7th Annual Anandtech Tax Time Thread

[EagleKeeper]

Ok, I live with my dad and he is doing his taxes this year. He wants to know if he can claim me if I am 19 years old and not in school. I also work part time if that matters.

Previous information on dependant eligibility has been provided along with the IRS linkages.

There is a truth table with 5 or so items that must be met to be declared as a dependant.

 

[redgtxdi]

Two people filing "Head of Household"........

Chick at work & her boyfriend rent a house together.

They are both filing single & head of household.

They're both on the lease so they could qualify. (edit: as in qualify for the amount of rent they pay, not qualify to both be able to file head of household)

Are they allowed to do that??

(If it matters, *he's* actually married but the wife has her own boyfriend so neither file 'married'. They both like to get their bang on w/ other folks)

 

[alkemyst]

Two people filing "Head of Household"........

Chick at work & her boyfriend rent a house together.

They are both filing single & head of household.

They're both on the lease so they could qualify.

Are they allowed to do that??

(If it matters, *he's* actually married but the wife has her own boyfriend so neither file 'married'. They both like to get their bang on w/ other folks)

That's not how it works...one of them should post the details if they are really looking to do this. They are sharing a lot about their lives with you.

 

[redgtxdi]

That's not how it works...one of them should post the details if they are really looking to do this. They are sharing a lot about their lives with you.[b/]

You don't know the half of it. (I won't mention bedroom details that I'd rather not here, but there again.......if banging other people's spouses is your thing........hey)

I edited above to show that when I said "qualify" I didn't mean "qualify to be able to call both of themselves "head of household" just to qualify for the amount of rent on the house.

And I don't really have more details other than that, just that I told her it's probably not a good idea that they do that. She said her stepfather who dabbles in doing other people's taxes said she could do it on her federal return, just not on her state so she doesn't garner attention. I told her it still sounds like a bad idea to me.

 

[alkemyst]

http://taxes.about.com/od/filingstatus/qt/headofhousehold.htm

There are the 'steps' to test, California has a self-test online, but I didn't look if it was CA specific....http://www.ftb.ca.gov/individuals/hoh/selftest/Index.shtml

 

[cbuchach]

Here is my situation and question as to what I am able to deduct from my income. I purchased a condo in 6/2004 for $115000 and used it as my sole residence until I moved out of the condo in May of 2008 to my new wife's home and put the condo for sale. The condo of course didn't sell, so I started looking for a renter in 12/2008. I started renting the condo for $650 a month in February of 2009 until I sold the condo in 9/2009 for $76000 and paid around $6000 in expenses related to the sale. I put the data into TurboTax and it gives me a loss of ~$43000 which comes off my income and gives me a nice refund from federal and state sources.

While a good refund is nice and makes my huge loss on the property more palatable--is this legit? What I have researched says it is since I did actively manage the property. But my main concern is how to quantify how much I lost. I lived in it for ~4 years then rented in for 10 months--will this still work?

Thanks for any help.

 

[EagleKeeper]

Two people filing "Head of Household"........

Chick at work & her boyfriend rent a house together.

They are both filing single & head of household.

They're both on the lease so they could qualify. (edit: as in qualify for the amount of rent they pay, not qualify to both be able to file head of household)

Are they allowed to do that??

(If it matters, *he's* actually married but the wife has her own boyfriend so neither file 'married'. They both like to get their bang on w/ other folks)

Filing as Head of Household requires certain conditions - one being a valid Dependant. A SS# has to be provided for the "Dependant".

the IRS will cross reference the Dependant with a Head of Household filer.

 

[EagleKeeper]

Here is my situation and question as to what I am able to deduct from my income. I purchased a condo in 6/2004 for $115000 and used it as my sole residence until I moved out of the condo in May of 2008 to my new wife's home and put the condo for sale. The condo of course didn't sell, so I started looking for a renter in 12/2008. I started renting the condo for $650 a month in February of 2009 until I sold the condo in 9/2009 for $76000 and paid around $6000 in expenses related to the sale. I put the data into TurboTax and it gives me a loss of ~$43000 which comes off my income and gives me a nice refund from federal and state sources.

While a good refund is nice and makes my huge loss on the property more palatable--is this legit? What I have researched says it is since I did actively manage the property. But my main concern is how to quantify how much I lost. I lived in it for ~4 years then rented in for 10 months--will this still work?

Thanks for any help.

As long as you intended on renting out the place, even if there was no income, then all expenses relating to the place become a writeoff against what ever income the unit generated.

However, the loss should be based on the value of the place when you made the decision to rent it out (Dec 08).

The value could be in May 2008 IF you decided to rent until it was sold.

You can not use the value from May 2004 when you purchased the unit.

 

[cbuchach]

As long as you intended on renting out the place, even if there was no income, then all expenses relating to the place become a writeoff against what ever income the unit generated.

However, the loss should be based on the value of the place when you made the decision to rent it out (Dec 08).

The value could be in May 2008 IF you decided to rent until it was sold.

You can not use the value from May 2004 when you purchased the unit.

Thanks, that was my main concern. Now I just need to figure out the value in Dec of 2008.

 

[alkemyst]

I wanted to add that cbuchach has a less likely to be audited case as well showing he actively had a renter vs those that have empty rooms they are using yet claiming they were actually 'rentals'.

 

[DietDrThunder]

I really missed the mark this year and way overpaid my taxes. I over compensated in 2009 because I ended up having to pay the IRS $3,172 in 2008 (wife went back to work). Now I'm getting a $2339 refund for 2009. Is there a standard rule on what percentage in taxes gets reduced for each allowance you claim on the W-4? I have one child and I'm currently choosing married with 3 allowances.

 

[EagleKeeper]

You can look at what your tax bracket percentage is (most tax S/W will also tell you in the summary reports).
A child is worth X dollars as a deduction. Multiply that by the tax bracket percentage and you have the actual value of the child for tax purposes.

Government also has other allowances based on multiple factors; but what is described above is a good starting point.

 

[Arkaign]

AT Tax Gurus, I have a question.

I have a friend who does taxes (is a CPA), he did my taxes last year with no problem, but this year he totally screwed it over.

Situation in brief :

I have a 3-year-old son, I am HOH, I am married but legally separated, and he lives with my 12 months of the year. Punching in my W2 and 1099s, according to the IRS calculator, the H&R Block Calculator, and the Turbotax calculator, my refund should have been roughly $4000.

Well, I gave him my W2, 1099s, and the info above, along with a cancelled check for E-file direct deposit. He calls me a few days later (he's been distracted, flaky, and hard to get ahold of recently), and tells me he's got me filed, and that my refund will be $670 or so. I was like WHAAAAAAAT? Hah. Anyhow, I got the login info he used to file the thing, he used Taxbrain's online service, and view the info he put in. There were numerous errors, most notably incorrect figures for my 1099 income, incorrect name for my son, and although he put that I had a son, the software had a selection that said 'lives elsewhere due to divorce', which TOTALLY screwed my refund (basically eliminated my EITC). Correcting the erroneous fields and selections in the software changed the refund amount from ~$670 to ~$4000 as it is supposed to be.

The status is that it's already been submitted, so now I have to file an amended tax return, which apparently can only be done by printing it and mailing it to them.

My questions :

(1)- As I have an incorrect refund amount already 'accepted' (guess Taxbrain's online submission to IRS has an automated response feature) on the way direct-deposit to my bank account, I should leave that deposit alone and wait for it to be corrected later?

(2)- How long does it typically take for an amended tax return to get processed (several typos in names, streets, and wrong info about child living with me, as well as marital status)?

It's very frustrating. I have done several difficult projects for him, including retrieving all of his programs and windows installation (he didn't have any of his original discs) from a laptop that had coffee spilled on it while it was on, onto a replacement unit. It was a project that took many hours, and I did it pretty much for free, along with helping him build a HTPC for free. Last year there was no problem at all, but this year he completely screwed me.

Thanks, AT!!

 

[alkemyst]

AT Tax Gurus, I have a question.

I have a friend who does taxes (is a CPA), he did my taxes last year with no problem, but this year he totally screwed it over.

Situation in brief :

I have a 3-year-old son, I am HOH, I am married but legally separated, and he lives with my 12 months of the year. Punching in my W2 and 1099s, according to the IRS calculator, the H&R Block Calculator, and the Turbotax calculator, my refund should have been roughly $4000.

Well, I gave him my W2, 1099s, and the info above, along with a cancelled check for E-file direct deposit. He calls me a few days later (he's been distracted, flaky, and hard to get ahold of recently), and tells me he's got me filed, and that my refund will be $670 or so. I was like WHAAAAAAAT? Hah. Anyhow, I got the login info he used to file the thing, he used Taxbrain's online service, and view the info he put in. There were numerous errors, most notably incorrect figures for my 1099 income, incorrect name for my son, and although he put that I had a son, the software had a selection that said 'lives elsewhere due to divorce', which TOTALLY screwed my refund (basically eliminated my EITC). Correcting the erroneous fields and selections in the software changed the refund amount from ~$670 to ~$4000 as it is supposed to be.

The status is that it's already been submitted, so now I have to file an amended tax return, which apparently can only be done by printing it and mailing it to them.

My questions :

(1)- As I have an incorrect refund amount already 'accepted' (guess Taxbrain's online submission to IRS has an automated response feature) on the way direct-deposit to my bank account, I should leave that deposit alone and wait for it to be corrected later?

(2)- How long does it typically take for an amended tax return to get processed (several typos in names, streets, and wrong info about child living with me, as well as marital status)?

It's very frustrating. I have done several difficult projects for him, including retrieving all of his programs and windows installation (he didn't have any of his original discs) from a laptop that had coffee spilled on it while it was on, onto a replacement unit. It was a project that took many hours, and I did it pretty much for free, along with helping him build a HTPC for free. Last year there was no problem at all, but this year he completely screwed me.

Thanks, AT!!

Your 'friend' should be able to file an amended return.

 

[Arkaign]

Your 'friend' should be able to file an amended return.

Hehe, well, at this point I'm terrified at the simple prospect of letting him touch anything else. I think I'm demoting him from 'friend' to 'past acquaintance'

 

[Jadow]

That's why I read my return before filing it, my accountant likes that I do to. He hasn't made a mistake yet, but we both feel better that I read it.

 

[onza]

(2)- How long does it typically take for an amended tax return to get processed (several typos in names, streets, and wrong info about child living with me, as well as marital status)?

I'd say if you do it quick enough with the correct info. it will take the government around 7weeks.

 

[TheWags]

Long time lurker, first time poster. This one is befuddling me:

How do I report my capital gains and "dividends" from Rio Tinto (ADR)?

I held RTP from 4/2009 - 11/2009. I got a very nice short term capital gain and there was also a $22.xx per share "dividend" paid with an ex-div (or maybe payment) date during 7/2009.

However, this "dividend" did not show up on my 1099-DIV, and I have been unable to find information about how Rio Tinto is classifying it. My e-mails to their investor relations folks have not received a response. I haven't yet called the broker (Scottrade), but when I do I expect that they will tell me that they can't provide tax advice and the 1099 is what it is.

I suspect that the fact that the 1099-DIV does not show this as a dividend (of any sort, qualified, non-qual, etc.) suggests that it may be classified as a "return of capital" for accounting purposes. In this case, that would not be as beneficial a treatment for me, as I would essentially pay STCG on this "dividend," as it would adjust my basis. But if that's the way it is, that's the way it is, I just need to see that from somewhere official.

When this has happened in the past, mostly recently with TRMS in 2008, Gainskeeper (in this case, with a different broker) has appropriately reported the adjusted basis via the transaction export function from Gainskeeper. (Which I generally use to populate Schedule D after truing it up to my own records.) That is, until the "dividend" is classified like that, it reports a higher basis in both the buy and sell transactions, and then they get adjusted down after the dividend is so-classified.

However, this 1099-DIV is still reporting the basis as the same as it was, but the 1099-B portion shows sale proceeds (for zero shares) equal to the dividend as of the date it was paid.

So, first, how do I figure out the actual treatment of this dividend, and how do I report it?

 

[TheWags]

I'd say if you do it quick enough with the correct info. it will take the government around 7weeks.

Just to set expectations, this may be faster than can really be expected, as least for my sample set of 1. Last year my basic info was all correct but I had to correct some information regarding amended 1099s, and filed a 1040x in July or so of last year, and it still took 12 weeks or so. Maybe they move quicker for 1040x's which are just correcting basic info, but I would be surprised if it was turned around that quickly during tax season. Note that, once you have filed, you have to wait for your existing return to be addressed before you can 1040x it, I think.

 

[Twista]

What is a qualifying relative?
A person is a qualifying relative if that person is not a qualifying child and meets the following requirements:

* Gross income — The person has gross income of less than $3,650 for the year unless the person is disabled.
* Support test — You must have provided more than half that person's support for the year.
* Member of household or relationship test — The person must have either lived with you for the entire year as a member of your household or be related to you. Certain relatives are not required to live with you for the entire year.

Lets say this person meets everything listed above.. maybe. The person however made hover 3,650 from state/gov help, but is disabled. The unless part confuses me so does that mean i can file the disabled person as a dependent? (aka is this person a qualifying relative?

 

[dullard]

Suppose that the wife + I are in 25% tax bracket, married filing jointly with our withholding from our salaries set to match our taxes in a normal year as close as possible. Suppose I receive a one time payment of $10,000 today. Suppose that no tax was withheld from that payment. Is the following correct?

1) I need to pay estimated 2010 taxes (using form 1040-ES) since we have a pay-as-you-go tax system.
2) Form 1040-ES would say that since I am in the 25% tax bracket (and still will be after the royalty payment), that I owe $2500 in tax through estimated payments.
3) I only have to pay 1/4 of that $2500 each quarter. Meaning each quarter I have to pay $625 in estimated tax.

I think I have that all correct. If not, please let me know where I erred. Now, my main question is: what happens if later this year I get another one time royalty payment of $10,000? I really don't know if it'll happen or not and at this point the magic 8-ball says "no". Suppose I get lucky and I do get another payment in August. When I do my quarterly payment after August, do I have to make up for the quarterly payments that I didn't do earlier before I knew about this second royalty payment? Or what? I'm new to this estimated payment stuff. I'm paying enough tax this year, I don't want to add a penalty for doing something at the wrong time.

Or can I just make it easy on myself and do a one-time estimated payment of $2500 now and a second one-time payment of $2500 if I ever get that second royalty payment?

 

[Izzo]

We have two houses, the one we live in and an older house we sold in last year for a loss. The old house was not our primary residence for the past two years. Can we claim this as a capital loss? I'm finding conflicting info on irs.gov

"You cannot deduct a loss from the sale of your main home." - Well this isn't my main house

But it seems to meet the requirements listed in the Capital Gains and Losses section.

 

[cpals]

My sister-in-law has a kid with a guy who has been incarcerated for a few years. Just last year they decided to get married while he was in jail. She wants me to do her taxes as I usually do (plugging numbers in), but am not sure the status she should be filing and if her incarcerated husband should be included in the return?

I've read differing people on the net saying that she can file as 'married filing separate' or 'married filing jointly.' I've also seen a couple results stating that if she hasn't lived with her husband in the last 6 months (which she hasn't) then she can file single?

 

[FatJackSprat]

What is the relation between the income from a single member LLC and the capital account for fed. income tax purposes?

John forms LLC in 2006 and contributes $8,500 in cash.

LLC has losses in tax year 2006, 2007, and 2008.

In 2009, the LLC has a net of about $1,800.

If John takes the $1,800 in cash is it subject to the income tax or is it somehow a return of a portion of his initial investment of $8,500 and not taxed? I was told that you don't pay any income tax until the cash out exceeds the capital account.

Thanks.

 

[alkemyst]

My sister-in-law has a kid with a guy who has been incarcerated for a few years. Just last year they decided to get married while he was in jail. She wants me to do her taxes as I usually do (plugging numbers in), but am not sure the status she should be filing and if her incarcerated husband should be included in the return?

I've read differing people on the net saying that she can file as 'married filing separate' or 'married filing jointly.' I've also seen a couple results stating that if she hasn't lived with her husband in the last 6 months (which she hasn't) then she can file single?

Is there a reason you don't want to use Married Filing Jointly (being she married him while he was in jail I am assuming they still see each other)? Also did he not make any income while in jail? If he had a job, that income is usually taxable.

I haven't heard anyone get 'single' status while married unless you mean Married Filing Separate (which is a definite option), Head of Household could become an option with kids...