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

[Beev]

So, I filed my taxes through hrblock.com like I usually do and am getting $397 back :|

My girlfriend makes less than I do, but had roughly the same percentage of federal withheld as me, yet is getting $1200 back. Why would this happen? I'm pretty ignorant about tax stuff and I don't understand why there is such a huge difference.

 

[EagleKeeper]

So, I filed my taxes through hrblock.com like I usually do and am getting $397 back :|

My girlfriend makes less than I do, but had roughly the same percentage of federal withheld as me, yet is getting $1200 back. Why would this happen? I'm pretty ignorant about tax stuff and I don't understand why there is such a huge difference.

Look at the line items on the form. Possible depending on your income levels, a credit is higher for her than you.

Otherwise without seeing the forms, there is no real answer. And you should be able to look at the forms for answers prior to asking here!

 

[Kroze]

You do not need to report who is controlling the IRA.

Transferring funds between them does not need to be reported UNLESS you take actual possession of the funds in between.

The reason I asked is because I had a problem with the IRS before.

I bought some stocks ($15k worth) and didn't sell it till the following year, when I sold the stocks and reported on my income tax return they tried to tell me I'm getting audited & owed them $10k!!! in taxes/penalty/fees (or something ridiculous to that amount)

Even though my capital gains were only next to nothing ($1k) they tried to say all of my money in the stocks were gains (the original $15k & $1k)

I contacted a CPA and got that issue resolved by filing an amended return which have the date, purchase price, & amount of the stocks. It clearly shows that i only gained like $1k. They (IRS) then sent me a letter to disregard, they're dropping the case against me.

As you can see, I don't want to run into that situation again with them. I don't want years down the road, they tried to say that they didn't have proof of when i purchased these mutual funds in the IRA & ROTH IRA with USAA and attempt to tax me to death.

 

[MikeyIs4Dcats]

You should declare it. Most ads that offer $$ to open an account state that the amount will be reported as interest to the gov.

this isn't any kind of bonus, it's just the interest on the deposit, like a CD. But the terming it of dividend has me stumped.

 

[SunnyD]

Thanks ATOT armchair CPAs! Taxes have been filed.

I'm actually looking forward to next year when I have a whole crapload more A) Mortgage interest, B) Student loan interest, C) Less income thanks for larger 401k contributions, D) Medical expenses to deduct.

 

[EagleKeeper]

The reason I asked is because I had a problem with the IRS before.

I bought some stocks ($15k worth) and didn't sell it till the following year, when I sold the stocks and reported on my income tax return they tried to tell me I'm getting audited & owed them $10k!!! in taxes/penalty/fees (or something ridiculous to that amount)

Even though my capital gains were only next to nothing ($1k) they tried to say all of my money in the stocks were gains (the original $15k & $1k)

I contacted a CPA and got that issue resolved by filing an amended return which have the date, purchase price, & amount of the stocks. It clearly shows that i only gained like $1k. They (IRS) then sent me a letter to disregard, they're dropping the case against me.

As you can see, I don't want to run into that situation again with them. I don't want years down the road, they tried to say that they didn't have proof of when i purchased these mutual funds in the IRA & ROTH IRA with USAA and attempt to tax me to death.

You do not need to report the transfer of trustee to the IRS. You just need to retain paperwork that shows you did not come into control of the funds personally when you transfered the trustee

 

[EagleKeeper]

Thanks ATOT armchair CPAs! Taxes have been filed.

I'm actually looking forward to next year when I have a whole crapload more A) Mortgage interest, B) Student loan interest, C) Less income thanks for larger 401k contributions, D) Medical expenses to deduct.

Medical will only work when it is greater than 7.5% of your net income.

 

[Homerboy]

I was just having a discussion the other day on audits and the like... one question that came up is when/how you know you have been hit with an audit. If you submit your paperwork and then X days later you check the status (or you program auto notifies you etc) that the submission has been "Accepted" does that mean you are in the clear and free? or that just your submission is "in the system and has been approved for processing... not necessarily that you are in the free"

And on the same note, what are some of the major red flags they look for to trigger an audit? Do they check # of W2s/1099s etc filed versus what they expect? Is it a random draw? Is it deductions? Wild changes from previous year(s)? (I know there is no definitive answer to this question, but I assume there is a pretty good idea what magic formula the IRS uses).

Edit: Guess I shoulda Googled first:
http://www.thewisdomjournal.com/Blog/what-trigger-an-irs-tax-audit/

Seems the big killer is W2s and 1099s etc. I guess I never thought about the fact that the govt is getting the same numbers from the same sources as you? If you got two W2s and 3 1099s, all totaling $100K, and you only report 3 of them totaling $80k, they'd know right there and then hey?

 

[mwtgg]

You do not need to report who is controlling the IRA.

Transferring funds between them does not need to be reported UNLESS you take actual possession of the funds in between.

Shouldn't he receive two 1099-R's with Code G/H in box 7?

 

[jme5343]

I have a fairly simple workload this year, just one W2. I have some tiny 1099s and stuff, but nothing that matters, and I'm not itemizing.

However, I did move, so I have instructions on filling out a 3903, but I didn't keep track of any minimal expenses we had to move. Am I reading it right that I don't need to do it if I'm not asking for a reduction in moving expenses paid by the company?

 

[EagleKeeper]

Shouldn't he receive two 1099-R's with Code G/H in box 7?

Looking at the instructions, this is correct.:thumbsup:

Learn new things every year:sneaky:

 

[EagleKeeper]

I have a fairly simple workload this year, just one W2. I have some tiny 1099s and stuff, but nothing that matters, and I'm not itemizing.

However, I did move, so I have instructions on filling out a 3903, but I didn't keep track of any minimal expenses we had to move. Am I reading it right that I don't need to do it if I'm not asking for a reduction in moving expenses paid by the company?

The 3903 would then be for expenses incurred that the company did not cover.

 

[Xcobra]

So, I filed my taxes through hrblock.com like I usually do and am getting $397 back :|

My girlfriend makes less than I do, but had roughly the same percentage of federal withheld as me, yet is getting $1200 back. Why would this happen? I'm pretty ignorant about tax stuff and I don't understand why there is such a huge difference.

My guess is that since she makes less than you, she ended up being overwithheld. Getting $397 is not bad. It just means that your withholding is more accurate than hers.

 

[pcguru78]

I just purchased a home last year. Two of my friends moved in and we split all of the bills including the mortgage. Do I have to claim any of that as income?

Thanks.

 

[EagleKeeper]

I just purchased a home last year. Two of my friends moved in and we split all of the bills including the mortgage. Do I have to claim any of that as income?

Thanks.

If you are formally renting to them, yes; You can also depreciate 2/3 of the overall costs of the house, including upkeep, mortgage, insurance, utilities, cable, internet, etc.

If otherwords, everything except food can get written off.
You have to declare on the Schedule e the money given to you.

And when you sell the house, the depreciation is supposed to be recaptured.

Or if there is no rental agreement; then nothing needs to be reported.

If you purchased the home and closed by the middle of the year; you also may qualify for the 8K tax credit.

 

[pcguru78]

If you are formally renting to them, yes; You can also depreciate 2/3 of the overall costs of the house, including upkeep, mortgage, insurance, utilities, cable, internet, etc.

If otherwords, everything except food can get written off.
You have to declare on the Schedule e the money given to you.

And when you sell the house, the depreciation is supposed to be recaptured.

Or if there is no rental agreement; then nothing needs to be reported.

If you purchased the home and closed by the middle of the year; you also may qualify for the 8K tax credit.

There is nothing in writing, it was just a hey, if you want to live here don't tear shit up and we split all the bills.

Unfortunately, I didn't have a signed sales contract in time to qualify for the credit.

 

[EagleKeeper]

There is nothing in writing, it was just a hey, if you want to live here don't tear shit up and we split all the bills.

Unfortunately, I didn't have a signed sales contract in time to qualify for the credit.

It becomes your call.

Experiment with the Schedule E using tax S/W and decide

 

[Cat]

Thanks again for doing this. I come back here every year to read up on any gotchas. This time I have a question.

On my W2 I have voluntary adjustments for AFLAC, pretax health and dental, and an HSA. These are subtracted from my regular wages and reflect correctly in Boxes 1, 3, and 5.

The HSA amount is also included in Box 12, but the other adjustments are not. Do I need to enter these adjustments on my 1040 somewhere? I'm using H&R Block and can't tell, I also looked at the physical form.

How does the IRS know about these adjustments?

 

[EagleKeeper]

Thanks again for doing this. I come back here every year to read up on any gotchas. This time I have a question.

On my W2 I have voluntary adjustments for AFLAC, pretax health and dental, and an HSA. These are subtracted from my regular wages and reflect correctly in Boxes 1, 3, and 5.

The HSA amount is also included in Box 12, but the other adjustments are not. Do I need to enter these adjustments on my 1040 somewhere? I'm using H&R Block and can't tell, I also looked at the physical form.

How does the IRS know about these adjustments?

TAx S/W should handle anything thrown at it from the W2 and 1099 forms.

The IRS gets a copy of your W2 - everything that you know; they have the ability to know & cross reference/double check

 

[Cat]

TAx S/W should handle anything thrown at it from the W2 and 1099 forms.

The IRS gets a copy of your W2 - everything that you know; they have the ability to know & cross reference/double check

Thank you. Why is the HSA deduction in Box 12 if it's already listed as a voluntary deduction?

 

[dullard]

Where do I report this income: 1099-MISC (box 2 royalties)?

It was from a patent sale royalty from a university. My first thought was 1040 Schedule E. That would be subject to the full income tax rate (due to federal and state AMT it is about 43%, ouch). However, I found this IRS Technical Advice Memorandum which states that patent royalties from a university are long-term capital gains. So, do I report the 1099-MISC on schedule D? Will the IRS expect it on Schedule E instead and complain?

 

[Xcobra]

Thank you. Why is the HSA deduction in Box 12 if it's already listed as a voluntary deduction?

I got the same issue as well. My guess is that the IRS needs to know how much you contributed and whether you went over your annually allowed limit. And for me, it makes the adjustment for the state (CA) since it doesn't recognize the HSA laws. Just my thoughts.

 

[sactoking]

If you are formally renting to them, yes; You can also depreciate 2/3 of the overall costs of the house, including upkeep, mortgage, insurance, utilities, cable, internet, etc.

If otherwords, everything except food can get written off.
You have to declare on the Schedule e the money given to you.

And when you sell the house, the depreciation is supposed to be recaptured.

Or if there is no rental agreement; then nothing needs to be reported.

If you purchased the home and closed by the middle of the year; you also may qualify for the 8K tax credit.

Just so you know pcguru, this is a big item to consider. Many people who depreciate their houses for a "home business" don't realize that when they sell any gain realized is not subject to the primary residence exemption in the proportion to which the asset was depreciated.

In other words, if you depreciate 2/3 of your house because you are renting it when you go to sell the house 2/3 of any gain is taxable up to the amount depreciated.

Buy a $300,000 house and depreciate $200,000. Sell the house for $500,000 for a gain of $200,000. 2/3 of that $200,000 gain ($133,333) is taxable as recapture of depreciation. Sell the house for $700,000 for a gain of $400,000 and 2/3 of that gain is taxable, up to $200,000.

It's a situation people often don't think through enough. A financial advisor/accountant local to you would be able to evaluate your specific scenario and lay out whether depreciation would help you or not.

 

[pcguru78]

Thank you for your replies.

I don't think I'm going to claim it, I just wanted to make sure I won't get bent over if I ever get audited.

 

[Turin39789]

If her income is under the table then I wold not expect her to have any paper trail.

No taxes paid would mean that any filing would require her to pay SS at a minimum.

Without EARNED income, she can not qualify for the EIC.

Best thing is to collect all the numbers, run it quickly through a tax S/W package and see what happens.

I'll try to get her to come up with an accurate figure. This is so far away from how my tax returns look I suppose my fear is that if her only job didn't take taxes out originally, and she doesn't have a 1099 it would seem like a huge audit flag, and as you suggested she likely doesn't have the paperwork to back it up.