ATOT's Second Annual Tax Time Thread!

[slycat]

Originally posted by: EagleKeeper

THanks for the explanation. So i guess i'm good then...i mean i sold the house, no real money made. Don't have to pay taxes on it then...coz some family folks were saying u gotta be careful when selling property since the govt takes like 40%?...or something like that...cannot remember whats it called.

btw.. whats this mean:
Tip - W2s are only required to be postmarked by January 31st.

 

[EagleKeeper]

Originally posted by: slycat

Originally posted by: EagleKeeper

THanks for the explanation. So i guess i'm good then...i mean i sold the house, no real money made. Don't have to pay taxes on it then...coz some family folks were saying u gotta be careful when selling property since the govt takes like 40%?...or something like that...cannot remember whats it called.

btw.. whats this mean:
Tip - W2s are only required to be postmarked by January 31st.

You do not have to worry about taxes, but you should still show the purchase and sale on the proper forms.

It used to be that a house sale was subject to captial short term gains depending on how long you owned it.
Since you have a loss, it does not apply.


W2s are required to be mailed to you by the end of January. You do not have to receive them by then. There is also no penalty for a company not mailing them to you.

/edit - Supposedly a company can be fined for not mailing on time. I would think that the IRS has bigger fish to fry than going after a company unless it becomes a habit

 

[Rogue]

We adopted a 5-year old last year ('04), with the adoption being finalized December 10, 2004. My wife's employer will re-imburse up to $3,000.00 in legal fees and associated expenses, however, is it better for us to claim them as a tax deduction or for her to claim through her employer?

Also, because we don't have any children of our own (yet), are we eligible for a child tax credit now that she is legally adopted? Our combined income this year will likely meet or exceed $90k. She has lived with us since the first week of June, 2004.

Are the goods we purchased to take her in also deductible (ie.-bed, clothing, linens, etc.)?

I feel bad asking, like I'm trying to make money on the kid, but so many people have told us so many things that I don't know what to believe at this point. Thank you for any assistance you can provide. Please let me know if you require any more information also and I will provide it.

EDIT: One final question. Is my cable modem bill tax deductible if I am an IT worker by trade? I've heard a lot on that too, but want to know the truth.

 

[Nuriko]

Rogue - check out the article at http://www.fool.com/taxes/2004/taxes041217.htm for a run down about the computer and expenses. Basically, it has to be a condition of your employment and used for the convenience of your employer (not yourself). If those requirements are fulfilled, then you can deduct the portion of the cable modem bill that you use for business (if you use it 50% for biz and 50% for pleasure, you could deduct 50% of it), and that is treated as a misc itemized deduction subject to the 2% of AGI limitation.

*edit*
And pub 968 at http://www.irs.gov/publications/p968/index.html has a listing of tax benefits for adoptions

 

[tnitsuj]

I have filed married filing together for the last couple of years, but due ot an impending marital status change I would like to file married filing seperately this year.

Are thier any downsides to doing this? My income for this year alone was around $130k. With the wife we are at around $180k.

 

[iamwiz82]

Originally posted by: Rogue
EDIT: One final question. Is my cable modem bill tax deductible if I am an IT worker by trade? I've heard a lot on that too, but want to know the truth.

I work from home occassionally, as well, and would like to know.

 

[Hayabusa Rider]

My situation:

We moved to NY from MA, bought a home for the first time (after all these years of renting).

I received a relocation allowance, so I don't think I can deduct expenses for that.

I usually itemize for charitable deductions, so I have been using computer programs for taxes. Is the software sufficient for my purposes and in my situation does it make sense to go to a professional, or will the likely difference not make it worth it?

 

[EagleKeeper]

Originally posted by: Rogue
We adopted a 5-year old last year ('04), with the adoption being finalized December 10, 2004. My wife's employer will re-imburse up to $3,000.00 in legal fees and associated expenses, however, is it better for us to claim them as a tax deduction or for her to claim through her employer?

Also, because we don't have any children of our own (yet), are we eligible for a child tax credit now that she is legally adopted? Our combined income this year will likely meet or exceed $90k. She has lived with us since the first week of June, 2004.

Are the goods we purchased to take her in also deductible (ie.-bed, clothing, linens, etc.)?

I feel bad asking, like I'm trying to make money on the kid, but so many people have told us so many things that I don't know what to believe at this point. Thank you for any assistance you can provide. Please let me know if you require any more information also and I will provide it.

Take the re-embursement. It is tax free cash. Then apply for the rest of expenses.
The total can not exceed $10,390. This allows you to claim 7.390 of expenses after the employer helps.

Adoption Credit - IRS FAQ

You are eligible for the all dependant credits as if the child was your biological. There is considered no difference between adopted and biological children with respect to the tax code (other than some extra help for the adoption expenses)

Goods for the child are not deductible, only the child itself.

For both the credit or the exclusion, qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child.

 

[EagleKeeper]

Originally posted by: Rogue Is my cable modem bill tax deductible if I am an IT worker by trade? I've heard a lot on that too, but want to know the truth.

1) If your employer requires you to work from home, then it automatically is.
2) If you use the cable modem with respect to improving/maintaining your knowledge (similar to continuing education) it is.
3) If you use it for surfing and neffing, no.

For options #1 & 2, the use of the modem should be pro-rated with respect to #3.

The cost of the actual modem, modem access and/or surcharges to your cable/DSL phone bill should then be prorated according to usage and entered in the misc item cat on the Form 2106/schedule A.

As noted in other posts in this thread it is not as good as it looks.
The expenses exceeding 2% of Gross income has to be met along with the requirement of itemization using Schedule A.

 

[EagleKeeper]

Originally posted by: tnitsuj
I have filed married filing together for the last couple of years, but due ot an impending marital status change I would like to file married filing seperately this year.

Are thier any downsides to doing this? My income for this year alone was around $130k. With the wife we are at around $180k.

Easiest thing to do is to setup different scenarios using tax S/W. It is a pain to do manually.

Create a master file as joint filing.

Then copy the file twice.

On one copy, adjust the filing status and remove yourself from the equation, along with all income and expenses possible.
Those that can not be removed should be adjusted porportionality either by income or 50/50.

Do the same on the other copy, exceptt remove your spouse.

Look at the final numbers and decide.

Note that some deductions allowed when filing jointly will not be allowed when filing seperately.

 

[EagleKeeper]

Originally posted by: WinstonSmith
My situation:

We moved to NY from MA, bought a home for the first time (after all these years of renting).

I received a relocation allowance, so I don't think I can deduct expenses for that.

I usually itemize for charitable deductions, so I have been using computer programs for taxes. Is the software sufficient for my purposes and in my situation does it make sense to go to a professional, or will the likely difference not make it worth it?

The relocation allowance may show up as taxable. check your W2.
If so, then you can deduct the expenses. There is a form for moving expenses (3903) that are deductable.

Any commercial tax S/W will take care of what you desire. All you have to do w/ respect to the house costs is to collect the closing statement and year end statements relating to taxes & interest paid.

There are three lines on the Schedule A that will need this info.

Property Taxes - Lump in gov fess that were also paid at closing
Interest paid
Points paid

After that there will be no difference.

 

[Sam334]

My question:

I just got a new job that does not deduct any taxes whatsoever from my paycheck. To be safe, what percentage of the check should I put in savings for next year? I'm also a student, does that come into play at all (maybe they take less taxes from students)? I've been told to put aside around 27% of each check for taxes. I live in NYC, so they have some city and state taxes as well. Any suggestions?

Thanks

Stephen

 

[EagleKeeper]

Originally posted by: Sam334
My question:

I just got a new job that does not deduct any taxes whatsoever from my paycheck. To be safe, what percentage of the check should I put in savings for next year? I'm also a student, does that come into play at all (maybe they take less taxes from students)? I've been told to put aside around 27% of each check for taxes. I live in NYC, so they have some city and state taxes as well. Any suggestions?

Thanks

Stephen

You need to find out exactly what is being withheld.

If nothing, then you will be responsible for everything - your are being treated as self-employed.

It is best is to look closely at your paycheck stub.

If nothing is being withheld, (you are getting paid a flat rate for hours worked), then get a calculator and figure out what your yearly income is.

Get Tax S/W for Fed and State(from any year will give you a close enough idea), and plug in the numbers.
Treat the income as a 1099.
Do not look for any expenses at this point against the income.

Enter your personal situation and look at what the Federal tax due would be.

25% of that is due to the IRS each quarter when you are self-employed.

Run the state numbers and figure out what that would be. - More than likely that same payment schedule applies.

Then determine how much is need to be saved in an untouchable account every paycheck to meet the 25% quarterly requirement. for both the state and fed taxes owed.

 

[richardycc]

what is head of household? can someone who is married with no kid, but file seperately claim to be the head of household?

 

[EagleKeeper]

Originally posted by: richardycc
what is head of household? can someone who is married with no kid, but file seperately claim to be the head of household?

Head of Household Status - IRS FAQ

Head of Household
You may be able to file as head of household if you meet all the following requirements.

You are unmarried or ?considered unmarried? on the last day of the year.

You paid more than half the cost of keeping up a home for the year.

A ?qualifying person? lived with you in the home for more than half the year (except for temporary absences, such as school). However, your dependent parent does not have to live with you. See Special rule for parent, later, under Qualifying Person. A foster child must live with you all year. Also, see Table 4, later.

 

[Sam334]

Originally posted by: EagleKeeper

You need to find out exactly what is being withheld.

If nothing, then you will be responsible for everything - your are being treated as self-employed.

It is best is to look closely at your paycheck stub.

If nothing is being withheld, (you are getting paid a flat rate for hours worked), then get a calculator and figure out what your yearly income is.

Get Tax S/W for Fed and State(from any year will give you a close enough idea), and plug in the numbers.
Treat the income as a 1099.
Do not look for any expenses at this point against the income.

Enter your personal situation and look at what the Federal tax due would be.

25% of that is due to the IRS each quarter when you are self-employed.

Run the state numbers and figure out what that would be. - More than likely that same payment schedule applies.

Then determine how much is need to be saved in an untouchable account every paycheck to meet the 25% quarterly requirement. for both the state and fed taxes owed.

Firstly, thanks for the quick reponse, it's greatly appreciated.

Ok, nothing is being withheld whatsoever. The problem with finding a yearly income is that my work hours vary greatly from week to week. During the time between semesters, I've been working 40 hours a week, but when school starts, it will most likely be around 15-20 per week. But then when summer comes, I'll be working almost full time. If I say I work 15 hours a week, my yearly income will be $11,700.

I was advised by someone else to put aside about 25-27% of my entire paycheck each month to be on the safe side. Does that sound like too much?

Since this is my first time filing taxes, I'm not sure what you mean by "Tax S/W for red and state." Where would I get said information?

Thanks,

Stephen

 

[EagleKeeper]

Pick up a copy of TurboTax or TaxCut.

Make sure that you get both the Federal and State CDs.
Plenty will become available over the next month or two as people do their taxes. You should be able to get them for 10-15 for this year, possible free + shipping for last year.

Run the numbers, using the worst case scenario; ie accurate estimate the hours that you will be working over the year and figure out what the total income would be.

30% is a decent guess, however, spending 10 minutes will provide you a more accurate figure.
When filing quarterly, accuracy is very cost effective.

The final payment for the end of the year will probably be less, because you will have slightly overpaid.
The final payment can start to take into account expenses incurred which reduce the total income to be taxed.

I usually make the 4th quarter payment at half the others.

Then when filing for the year end, I get an accurate expense adjustment.

 

[CPA]

Originally posted by: Sam334

Originally posted by: EagleKeeper

You need to find out exactly what is being withheld.

If nothing, then you will be responsible for everything - your are being treated as self-employed.

It is best is to look closely at your paycheck stub.

If nothing is being withheld, (you are getting paid a flat rate for hours worked), then get a calculator and figure out what your yearly income is.

Get Tax S/W for Fed and State(from any year will give you a close enough idea), and plug in the numbers.
Treat the income as a 1099.
Do not look for any expenses at this point against the income.

Enter your personal situation and look at what the Federal tax due would be.

25% of that is due to the IRS each quarter when you are self-employed.

Run the state numbers and figure out what that would be. - More than likely that same payment schedule applies.

Then determine how much is need to be saved in an untouchable account every paycheck to meet the 25% quarterly requirement. for both the state and fed taxes owed.

Firstly, thanks for the quick reponse, it's greatly appreciated.

Ok, nothing is being withheld whatsoever. The problem with finding a yearly income is that my work hours vary greatly from week to week. During the time between semesters, I've been working 40 hours a week, but when school starts, it will most likely be around 15-20 per week. But then when summer comes, I'll be working almost full time. If I say I work 15 hours a week, my yearly income will be $11,700.

I was advised by someone else to put aside about 25-27% of my entire paycheck each month to be on the safe side. Does that sound like too much?

Since this is my first time filing taxes, I'm not sure what you mean by "Tax S/W for red and state." Where would I get said information?

Thanks,

Stephen

Sounds like you are being treated as an independent contractor. So you will file a Schedule C with your 1040. Basically you are treating your income as if you are a business owner. That said, you will be allowed to deduct expenses incurred related to earning this income. Expenses can come from a variety of places, including auto expense, home-office deduction, any job related expenditures you made but weren't reimbursed for, etc. Keep tab of all of these as they will reduce your taxable income at year end.

Also, not only should you set aside 20-25%, but you will need to send it in on a quarterly basis to the IRS.

 

[slycat]

Originally posted by: EagleKeeper

Originally posted by: Rogue Is my cable modem bill tax deductible if I am an IT worker by trade? I've heard a lot on that too, but want to know the truth.

1) If your employer requires you to work from home, then it automatically is.
2) If you use the cable modem with respect to improving/maintaining your knowledge (similar to continuing education) it is.
3) If you use it for surfing and neffing, no.

For options #1 & 2, the use of the modem should be pro-rated with respect to #3.

The cost of the actual modem, modem access and/or surcharges to your cable/DSL phone bill should then be prorated according to usage and entered in the misc item cat on the Form 2106/schedule A.

hmm...i am also an IT worker and i also do work from home a lot..in fact i'm required to since a lot of it is also late nights. Therefore i need a broadband connection and also a static IP. $50 a month for 12months. Is that deductable? I don't care about the computer/perpherals...just want the dsl fees. How will they ask you to prove that its a condition of employment?..or will they?

 

[CPA]

Originally posted by: slycat

Originally posted by: EagleKeeper

Originally posted by: Rogue Is my cable modem bill tax deductible if I am an IT worker by trade? I've heard a lot on that too, but want to know the truth.

1) If your employer requires you to work from home, then it automatically is.
2) If you use the cable modem with respect to improving/maintaining your knowledge (similar to continuing education) it is.
3) If you use it for surfing and neffing, no.

For options #1 & 2, the use of the modem should be pro-rated with respect to #3.

The cost of the actual modem, modem access and/or surcharges to your cable/DSL phone bill should then be prorated according to usage and entered in the misc item cat on the Form 2106/schedule A.

hmm...i am also an IT worker and i also do work from home a lot..in fact i'm required to since a lot of it is also late nights. Therefore i need a broadband connection and also a static IP. $50 a month for 12months. Is that deductable?

technically yes, but you probably won't have enough to get over the 2% of AGI floor. For instance, if your AGI (Adjusted Gross Income) = $40K, the floor on allowed job expenses would be $800. In your example, you would only have $600 in expense, so none of it is allowed as an itemized deduction.

To continue, if your expenses were $1K, you would only be allowed $200, but then you would still have to have enough itemized deductions to offset your standard deduction.

 

[slycat]

hmm...i am also an IT worker and i also do work from home a lot..in fact i'm required to since a lot of it is also late nights. Therefore i need a broadband connection and also a static IP. $50 a month for 12months. Is that deductable?

technically yes, but you probably won't have enough to get over the 2% of AGI floor. For instance, if your AGI (Adjusted Gross Income) = $40K, the floor on allowed job expenses would be $800. In your example, you would only have $600 in expense, so none of it is allowed as an itemized deduction.

To continue, if your expenses were $1K, you would only be allowed $200, but then you would still have to have enough itemized deductions to offset your standard deduction.

aww..crap..no go then.

 

[CPA]

Originally posted by: slycat

hmm...i am also an IT worker and i also do work from home a lot..in fact i'm required to since a lot of it is also late nights. Therefore i need a broadband connection and also a static IP. $50 a month for 12months. Is that deductable?

technically yes, but you probably won't have enough to get over the 2% of AGI floor. For instance, if your AGI (Adjusted Gross Income) = $40K, the floor on allowed job expenses would be $800. In your example, you would only have $600 in expense, so none of it is allowed as an itemized deduction.

To continue, if your expenses were $1K, you would only be allowed $200, but then you would still have to have enough itemized deductions to offset your standard deduction.

aww..crap..no go then.

This is why it's important to set the rules with your company before you start working from home. Have them pay for part of your expenses.

 

[orion7144]

2 quick questions...

1. On the sales tax deduction, Since we were not aware that we would have to keep reciepts and they cam out with the tables, I see you can add the tax on an automobile purchase but, can you add other high ticket purchases on as well. I have all of my reciepts for the new fridge, tv, computer parts, car, etc.

2. I eat luch out 2-3 times per week with our equipment vendors. Since we are talking "shop" can I write that off as a un-reimbures buisness expense?

 

[CPA]

Originally posted by: orion7144
2 quick questions...

1. On the sales tax deduction, Since we were not aware that we would have to keep reciepts and they cam out with the tables, I see you can add the tax on an automobile purchase but, can you add other high ticket purchases on as well. I have all of my reciepts for the new fridge, tv, computer parts, car, etc.

2. I eat luch out 2-3 times per week with our equipment vendors. Since we are talking "shop" can I write that off as a un-reimbures buisness expense?

1. Basically, vehicles, boats, home (manufactured, prefabbed) and home building materials can be included.

2. See my response to Slycat above.

 

[Carrot44]

Hello all!
Can I on my 2005 W4 change my deductions from 2 to 3 even though I am single and it still be legal?
Reason I ask is I am having arguments with the VA (disabled vet) who cant speil. And they are taking all my
taxes for drugs that should be free for me. I would just like to keep some for me till this is settled.

Ken