ATOT's Second Annual Tax Time Thread!

[kmac1914]

Originally posted by: EagleKeeper

Originally posted by: kmac1914
This past year, I was hired(maybe contracted is a better word) to create a website for an organization that i am a part of. I bought a laptop primarily for this purpose; would this be deductible?

If you were paid for the work:

a) 1099 - The laptop coiuld be written off completely via Schedule C and possibly Section 179.
b) W2 - The laptop would have to be expensed off using the Form 2106/Schedule A.

See above posts regarding the headaches/benifits of the 2106 deductions.

Okay, I've been reading through the thread, but im still a little fuzzy on the 2106 thing. In addition to being paid to make the website, i also worked over the summer and made about 4k, so I'll be getting a W2 back from that. I usually file a 1040EZ since the summer job is my only real income (still in college). I saw something about it having to be above 2% of my AGI for it to be deductible...so, if the laptop was $700, would that qualify? And am i going to have to use the standard 1040 if i do this, even though it's the only real deduction i'd be making and i don't have anything else to itemize?

 

[CPA]

Originally posted by: kmac1914

Originally posted by: EagleKeeper

Originally posted by: kmac1914
This past year, I was hired(maybe contracted is a better word) to create a website for an organization that i am a part of. I bought a laptop primarily for this purpose; would this be deductible?

If you were paid for the work:

a) 1099 - The laptop coiuld be written off completely via Schedule C and possibly Section 179.
b) W2 - The laptop would have to be expensed off using the Form 2106/Schedule A.

See above posts regarding the headaches/benifits of the 2106 deductions.

Okay, I've been reading through the thread, but im still a little fuzzy on the 2106 thing. In addition to being paid to make the website, i also worked over the summer and made about 4k, so I'll be getting a W2 back from that. I usually file a 1040EZ since the summer job is my only real income (still in college). I saw something about it having to be above 2% of my AGI for it to be deductible...so, if the laptop was $700, would that qualify? And am i going to have to use the standard 1040 if i do this, even though it's the only real deduction i'd be making and i don't have anything else to itemize?

Didn't see the response, but are you a contractor (will receive a 1099) or an employee (will receive a W2) of the organization?

 

[CPA]

Originally posted by: pmoa
i am going to make 72,000 this year as a contractor in MARYLAND. How do I compute my AGI?

You will fill out a Schedule C - Profit/Loss from Business.

 

[EagleKeeper]

Originally posted by: CPA

Originally posted by: pmoa
i am going to make 72,000 this year as a contractor in MARYLAND. How do I compute my AGI?

You will fill out a Schedule C - Profit/Loss from Business.

Congrats:

Make sure that you track down every expense that is remotely possibly related to your line of work.

Make sure that you get a 1099. Some contract shops will say you are a contractor but treat you as a W2.

 

[EagleKeeper]

Originally posted by: kmac1914

Originally posted by: EagleKeeper

Originally posted by: kmac1914
This past year, I was hired(maybe contracted is a better word) to create a website for an organization that i am a part of. I bought a laptop primarily for this purpose; would this be deductible?

If you were paid for the work:

a) 1099 - The laptop coiuld be written off completely via Schedule C and possibly Section 179.
b) W2 - The laptop would have to be expensed off using the Form 2106/Schedule A.

See above posts regarding the headaches/benifits of the 2106 deductions.

Okay, I've been reading through the thread, but im still a little fuzzy on the 2106 thing. In addition to being paid to make the website, i also worked over the summer and made about 4k, so I'll be getting a W2 back from that. I usually file a 1040EZ since the summer job is my only real income (still in college). I saw something about it having to be above 2% of my AGI for it to be deductible...so, if the laptop was $700, would that qualify? And am i going to have to use the standard 1040 if i do this, even though it's the only real deduction i'd be making and i don't have anything else to itemize?

The 2% of AGI becomes part of the requirements for the 2106/Schedule A.
That means you need about $3500 of itemized deductions on the schedule A for the laptop expense to have any effect.

If you get a 1099, then you can fiel the Schedule C and expense the laptop directly against the 1099 income.

 

[phatj]

Question regarding eBay

I've sold several high-priced items on eBay. My profits were small relative to the price I paid for the items. I also paid thousands of dollars in sales tax for these items. How do I go about reporting the sales/profits/sales tax I paid for the laptops? I read somewhere that reporting eBay earnings/sales tax crap can be to one's advantage, but it did not go into detail. Help?

 

[EagleKeeper]

Originally posted by: phatj
Question regarding eBay

I've sold several high-priced items on eBay. My profits were small relative to the price I paid for the items. I also paid thousands of dollars in sales tax for these items. How do I go about reporting the sales/profits/sales tax I paid for the laptops? I read somewhere that reporting eBay earnings/sales tax crap can be to one's advantage, but it did not go into detail. Help?

Schedule C.

Simple itemization of cost of materials vs expenses to sell materials.

Difference is the taxableprofit.

Example Only:

$1200 laptop (new)
5% sales tax = $60 paid by you when buying the item.

Gross cost $1260

Sold on E-Bay for $1500
E-Bay charges $100.
Shipping charges w/ Insurance $40

Net sale price $1360
Profit $100.




===========================
Sum up all your costs of materials
===========================
Sum up all your sales taxes paid
Sum up all your E-Bay fees
Sum up all your direct costs when selling/shipping the item.
Sum up all your misc expenses related to selling items.
- Internet Access/computer depreciation, storage, and anything else remotely connected


The above should sum up all expenses.
===========================
Sum up all your sales.
===========================

Viola - now you know what your profit is to be taxed.

 

[blurredvision]

EDIT: Nevermind, figured it out myself.

 

[slycat]

Originally posted by: EagleKeeper

Originally posted by: CPA

Originally posted by: pmoa
i am going to make 72,000 this year as a contractor in MARYLAND. How do I compute my AGI?

You will fill out a Schedule C - Profit/Loss from Business.

Congrats:

Make sure that you track down every expense that is remotely possibly related to your line of work.

Make sure that you get a 1099. Some contract shops will say you are a contractor but treat you as a W2.

isn't w2 better than 1099?
i always got that impression that u pay way more tax when u get 1099's..

 

[EagleKeeper]

Originally posted by: slycat

Originally posted by: EagleKeeper

Originally posted by: CPA

Originally posted by: pmoa
i am going to make 72,000 this year as a contractor in MARYLAND. How do I compute my AGI?

You will fill out a Schedule C - Profit/Loss from Business.

Congrats:

Make sure that you track down every expense that is remotely possibly related to your line of work.

Make sure that you get a 1099. Some contract shops will say you are a contractor but treat you as a W2.

isn't w2 better than 1099?
i always got that impression that u pay way more tax when u get 1099's..

With W2s, the employer foots part of the SS tax.

however, with the 1099, you can expenses many items directly against income without having to worry about certain limits. There is also a lot more room to manuver with the declarationi of expenses relating to the income.


As an example, review the post by kmac1914 regarding a laptop purchased for a job.
If the poster gets a W2, there must be a sacrifice at least 2% of his AGI before the value of the laptop comes into play. Then unless he can also use the Schedule A, he is SOL regarding the laptop as a business expense.

With a 1099, the cost of the laptop is deducted from the raw income earned. He does not need to worry about itemization using the Schedule A/2106

 

[busterTI]

Someone may find THIS usefull.

 

[CPA]

Originally posted by: busterTI
Someone may find THIS usefull.

That is pretty cool. Must of taken a long time to put together.

 

[EagleKeeper]

Originally posted by: CPA

Originally posted by: busterTI
Someone may find THIS usefull.

That is pretty cool. Must of taken a long time to put together.

Now there just needs to be away to bypass the e-file monopoly

 

[Lucky]

.

 

[KEV1N]

Last year I filed a 1040EZ. All I have this year that's different is student loan interest. Can I still file a 1040EZ or must I file a 1040A to get that student loan interest line item?

 

[Lucky]

Question about claiming a fiance as a dependent. I saw the earlier response but this is slightly different. My fiance was working as a bartender for the first 3 months of the year, and the last 2 months as a BestBbuy employee. The rest of the time I was supporting her full time as she underwent treatment for cancer. Her total income is likely slightly more than the $2900 it seems that she would have to less than for me to claim her as a dependent under the Gross Income Test on Pub. 501. Is there any way around this, like to reduce her qualifying income for the test? She is 24 and not attending school. I'm guessing no since the test is for gross and not net income, but I thought I'd ask.

Thanks for the help.

 

[EagleKeeper]

Originally posted by: KEV1N
Last year I filed a 1040EZ. All I have this year that's different is student loan interest. Can I still file a 1040EZ or must I file a 1040A to get that student loan interest line item?

Look at the EZ form. There is no line item, then you have use the 1040A.
The EZ does not allow adjustments to income. The student loan interest is an adjustment.

 

[EagleKeeper]

Originally posted by: Lucky
Question about claiming a fiance as a dependent. I saw the earlier response but this is slightly different. My fiance was working as a bartender for the first 3 months of the year, and the last 2 months as a BestBbuy employee. The rest of the time I was supporting her full time as she underwent treatment for cancer. Her total income is likely slightly more than the $2900 it seems that she would have to less than for me to claim her as a dependent under the Gross Income Test on Pub. 501. Is there any way around this, like to reduce her qualifying income for the test? She is 24 and not attending school. I'm guessing no since the test is for gross and not net income, but I thought I'd ask.

Thanks for the help.

You are correct. Gross is what counts as a dependency test.

Also, be concerned about the state laws regarding your relationship as indicated above when thinking about claiming her as an dependant.

Best thing is to tie the knot.

 

[AStar617]

No way I will be able to wade thru the whole thread! But perhaps this can be added to the OP so it won't get buried (I assume someone's already provided this):

IRS Free File Program

Participating companies have their own rules for who qualifies, and some may require you to click-thru via the IRS.gov site ONLY if you want a fee-free electronic preparation/filing. Check it out for more details.

Good luck to all!

 

[CPA]

Originally posted by: AStar617
No way I will be able to wade thru the whole thread! But perhaps this can be added to the OP so it won't get buried (I assume someone's already provided this):

IRS Free File Program

Participating companies have their own rules for who qualifies, and some may require you to click-thru via the IRS.gov site ONLY if you want a fee-free electronic preparation/filing. Check it out for more details.

Good luck to all!

Done.

 

[Rumpltzer]

Question #1:
I married a little lady in December, 2004. She's not a US citizen, she has no SSN, and she doesn't live/work in the US.

Does the IRS care? I mean, does the mere fact that I'm married gain me anything as far as tax breaks if my wife isn't a citizen, has no SSN, and doesn't work in the US?

Question #2:
I got out of school and my employer paid my relocation expenses in July, 2004.

In January, 2005, I quit that job and was required to reimburse the company $5500 in relocation expenses. Can I claim the $5500?

 

[Leejai]

Just want to see what's safe to claim on my W4 so that I won't also have to pay taxes. I went to a couple CPA's in my local area, but they all told me the same (claim 9, keep all the money, gain interest, then pay the IRS).

I agree with them, but frankly, I don't trust myself to not save/invest wisely the money especially with the amount of time I spend here and in Hot Deals.

Any ideas on what I should claim:

Single (Not Married)
Recent Homeowner (throughout 2004)

House is shared with my cousin, so I'm not sure if both of us could claim Man of Household or something.

What you claim and your situation may help, so anything is greatly appreciated.

couple of things. interest we are already splitting 50/50 (as w/ prop tax)

 

[CPA]

Originally posted by: Leejai
Just want to see what's safe to claim on my W4 so that I won't also have to pay taxes. I went to a couple CPA's in my local area, but they all told me the same (claim 9, keep all the money, gain interest, then pay the IRS).

I agree with them, but frankly, I don't trust myself to not save/invest wisely the money especially with the amount of time I spend here and in Hot Deals.

Any ideas on what I should claim:

Single (Not Married)
Recent Homeowner (throughout 2004)

House is shared with my cousin, so I'm not sure if both of us could claim Man of Household or something.

What you claim and your situation may help, so anything is greatly appreciated.

couple of things. interest we are already splitting 50/50 (as w/ prop tax)

The thread is not really to advise you what to do for your particular tax situations (ie, what to withhold), but I will say the CPAs advice should be taken with a grain of salt. You may put yourself in a position that you owe a penalty for underpaying.

as for the interest, if you don't claim him as a dependent, the rule is:

More than one borrower.

If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print ?See attached? next to the line.

Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. You should let each of the other borrowers know what his or her share is.


Keep in mind that you will have to itemize to take advantage of the interest deduction. This amount may not be above your standard deduction.

 

[CPA]

Originally posted by: Rumpltzer
Question #1:
I married a little lady in December, 2004. She's not a US citizen, she has no SSN, and she doesn't live/work in the US.

Does the IRS care? I mean, does the mere fact that I'm married gain me anything as far as tax breaks if my wife isn't a citizen, has no SSN, and doesn't work in the US?

Question #2:
I got out of school and my employer paid my relocation expenses in July, 2004.

In January, 2005, I quit that job and was required to reimburse the company $5500 in relocation expenses. Can I claim the $5500?

1

You can claim her as your spouse for income tax filing, but there are rules:

How To Make The Choice

Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. It should contain the following:

A declaration that one spouse was a nonresident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year, and that you choose to be treated as US residents for the entire tax year, and
The name, address, and social security number (or individual taxpayer identification number) of each spouse. (If one spouse died, include the name and address of the person making the choice for the deceased spouse.)
You generally make this choice when you file your joint return. However, you can also make the choice by filing a joint amended return on Form 1040 or Form 1040A. Be sure to write the word "Amended" across the top of the amended return. If you make the choice with an amended return, you and your spouse must also amend any returns that you may have filed after the year for which you made the choice.

You generally must file the amended joint return within 3 years from the date you filed your original US income tax return or 2 years from the date you paid your income tax for that year, whichever is later.

So will need to get her a SS number. You will also have to claim her income. If she has no, to little income, then it may benefit you to get the SS number and claim her.

2

You may want to speak with a local tax expert on this one, but the way I understand moving expenses, there is a time test, which does not look like you have met:

The second test concerns time. If you are an employee, you must work full?time for at least 39 weeks during the 12 months right after you move. If you are self?employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you move. If you haven't met the time test by the date your 2004 tax return is due, you may still deduct your moving expenses on your 2004 return as long as you expect to meet the time test.

 

[EagleKeeper]

Originally posted by: CPA

Originally posted by: Leejai
Just want to see what's safe to claim on my W4 so that I won't also have to pay taxes. I went to a couple CPA's in my local area, but they all told me the same (claim 9, keep all the money, gain interest, then pay the IRS).

I agree with them, but frankly, I don't trust myself to not save/invest wisely the money especially with the amount of time I spend here and in Hot Deals.

Any ideas on what I should claim:

Single (Not Married)
Recent Homeowner (throughout 2004)

House is shared with my cousin, so I'm not sure if both of us could claim Man of Household or something.

What you claim and your situation may help, so anything is greatly appreciated.

couple of things. interest we are already splitting 50/50 (as w/ prop tax)

The thread is not really to advise you what to do for your particular tax situations (ie, what to withhold), but I will say the CPAs advice should be taken with a grain of salt. You may put yourself in a position that you owe a penalty for underpaying.

as for the interest, if you don't claim him as a dependent, the rule is:

More than one borrower.

If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print ?See attached? next to the line.

Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. You should let each of the other borrowers know what his or her share is.


Keep in mind that you will have to itemize to take advantage of the interest deduction. This amount may not be above your standard deduction.

If the split will not allow you to take advantage of itemization, but without the split one of you can; then you may have one take the complete deduction one year and the other the following year.
As CPA stated, explanations will have to be attached stating the situation regarding the sharing of the deductions. You do not need to volunteer in the statement that you are doing the deduction swap for only tax purposes.

FYI: Such a statement will preclude e-filing. There is no mechanism for attaching misc information to an e-file return.