5th Annual Tax Thread - 2007

[EagleKeeper]

Originally posted by: Casawi
I received moving expenses from my company about $1000. Do I need to do anything with that.

Thanks.

It should be classified as taxable income on your W2 and taxes are owed on the amount.

If you file a Form 3903, you may be able to reduce the tax bite.

 

[moonbit]

My husband and a friend started a business this year, both contributed to the start-up expenses. However, I believe the friend has the business as a sole proprietorship in his name. Can my husband still claim the expenses he kicked in, and if he can, how would he go about that?

Thanks.

 

[EagleKeeper]

Originally posted by: moonbit
My husband and a friend started a business this year, both contributed to the start-up expenses. However, I believe the friend has the business as a sole proprietorship in his name. Can my husband still claim the expenses he kicked in, and if he can, how would he go about that?

Thanks.

If your husband can provide documentation showing that he has ownership in the business, then he can use the Schedule C to handle his share of income and expenses.

Without documentation, then an audit would turn on a he said/she said scenario.

Right now, he looks like just an invester to the IRS.



/edit:

CPA's explanation below is much more in detail.

 

[CPA]

Originally posted by: moonbit
My husband and a friend started a business this year, both contributed to the start-up expenses. However, I believe the friend has the business as a sole proprietorship in his name. Can my husband still claim the expenses he kicked in, and if he can, how would he go about that?

Thanks.

First, I assume you mean he has registered with his state as a sole-proprietor or he contacted the IRS to get a FEIN for a sole-proprietorship.

Putting money into a business does not necessarily equate to expense. In fact, initially, it equates to owner capital. If the cash was eventually used to pay expenses then the owner could claim those as deductions to income.

Now, in your case, if the friend has this company registered as a sole propreitorship, then only he can claim expenses for the company. A sole-proprietorship can only have one owner. Your husband, however, could claim seperately using his SS number having his own sole proprietorship under his name as long as he issues a 1099 to his friend - which would require the friend to claim the cash as income. Your husband, however, should show some amount of revenue, otherwise the IRS could get suspicious. It's a sticky situation. Just keep in mind that "sole" means 1.

At the end of the day, a seperate "Partnership" really needs to be set-up to either 1) replace the sole-proprietorship, or 2) be a seperate relationship with it's own income and expenses.

If none of this will help, the absolute minimum your husband should do is get a loan contract drawn up between the friend and him and get the friend to pay back (with or without interest) over a period of time. Otherwise, you risk the chance your husband will never see the money again (ie, friendship goes sour, business goes belly-up, etc).

 

[ElFenix]

if i sell blood plasma is that income? i'm converting body parts (an asset) into another asset, but i guess i don't have a basis.

hmmm

 

[moonbit]

Originally posted by: CPA

Originally posted by: moonbit
My husband and a friend started a business this year, both contributed to the start-up expenses. However, I believe the friend has the business as a sole proprietorship in his name. Can my husband still claim the expenses he kicked in, and if he can, how would he go about that?

Thanks.

First, I assume you mean he has registered with his state as a sole-proprietor or he contacted the IRS to get a FEIN for a sole-proprietorship.

Putting money into a business does not necessarily equate to expense. In fact, initially, it equates to owner capital. If the cash was eventually used to pay expenses then the owner could claim those as deductions to income.

Now, in your case, if the friend has this company registered as a sole propreitorship, then only he can claim expenses for the company. A sole-proprietorship can only have one owner. Your husband, however, could claim seperately using his SS number having his own sole proprietorship under his name as long as he issues a 1099 to his friend - which would require the friend to claim the cash as income. Your husband, however, should show some amount of revenue, otherwise the IRS could get suspicious. It's a sticky situation. Just keep in mind that "sole" means 1.

At the end of the day, a seperate "Partnership" really needs to be set-up to either 1) replace the sole-proprietorship, or 2) be a seperate relationship with it's own income and expenses.

If none of this will help, the absolute minimum your husband should do is get a loan contract drawn up between the friend and him and get the friend to pay back (with or without interest) over a period of time. Otherwise, you risk the chance your husband will never see the money again (ie, friendship goes sour, business goes belly-up, etc).

Ok, I talked to the friend, and he has the business license filed under his name as sole proprietor. He has no problem claiming anything as income for himself. So say my husband established sole proprietorship today, this would be ok for the 2007 tax year? This is all very new and confusing to me. The next time my husband decides to set up a business in the garage, I'm going to hold a gun on him until he works all this stuff out first. :|

Thanks A LOT for the help.

 

[CPA]

Originally posted by: moonbit

Originally posted by: CPA

Originally posted by: moonbit
My husband and a friend started a business this year, both contributed to the start-up expenses. However, I believe the friend has the business as a sole proprietorship in his name. Can my husband still claim the expenses he kicked in, and if he can, how would he go about that?

Thanks.

First, I assume you mean he has registered with his state as a sole-proprietor or he contacted the IRS to get a FEIN for a sole-proprietorship.

Putting money into a business does not necessarily equate to expense. In fact, initially, it equates to owner capital. If the cash was eventually used to pay expenses then the owner could claim those as deductions to income.

Now, in your case, if the friend has this company registered as a sole propreitorship, then only he can claim expenses for the company. A sole-proprietorship can only have one owner. Your husband, however, could claim seperately using his SS number having his own sole proprietorship under his name as long as he issues a 1099 to his friend - which would require the friend to claim the cash as income. Your husband, however, should show some amount of revenue, otherwise the IRS could get suspicious. It's a sticky situation. Just keep in mind that "sole" means 1.

At the end of the day, a seperate "Partnership" really needs to be set-up to either 1) replace the sole-proprietorship, or 2) be a seperate relationship with it's own income and expenses.

If none of this will help, the absolute minimum your husband should do is get a loan contract drawn up between the friend and him and get the friend to pay back (with or without interest) over a period of time. Otherwise, you risk the chance your husband will never see the money again (ie, friendship goes sour, business goes belly-up, etc).

Ok, I talked to the friend, and he has the business license filed under his name as sole proprietor. He has no problem claiming anything as income for himself. So say my husband established sole proprietorship today, this would be ok for the 2007 tax year? This is all very new and confusing to me. The next time my husband decides to set up a business in the garage, I'm going to hold a gun on him until he works all this stuff out first. :|

Thanks A LOT for the help.

Check your state requirements, but for Federal, as long as you don't have any employees you should be fine. You don't necessary file with the Feds to "open" a sole proprietorship. You just use your SSN as your TIN on the Schedule C. List all expenses and revenue to get any taxable income.

Your husband will also need file a 1099 and the summary 1096 form by February 29th showing he paid the friend. Any money paid to your husband should be reported on a 1099 to him from the friend.

The good thing is he can take the full payment to the friend as an expense this year. Depending on how much revenue he generated (payments he recieved) he could see a nice reduction of ordinary income for 2007. On the other hand, if he received more than he paid, then he will have to pay taxes on it.

I still recommend the two put a partnership together to make this easier.

 

[CPA]

Originally posted by: ElFenix
if i sell blood plasma is that income? i'm converting body parts (an asset) into another asset, but i guess i don't have a basis.

hmmm

Technically, it's income.

 

[chickadee]

I donated two cars in 2006. I called on December 31 for them to pick up one, but they hadn't actually picked it up until the first week of 2007 so i didn't think about it when i was doing my taxes. When I went back and looked at it, they dated it for 2006. I didn't make much money last year, so the tax write off wouldnt have even mattered to me for last year, however it could be important to me this year.

Even though it says I donated in 2006, can I still use it as a tax write off for this year?

(Not sure its important - but I live in NJ)

 

[ScottFern]

I have one question about my 2007 Tax return........I have been paying interest on a student loan for the past 12 months and I believe I am eligible to get that interest back? It should be very substantial because my loan in amortized and I have been paying $90+ in interest every month.

 

[CPA]

Originally posted by: chickadee
I donated two cars in 2006. I called on December 31 for them to pick up one, but they hadn't actually picked it up until the first week of 2007 so i didn't think about it when i was doing my taxes. When I went back and looked at it, they dated it for 2006. I didn't make much money last year, so the tax write off wouldnt have even mattered to me for last year, however it could be important to me this year.

Even though it says I donated in 2006, can I still use it as a tax write off for this year?

(Not sure its important - but I live in NJ)

no. It must be taken in 2006.

 

[CPA]

Originally posted by: ScottFern
I have one question about my 2007 Tax return........I have been paying interest on a student loan for the past 12 months and I believe I am eligible to get that interest back? It should be very substantial because my loan in amortized and I have been paying $90+ in interest every month.

You can use it as an adjustment to income. Line 33 on a 1040, line 18 on a 1040A.

 

[Tweak155]

In the beginning of the year I worked part time in Michigan then was promoted to salary employee in Missouri.

I lived and worked in Missouri for 1 month (3/15 - 4/15). I then moved to Kansas but still worked in Missouri for the rest of 2007.

Will this be complicated to do with tax s/w? Would it be worth it to pay H&R to figure these taxes? I would expect a return as I was taxed roughly 28% of my income for the year.

Also my work paid for my relocation and it was not reimbursed through my check, however, they did provide a 1 time check that was "grossed up" but it was to cover any misc moving expenses. I'm assuming this is just counted as regular income?

I read all the posts and someone was mentioning salary increase and owing tax due to that... if thats the case my salary based on last year increased over 300%. I'm confused why a 20% increase in salary would result in owing 21k but that may be due to the way they are paid. I am a W2 employee.

 

[SampSon]

What is the cutoff level for paying into social security?
Is it $97,000?

 

[Eeezee]

I'm a first-year graduate student and will be filling independently for the first time this year. I have no student loans (and don't plan to take any in the future), if that changes anything.

I'm fortunate enough to not have to pay any tuition or fees, so I'm ineligible for the Lifetime Learning Credit. I still have to buy books and spent a lot on moving to my new grad school in southern California, where I pay a lot in rent. Is there anything I can deduct there? I don't make a lot of money, so every dollar I can deduct is important to me.

 

[IronWing]

Is there any way to take the energy efficiency tax credit w/o filling out the 1040 long form?

 

[CPA]

Originally posted by: SampSon
What is the cutoff level for paying into social security?
Is it $97,000?

For 2007 it was $97500
For 2008 it's $102000

 

[CPA]

Originally posted by: ironwing
Is there any way to take the energy efficiency tax credit w/o filling out the 1040 long form?

Not that I know of, plus you need to fill out form 5695.

 

[CPA]

Originally posted by: Eeezee
I'm a first-year graduate student and will be filling independently for the first time this year. I have no student loans (and don't plan to take any in the future), if that changes anything.

I'm fortunate enough to not have to pay any tuition or fees, so I'm ineligible for the Lifetime Learning Credit. I still have to buy books and spent a lot on moving to my new grad school in southern California, where I pay a lot in rent. Is there anything I can deduct there? I don't make a lot of money, so every dollar I can deduct is important to me.

Your books, but only if it's paid to the school and is required for enrollment. Generally, though, only tuition and fees. Room and board are NOT allowed.

 

[RagingNova]

Hi everyone.

I have been looking for a place to ask some tax questions, and it looks like I found it.

1st question: In the OP you said to be a dependent you have to be under 25 and in school, or 19. However I was looking at publication 17 and it states you have to be under 24.

Also from US Code: Title 26 §152

(3) Age requirements
(A) In general
For purposes of paragraph (1)(C), an individual meets the requirements of this paragraph if such individual?
(i) has not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins, or
(ii) is a student who has not attained the age of 24 as of the close of such calendar year.
(B) Special rule for disabled
In the case of an individual who is permanently and totally disabled (as defined in section 22 (e)(3)) at any time during such calendar year, the requirements of subparagraph (A) shall be treated as met with respect to such individual.

So is it 25 or 24 years?

2nd question: I made around $200 in interest from savings this month, and I know legally I have to report it. However it is only $200, and if I don't report it will the IRS care?

3rd question: How strict is the IRS on the age limit? If I have a birthday in december will they be lenient if I am just over the age limit? If I was born a few days later I would be within the required age limit. It is just a couple days.

Thank you for any response.

 

[CPA]

Originally posted by: RagingNova
Hi everyone.

I have been looking for a place to ask some tax questions, and it looks like I found it.

1st question: In the OP you said to be a dependent you have to be under 25 and in school, or 19. However I was looking at publication 17 and it states you have to be under 24.

Also from US Code: Title 26 §152

(3) Age requirements
(A) In general
For purposes of paragraph (1)(C), an individual meets the requirements of this paragraph if such individual?
(i) has not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins, or
(ii) is a student who has not attained the age of 24 as of the close of such calendar year.
(B) Special rule for disabled
In the case of an individual who is permanently and totally disabled (as defined in section 22 (e)(3)) at any time during such calendar year, the requirements of subparagraph (A) shall be treated as met with respect to such individual.

So is it 25 or 24 years?

2nd question: I made around $200 in interest from savings this month, and I know legally I have to report it. However it is only $200, and if I don't report it will the IRS care?

3rd question: How strict is the IRS on the age limit? If I have a birthday in december will they be lenient if I am just over the age limit? If I was born a few days later I would be within the required age limit. It is just a couple days.

Thank you for any response.

1) You are right, it should be under 24. Looks like we have a typo.

2) If all you had was unearned income (ie, interest) and it's under $850, then you don't have to file. If you had other income, as well, then my answer may change.

3) It's not a matter of them being strict, it's a matter of you having to prove you weren't being fraudulent if they caught you. Don't chance it. They will verify ages with the Social Security Administration and their computers will flag your form if it sees anything out of whack. The most they would probably do, however, is adjust the filing and charge you interest and penalty if you end up owing tax.

 

[RagingNova]

Originally posted by: CPA

Originally posted by: RagingNova
Hi everyone.

I have been looking for a place to ask some tax questions, and it looks like I found it.

1st question: In the OP you said to be a dependent you have to be under 25 and in school, or 19. However I was looking at publication 17 and it states you have to be under 24.

Also from US Code: Title 26 §152

(3) Age requirements
(A) In general
For purposes of paragraph (1)(C), an individual meets the requirements of this paragraph if such individual?
(i) has not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins, or
(ii) is a student who has not attained the age of 24 as of the close of such calendar year.
(B) Special rule for disabled
In the case of an individual who is permanently and totally disabled (as defined in section 22 (e)(3)) at any time during such calendar year, the requirements of subparagraph (A) shall be treated as met with respect to such individual.

So is it 25 or 24 years?

2nd question: I made around $200 in interest from savings this month, and I know legally I have to report it. However it is only $200, and if I don't report it will the IRS care?

3rd question: How strict is the IRS on the age limit? If I have a birthday in december will they be lenient if I am just over the age limit? If I was born a few days later I would be within the required age limit. It is just a couple days.

Thank you for any response.

1) You are right, it should be under 24. Looks like we have a typo.

2) If all you had was unearned income (ie, interest) and it's under $850, then you don't have to file. If you had other income, as well, then my answer may change.

3) It's not a matter of them being strict, it's a matter of you having to prove you weren't being fraudulent if they caught you. Don't chance it. They will verify ages with the Social Security Administration and their computers will flag your form if it sees anything out of whack. The most they would probably do, however, is adjust the filing and charge you interest and penalty if you end up owing tax.

2) I also have $18,000 in earned income for the year. I just thought they wouldn't notice the additional $200 missing.

3) This has to do with me having turned 24 days before the new year. If my parents claim me as a dependent they can get more benefit from it, then I can if I claimed my self as exemption. I understand now this is probably fraudulent so I won't chance it. Just hoped maybe the IRS wouldn't care.

 

[SampSon]

Originally posted by: CPA

Originally posted by: SampSon
What is the cutoff level for paying into social security?
Is it $97,000?

For 2007 it was $97500
For 2008 it's $102000

So for the tax year ending on 12-21-2007 it's 97K?
Thanks.

 

[CPA]

Originally posted by: SampSon

Originally posted by: CPA

Originally posted by: SampSon
What is the cutoff level for paying into social security?
Is it $97,000?

For 2007 it was $97500
For 2008 it's $102000

So for the tax year ending on 12-21-2007 it's 97K?
Thanks.

$97,500

 

[CPA]

Originally posted by: RagingNova

Originally posted by: CPA

Originally posted by: RagingNova
Hi everyone.

I have been looking for a place to ask some tax questions, and it looks like I found it.

1st question: In the OP you said to be a dependent you have to be under 25 and in school, or 19. However I was looking at publication 17 and it states you have to be under 24.

Also from US Code: Title 26 §152

(3) Age requirements
(A) In general
For purposes of paragraph (1)(C), an individual meets the requirements of this paragraph if such individual?
(i) has not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins, or
(ii) is a student who has not attained the age of 24 as of the close of such calendar year.
(B) Special rule for disabled
In the case of an individual who is permanently and totally disabled (as defined in section 22 (e)(3)) at any time during such calendar year, the requirements of subparagraph (A) shall be treated as met with respect to such individual.

So is it 25 or 24 years?

2nd question: I made around $200 in interest from savings this month, and I know legally I have to report it. However it is only $200, and if I don't report it will the IRS care?

3rd question: How strict is the IRS on the age limit? If I have a birthday in december will they be lenient if I am just over the age limit? If I was born a few days later I would be within the required age limit. It is just a couple days.

Thank you for any response.

1) You are right, it should be under 24. Looks like we have a typo.

2) If all you had was unearned income (ie, interest) and it's under $850, then you don't have to file. If you had other income, as well, then my answer may change.

3) It's not a matter of them being strict, it's a matter of you having to prove you weren't being fraudulent if they caught you. Don't chance it. They will verify ages with the Social Security Administration and their computers will flag your form if it sees anything out of whack. The most they would probably do, however, is adjust the filing and charge you interest and penalty if you end up owing tax.

2) I also have $18,000 in earned income for the year. I just thought they wouldn't notice the additional $200 missing.

3) This has to do with me having turned 24 days before the new year. If my parents claim me as a dependent they can get more benefit from it, then I can if I claimed my self as exemption. I understand now this is probably fraudulent so I won't chance it. Just hoped maybe the IRS wouldn't care.

you definitely need to include it then.