indicated in the OP of this thread 3) You meet certain income limits.

Tuition has actually 4 choices
a) Hope - first two years of post HS education
b) LLC - everythign afterwards - limitations
c) Tuition Expense - some crazy rules on using it vs the LLC
d) Itemized deduction using the Form 2106 and Schedule A

sigh.

last question I hope. I called the county clerk for the tax amounts, the clerk was less tha knowledgeable. If I can dig up the registration slips for the cars(sold one and might not have the slip anymore) I can get the tax off of there, or I can call back in with the vins and get the amounts over the phone, with no paper proof. Those were the two option she gave me.

I'm not going to be itemizing anyway - have I been spinning my wheels? I heard that since I'm in ky and we pay yearly tax based on vehicle value we're eligible to deduct and I just assumed it was a deduction in addition to the standard deduction(like and education deduction). Is this right, and if so should I worry about pressing for proof or just call in and get the numbers?

No, it's an itemized deduction under "personal property taxes", so if you're not itemizing then it's a moot point.

 

[Turin39789]

last question I swear- why do they need my phone number? Just curious, Don't remember doing this before. Is it required?

 

[Ns1]

Originally posted by: Turin39789
last question I swear- why do they need my phone number? Just curious, Don't remember doing this before. Is it required?

To call you for an audit


MOST people say that "audits are only engaged in writing", but in the IRS audit manual, it says "appointments are to be made via telephone [for the sake of convenience]" or something to that effect

 

[EagleKeeper]

Originally posted by: Linflas

Originally posted by: EagleKeeper

Originally posted by: Linflas
This question is more for tax year 2008. We have a house that was inherited from my father and left jointly to me and my 3 brothers. The way the will was done left the house for my mothers use and when we finished the probate the way it was set up is that my brothers and I are trustees and she is in control of the trust. We are planning on selling the house this year so I would like to know if there is anything we can do to minimize the tax impact once we sell it?

The cost basis of the house at death will be the determining factor.
Because it is left to the three of you, then when the place is sold, the capital gains will be the increased value of thehouse from that point.

There is nothing much that can be done regarding the tax impact - however, I do not think the place will jump 300-400K in value during that time. When the place is sold, each trustee wil be responsible for 1/3 of the capital gains

Does the basis on this work the same way as a primary residence? By that I mean does any money used for repair and improvements like replacing the roof etc. come into play? Also, since the house was willed to our mother for her use she has been renting it since our fathers death in 1994. Will that have any bearing on the taxes after the sale or will it still be a simple 4 way split among my brothers and I since we are the actual owners? We are not talking huge numbers here as this house is a small Cape Cod in a rural area of Maryland's eastern shore so I doubt it will sell for more than $120,000.

If you mother is not living in the house, then has she been claiming the rent as income via the Schedule E?
Also, has she be deducting expenses against the Schedule E for the property?

If the house has been claimed for depreciation using the Schedule E, the depreciation must be re-captured upon sale of the property for whomever was filing the Schedule E.

If the property is treated as part of the trust, then the capital gains after the termination of the trust becomes split between the four of you.

 

[EagleKeeper]

Originally posted by: JBT

Originally posted by: Ns1

Originally posted by: JBT
I ended up paying in last year
~$1800 to the feds and ~$500 to state I've been told I can use this as a deduction, I've gone through Turbo Tax Premium a few times and am only seeing where I can use the state for a deduction... Have I been missinfomred about being able to deduct this amount?

There is no deduction for federal income taxes paid, just state.

Unless you're talking about this...

Q: How many states allow a deduction for federal income taxes paid? How is this deduction calculated?

A: For tax year 2000, nine states allow their taxpayers the option of deducting some percentage of their federal income taxes on their state income tax forms. The following table lists these states and the formula by which the deduction amount is calculated. Of these nine states, only three (Alabama, Iowa, and Louisiana) allow all taxpayers to deduct the full value of all federal personal income taxes paid. Three states (Missouri, Oregon, and Utah) allow all taxpayers to deduct a portion of federal income tax liability, and the remaining three states (Montana, North Dakota, and Oklahoma) allow this deduction only to certain taxpayers.

Not sure about current tax law (ie which states now)

thanks for the info! thats all I needed to know.

If you paid additional state taxes in beyond what was withheld on the W2 those payments can be added as an itemized deduction for the following year.

 

[Linflas]

Not sure how I managed to double post :/

 

[Linflas]

Originally posted by: EagleKeeper

Originally posted by: Linflas

Originally posted by: EagleKeeper

Originally posted by: Linflas
This question is more for tax year 2008. We have a house that was inherited from my father and left jointly to me and my 3 brothers. The way the will was done left the house for my mothers use and when we finished the probate the way it was set up is that my brothers and I are trustees and she is in control of the trust. We are planning on selling the house this year so I would like to know if there is anything we can do to minimize the tax impact once we sell it?

The cost basis of the house at death will be the determining factor.
Because it is left to the three of you, then when the place is sold, the capital gains will be the increased value of thehouse from that point.

There is nothing much that can be done regarding the tax impact - however, I do not think the place will jump 300-400K in value during that time. When the place is sold, each trustee wil be responsible for 1/3 of the capital gains

Does the basis on this work the same way as a primary residence? By that I mean does any money used for repair and improvements like replacing the roof etc. come into play? Also, since the house was willed to our mother for her use she has been renting it since our fathers death in 1994. Will that have any bearing on the taxes after the sale or will it still be a simple 4 way split among my brothers and I since we are the actual owners? We are not talking huge numbers here as this house is a small Cape Cod in a rural area of Maryland's eastern shore so I doubt it will sell for more than $120,000.

If you mother is not living in the house, then has she been claiming the rent as income via the Schedule E?
Also, has she be deducting expenses against the Schedule E for the property?

If the house has been claimed for depreciation using the Schedule E, the depreciation must be re-captured upon sale of the property for whomever was filing the Schedule E.

If the property is treated as part of the trust, then the capital gains after the termination of the trust becomes split between the four of you.

Ugh this is starting to sound complicated. Yes my mother has been the one getting whatever tax benefits there are to renting the property since my fathers death however she is not the actual property owner. The will was done in an old fashioned way whereby she was entitled to use of the property for the rest of her natural life but the actual ownership of the property was split equally between my brothers and I. My understanding of the way the lawyer we paid to get the will executed properly set it up the property is recorded as being held in trust by her for us. The Maryland real estate property card for it says "<mothers name> & ETAL Co-Trustees". Sounds like we will probably need to pay a tax guy to sort all this out once we sell it.

 

[E equals MC2]

A simple question: what the heck is Form 8453-OL and what the heck is its purpose?

I just efiled both my fed and state taxes and one last step is that I have to print -> sign -> mail Form 8453-OL within 3 biz days to a local office.

I just think it's suddenly backward stepping. I did everything electronically and they couldn't make THIS step electronic?

Any explanation would be grateful.

 

[EagleKeeper]

Originally posted by: E equals MC2
A simple question: what the heck is Form 8453-OL and what the heck is its purpose?

I just efiled both my fed and state taxes and one last step is that I have to print -> sign -> mail Form 8453-OL within 3 biz days to a local office.

I just think it's suddenly backward stepping. I did everything electronically and they couldn't make THIS step electronic?

Any explanation would be grateful.

When you e-file, you have to prove identity to the IRS.

The way you do so is to indicate a key value from last years tax return.

If you do not provide this information, you have to mail in form 8453-OL in which you are providing a signature on paper instead of using an electronic confirmation.

 

[ZippyDan]

hi. thanks for answers. here r questions

i had a fender bender and paid for bumper repairs for my car and the other car out of pocket. is this deductible and if so where?

i used my car for work. i was reimbursed by employer at 0.44$ per mile. am i still eligible to deduct the .485$ per mile? i also incurred maintenance and gasoline expenses on this vehicle. are these deductible? are they included in the .485$?

since i was often on the road for work, i would frequently eat out. i would return home to sleep usually, but it was often the next day by the time i returned (between 12am and 6am) are any of those meal expenses deductible?

i purchased many tools for work for which i was not reimbursed. im fairly certain these are deductible but im not sure between two sections where this goes on the return?

i purchased a new car in 2007. i know i can take a sales tax deduction instead of a normal deduction, but there are so many "taxes" on my invoice that i am not sure which qualify for deduction. also, there are additional items besides the car such as extended warranty and gap insurance. any guidance here?

this may be a state tax question, but i went looking for my ad valorem tax on my registration (which im sure my state has,) but could not find it. is it likely that on a new car purchase you pay the ad valorem up front or perhaps do not pay it the first year at all?

 

[Ns1]

Originally posted by: ZippyDan
hi. thanks for answers. here r questions

i had a fender bender and paid for bumper repairs for my car and the other car out of pocket. is this deductible and if so where?
NO

i used my car for work. i was reimbursed by employer at 0.44$ per mile. am i still eligible to deduct the .485$ per mile? i also incurred maintenance and gasoline expenses on this vehicle. are these deductible? are they included in the .485$?

You're only eligible to deduct the spread, or the portion that is not reimbursed as an itemized deduction

since i was often on the road for work, i would frequently eat out. i would return home to sleep usually, but it was often the next day by the time i returned (between 12am and 6am) are any of those meal expenses deductible?

No since you weren't away from home overnight/long enough to require rest/sleep

i purchased many tools for work for which i was not reimbursed. im fairly certain these are deductible but im not sure between two sections where this goes on the return?

Probably, unreimbursed business expenses or sch. c

i purchased a new car in 2007. i know i can take a sales tax deduction instead of a normal deduction, but there are so many "taxes" on my invoice that i am not sure which qualify for deduction. also, there are additional items besides the car such as extended warranty and gap insurance. any guidance here?

Just the property taxes on said vehicle

this may be a state tax question, but i went looking for my ad valorem tax on my registration (which im sure my state has,) but could not find it. is it likely that on a new car purchase you pay the ad valorem up front or perhaps do not pay it the first year at all?


no idea

Pretty sure I got this right, so here goes. It would help to know if you're filing a Sch. C or not, but then again I'm sure EK will fill in the gaps (EK how do you hold in so much knowledge!?)

 

[ZippyDan]

thanks. one more question:

i could possibly claim someone as a dependent but im not sure if that would hurt their tax return. they make a very meager income, receive child support, do not go to school, no other unusual tax situations. any good reason to not claim?

 

[Ns1]

Originally posted by: ZippyDan
thanks. one more question:

i could possibly claim someone as a dependent but im not sure if that would hurt their tax return. they make a very meager income, receive child support, do not go to school, no other unusual tax situations. any good reason to not claim?

Well first you gotta make sure you would qualify to claim them as a dependent.

Second, I'm not 100% sure on this since the IRS guidelines are so vague, but that would might bump them out of the economic stimulus.

Also ineligible are individuals who can be claimed as dependents on someone else?s return,

Not sure if "can be" also means "is"

How old is this person?

 

[ZippyDan]

Originally posted by: Ns1

Originally posted by: ZippyDan
thanks. one more question:

i could possibly claim someone as a dependent but im not sure if that would hurt their tax return. they make a very meager income, receive child support, do not go to school, no other unusual tax situations. any good reason to not claim?

Well first you gotta make sure you would qualify to claim them as a dependent.

Second, I'm not 100% sure on this since the IRS guidelines are so vague, but that would might bump them out of the economic stimulus.

Also ineligible are individuals who can be claimed as dependents on someone else?s return,

Not sure if "can be" also means "is"

How old is this person?

over 24

it seems there is a requirement that person makes under 3400 per year, is child support included in that?

 

[Ns1]

Originally posted by: ZippyDan

Originally posted by: Ns1

Originally posted by: ZippyDan
thanks. one more question:

i could possibly claim someone as a dependent but im not sure if that would hurt their tax return. they make a very meager income, receive child support, do not go to school, no other unusual tax situations. any good reason to not claim?

Well first you gotta make sure you would qualify to claim them as a dependent.

Second, I'm not 100% sure on this since the IRS guidelines are so vague, but that would might bump them out of the economic stimulus.

Also ineligible are individuals who can be claimed as dependents on someone else?s return,

Not sure if "can be" also means "is"

How old is this person?

over 24

it seems there is a requirement that person makes under 3400 per year, is child support included in that?

Dependency Exemptions

Qualifying child = nogo, over the age of 24
Qualifying relative

1. Over 50% support
2. A person may nobt be claimed as a dependent unless dependent's gross income is less than the exemption amount (3300 was the amount in 2006, not sure for 2007).
- Child support is not taxable/not included in this amount
3. Dependent can't file joint return (generally)
4. Only US citizens or residents of US/Mexico/Canada
5. Relative OR
6. Taxpayer lives with (you) for entire year

 

[ZippyDan]

Originally posted by: Ns1

Originally posted by: ZippyDan

since i was often on the road for work, i would frequently eat out. i would return home to sleep usually, but it was often the next day by the time i returned (between 12am and 6am) are any of those meal expenses deductible?

No since you weren't away from home overnight/long enough to require rest/sleep

i purchased a new car in 2007. i know i can take a sales tax deduction instead of a normal deduction, but there are so many "taxes" on my invoice that i am not sure which qualify for deduction. also, there are additional items besides the car such as extended warranty and gap insurance. any guidance here?

Just the property taxes on said vehicle

ok

what if i took naps in the vehicle because i was so tired?

to make sure we are on the same page with the property tax thing: i am contemplating using total sales tax deduction instead of the state and local income tax deduction... im not asking about the normal property tax deduction

 

[Ns1]

Originally posted by: ZippyDan

Originally posted by: Ns1

Originally posted by: ZippyDan

since i was often on the road for work, i would frequently eat out. i would return home to sleep usually, but it was often the next day by the time i returned (between 12am and 6am) are any of those meal expenses deductible?

No since you weren't away from home overnight/long enough to require rest/sleep

i purchased a new car in 2007. i know i can take a sales tax deduction instead of a normal deduction, but there are so many "taxes" on my invoice that i am not sure which qualify for deduction. also, there are additional items besides the car such as extended warranty and gap insurance. any guidance here?

Just the property taxes on said vehicle

ok

what if i took naps in the vehicle because i was so tired?

to make sure we are on the same page with the property tax thing: i am contemplating using total sales tax deduction instead of the state and local income tax deduction... im not asking about the normal property tax deduction

Sorry, that's a touch out of my league EK will chime in for that one.

 

[EagleKeeper]

Originally posted by: ZippyDan

Originally posted by: Ns1

Originally posted by: ZippyDan

since i was often on the road for work, i would frequently eat out. i would return home to sleep usually, but it was often the next day by the time i returned (between 12am and 6am) are any of those meal expenses deductible?

No since you weren't away from home overnight/long enough to require rest/sleep

i purchased a new car in 2007. i know i can take a sales tax deduction instead of a normal deduction, but there are so many "taxes" on my invoice that i am not sure which qualify for deduction. also, there are additional items besides the car such as extended warranty and gap insurance. any guidance here?

Just the property taxes on said vehicle

ok

what if i took naps in the vehicle because i was so tired?

to make sure we are on the same page with the property tax thing: i am contemplating using total sales tax deduction instead of the state and local income tax deduction... im not asking about the normal property tax deduction

The IRS has a sales tax table based on your state, locality (sales tax percentage) vs income level.

That is a fixed hard number - no wiggle room.
To that you can add the SALES tax for large purchase items.

Then see if that amount is greater than the sum of your state/local income taxes withheld.

You can use the larger of the two amounts on the Schedule A.


Because is sounds like you are working for an employer and getting a W2, and business expenses will have to show on the Form 2106 and is also subject to a 2% min floor based on your AGI.

 

[imported_krayzie]

I have lived with my fiancee and her two children for 2 years now. I provide more than half the support for her and her children. One of the children is disabled and is on SSI. My question is whether or not I can claim head of household and also claim my fiancee and her disabled child.

I was reading this. and it seems that I should be able to at least claim her as she had a gross income less than $3,400 last year as she was going to school. I know that for the taxes last year, I did not claim anyone as the check list did not seem to allow me to claim them. This year it seems like I can claim her and perhaps I can claim her disabled child. Does the disabled childs SSI count towards the $3,400 maximum gross income?

On another note my fiancee's ex husband is only allowed to claim the other child, this was decided by the courts. He has only paid about $200 worth of child support in 2007 and I was wondering if this would allow me to claim both children since he is not paying more than half the support. If so what would happen if he and I both claim the same child? From what I read, it seems that he automatically wins since he is the father of the child. I also read though that you must pay for more than half the childs support to claim them.

Thanks for any help!