5th Annual Tax Thread - 2007

[ShotgunSteven]

Originally posted by: CPA

Originally posted by: ShotgunSteven
How many years back can you still file for if you are owed a refund?

If the address you would send the paperwork to has changed since that tax year, do you send it to the old address or the new address?

3 years. I'm not sure I understand your second question. did your address change?

Mine didn't, but the address they said to send them to did.

 

[CPA]

Originally posted by: ShotgunSteven

Originally posted by: CPA

Originally posted by: ShotgunSteven
How many years back can you still file for if you are owed a refund?

If the address you would send the paperwork to has changed since that tax year, do you send it to the old address or the new address?

3 years. I'm not sure I understand your second question. did your address change?

Mine didn't, but the address they said to send them to did.

Oh, send it to the new.

 

[Leejai]

Originally posted by: CPA

Originally posted by: Leejai

Originally posted by: CPA

Originally posted by: Leejai

Originally posted by: EagleKeeper
Because the LLC does not feed directly to you, the LLC takes the loss, not you.

The expenses that are not related to the W2 can be taken against the personal income.

Thanks Eagle Keeper, so based on that, my total income in my example would be:

W2 80K + 1099 16K - Expenses 30K = 66K

And the Schedule K for the LLC affects only the LLC and not my personal income.

Did I get that right?

No. The IRS doesn't recognize an LLC as a tax-filing entity (such as a Corporation or Partnership). If you are filing a Schedule K-1, then you are a partnership in the IRS' eyes and any income from that partnership is taxable to you personally. The only time LLC income would not impact you personally is if you filed your LLC as a Corporation.

CPA, you are correct in that I'm filing a schedule K-1. The LLC is for a real estate in which we've depreciation "losses". So let's say depreciation (after taking in income, etc...) results in a loss of 10k.

I'm assuming that because I'm taxable for income, I can take the losses as well?

W2 80K + 1099 16K - Expenses 30K - K-1 10K = 56K

Right now?

Yes. Technically, you file a Form 1065 (Schedule K-1). Then your non-passive gains(losses) get transferred to 1040 Schedule E. After that, it gets transferred to Line 17 on a 1040.

As always, Thanks much! You guys seriously rock!

 

[ChaoZ]

Originally posted by: CPA

Originally posted by: ChaoZ
I just read that in order for a security to be a capital asset you have to classify it as such. So when you buy stocks using Scottrade or something, how do you classify them as investments so you can claim capital gains?

Classified as opposed to what? Can you link this article?

It's in my tax textbook. If you don't classify it as an investment, any gains will be considered ordinary gains. So you would be taxed more than with capital gains.

 

[Ns1]

Originally posted by: ChaoZ

Originally posted by: CPA

Originally posted by: ChaoZ
I just read that in order for a security to be a capital asset you have to classify it as such. So when you buy stocks using Scottrade or something, how do you classify them as investments so you can claim capital gains?

Classified as opposed to what? Can you link this article?

It's in my tax textbook. If you don't classify it as an investment, any gains will be considered ordinary gains. So you would be taxed more than with capital gains.

neg, there is no election, i think what you're getting at is what's it's purpose

Property held for the production of income, but not used in trade or business of the taxpayer, is a capital asset

Reg §1.1221-1

The term ?capital assets? includes all classes of property not specifically excluded by section 1221. In determining whether property is a ?capital asset?, the period for which held is immaterial.

 

[CalvinHobbes]

I just got a call from my CPA. I owe A LOT of money this year due to exercising and holding both ISO and NQ options. What I still don't understand is why it seems like I'm being taxed multiple times.
For example, let's say I make $20,000/yr. I exercise and hold (cashless exercise) 1000 ISO shares and 1000 NQ shares. I have to pay taxes immediately on the NQ options. The ISO I pay later.

I get my W2 and my income is now $40,000 (due to the exercise) and also contains values for Income from non-statutory stock options and income from stock sales (to cover exercise)

So, now I'm taxed like crazy since my income just doubled, then I'm taxed like crazy on the exercising, then when I finally sell the stock I get to pay taxes again.

So in my scenario, I really made $20,000/yr but I'm being taxed on $40,000 and I also am taxed on the exercise which causes AMT. So I now owe $8,000 to Fed and $2,500 state on an income of $20,000 per year when I really didn't make any money from the stocks because I still haven't sold them.

What am I missing here, it seems like I'm being taxed multiple times and by a crazy amount.

* all of the figures are fictional for simplicity*

 

[mav451]

Just finished filling out the 1040X via TurboTax and printed it out. Maybe a dumb question, but do I sign both the 1040X and my old 1040EZ?
Or am I just signing the 1040X?

 

[erwin1978]

Someone I know doesn't need to file for taxes this year because she had no taxable income from last year. Should she file anyway to get the rebate? Does she even qualify for the rebate? What's the qualifications?

 

[CPA]

Originally posted by: erwin1978
Someone I know doesn't need to file for taxes this year because she had no taxable income from last year. Should she file anyway to get the rebate? Does she even qualify for the rebate? What's the qualifications?

Does this mean that she earned no income or that she earned income but not enough to file? In any case, she must have earned at least $3K to be eligible. She would also have to file.

 

[CPA]

Originally posted by: CalvinHobbes
I just got a call from my CPA. I owe A LOT of money this year due to exercising and holding both ISO and NQ options. What I still don't understand is why it seems like I'm being taxed multiple times.
For example, let's say I make $20,000/yr. I exercise and hold (cashless exercise) 1000 ISO shares and 1000 NQ shares. I have to pay taxes immediately on the NQ options. The ISO I pay later.

I get my W2 and my income is now $40,000 (due to the exercise) and also contains values for Income from non-statutory stock options and income from stock sales (to cover exercise)

So, now I'm taxed like crazy since my income just doubled, then I'm taxed like crazy on the exercising, then when I finally sell the stock I get to pay taxes again.

So in my scenario, I really made $20,000/yr but I'm being taxed on $40,000 and I also am taxed on the exercise which causes AMT. So I now owe $8,000 to Fed and $2,500 state on an income of $20,000 per year when I really didn't make any money from the stocks because I still haven't sold them.

What am I missing here, it seems like I'm being taxed multiple times and by a crazy amount.

* all of the figures are fictional for simplicity*

When you exercised, did you pay the taxes? Normally, the exercise and sale would be recognized on your W2 along with the taxes you already paid (25% Fed rate withheld from proceeds) and on Schedule D you would then show a loss for the amount of fees you paid. this way you are only showing the taxes once. BTW, we're only talking the NQS options here, because if you exercised and held the ISOs then you don't have to worry about taxes until you actually sell the shares. If you hold them long enough (1 year) they will be considered a capital asset and subject to long-term capital gains tax rather than ordinary income tax.

So, when you exercise you will pay taxes on the gain (FMV - option price). This should be reported as W2 income. On Schedule D, you will show a small loss equal to any commissions and fees you paid. When you finally sell the NQS options, you will only pay tax on the difference of the exercise price and the sale price. This will be classified as a capital gain.

 

[EagleKeeper]

Originally posted by: mav451
Just finished filling out the 1040X via TurboTax and printed it out. Maybe a dumb question, but do I sign both the 1040X and my old 1040EZ?
Or am I just signing the 1040X?

The 1040X needs to be signed. They should already have the old 1040EZ

 

[EagleKeeper]

Originally posted by: CPA

Originally posted by: erwin1978
Someone I know doesn't need to file for taxes this year because she had no taxable income from last year. Should she file anyway to get the rebate? Does she even qualify for the rebate? What's the qualifications?

Does this mean that she earned no income or that she earned income but not enough to file? In any case, she must have earned at least $3K to be eligible. She would also have to file.

It would be best to review the guidelines from the IRS Web site regarding the "rebate". Their internal links are right on the first page.

Each person's circumstances are different on how the are elgible and what needs to be done to ensure that Uncle has that person in the system.

 

[jbloggs]

I don't know if has been mentioned already or not but Several counties in GA have been given an extension to file taxes due to recent tornado/storms relief, they can now file their taxes by May 19th

Notice of Tax filing extension

This includes State and Federal

FOR IMMEDIATE RELEASE
March 28, 2008
DOR Offers Relief to Severe Storm and Tornado Victims

ATLANTA â?? Businesses or individuals in seven Georgia counties struck by the recent severe storms and tornadoes that began on March 14 and have been declared a presidential disaster area are eligible for tax extensions and assistance from the Georgia Department of Revenue, Commissioner Bart L. Graham announced today. Counties in the disaster area are Bartow, Burke, DeKalb, Floyd, Fulton, Jefferson and Polk.

"We will do all we can to assist the affected businesses and individuals as they work their way through this situation," said Commissioner Graham.

Affected businesses or individuals in the presidential disaster area will be given until May 19 to submit their returns or make tax payments, including estimated tax payments that have a due date falling on or after March 14, 2008, or on or before May 19, 2008. These dates correspond with the dates set by the Internal Revenue Service. Affected taxpayers should write 'March 2008 Tornado' across the top of any forms submitted to the Department.

Taxpayers who are assessed a penalty and believe they did not receive due consideration regarding the storms' impact, need assistance, or have questions should contact DOR's main office in Atlanta at (404) 417-2400.

Federal Press release


List of other states with extension (Note: Extension dates differ)

To be eligible for the extension you just need to live in the County where the extension has been granted, you don't actually need your house blown away or anything.

 

[Leejai]

W2, 1099, and 1098.

Doing the taxes for my brother. He's a senior in college.

He has the following:

2 W2s adding to 6,500
1 1099 adding to 4000
1 1098-T with 13,000 in box 1

I keep adding that he owes the government. Why does the 1098 not deduct against 1099 as well as the W2?

If I only process the W2, he receives a refund of $600
If I add the 1098, no change. Still $600
If I add the 1099, he owes $400

 

[erwin1978]

Originally posted by: CPA

Originally posted by: erwin1978
Someone I know doesn't need to file for taxes this year because she had no taxable income from last year. Should she file anyway to get the rebate? Does she even qualify for the rebate? What's the qualifications?

Does this mean that she earned no income or that she earned income but not enough to file? In any case, she must have earned at least $3K to be eligible. She would also have to file.

She had a housekeeping job and she got paid off the books. So since her pay was not reported to the IRS by her employer she doesn't need to file a return.

In this case will it benefit her to file anyway to get the rebate or does she simply don't qualify?

 

[erwin1978]

Originally posted by: CPA

Originally posted by: ShotgunSteven
How many years back can you still file for if you are owed a refund?

If the address you would send the paperwork to has changed since that tax year, do you send it to the old address or the new address?

3 years. I'm not sure I understand your second question. did your address change?

I think I made a mistake on my 2004 return and paid too much. Does this mean I can still send an amendment return? I want my $100 back.

 

[UTmtnbiker]

Question on payment.

Looks like I owe this year due to the wife working as an independent contractor and not having any money withheld on her 1099-MISC form.

I'm using TurboTax like usual and would like to pay with a credit card. However, TT charges a 2.5% fee for using a credit care if e-filing. My question...Can I have TT print out paper forms and then use an online approved IRS payment form such as officialpaymentsdebit.com, who only charges $3 for credit card payments, to pay it while the paper forms are still in the mail? I obviously don't want to file until the very last minute to I can keep as much money in my pocket for as long as possible.

 

[bigbangtech]

If someone wants to get up to date with taxes, and paying them, the following questions are weighing on my mind with the April 15th deadline looming.

Let's say 3+ years of taxes not filed or paid due to barely scraping by.

All income from 1099-MISC, only last two years of 1099-MISC statements available

Need to pay estimated for 1/4 of 2008 by April 15th

What should be done first? File extension, then prepare all years and file them?

Or file for 2007 before April 15th, pay estimated for 2008 so far, then prepare missing years?

No judging please, just some advice to get current. I know it's going to take a lot of work to get current

 

[Leejai]

One more question. If one files an extension for their personal tax income, does that automatically file an extension for a sole proprietorship as well (has an EIN). Or does the Sole Proprietorship extension have to be filed seperately?

Sole Prop has zero employees if that makes a difference.

 

[LordSnailz]

I know this is last minute but is there a calculator out there that will calculate the reduced roth ira contribution limit? We're filing married jointly and our agi is between the $155k and $166k range and I want to figure out what is the max. allowed we can contribute to our Roth. Thanks!

 

[EagleKeeper]

Originally posted by: Leejai
W2, 1099, and 1098.

Doing the taxes for my brother. He's a senior in college.

He has the following:

2 W2s adding to 6,500
1 1099 adding to 4000
1 1098-T with 13,000 in box 1

I keep adding that he owes the government. Why does the 1098 not deduct against 1099 as well as the W2?

If I only process the W2, he receives a refund of $600
If I add the 1098, no change. Still $600
If I add the 1099, he owes $400

The 1098 will go in as either the tuition costs or the LLC depending on the situation and generate a credit applied to the taxes owed, unless he is being claimed as a dependent.

The 1099 is additional income - he is responsible for the Federal Income tax and Self-employment tax on it.
By having a 1099 - it also allows him to expense off items that are directly related to the income as well as proportional expensing of indirect expenses.

I would tell your brother to take the week-end off from school and party and put on his thinking cap.

1) Any college student should be able to do his own taxes.

2) Given the income level, Free Federal preparation/filing is available to him via online S/W

3) Have him take a CLOSE look at the way he obtained the 1099 income and figure out expenses that can drop that tax bite. He may even be able to come out in the negative:thumbsup: which will offset some of the W2 income.

 

[EagleKeeper]

Originally posted by: erwin1978

Originally posted by: CPA

Originally posted by: erwin1978
Someone I know doesn't need to file for taxes this year because she had no taxable income from last year. Should she file anyway to get the rebate? Does she even qualify for the rebate? What's the qualifications?

Does this mean that she earned no income or that she earned income but not enough to file? In any case, she must have earned at least $3K to be eligible. She would also have to file.

She had a housekeeping job and she got paid off the books. So since her pay was not reported to the IRS by her employer she doesn't need to file a return.

In this case will it benefit her to file anyway to get the rebate or does she simply don't qualify?

She should research if it would be benificial for her to file using the Schedule C and expense off a large amount of the income.

By research, I mean will such a return then allow her to qualify for the rebate

 

[EagleKeeper]

Originally posted by: erwin1978

Originally posted by: CPA

Originally posted by: ShotgunSteven
How many years back can you still file for if you are owed a refund?

If the address you would send the paperwork to has changed since that tax year, do you send it to the old address or the new address?

3 years. I'm not sure I understand your second question. did your address change?

I think I made a mistake on my 2004 return and paid too much. Does this mean I can still send an amendment return? I want my $100 back.

File a 1040X for 2004. If you delay past 15 April, you may not be able to - you can only go back 3 years.

 

[EagleKeeper]

Originally posted by: UTmtnbiker
Question on payment.

Looks like I owe this year due to the wife working as an independent contractor and not having any money withheld on her 1099-MISC form.

I'm using TurboTax like usual and would like to pay with a credit card. However, TT charges a 2.5% fee for using a credit care if e-filing. My question...Can I have TT print out paper forms and then use an online approved IRS payment form such as officialpaymentsdebit.com, who only charges $3 for credit card payments, to pay it while the paper forms are still in the mail? I obviously don't want to file until the very last minute to I can keep as much money in my pocket for as long as possible.

You can printout the paper forms and mail them in. Why pay for e-filing if you owe money (unless you qualify for Free Federal).

Have you looked at using the Schedule C to handle the 1099 income. Expense, expenses...

You may also have the ability to enter the CC information for the IRS to charge you (unsure on this).

 

[EagleKeeper]

Originally posted by: bigbangtech
If someone wants to get up to date with taxes, and paying them, the following questions are weighing on my mind with the April 15th deadline looming.

Let's say 3+ years of taxes not filed or paid due to barely scraping by.

All income from 1099-MISC, only last two years of 1099-MISC statements available

Need to pay estimated for 1/4 of 2008 by April 15th

What should be done first? File extension, then prepare all years and file them?

Or file for 2007 before April 15th, pay estimated for 2008 so far, then prepare missing years?

No judging please, just some advice to get current. I know it's going to take a lot of work to get current

Take care of the current year first. File 2007. Make payment for 2008. Download 1040 and Schedule C forms for 2004, 2005, 2006.
Start from 2004 and work forward.
When you work on any year, keep a sheet of paper handy to jot notes about this that you think may also affect the other years.

If thought relates to a previous year - do not go back to the previous year - continue with the current train of thought. When you finish that form for the year, then go back to the previous year and make the adjustment.

When preparing all the years, did DEEPfor the expenses against the 1099 income.