6th Annual Anandtech Tax Time Thread

[EagleKeeper]

Originally posted by: Doggiedog

Originally posted by: EagleKeeper

Originally posted by: Doggiedog
Hi EagleKeeper,

I have a question for you on Income Tax withholding.

I got divorced last year and with my new paycheck, my marital status has changed to single.

I noticed that my tax withholding is up 50%. Is this normal? The only other change is a small pay increase of 5%. I took 0 deductions on withholding while I was married (bc I didn't want to get blindsided by owed taxes) and I continued to take 0 deductions now. I looked at my tax schedule and I was in the 25% bracket as a married person but should be in the 28% bracket now as a single person.

Can you direct me to where I can look this up? The payroll people insist that they are right but they can't provide me any proof. They tell me to look at circular e or something. I am taking home several hundred $ less after a 5% pay increase than I did before I got the increase and status change. I would think at worst, it would be a wash but I am actually down. If you need, I can supply you with the #s.

Thanks!

DD

Changing the withholding status from married to single is the equivalent of a $3500 taxable income increase.

25% of that amount is $900 extra taxes

Thanks for the help.

So let's say to make it round numbers I get $100K, that should be approximately a $3000 increase because of the 3% change in tax bracket. That should come out to a $250 increase a month. I am paying a lot more %age wise than that. It doesn't make sense to me.

Separate out the impact of the divorce from the pay increase.
Look at each separately and then add in the consequences.

At an income level of $100K - the tax rate is 28% (call it 30%)
Losing the spousal deduction is just over $3000 - $1000K taxes
5% pay increase is $5K - $1500 in taxes.

$2500 in Federal taxes added == $200 month withhold

Now take into account your state tax.


You payroll department just uses provided tables to determine the amount of withholding based on your income and dependents. If they have double checked, then trust them.
The worst case is they are withholding to much - it will come out in the wash next year.

 

[importdistributors]

When you do taxes, and you put on expenses, does that cancel out an equivalent amount of taxes? Example, Say I made 11,000 daytrading stocks, and my fees I paid to Scottrade were 1,000 dollars. Does that mean that they only tax 10,000 dollars?

 

[Deviant Grasshopper]

I browsed through this thread yesterday and didn't see an answer to my questions -

1) Is there any benefit to waiting to file in case the feds come up with some sort of rebate or tax break?

2) Is there a generally recommended software package to use? I'm pretty sure that I make too much to qualify for the free ones, but my return is fairly simple - single, own my home, 1 job

 

[shopbruin]

What is the difference between Business Income and Other Income?

I should be receiving a 1099 soon. I know how much the 1099 will be, but I can't really determine if it's business income. I was just receiving money with no effort on my end.

When we plugged it into Turbo Tax, the amount we have to pay is about half when it's figured as "other" income instead of business income.

Also, I don't have any deductions I'd be comfortable taking in case of an audit, because literally I did not conduct any business other than have this account. I almost just want to file it as business income so I don't get reamed later in possible penalties.

 

[alkemyst]

Originally posted by: Deviant Grasshopper
I browsed through this thread yesterday and didn't see an answer to my questions -

1) Is there any benefit to waiting to file in case the feds come up with some sort of rebate or tax break?

2) Is there a generally recommended software package to use? I'm pretty sure that I make too much to qualify for the free ones, but my return is fairly simple - single, own my home, 1 job

I answered this already. If they come up with something it will not be before April...also even if they do it will be done like the stimulus checks or applied to next years taxes.

Turbotax is a popular one...any are decent really esp for a simple return.

 

[alkemyst]

Originally posted by: freesia39
What is the difference between Business Income and Other Income?

I should be receiving a 1099 soon. I know how much the 1099 will be, but I can't really determine if it's business income. I was just receiving money with no effort on my end.

When we plugged it into Turbo Tax, the amount we have to pay is about half when it's figured as "other" income instead of business income.

Also, I don't have any deductions I'd be comfortable taking in case of an audit, because literally I did not conduct any business other than have this account. I almost just want to file it as business income so I don't get reamed later in possible penalties.

Turbotax should walk you through entering 1099 income.

 

[EagleKeeper]

Originally posted by: importdistributors
When you do taxes, and you put on expenses, does that cancel out an equivalent amount of taxes? Example, Say I made 11,000 daytrading stocks, and my fees I paid to Scottrade were 1,000 dollars. Does that mean that they only tax 10,000 dollars?

Expenses go against the income that will be taxable.

Your wording is wrong but the answer to your intended question is that the $1K in expenses reduces the taxable income by $1K. Your taxable income from day trading in this case will be $10K

 

[EagleKeeper]

Originally posted by: alkemyst

Originally posted by: Deviant Grasshopper
I browsed through this thread yesterday and didn't see an answer to my questions -

1) Is there any benefit to waiting to file in case the feds come up with some sort of rebate or tax break?

2) Is there a generally recommended software package to use? I'm pretty sure that I make too much to qualify for the free ones, but my return is fairly simple - single, own my home, 1 job

I answered this already. If they come up with something it will not be before April...also even if they do it will be done like the stimulus checks or applied to next years taxes.

Turbotax is a popular one...any are decent really esp for a simple return.

Online versions of TurboTax & TaxCut have income limits.
The online version of TaxAct does not.

 

[EagleKeeper]

Originally posted by: freesia39
What is the difference between Business Income and Other Income?

I should be receiving a 1099 soon. I know how much the 1099 will be, but I can't really determine if it's business income. I was just receiving money with no effort on my end.

When we plugged it into Turbo Tax, the amount we have to pay is about half when it's figured as "other" income instead of business income.

Also, I don't have any deductions I'd be comfortable taking in case of an audit, because literally I did not conduct any business other than have this account. I almost just want to file it as business income so I don't get reamed later in possible penalties.

Depending on the amount of income, you may have to use the Schedule C.

Unless you did nothing to look for the income source and the income was handed to you for doing nothing, there should be some expense in obtaining that income and or expenses associated in figuring out what to file it under. That is all either direct or indirect expenses.

 

[MikeyIs4Dcats]

question regarding tuition and scholarships. My wife was selected to take an internship in Mexico working at the public library (her degree is in library science). Her costs for the week were reimbursed via a "scholarship", but these costs were above and beyond her tuition. Her 1098T of course is showing this "scholarship", but of course that didn't actually go against her tuition but Turbotax applies it anyway. Is this correct? Does she have to claim this money?

For clarification, say her tuition was $5000, and the schlarship was $1500. Turbotax is showing her net tuition cost at 3500, but of course it was actually 5000, and the 1500 covered her travel expense.

This all seems very screwy to me, but then again I also find it weird her school reports tuition cost on the 1098 only for the fall semester because they billed spring in Dec 2007, even though it was due nor paid until 2008.

 

[Turin39789]

Got married this year, so I'm going to ask a vague and unanswerable question.

Ran through turbotax real fast, estimated our 1098-t amounts by looking at our tuition on the schools site and subtracting our employer refund amounts.

We both spent around 2100 on tuition(me undergrad, her grad) and under married filed joint we get about 1200 back fed and owe 70 on state(ky)

I switch it to married filed separate and fed falls to $1k and state jumps to a $1500 refund.

Does that sound reasonable?
Why didnt turbotax switch that for me?

 

[Turin39789]

and I double posted too!

 

[alkemyst]

Originally posted by: MikeyIs4Dcats
question regarding tuition and scholarships. My wife was selected to take an internship in Mexico working at the public library (her degree is in library science). Her costs for the week were reimbursed via a "scholarship", but these costs were above and beyond her tuition. Her 1098T of course is showing this "scholarship", but of course that didn't actually go against her tuition but Turbotax applies it anyway. Is this correct? Does she have to claim this money?

For clarification, say her tuition was $5000, and the schlarship was $1500. Turbotax is showing her net tuition cost at 3500, but of course it was actually 5000, and the 1500 covered her travel expense.

This all seems very screwy to me, but then again I also find it weird her school reports tuition cost on the 1098 only for the fall semester because they billed spring in Dec 2007, even though it was due nor paid until 2008.

If it's a scholarship AFAIK it's applied to tuition. They should have made it a reimbursement check.

 

[EagleKeeper]

Originally posted by: Turin39789
Got married this year, so I'm going to ask a vague and unanswerable question.

Ran through turbotax real fast, estimated our 1098-t amounts by looking at our tuition on the schools site and subtracting our employer refund amounts.

We both spent around 2100 on tuition(me undergrad, her grad) and under married filed joint we get about 1200 back fed and owe 70 on state(ky)

I switch it to married filed separate and fed falls to $1k and state jumps to a $1500 refund.

Does that sound reasonable?
Why didnt turbotax switch that for me?

You have to tell TT what option for filing you want. from that point, it will do the calculations.
To play what if - you have to manually manipulate the numbers.

Married filing separately with similar incomes, should increase the tax. also, the educational credits are prevented in that case.

 

[TruePaige]

Okay! 1099 Stock question. Different from any I've seen in the thread so far.

I was really just entering the stock market for some fun and learning experiences last year. On the grand rule of saving some of my investment I sold some shares of stock. I then used it to buy more shares the next day when it was slightly lower priced. I received my 1099 today and on it I have:

--

Summary of Gross Proceeds Transactions

Box Description Amount

2 Gross Proceeds Less Commissions.............. . . . . . . . . . . . . $XXX.XX
4 Federal Income Tax Withheld.................. . . . . . . . . . . . . . . $0.00

--


But immediately after I sold those I used the money to buy more shares, which I've been holding ever since.

What should be done from there to show I don't actually have any money from this...it's not like I pocketed $XXX~ odd dollars.

I still might go to a tax place, if I do should I just take my Year End Statement and 1099?

Thanks in advance guys!

 

[alchemize]

I had excess distributions to my Roth IRA in 2008. Of course, I lost a bit on the cashout ($5000 put in, $2,800 cashed out) Will these capital losses be tax deductible? And in 08 or 09?

 

[FAS284]

Great thread - I searched for my question but couldn't really find a definite answer.

My wife has been a graduate student so she gets a stipend of ~20K per year and her tuition is waived (how much it costs, I do not know). She's been in school for 3 years but apparently, this is the first year we actually received her 1098-T (I was able to pull up previous 1098-Ts from the school website today - no idea why we didn't receive it previously).

When I put the following figures in taxact, I end up paying higher taxes. I tried to explain this to the accounting dept at her school but they insisted I should be getting a tax credit.

Box #2 - payments received for qualified tuition and related expenses - $3,234.25
Box #5 - scholarships or grants - $3,394.25
Boxes #8 and 9 checked (half time student, graduate student).

I can see that the scholarships > qualified tuition (even though she never got the scholarship money.. just her stipend). Should I be reporting this and get higher tax or am I missing the big picture that this really is a tax (Lifetime Learning) credit? And what do I do for the previous years? They have similar values with scholarship/grants greater than payments by ~$100-$200.

Thanks!

 

[Argo]

Guys, can you help me handle the following situation. Turbo tax is failing me.

Bought 100 shares of company A for $100 a share in 2006.

In 2008 company A is purchased company B. As part of the deal I received 50 shares of B + $5000 in cash for my 100 shares of A.

Few days later I sold 50 shares of B for $150 a share.

How do I report this? On my 1099 I'm showing two sales:

Sold 100 shares of A for $5000
Sold 50 shares of B for $7500

Do I report first transaction as a $5000 sale with $10000 cost basis and therefore a $5k loss?

The what is the cost basis for the 2nd transaction?

 

[TallBill]

Any idea if Illinois Veteran's Grant money is taxable? I'm 95% sure that it's not, because I read somewhere that all veteran's benefits are tax free. But it turns my $400 federal return into owing $300 if it is.

 

[MikeyIs4Dcats]

Originally posted by: alkemyst

Originally posted by: MikeyIs4Dcats
question regarding tuition and scholarships. My wife was selected to take an internship in Mexico working at the public library (her degree is in library science). Her costs for the week were reimbursed via a "scholarship", but these costs were above and beyond her tuition. Her 1098T of course is showing this "scholarship", but of course that didn't actually go against her tuition but Turbotax applies it anyway. Is this correct? Does she have to claim this money?

For clarification, say her tuition was $5000, and the schlarship was $1500. Turbotax is showing her net tuition cost at 3500, but of course it was actually 5000, and the 1500 covered her travel expense.

This all seems very screwy to me, but then again I also find it weird her school reports tuition cost on the 1098 only for the fall semester because they billed spring in Dec 2007, even though it was due nor paid until 2008.

If it's a scholarship AFAIK it's applied to tuition. They should have made it a reimbursement check.

that;s pretty much what it was, except she didn't have to submit receipts or anything. And they are showing it in the Scholarship box. No way around this I suppose?

 

[rky60]

Misclassification of employment?

Situation: In 2008, I work for a home improvement company (we'll call company A) who had me on payroll and taxes were being withheld. I also worked for another company (we'll call company B) out of the same building and did the exact same type of work and wasn't on the payroll.


Company A, I had complete control over my job duties. Still employed here!

Company B dictated how and when everything was done. No longer doing work for this company.

Company A has since moved to it's own location. I had a feeling company B would attempt to 1099-MISC me. I never filled out any application or a W-9 for Company B, yet they still managed to get my SS # and send me the 1099. Probably from snooping in Company A records which were in the same filing room.

Can anyone take a wild guess at what my chances are at filing form SS-8? It's a touchy subject I guess, but I know company B only paid me this way to avoid % of taxes by employer, workers comp/uc payments and such. I also know for a fact that company B does this to thier janitor as well.

Thanks for any info...

 

[Gunslinger08]

Question about buying a home in 2008. Which items that I paid for at closing are generally tax deductible? I'm running through Turbo Tax, and it didn't ask me for any items related to closing costs.

A few of the items:
- Mortgage Insurance Premium to HUD ($3372.38)
- Government Recording and Transfer Charges - State Tax - Deed ($575.00) and Mortgage ($570.50)

My AGI is around $78k.

 

[DukeFan21]

This is my first time filing my own return, and I'm not sure what to do with the 1098-T. The amount billed to me for tuition was $6921 (box #2). No scholarships, grants, or adjustments. I graduated in May, and my loan repayments didn't begin until November.

Using Turbo Tax, I entered this all in the 1098-T portion. It then asks me: "Out of the $6921 that was billed to Penn State, how much was actually paid to the school (including scholarships, fellows, and grants?" I assume that ALL of this was paid to the school, by my lender. Is that correct, and I put the full $6921 amount in there?

 

[SarcasticDwarf]

Originally posted by: SarcasticDwarf
Two questions:

1) For the LL Credit there is a different set of rules for those in affected areas. I lived and went to school in one of the counties listed until 3 days before the disaster date (June 5th). The three weeks after that I lived (but did not go to a school) in another of the listed counties before moving out of state (but taking online classes starting the fall semester). So does that mean I am or am not qualified to take it?

2) I have a sole proprietorship that I am turning into a LLC this year (it could technically have closed the last day of 2008). Is there any way that I am supposed to report it closing?

Any thoughts? Never got a response.

 

[alkemyst]

you report a business closing on Schedule C. You'd need to have gone to school in the disaster area during the disaster to claim AFAIK.