8th Annual Anandtech Tax Time Thread (OP Updated 14th Jan)

[sohcrates]

Just thought i'd re-post my question on the off chance you do have some insight. It did not get answered earlier. Thanks!

Child and dependent care question:

We paid $9K in child care last year. $5K of that was from a pre-tax dependent care flexible spending program through work. so that is 9k-5k = $4k

according to the IRS, the max we can take is $3k anyway.

so $3k-$5k is a negative number, therefore we do not qualify for this tax credit.

However, in turbotax when i put in $9k total it immediatelys give us approximately $1600 back on what we owe on taxes which doesn't seem right? (we go from owing $1100) to getting back $500.

turbotax clearly tells us however that we "do not qualify" for the dependent care credit and puts a "$0" in there. Turbotax is aware of our $5k dependent care pre-tax from our W-2.

So where did this $1600 credit come from? Form 2441 is the only form that has been added.

 

[EagleKeeper]

Just thought i'd re-post my question on the off chance you do have some insight. It did not get answered earlier. Thanks!

Child and dependent care question:

We paid $9K in child care last year. $5K of that was from a pre-tax dependent care flexible spending program through work. so that is 9k-5k = $4k

according to the IRS, the max we can take is $3k anyway.

so $3k-$5k is a negative number, therefore we do not qualify for this tax credit.

However, in turbotax when i put in $9k total it immediatelys give us approximately $1600 back on what we owe on taxes which doesn't seem right? (we go from owing $1100) to getting back $500.

turbotax clearly tells us however that we "do not qualify" for the dependent care credit and puts a "$0" in there. Turbotax is aware of our $5k dependent care pre-tax from our W-2.

So where did this $1600 credit come from? Form 2441 is the only form that has been added.

You are adding in the $5K that was a tax deffered for Childcare twice.

Because you have already paid that amount via withholding, you do not line item it for expenses on the 2441

 

[sohcrates]

You are adding in the $5K that was a tax deffered for Childcare twice.

Because you have already paid that amount via withholding, you do not line item it for expenses on the 2441

Thanks for the quick reply. Sorry if i am confused but are you saying i should not complete the 2441? Or are you saying getting a $1600 credit sounds correct?

 

[EagleKeeper]

Thanks for the quick reply. Sorry if i am confused but are you saying i should not complete the 2441? Or are you saying getting a $1600 credit sounds correct?

Because the $5K child care was already accounted for in your W2, you should not be using that number again anywhere.

If that $5K is what is on the 2441, then delete the 2441 form.

 

[sohcrates]

Because the $5K child care was already accounted for in your W2, you should not be using that number again anywhere.

If that $5K is what is on the 2441, then delete the 2441 form.

The weird thing is that it is turbotax, not me, that is importing that $5k into the 2441 from my W2.

I will look into it i guess, thanks for the help

 

[Aharami]

what is considered a HSA distribution? I'm going thru the tax act software and it is asking "Did you or your spouse receive a distribution from a health savings account (HSA), Archer Medical Savings Account (MSA) or a Medicare Advantage Medical Savings Account that was reported to you on Form 1099-SA?"

Both wife and I have our own HSA from work, and we use HSA toward medical bills. Is that considered a HSA distribution? We don't recall getting a 1099-SA.

Also is it true that I have till April 18th to contribute toward my 2010 HSA maximum? If I contribute now, it will be post-tax contribution. How will that effect my tax liability and refund?

 

[Svnla]

I have a question for a friend, I am single with no kid so I am pretty much clueless about this situation.

He was married but divorced now. He is paying child support for 2 kids, no alimony. Does he get any credit on his tax for this child support payment?

Any other ways for him to get more tax credits or way to reduce his tax liability? He used to file as married couple with tax breaks/credits from the two kids and house (it is sold now), etc. but now only single with no kid for him? Thanks guys/gals.

 

[endervalentine]

hey guys, I have a IRA question, I funded my traditional IRA with after tax money, and when I converted my traditional IRA to a Roth IRA, I'm getting tax on the whole amount. I thought since I funded my traditional IRA with after tax money, I would only get tax on the gains when I do the conversion. But TurboTax is taxing the whole amt. instead?

Any help is greatly appreciated!

 

[EvilYoda]

So, I'm an idiot (just getting that out of the way) and went to H&R this year thinking that they'd wave their magic wand and help me with my new work situation. So first, I got raped on their fee. Second, does this sound right:

2009 - worked in an office in AZ, overall percentage of tax/wages was around 13%.
2010 - worked solely as an independent contractor, moved to MI in August, made about $20K more than 2009. Overall tax percentage is 30%.

Even if I jumped a tax bracket, that seems like a stupid amount of taxes. $50K->$70K jump from 2009 to 2010.

Maybe this is just how things work, I don't know.

 

[EagleKeeper]

I have a question for a friend, I am single with no kid so I am pretty much clueless about this situation.

He was married but divorced now. He is paying child support for 2 kids, no alimony. Does he get any credit on his tax for this child support payment?

Any other ways for him to get more tax credits or way to reduce his tax liability? He used to file as married couple with tax breaks/credits from the two kids and house (it is sold now), etc. but now only single with no kid for him? Thanks guys/gals.

Depending on the divorce decree, he may be able to claim some credit for the kids.

He can reduce his tax liability by ensuring that he uses the IRA/401K options to their fullest.

Anything above that is spending a chunk of change to save a little. Unless he needs to spend that chunk, it is not worth it.

 

[EagleKeeper]

hey guys, I have a IRA question, I funded my traditional IRA with after tax money, and when I converted my traditional IRA to a Roth IRA, I'm getting tax on the whole amount. I thought since I funded my traditional IRA with after tax money, I would only get tax on the gains when I do the conversion. But TurboTax is taxing the whole amt. instead?

Any help is greatly appreciated!

You can call TT people for help, but unless you paid the premium package, you may not get it.

Best thing would be to ignore the rollover in terms of tax filing. Because both are after tax money, it will not make a difference.
Just keep track of the paperwork showing the transfer and something showing that the IRA funds were after taxes.

 

[EagleKeeper]

So, I'm an idiot (just getting that out of the way) and went to H&R this year thinking that they'd wave their magic wand and help me with my new work situation. So first, I got raped on their fee. Second, does this sound right:

2009 - worked in an office in AZ, overall percentage of tax/wages was around 13%.
2010 - worked solely as an independent contractor, moved to MI in August, made about $20K more than 2009. Overall tax percentage is 30%.

Even if I jumped a tax bracket, that seems like a stupid amount of taxes. $50K->$70K jump from 2009 to 2010.

Maybe this is just how things work, I don't know.

As an independent contract, you paid the extra share of the FICA (7%)

Now if you ignored the benefits of the Schedule C; you deserved to get raped. The simple H&R Block offices are not smart enough to maximize the Schedule C for you. They punch in numbers that you provided them, had out the lubes and go from there.

 

[EagleKeeper]

what is considered a HSA distribution? I'm going thru the tax act software and it is asking "Did you or your spouse receive a distribution from a health savings account (HSA), Archer Medical Savings Account (MSA) or a Medicare Advantage Medical Savings Account that was reported to you on Form 1099-SA?"

Both wife and I have our own HSA from work, and we use HSA toward medical bills. Is that considered a HSA distribution? We don't recall getting a 1099-SA.

Also is it true that I have till April 18th to contribute toward my 2010 HSA maximum? If I contribute now, it will be post-tax contribution. How will that effect my tax liability and refund?

The first issue - anything that you get refunded from you HSA is considered to be a distribution.

If you do not remember getting a 1099-SA; contact the plan administrator ASAP and ask.

Second Issue - funding
I can not answer that

 

[endervalentine]

You can call TT people for help, but unless you paid the premium package, you may not get it.

Best thing would be to ignore the rollover in terms of tax filing. Because both are after tax money, it will not make a difference.
Just keep track of the paperwork showing the transfer and something showing that the IRA funds were after taxes.

But what about the gains I got from that one year, it's actually very small, ~$200 or so. Also, what do you mean by both are after tax money? The after tax money was when I funded the traditional IRA. thanks again!

This is what I did right?
http://blog.adamnash.com/2006/11/04/roth-ira-loophole-everyone-can-qualify-in-2010/

"You can start funding your regular, non-deductible IRAs this year, in 2006. You can continue to do this in 2007, 2008 & 2009. Then in 2010, you can convert all of these funds over to the Roth IRA. And since the non-deductible IRA is funded with after-tax money, you will only have to pay a small amount of tax on the conversion based on the gains from 2006 to 2010."

 

[EvilYoda]

As an independent contract, you paid the extra share of the FICA (7%)

Now if you ignored the benefits of the Schedule C; you deserved to get raped. The simple H&R Block offices are not smart enough to maximize the Schedule C for you. They punch in numbers that you provided them, had out the lubes and go from there.

So what exactly are the benefits of the Schedule C? Maybe I can save myself from some anus-enlarging next year...that'd be nice.

 

[EagleKeeper]

But what about the gains I got from that one year, it's actually very small, ~$200 or so. Also, what do you mean by both are after tax money? The after tax money was when I funded the traditional IRA. thanks again!

This is what I did right?
http://blog.adamnash.com/2006/11/04/roth-ira-loophole-everyone-can-qualify-in-2010/

"You can start funding your regular, non-deductible IRAs this year, in 2006. You can continue to do this in 2007, 2008 & 2009. Then in 2010, you can convert all of these funds over to the Roth IRA. And since the non-deductible IRA is funded with after-tax money, you will only have to pay a small amount of tax on the conversion based on the gains from 2006 to 2010."

Let TT handle the gain as if that is what you are funding the Roth with.
Because the traditional IRA was funded with after tax $$ the intention would be that only the gains would be taxed. The Roth is funded with after tax money, so only the gain is taxed there. The color of both fundings is the same from the IRS perspective. So only the aftertax IRA gains are taxed.

This is what TT is trying to do, take what you are moving to the Roth and treat it all as gains. So just play it's game,give it the gains and keep on rolling.

 

[EagleKeeper]

So what exactly are the benefits of the Schedule C? Maybe I can save myself from some anus-enlarging next year...that'd be nice.

I could be mean and tell you to research through the tax thread here and those linked for previous years. And for you to fully reap the benefit of the Schedule C, that is what you need to do. ()

However, I will whet your appetite.

The Schedule C allows for you to write off any related expenses as related to yourself employment income which is also listed on the Schedule C instead of the misc income line.

And the word RELATED can be very liberally interpreted.

In one way, anything that you spend that is remotely related to obtaining the income can be expensed off. Phone, vehicle, internet, home utilities, work space, etc This reduces the amount of taxable income and there actually is the possibility of having a valid net loss which can be used against normal wage/stock gains/interest.

Now if the ability to reduce your taxable income from the self-employment and as such, reduce your taxes to be paid excites you, start reviewing the threads for ideas. One can always file an amended return for the 2010 year using the 1040X to recover excess tax paid.

Had you used Tax S/W, the KY would have been sensed and the Schedule C options presented.

Look closely at the paperwork Block gave you. If there is no Schedule C; I would march back to their office and DEMAND a refund - they did not do their job if you told them about self employment income. If you have a Schedule C and they did not ask you anything about the 20+ line items that would have reduced your taxable profit, again raise hell. They did not do their job properly. Any decent tax preparer should have asked you about each line item. Block probably just took what paperwork you provided and ran with it. Especially if you used the Kiosk type places.

 

[ZOOYUKA]

The weird thing is that it is turbotax, not me, that is importing that $5k into the 2441 from my W2.

I will look into it i guess, thanks for the help

It is probably adding it and netting it out. It needs to be on the form to represent your total expenses.

 

[manlymatt83]

OK, I completely forgot about 1099 work I did in 2009 but wasn't paid until early 2010. Therefore, I actually owe the IRS about another $20k that I didn't pay in. I filed my taxes today showing I owed that (and I only had like 10% deductions unfortunately). Apparently, if I can pay that $20k in 120 days, there's no issue?

 

[endervalentine]

Just want to come back in and say thanks for doing this EagleKeeper!! Very much appreciated!

 

[bunker]

Next year tax question. Long story short, I received a 401k disbursement from an old job to roll over. The check is payable to my current 401k FBO: Me

The grand total of the check is $0.01. Yes, one penny.

The stamp will cost me more. I will not hold anyone legally responsible for their advice, can I just ignore the damn thing?

 

[Xcobra]

Next year tax question. Long story short, I received a 401k disbursement from an old job to roll over. The check is payable to my current 401k FBO: Me

The grand total of the check is $0.01. Yes, one penny.

The stamp will cost me more. I will not hold anyone legally responsible for their advice, can I just ignore the damn thing?

lol are you serious? forget it...

 

[EagleKeeper]

You can not cash the check.

If bored call the issuer and ask why they did something like sending it to you instead of the address of the new 401K.

Then call Uncle and ask what you should do to prevent a penalty.

 

[JEDI]

if i opened a margin line for my IRA, is the interest tax deductible?

ie:
i have $100k in my IRA. with margin, i now have an additional $100k at 10% interest. i put it all in stock XYZ.

Is the margin interest tax deductible? WHY?

 

[s1175290]

if i opened a margin line for my IRA, is the interest tax deductible?

ie:
i have $100k in my IRA. with margin, i now have an additional $100k at 10% interest. i put it all in stock XYZ.

Is the margin interest tax deductible? WHY?

Is this some kind of homework question? It sounds like it to me, but it's Saturday night and I have a few minutes.

It is very rare (it might even be prohibited by law) to see an IRA account that has a margin line. The biggest issue is that if you blow the account out and receive a margin call, what do you do if you have already contributed the maximum to your IRA for the year? I think this is specifically why you don't see margin capabilities on an IRA account.

If it is possible to buy stock on margin in an IRA account, the margin interest should not be tax deductible (assuming it is a traditional IRA). It is the withdrawal of the money from a traditional IRA that is the taxable event. The activity in the account (purchases, sales, gains, losses, etc.) would be non-taxable events. It would stand to reason that this would include margin interest.

On top of all of that, you have investment income limitations involved in the deduction of investment interest. If all of the investment income occurs in an IRA account, the margin interest would not be deductible. You would need to have other regular taxable investment income in order to deduct the margin interest. This is the least of the issues as I believe the first two issues above are show stoppers.