The 2014 Annual Anandtech Tax Time Thread!

[CPA]

I know it's almost March and I know many of you have already filed, but some of you have been asking for this year's tax thread and I've finally gotten off my rear-end to put it together. Man, I wish Eaglekeeper was still here .

So, better Nate than Lever, I present to you:

The 12th Annual Anandtech Tax Time Thread!!!

First order of business:
Gratutities can be sent to the me in lieu of all the birthday presents you bastards have missed giving me over the years.:whiste: (sorry, until I come up with another lame joke, I'm sticking with this lame joke)

Now the legal mumbo jumbo:

All responses to questions (primarily from myself and a few other knowledgeable folks) are based on our knowledge and understanding of the current tax code. That said, we do not expressly give permission to use our opinions and responses as sole binding measure for any user, the intended or not. Seek out a local expert and a second opinion with any tax inquiry. We will not be held liable for any audit, fine, penalty or other consequence due to any user basing a filing primarily on our responses. In other words, you're on your own.

Please understand that the service provided here is not to be considered as the final say in any tax related question or issue. We advise everyone to take caution with accepting the answers posted here and seek a good tax accountant or tax lawyer when necessary, especially those pesky complicated questions. Additionally Anandtech, nor the new owners, have endorsed myself or the other benevolent responders in this thread. So please don't complain to them if you feel like you got a bogus answer. Finally, this thread is NOT meant to offer advice nor do your taxes for you. It is solely to help clear up questions, concerns or misunderstandings that you may have concerning the 2014 Tax Code. None of the responders take responsibility for your final tax preparation. You do!

Secondly, this is important people:

Please post all tax questions in this thread! We will not, REPEAT, WILL NOT, intend to respond to other threads and generally the mods will lock one-off threads. Thanks mods. We strongly encourage all members to post your questions here for the benefit of others. We will NOT respond to PMs unless we request one from you or if there is personal information that cannot be scrubbed to support a question. And finally, please, for the love of all that's good in the world, read through the thread, there is a good chance your question has already been asked and answered. We know that such is inconvenient, but you may also pick up unknown tidbits of useful information at the same time.

Questions that have been answered, will be indicated as such, you will have to dig through the thread anyhow to find it. Should your question have been answered previously, anticipate that sarcasm will be the response. The other threads have been archived and the search function works (now we are on vB).

If the below saves one ATOT member from being a sucker, it will be worth the typing:

**** Warning - Snapshot of IRS Phishing E-Mail ****
IRS Privacy Page Quote:
PLEASE NOTE: Do not respond to unsolicited e-mails that claim to come from the IRS, or any e-mail from an unknown party asking you to submit personal, tax, or financial data. The Internal Revenue Service does not use e-mail to request this type of information. Forward suspicious emails to: phishing@irs.gov

Also, YES, the phone calls you've been getting stating you owe large tax amounts to the IRS and there's a warrant out for your arrest are a SCAM! Yes, a SCAM!

If you E-File, the provider will inform you of the estimated time to have a refund issued.
If you mail, please allow a MINIMUM of extra 2 weeks for a refund to be processed.
A good rule is to allow an extra additional week in addition to above, for each month that you delay filing.
Allow an extra week if the funds are being mailed to you instead of being direct deposit.


Now, if you're an ambitious one, you can always trudge through the IRS website for help. Most of our technical answers will come from it.

Oh, and again please, try not to PM us or any of the other responders unless you are asked to. Instead, post your question here for all to see, because chances are there is another member with a similar issue. The Mods have been requested to lock any/all other threads that show up dealing with tax issues.

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Okay, moving on. This thread is NOT intended to:

-Answer state tax questions. Sorry folks, states are their own beasts. They all have different rules and regs, heck 7 states don't even have income taxes. We are not about to keep up with 43 different state codifications. Therefore, we won't be answering specific state questions. The best way to get an answer for a state question is to call up the State Treasury or Revenue Dept.

- Endorse any tax software. We can safely say that most of the software does it's job well. Without recommending any particular one, you can choose TaxAct, TaxCut, or TurboTax. Additionally, these and many more sites assist you in actually doing your taxes online. Even the IRS website has the ability for you to file online with simple filings.

-Help propagate any illegal tax schemes. Some of us do not appreciate the hospitality of the Federal Government. So keep your schemes out of this thread. Thanks for understanding.

- Start any arguments between the current system, flat tax, national sales tax or any other tax opinion. The thread is to help people, not debate, flame or troll. The Moderators will be asked to intervene for the latter items as needed.

- Some states have their own online filing - check before you pay for state filing.

We also very busy this year, so may not be responding to questions as fast as in the previous years. However, we have good knowledgeable people that will help to fill in the gaps.

For those of you who enjoy torturing yourself, We present the IRS Web Site. However, this site also has most of the answers also. Hard to find, but they will be there.

Previous ATOT Tax Threads for reference

• 2003
• 2004
• 2005
• 2006
• 2007
• 2008
• 2009
• 2010
• 2011
• 2012
• 2013

All the three main biggies (TurboTax, TaxCut and TaxAct) do the job. Each has slightly different user interfaces and their quirks/irritations. They continually look at the competition and attempt to match them in features the following year. All three area able to import datafiles from each other.

Each attempts to sell you the Basic Federal package in fancier terms. What you get is added support/documentation.
The internal S/W is still the same - supports all forms that a person will need for themselves, investments (Stocks/bonds/Interest and rental property) and Small Business use.

Some will allow multiple Federal efiles for the same license.

All three have state filing.
However, if you have multiple states to work with, you MUST USUALLY purchase a copy for each state that you need to work with.


Some IRS and other Tax Links may not be fully operational until mid January or later
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Okay, now that that stuff is out of the way, let's get to some helpful insight.

Deadlines (midnight of the date listed for filing deadlines)

W2 - Companies are required to have your W2 POSTMARKED by January 31st. It is NOT required that you have it in your hands by that date. Let's dispel that myth right now, please.

If you do not receive it by mid-February: for ex-employers, call the employer and ask for a copy to be Faxed to you; For current employers, contact your HR department.

1099 - 1099s do not have to be sent to you. Individuals that could receive a 1099 are responsible for tracking their own income.

Federal returns - Tuesday, April 15, 2014. This is also the date to file for request of extension. An extension is generally granted when filed, BUT it is an extension to file NOT to pay. You still need to pay your taxes by April 15th (or what you reasonably believe your tax liability is at that time). The extension grants you 6 extra months to file your paperwork and avoid late-filing penalties (but not interest).

IRS FAQ Index - contains links for below areas Quote:

Filing Requirements/Status/Dependents/Exemptions
IRS Procedures
Itemized Deductions/Standard Deductions
Interest/Dividends/Other Types of Income
Pensions and Annuities
Social Security Income
Child Care Credit/Other Credits
Earned Income Tax Credit
Estimated Tax
Capital Gains, Losses/Sale of Home
Sale or Trade of Business, Depreciation, Rentals
Small Business/Self-Employed/Other Business
Aliens and U.S. Citizens Living Abroad
Electronic Filing (e-file)
Magnetic Media Filers
Other (Alternative Minimum Tax, Estates, Trusts, Tax Shelters, State Tax Inquiries)
Individual Retirement Arrangements (IRAs)
Recent changes in the tax law

Free Filing - via IRS

EVERYONE is Eligible to Free File!

Let Free File do the hard work for you with brand-name software or online Fillable Forms. You can prepare and e-file your federal return for free. Participating software companies make their products available through the IRS. Some also support state tax returns (not always free).

And now the newest biggie:

Affordable Care Act

Here is the IRS page chock full of questions and answers regarding ACA

Reporting your coverage is as easy as checking a box on your 1040 form.

If you don't have minimum coverage or aren't eligible for an exemption, then you will have to make your "shared responsibility payment" using the worksheet within the instructions for Form 8965 (scroll to page 5). Good news, there is a cap to the penalty. For 2014, it's the greater of $285 if you fall under the Flat-dollar group (usually lower income) or $2,448 under the Percentage of Income group (usually higher income).

Some useful tidbits accumulated from previous years.

Dependants:

Significant others are able to be declared as a dependent if you provide the support according to the IRS guidelines. (I would not push it with multiple SO at the same time ...) SO's children are now allowed based on a IRS notice of 3/08. This can also be used retroactively for the past 3 years.

You are a dependent of your parents if you are under 18 (24 if in school) unless:
You have stood on your own for more than 6 months. Just because you paid for your tuition costs does not mean that you are not a dependent.
Your parents have the option of not declaring you and letting you stand on your own.

If you cover more than 50% TOTAL of living expenses for a "legal" (per IRS definition +/- two generations) relative they can be declared as a dependent.

You cannot claim a spouse as a Dependent if filing as Head Of Household.

1099:

If you get paid with a 1099, you have the option of filing it with your 1040/1040A under misc income or using the Schedule C. Use of the Schedule C (requires a 1040) and allows you to write off expenses directly and some portion indirectly related to that income before taxes. Previous tax threads have provided guidance on items that could be used as expenses in on capacity or another.
Income earned via a 1099 is also subject to the self employment tax as well as the normal expected W2 type taxes.

Mileage - (New numbers are posted)

56.0 cents per mile for business miles
23.5 cents per mile driven for moving purposes
23.5 cents per mile driven for medical purposes
14.0 cents per mile driven in service to a charitable organization

Commuting is not deductible expenses.
Commuting between two jobs is.

Mileage to/from school while working (if the education if not primary - ie. it supports work) is a deductible expense on the Form 2106 (which requires 1040 and Schedule A).

If school can be considered as supportive of business income, the tuition, fees, books and mileage become a business expense on the Schedule C. Otherwise use the 2106

You can not claim mileage and expenses on the same vehicle

.
Moving:

Expenses incurred when changing work locations (for any reason) if the location meets the distance test of 50 miles is filed on the Form 3903 and does NOT require a schedule A.

Sales Tax: (Still Valid for 2014)

Sales tax is still allowed as an itemized deduction this year. While it can be a little complicated, the main points of this deduction are:
a. Publication 600 is the main reference for this deduction and contains the tables for those of us who didn't keep your receipts all year long.
b. Anyone who itemized can take it, regardless of what state you are in, BUT, if you live in a state with local/state income tax you have to choose to use the sales tax or income tax deduction. You CAN'T have both.

Sales Tax Calculator

Interest Reporting

You are responsible to report interest /dividends over $1.
The payee is responsible for providing you a 1099 form when the payment is over $10.

Business Expense write-offs.

Unless you have Self-Employment income (use the Schedule C), expenses must fall under the Form 2106 using Schedule A (Itemizations)

Expenses for clothing are not deductible, unless those items cannot be worn out in public for normal use and/or private functions.

Example:
If you have to wear a suit for work, you cannot deduct the cost of the suit and dry cleaning.

If your required to wear a uniform, you can deduct as part of Schedule A Itemized Deductions.

If you have a military or other Government service type uniform, it is deductible.

Students:

American Opportunity is for expenses. (Complex formula)
Hope Credit is for tuition for the first 2 years of college. = 50%
Lifetime Learning Credit is for any other type of educational advancement. = 20%
Note: If your parents claim you as a dependent, they get the Credits, no matter who pays the tuition.
Note: If filing separately, NO educational credits can be claimed for self.

The above credits are for tuition only. Books (unless required to be purchased directly from the school as a term of enrollment), room, board, fees of any kind, laptops, etc. do not qualify. Those would have to be entered as expenses on the Form 2106 for those that use Schedule A.


No Double Benefit Allowed
You cannot do any of the following:

Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses.

Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student.

Claim a lifetime learning credit and a Hope credit based on the same qualified education expenses.

Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a covered education savings account (ESA) or qualified tuition program (QTP). See Coordination With Hope and Lifetime Learning Credits in Chapter 7 and Chapter 8 (QTP).

Claim a credit based on qualified education expenses paid with a tax-free scholarship, grant, or employer-provided educational assistance. See Adjustments to Qualified Education Expenses, later.

AMT

2011 AMT Exemption levels
Single $48,450
Married Jointly $74,450
Married Separately $37,225

2012 AMT Exemption levels
S $33,750
MJ $45,000
MS $22,500

2013 AMT Exemption levels
S $51,900
MJ $80,800
MS $40,400

2014 AMT Exemption levels
S $52,800
MJ $82,100
MS $41,050

Well, sorry for the long post, but just like the IRS code, it takes a lot to do something simple. We have tried to organize it for easier reading by using the quoting method to section areas off.

AGAIN
Questions already answered in the thread may be responded to as "all ready answered". If so, you will <gasp> actually have to read this thread. Hint: Try the in-thread search function.

We will attempt to update this OP for any changes made by Congress in the coming months.

 

[JEDI]

what happened to Eaglekeeper?!

 

[jagec]

what happened to Eaglekeeper?!

He asked too many questions.

 

[CPA]

what happened to Eaglekeeper?!

No one knows. Hasn't been around for over a year.

 

[Nograts]

How incredibly boring is it to be a CPA as opposed to say, a nude surfer instructor? Do you loathe tax season?

 

[CPA]

How incredibly boring is it to be a CPA as opposed to say, a nude surfer instructor? Do you loathe tax season?

Who says I don't do nude surfing instruction on the side? You'd be surprised how wild us CPA's get.

But actually, tax is not my specialty. I work for a Fortune 250 company as a Director of Accounting.

I do this thread as a way to help my fellow ATOTers and to help me keep up on tax law. But, I don't do this for a living and I don't consider myself an expert.

 

[s0me0nesmind1]

How incredibly boring is it to be a CPA as opposed to say, a nude surfer instructor? Do you loathe tax season?

I'm not a CERTIFIED public accountant, but I do work with plenty of CPA's. I don't have my CPA mostly since our line of work is a combination of IT And Accounting, I went with the IT portion... and a CPA requires a certain # of hours be accounting hours (depending on the state). Obviously without an accounting major, you're not going to be eligible for a CPA unless you go back to school.

But regardless, I find tax time exciting and... almost...fun.

It's awesome learning about the tax codes and all the rules. You just might learn things about government. Of course, I also work in tax, so maybe I'm a bit bias

 

[kranky]

CPA, the tax thread is a great service to the AT community. Thank you for doing this!

 

[CPA]

But regardless, I find tax time exciting and... almost...fun.

It's awesome learning about the tax codes and all the rules.

There's some truth to this, but personally, I would scrap the income tax if I was King. That's for another discussion, though.

 

[s0me0nesmind1]

There's some truth to this, but personally, I would scrap the income tax if I was King. That's for another discussion, though.

What and do a flat tax? Yeah, everyone in the top 10% paying 90% of taxes isn't going to disagree with that notion.

 

[CPA]

What and do a flat tax? Yeah, everyone in the top 10% paying 90% of taxes isn't going to disagree with that notion.

Like I said, for another discussion

 

[lupi]

Filled both of mine about 2 weeks ago on a sunday. Had both refunds back the next thursday. Over the years the electronic processing and deposits have been getting quicker, but this would be my new record.

 

[JM Aggie08]

Purchased a home with my fiance - assuming we split the interest and all other stuffs from the purchase right and half since we're filing separately?

 

[s0me0nesmind1]

Purchased a home with my fiance - assuming we split the interest and all other stuffs from the purchase right and half since we're filing separately?

Uhhh, are we under the assumption that the loan was signed in both of your names?

Either way, I suppose that is a good question assuming the loan WAS in both of your names. However, it would make much more sense to put it all under 1 of you. I presume this is a case of itemizing taxes for the best return, and getting past the hump of "worthy" to itemize or not is a hard hill to climb. If you don't put it all under 1 person it might not be worth it to itemize.

 

[Xonim]

1098-E for my student loan is showing over $1000 in interest payments. The transaction history for my payments made shows $162.xx going to interest. I contacted the company and was told my 1098-E is correct. Any ideas?

FWIW, this loan was sold to this new company in Dec 2013. Payments started with the new company in March, so there was 10 payments. Payment amount is $50-55/mo, and I've been paying $130/mo.

Is the overpayment maybe being counted as interest? Is that normal, or should I continue to hold off on filing?

 

[ViviTheMage]

Thanks for doing this
Wonder where Eagle is?!

 

[JM Aggie08]

Uhhh, are we under the assumption that the loan was signed in both of your names?

Either way, I suppose that is a good question assuming the loan WAS in both of your names. However, it would make much more sense to put it all under 1 of you. I presume this is a case of itemizing taxes for the best return, and getting past the hump of "worthy" to itemize or not is a hard hill to climb. If you don't put it all under 1 person it might not be worth it to itemize.

I'm the main she's the co-borrower, so the loan is under both our names.

 

[CPA]

1098-E for my student loan is showing over $1000 in interest payments. The transaction history for my payments made shows $162.xx going to interest. I contacted the company and was told my 1098-E is correct. Any ideas?

FWIW, this loan was sold to this new company in Dec 2013. Payments started with the new company in March, so there was 10 payments. Payment amount is $50-55/mo, and I've been paying $130/mo.

Is the overpayment maybe being counted as interest? Is that normal, or should I continue to hold off on filing?

If you've been overpaying and not telling them to take the overpayment to principal, then it is entirely possible they've been applying it against interest. Check your loan docs to see how over-payments are applied.

 

[CPA]

I'm the main she's the co-borrower, so the loan is under both our names.

Pretty simple, actually, just depends on who the 1098 is made out to. If both of you are on it just provide the other person's info and how much the other person took as a deduction. Per IRS:

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. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. 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. Let each of the other borrowers know what his or her share is.

BTW, you may want to run a full deduction through either of you and see if the total tax of both of you is better than splitting the deduction.

 

[Xonim]

If you've been overpaying and not telling them to take the overpayment to principal, then it is entirely possible they've been applying it against interest. Check your loan docs to see how over-payments are applied.

Here's what it says on the statement:

Payments received will be applied in the following order: fees, accrued
interest and then principal. If any applicable fees and accrued interest are
paid current with your payment, excess amounts will be applied entirely to
principal. Amounts paid in excess of the monthly installment amount will
be applied toward the next payment due date in the order stated above, unless
instructed otherwise. Full installment amounts will pay the account ahead,
unless instructed otherwise. If all accrued interest is paid to date at the time
the loan enters repayment or is recalculated, interest will not be added to the
balance of your loan through capitalization. Prepayments may be made at
anytime without penalty.

Last statement / payment shows this:

Payment Due: $55.00
Payment Amount: $130.00
Principal: $116.92
Interest: $13.08

Even if I add up the extra principal I'm still short. I guess I'll hold off another month and see what happens. Thanks!

 

[CPA]

Here's what it says on the statement:

Payments received will be applied in the following order: fees, accrued
interest and then principal. If any applicable fees and accrued interest are
paid current with your payment, excess amounts will be applied entirely to
principal. Amounts paid in excess of the monthly installment amount will
be applied toward the next payment due date in the order stated above, unless
instructed otherwise. Full installment amounts will pay the account ahead,
unless instructed otherwise. If all accrued interest is paid to date at the time
the loan enters repayment or is recalculated, interest will not be added to the
balance of your loan through capitalization. Prepayments may be made at
anytime without penalty.

Last statement / payment shows this:

Payment Due: $55.00
Payment Amount: $130.00
Principal: $116.92
Interest: $13.08

Even if I add up the extra principal I'm still short. I guess I'll hold off another month and see what happens. Thanks!

You can ask them to send you a detailed annual statement of payment application. Something looks off.

 

[AznAnarchy99]

Ugh I might owe some money this year. I have to comb through all my charges to find some expenses to write off.

I should have kept better book keeping

 

[HopJokey]

I sold a bunch of stocks this quarter and registered a large amount of capital gains. Am I suppose to spread out the estimated payments of estimated tax liability throughout the year or one big lump sum in Q1?

 

[olds]

CPA, the tax thread is a great service to the AT community. Thank you for doing this!

I concur. Thank you.

 

[CPA]

I sold a bunch of stocks this quarter and registered a large amount of capital gains. Am I suppose to spread out the estimated payments of estimated tax liability throughout the year or one big lump sum in Q1?

You should pay the estimated amount in Q1. Technically, they can assess a penalty on you if you under-reported per quarter.