5th Annual Tax Thread - 2007

[Oyeve]

My question is this:

My wife and I are LEGALLY seperated and live in different areas in the same city. We have one child. Can we still file jointly and share the child dependent refund (if we get one) or do we HAVE to file seperately and draw straws on who claims the kid?

 

[ChaoZ]

I'm doing a VITA exam and this is really confusing me. Suppose:

You live with your girlfriend who has her own child (not yours). They've been living with you for the past 2 years and you provide the majority of the money to support them. Can I claim the kid as a dependant? I know you need to be related by blood or you have to be an "eligible foster parent". The latter is what gets me.

 

[EagleKeeper]

Originally posted by: BaNzaiDags
I have a question about health Savings ACC (HSA).
My girlfriend is pregnant and is Due in July. I'm starting an HSA this year, the baby will by my dependent, but she is under her own health plan
I was wondering if I could use my HSA to pay for her mediacal bills, I went to IRS.gov site and looked up publication 502 , I don't see why she wouldn't fall under qualifying relative.

my question is: Can i pay for her medical bills out of my HSA account?

"Qualifying Relative

A qualifying relative is a person:

1. Who is your:
1. Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild),
2. Brother, sister, or a son or daughter of either of them,
3. Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle),
4. Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or
5. Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law,
2. Who was not a qualifying child (see Qualifying child above) of any taxpayer for 2007, and
3. For whom you provided over half of the support in 2007. But see Child of divorced or separated parents, earlier, Support claimed under a multiple support agreement, next, and Kidnapped child under Qualifying Relative in Publication 501, Exemptions, Standard Deduction, and Filing Information."

If you will be listed as the father on the birth certificate, you can start the Health Care Account and use it for the Child's Expenses.
It can not be used for the mother's expenses (according to the letter of the law).

How the medical bills would be identified is between the two of you and the medical facility providing the care.

Usually, the people administering the HSA account will look to see if you have the recipient listed on the form when the account is set up. You may wish to contact them to see if there is a way around the issue.

 

[EagleKeeper]

Originally posted by: Oyeve
My question is this:

My wife and I are LEGALLY separated and live in different areas in the same city. We have one child. Can we still file jointly and share the child dependent refund (if we get one) or do we HAVE to file separately and draw straws on who claims the kid?

You are not divorced at this time.

You have the still option of filing jointly and being civil on handling the refunds/credits caused by the child.

You can file separately w/ one claiming the child and associated benefits and then being civil about handling the funds.

The key word is civil and what will have the largest benefit to the overall family unit.

 

[EagleKeeper]

Originally posted by: ChaoZ
I'm doing a VITA exam and this is really confusing me. Suppose:

You live with your girlfriend who has her own child (not yours). They've been living with you for the past 2 years and you provide the majority of the money to support them. Can I claim the kid as a dependant? I know you need to be related by blood or you have to be an "eligible foster parent". The latter is what gets me.

Foster parents are not tied by blood but rather by a legal agreement.

 

[Winchester]

Can you explain how giving discounts work for taxes?

Ex. Company A gives Company B a discount on their services. Is the discount part a write-off?

 

[EagleKeeper]

Originally posted by: Winchester
Can you explain how giving discounts work for taxes?

Ex. Company A gives Company B a discount on their services. Is the discount part a write-off?

The discount is just another way of stating a price adjustment for the unit.

Company A treats it as less income
Company B treats it as a lower capital/service cost or expense

 

[DisgruntledVirus]

I have a few questions about my taxes as the relate to college. I am not a dependent, and was wondering with the Hope credit do you have to use the credit the first two years or can you take it any two years? Secondly I do not have to get a degree for my current position, however if I want to advance in the company above my current level a degree is required. Can that qualify for being work related because I have to have the degree to advance, but not required to at my current level. Third regarding student loans and my employers tuition reimbursment how does that exactly work. I know how no reimbursment works but with the company paying for a good chunk of that how does that change the tax filing? The employer gives it as a lump sum should it be taxed then or is it not taxed because I don't have any gain from it since it is repaying a loan?

Thanks

 

[A5]

Did a quick run-through on the Tax Freedom site, and I'm looking at a ~$500 refund. Good to get it, but I wish I never lost it to start with ...now I just have to wait for my 2 1099s to come in to finish it...

 

[EagleKeeper]

Originally posted by: DisgruntledVirus
I have a few questions about my taxes as the relate to college. I am not a dependent, and was wondering with the Hope credit do you have to use the credit the first two years or can you take it any two years? Secondly I do not have to get a degree for my current position, however if I want to advance in the company above my current level a degree is required. Can that qualify for being work related because I have to have the degree to advance, but not required to at my current level. Third regarding student loans and my employers tuition reimbursement how does that exactly work. I know how no reimbursement works but with the company paying for a good chunk of that how does that change the tax filing? The employer gives it as a lump sum should it be taxed then or is it not taxed because I don't have any gain from it since it is repaying a loan?

Thanks

The Hope is intended to cover the costs of the first two years of college level schooling.


As long as you can demonstrate to the IRS that the degree will help you stay current and/or advance, then it is a justifiable expense.

It is up to the company on how they classify the reimbursement.
If it is just something that would be handles off an expense report, then you should not get taxed.

If they handle it as a separate line item, then you may have it included as income and are taxed on it. That then forces you to file for the credits on your taxes.

 

[EagleKeeper]

Originally posted by: A5
Did a quick run-through on the Tax Freedom site, and I'm looking at a ~$500 refund. Good to get it, but I wish I never lost it to start with ...now I just have to wait for my 2 1099s to come in to finish it...

When you file with the 1099 info, make sure that you look at placing that income on the Schedule C.

That way, you have the option of expensing off some of that income.

 

[SarcasticDwarf]

Are there any major education tax credits/writeoffs available to someone who:

1) is not a dependent
2) worked AND took out loans but did NOT pay any interest (deferred)


It is not really clear to me if the LLC applies or not.

 

[EagleKeeper]

Originally posted by: SarcasticDwarf
Are there any major education tax credits/writeoffs available to someone who:

1) is not a dependent
2) worked AND took out loans but did NOT pay any interest (deferred)


It is not really clear to me if the LLC applies or not.

Depending on which year of college.
The Hope (as indicated above) will cover the first two years.
The LLC will cover anything else.


I have heard rumors that there also may be another type of tuition credit.
With the IRS site not fully functional (maybe they use Fuse Talk), I have not been able to see what the rumors are and/or what the restrictions.

If one is working, the Form 2106 may be more useful than the LLC. It also allows you to go after the cost of books, fees and travel for school.

 

[Xcobra]

Originally posted by: CPA

Originally posted by: Xcobra
Quick question for you here from a first timer:

Well my parents are divorcing (im 21)...my mother moved to NY, my father is still here in california. He has a house all to himself. I live off-campus on my own, he nor my mother provides ZERO support for my schooling or expenses at all. I get financial aid. Question is, would I still be called "dependent" even though I clearly depend on myself?

Also (again, california) i have no idea what form to file? suggestions.

If they provided zero support, then by definition they cannot claim you as a dependent.

so given that they provided zero support, even though im a student under 25, they still cant claim me as a dependent?

 

[SarcasticDwarf]

Originally posted by: EagleKeeper

Originally posted by: SarcasticDwarf
Are there any major education tax credits/writeoffs available to someone who:

1) is not a dependent
2) worked AND took out loans but did NOT pay any interest (deferred)


It is not really clear to me if the LLC applies or not.

Depending on which year of college.
The Hope (as indicated above) will cover the first two years.
The LLC will cover anything else.


I have heard rumors that there also may be another type of tuition credit.
With the IRS site not fully functional (maybe they use Fuse Talk), I have not been able to see what the rumors are and/or what the restrictions.

If one is working, the Form 2106 may be more useful than the LLC. It also allows you to go after the cost of books, fees and travel for school.

Ah. FWIW, I am in my first year of grad school. I was a dependent during my undergrad. So that would likely leave me with the LLC.

 

[EagleKeeper]

Originally posted by: Xcobra

Originally posted by: CPA

Originally posted by: Xcobra
Quick question for you here from a first timer:

Well my parents are divorcing (im 21)...my mother moved to NY, my father is still here in california. He has a house all to himself. I live off-campus on my own, he nor my mother provides ZERO support for my schooling or expenses at all. I get financial aid. Question is, would I still be called "dependent" even though I clearly depend on myself?

Also (again, california) i have no idea what form to file? suggestions.

If they provided zero support, then by definition they cannot claim you as a dependent.

so given that they provided zero support, even though im a student under 25, they still cant claim me as a dependent?

/edit
Original response that I made was incorrect & was quoted.


I had misread the post to quickly.

If he lived out of the house in 2007 and the parents provided less than 50% of his total support, he should claim himself as independent.

 

[Xcobra]

Originally posted by: EagleKeeper

Originally posted by: Xcobra

Originally posted by: CPA

Originally posted by: Xcobra
Quick question for you here from a first timer:

Well my parents are divorcing (im 21)...my mother moved to NY, my father is still here in california. He has a house all to himself. I live off-campus on my own, he nor my mother provides ZERO support for my schooling or expenses at all. I get financial aid. Question is, would I still be called "dependent" even though I clearly depend on myself?

Also (again, california) i have no idea what form to file? suggestions.

If they provided zero support, then by definition they cannot claim you as a dependent.

so given that they provided zero support, even though im a student under 25, they still cant claim me as a dependent?

Legally, they have that option.

Well Im asking because Calif. requires you to file a different form if you CAN be claimed as an dependent, so can they, still, even though no financial support from them?

 

[EagleKeeper]

Cali and Feds are two different issue.

The Federal rules allow your parents to claim you as a dependent if you meet the rules spelled out by the IRS/Congress. This does not mean that they have to claim you.


You need to discuss it with your parents on how everyone will proceed.

 

[Ns1]

Originally posted by: Xcobra

Originally posted by: EagleKeeper

Originally posted by: Xcobra

Originally posted by: CPA

Originally posted by: Xcobra
Quick question for you here from a first timer:

Well my parents are divorcing (im 21)...my mother moved to NY, my father is still here in california. He has a house all to himself. I live off-campus on my own, he nor my mother provides ZERO support for my schooling or expenses at all. I get financial aid. Question is, would I still be called "dependent" even though I clearly depend on myself?

Also (again, california) i have no idea what form to file? suggestions.

If they provided zero support, then by definition they cannot claim you as a dependent.

so given that they provided zero support, even though im a student under 25, they still cant claim me as a dependent?

Legally, they have that option.

Well Im asking because Calif. requires you to file a different form if you CAN be claimed as an dependent, so can they, still, even though no financial support from them?

Unless things have changed from 2 years ago when I was in school, even if they provide zero support AND you claim yourself as an independent, you have to report their income for EFC/FAFSA purposes. There are a few exeptions, reaching the age of 25, military service, etc, and I believe you can petition in rare cases...and yes they can claim you as a dependent. this is an issue you should be discussing with your parents

 

[Xcobra]

I lived out of home 100% of the time last year and supported myself with the help of financial aid, besides the job i have...so technically since i didnt live at home the whole year and no financial support, they can't...they dont have an option...right? sorry if im making this more difficult than it is but i dont want to screw up...thank you

 

[Xcobra]

Originally posted by: Ns1

Originally posted by: Xcobra

Originally posted by: EagleKeeper

Originally posted by: Xcobra

Originally posted by: CPA

Originally posted by: Xcobra
Quick question for you here from a first timer:

Well my parents are divorcing (im 21)...my mother moved to NY, my father is still here in california. He has a house all to himself. I live off-campus on my own, he nor my mother provides ZERO support for my schooling or expenses at all. I get financial aid. Question is, would I still be called "dependent" even though I clearly depend on myself?

Also (again, california) i have no idea what form to file? suggestions.

If they provided zero support, then by definition they cannot claim you as a dependent.

so given that they provided zero support, even though im a student under 25, they still cant claim me as a dependent?

Legally, they have that option.

Well Im asking because Calif. requires you to file a different form if you CAN be claimed as an dependent, so can they, still, even though no financial support from them?

Unless things have changed from 2 years ago when I was in school, even if they provide zero support AND you claim yourself as an independent, you have to report their income for EFC/FAFSA purposes. There are a few exeptions, reaching the age of 25, military service, etc, and I believe you can petition in rare cases...and yes they can claim you as a dependent. this is an issue you should be discussing with your parents

Yes. I am aware of that. FAFSA does it totally different.

As for Federal Taxes, I read Pub. 501 and no, they cannot claim me as a dependent. Thanks to all for your help!

 

[Winchester]

Originally posted by: EagleKeeper

Originally posted by: Winchester
Can you explain how giving discounts work for taxes?

Ex. Company A gives Company B a discount on their services. Is the discount part a write-off?

The discount is just another way of stating a price adjustment for the unit.

Company A treats it as less income
Company B treats it as a lower capital/service cost or expense

I have read that you get a write off for the discount amount up to a certain percentage. Is that not true?

 

[ChaoZ]

I'm trying to do a Schedule A - Itemized deductions. There are parts where it says to see page A-2, A-5, etc. Where the hell is that at?

 

[EagleKeeper]

Originally posted by: Winchester

Originally posted by: EagleKeeper

Originally posted by: Winchester
Can you explain how giving discounts work for taxes?

Ex. Company A gives Company B a discount on their services. Is the discount part a write-off?

The discount is just another way of stating a price adjustment for the unit.

Company A treats it as less income
Company B treats it as a lower capital/service cost or expense

I have read that you get a write off for the discount amount up to a certain percentage. Is that not true?

IRS Pub 334 - Chapter 6

Trade discounts.
The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. You must use the prices you pay (not the stated prices) in figuring your cost of purchases. Do not show the discount amount separately as an item in gross income.

An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount.

Cash discounts.
Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. There are two methods of accounting for cash discounts. You can either credit them to a separate discount account or deduct them from total purchases for the year. Whichever method you use, you must be consistent. If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. For more information, see Change in Accounting Method in chapter 2.

If you credit cash discounts to a separate account, you must include this credit balance in your business income at the end of the tax year. If you use this method, do not reduce your cost of goods sold by the cash discounts.

 

[EagleKeeper]

Originally posted by: ChaoZ
I'm trying to do a Schedule A - Itemized deductions. There are parts where it says to see page A-2, A-5, etc. Where the hell is that at?

Even the IRS will provide a manual for use of the Form (it may not be crystal clear)