3rd Annual AT Tax Time Thread

[CPA]

Originally posted by: EagleKeeper

Originally posted by: jlbenedict
For instance.. this past year, I enrolled in my previous companys 401k and I believe had about $1200'somthin deducted before this company lost the defense contract... I had to switch employment to another company.

Since I only had a low amount invested, JP Morgan informed me I had to withdraw the funds. The new company I began employment with has crappy benefits, and I'm still no eligible for their 401k yet..
Of course, since I couldn't roll it over, I withdrew it. It was taxed. I opted to only have Federal taxes deducted, since it was such a low amount.

When I get my W2's, I should also get a 1099 correct? (for the 401k withdraw)

If possible setup an IRA and put the funds that you withdrew into it. That will allow you to avoid the Federal tax penalties (10% of the amount + normal taxes).
JP Morgan should have informed you of that possibility.

While he doesn't specifically state it, I'm guessing he missed the rollover due date.

 

[CPA]

Originally posted by: AStar617
A friend bought his home in April 2001. If he sells the home in 2006 after living there fulltime, will he end up having to pay capital gains for FY06 provided he hasn't accessed his equity?

And if he has taken out the entire equity, then what happens--is he still responsible for capital gains?

He is wondering about whether or not he'd be exempt from capital gains after owning the property for a certain amount of time, based on the following that he read:

Capital Gains Taxes on Real Estate. May 1st, 2002 By Scottie Johnson As you may know, profits made on the sale of property are subject to capital gains taxes. The current federal limit on how much profit you can make on the sale of your principal residence before being required to pay capital gains tax is $500,000 for a married couple and $250,000 for a single homeowner. This tax break applies if the owner has occupied the property as his/her primary residence for at least 2 of the past 5 years. If the property in question is used as an investment, capital gains taxes may be differed [sic] using a 1031 tax exchange.

Seems like he should be okay, but just checking anyway (considering the source didn't even know how to spell key terms right ). Thanks CPA, et al.! :beer:

What Eaglekeep said.

Also, he needs to calculate what his basis is in the house. Most people think it's just what they paid for it, but you need to add in non-deductible closing costs (including those from refinancing), improvements, additions and such. So to figure his gain he needs this formula:

Sale Price - Basis (Purchase price + non-deductible closing costs + improvement costs) = gain. Then compare it against the floors.

He can use the $500 and $250 rule every two years.

 

[EagleKeeper]

Originally posted by: CPA

Originally posted by: EagleKeeper

Originally posted by: jlbenedict
For instance.. this past year, I enrolled in my previous companys 401k and I believe had about $1200'somthin deducted before this company lost the defense contract... I had to switch employment to another company.

Since I only had a low amount invested, JP Morgan informed me I had to withdraw the funds. The new company I began employment with has crappy benefits, and I'm still no eligible for their 401k yet..
Of course, since I couldn't roll it over, I withdrew it. It was taxed. I opted to only have Federal taxes deducted, since it was such a low amount.

When I get my W2's, I should also get a 1099 correct? (for the 401k withdraw)

If possible setup an IRA and put the funds that you withdrew into it. That will allow you to avoid the Federal tax penalties (10% of the amount + normal taxes).
JP Morgan should have informed you of that possibility.

While he doesn't specifically state it, I'm guessing he missed the rollover due date.

Rollover timeframe is 60 days
IRS - FAQ - IRA Rollovers

I have heard rumors that the IRS does not do much/if any cross matching of distribution dates vs IRS funding dates. They rely on honest taxpayers

 

[edprush]

I bought property in 2005 as an investment. I don't live at the property but I pay property tax, utility minimums, and have 'upkeep/maintenance' expenses.

Can any of that be used to my tax advantage?

 

[EagleKeeper]

Originally posted by: edprush
I bought property in 2005 as an investment. I don't live at the property but I pay property tax, utility minimums, and have 'upkeep/maintenance' expenses.

Can any of that be used to my tax advantage?

More details on this would be required for any opinion to be provided.

Type of property?
Income generation?

 

[edprush]

Originally posted by: EagleKeeper

Originally posted by: edprush
I bought property in 2005 as an investment. I don't live at the property but I pay property tax, utility minimums, and have 'upkeep/maintenance' expenses.

Can any of that be used to my tax advantage?

More details on this would be required for any opinion to be provided.

Type of property?
Income generation?

The property is a house with an accessory buiilding (Morton building) on 3 acres of land.

Income generation: I guy paid me $30 to store his furniture in the Morton building for one month.

If I can't get it rented out I will put it on the 'for sale' market and if it doesn't sell I may consider moving into it.


Thanks.

 

[Saga]

Originally posted by: edprush

Originally posted by: EagleKeeper

Originally posted by: edprush
I bought property in 2005 as an investment. I don't live at the property but I pay property tax, utility minimums, and have 'upkeep/maintenance' expenses.

Can any of that be used to my tax advantage?

More details on this would be required for any opinion to be provided.

Type of property?
Income generation?

The property is a house with an accessory buiilding (Morton building) on 3 acres of land.

Income generation: I guy paid me $30 to store his furniture in the Morton building for one month.

If I can't get it rented out I will put it on the 'for sale' market and if it doesn't sell I may consider moving into it.


Thanks.

Well, obviously you incurred expenses due to placing the property in service with the intent to rent, correct? You mentioned property tax, utilities, and upkeep. I would suggest a good reading of IRS Publication 527 - Residental Rental Property. I would refer you to Schedule E form 1040.

 

[EagleKeeper]

If you intend on renting the place; then as suggested above, use the Schedule E.

Your rental income will be minimal; however all expenses that you have incurred will be able to go against the income of the property and up to a $25K loss against regular income. You will also have depreciation on the property.

Note: once you depreciate a property, you will have to "recover" such depreciation when sold.

 

[LukFilm]

Originally posted by: CPA

Originally posted by: LukFilm

Originally posted by: CPA

Originally posted by: LukFilm
Have a Russian au-pair in the house solely for the reason so I can do business (self-employed) and don't have to watch my son. Is her weekly pay tax deductible?

This is not generally considered a business expense. Let's put it this way, if you took your kids to daycare, you would not write that off as a business expense.

That said, if you are expecting her to claim her wages (file), then you could use the Child Care Credit. Make sure she is filing though, otherwise you can get her into trouble, because you have to report her SSN number (or taxpayer ID number) on form 2441.

Now, here is the really bad part: because she is performing the service in your home and I assume you did not hire her through and agency, you are technically required to file a schedule H and will owe Social Security taxes on the wages you paid her. The reason is the IRS considers you her employer and her an employee. In fact, you are required to get and EIN and file quarterly 941s (Federal Withholding Tax) and annual 940 (Fed Unemployment Tax).

Thanks for the answer, I DID hire her through an official agency (they are not cheap), so I guess the last paragraph doesn't apply to me then. Also, I don't expect her to file, so I assume that means that I cannot write it off.

I should clarify. Do you pay her or do you pay the agency? If you're paying the agency, then you would use them as the provider and you would file for the Child Care Credit.

I pay agency the "fees" and her the weekly salary.

 

[EagleKeeper]

Originally posted by: LukFilm

Originally posted by: CPA

Originally posted by: LukFilm

Originally posted by: CPA

Originally posted by: LukFilm
Have a Russian au-pair in the house solely for the reason so I can do business (self-employed) and don't have to watch my son. Is her weekly pay tax deductible?

This is not generally considered a business expense. Let's put it this way, if you took your kids to daycare, you would not write that off as a business expense.

That said, if you are expecting her to claim her wages (file), then you could use the Child Care Credit. Make sure she is filing though, otherwise you can get her into trouble, because you have to report her SSN number (or taxpayer ID number) on form 2441.

Now, here is the really bad part: because she is performing the service in your home and I assume you did not hire her through and agency, you are technically required to file a schedule H and will owe Social Security taxes on the wages you paid her. The reason is the IRS considers you her employer and her an employee. In fact, you are required to get and EIN and file quarterly 941s (Federal Withholding Tax) and annual 940 (Fed Unemployment Tax).

Thanks for the answer, I DID hire her through an official agency (they are not cheap), so I guess the last paragraph doesn't apply to me then. Also, I don't expect her to file, so I assume that means that I cannot write it off.

I should clarify. Do you pay her or do you pay the agency? If you're paying the agency, then you would use them as the provider and you would file for the Child Care Credit.

I pay agency the "fees" and her the weekly salary.

The total of $$ paid to the agency for her can be classified as a Child Care Credit.
There is a limitaiton on the amount though.

The agency should provide you with a tax id number.

 

[LukFilm]

Originally posted by: EagleKeeper

Originally posted by: LukFilm

Originally posted by: CPA

Originally posted by: LukFilm

Originally posted by: CPA

Originally posted by: LukFilm
Have a Russian au-pair in the house solely for the reason so I can do business (self-employed) and don't have to watch my son. Is her weekly pay tax deductible?

This is not generally considered a business expense. Let's put it this way, if you took your kids to daycare, you would not write that off as a business expense.

That said, if you are expecting her to claim her wages (file), then you could use the Child Care Credit. Make sure she is filing though, otherwise you can get her into trouble, because you have to report her SSN number (or taxpayer ID number) on form 2441.

Now, here is the really bad part: because she is performing the service in your home and I assume you did not hire her through and agency, you are technically required to file a schedule H and will owe Social Security taxes on the wages you paid her. The reason is the IRS considers you her employer and her an employee. In fact, you are required to get and EIN and file quarterly 941s (Federal Withholding Tax) and annual 940 (Fed Unemployment Tax).

Thanks for the answer, I DID hire her through an official agency (they are not cheap), so I guess the last paragraph doesn't apply to me then. Also, I don't expect her to file, so I assume that means that I cannot write it off.

I should clarify. Do you pay her or do you pay the agency? If you're paying the agency, then you would use them as the provider and you would file for the Child Care Credit.

I pay agency the "fees" and her the weekly salary.

The total of $$ paid to the agency for her can be classified as a Child Care Credit.
There is a limitaiton on the amount though.

The agency should provide you with a tax id number.

Thank you VERY MUCH.

 

[CupCak3]

First off, thanks alot to CPA and everyone helping in this thread. I finally finished reading this whole thread, and sweet lord did it take some time.


Anyways, my wife and I just finished our college degrees this last summer and got married after graduation. Before being married, we were both dependants of our parents for health insurance reasons. She's been working her job since late in the summer but do to the area we moved, I was not able to find a job in my field until mid December. When hired, I filled out my Tax form as being an independant but now looking at it, since I only have a couple thousand dollars of taxable income for 2005, can we fill out our tax returns as her as head of household and me as a dependant? (since I was pretty much relying off her for several months) Are there any pros or cons of filing our taxes this way? Also, I'm setting up a 401k for me through work and a Roth IRA for both of us, should watch out for anything?

Also, we both have student loans and havenot deducted any of the interest from them on our taxes. Can we duduct all our acrued interest on the loans up to this point (since we haven't before) or only the interest for this year? Also, are there only certain loan types that apply?


Thanks!

 

[sonoma1993]

Does anyone file there taxes through turbotax.com? I've notice that this year they took away the filing state taxes somewhat. they still have it there but for optional $24.95 + the cost of federal which ranges from $10 to $40. They keep taking away features and rasing the cost.

 

[EagleKeeper]

Originally posted by: CupCak3
First off, thanks alot to CPA and everyone helping in this thread. I finally finished reading this whole thread, and sweet lord did it take some time.


Anyways, my wife and I just finished our college degrees this last summer and got married after graduation. Before being married, we were both dependants of our parents for health insurance reasons. She's been working her job since late in the summer but do to the area we moved, I was not able to find a job in my field until mid December. When hired, I filled out my Tax form as being an independant but now looking at it, since I only have a couple thousand dollars of taxable income for 2005, can we fill out our tax returns as her as head of household and me as a dependant? (since I was pretty much relying off her for several months) Are there any pros or cons of filing our taxes this way? Also, I'm setting up a 401k for me through work and a Roth IRA for both of us, should watch out for anything?

Also, we both have student loans and havenot deducted any of the interest from them on our taxes. Can we deduct all our acrued interest on the loans up to this point (since we haven't before) or only the interest for this year? Also, are there only certain loan types that apply?


Thanks!

1) IRS - FAQ - Head of Household

Head of Household: Generally, you may claim head of household filing status on your tax return only if you are unmarried and pay more than 50% of the costs of keeping up a home for yourself and your dependent(s) or other qualifying individuals.

2) It is to your benefit to file joint unless there is a large discrepency in income and itemized deductions.

3) The IRAs through work will handle all the paperwork for you and unless you are paid as a pure independent (1099/corp) will also take care of theappropraite paperwork/numbers adjustments in your tax documents.

4) Interest is only for the amount paid in that year. Anything else would be fraud.

5) You both can apply the Lifetime Learning Credit to the tutition for 2005.

6) Because you moved do to employment, the costs of moving can be expensed out using the form 3903 unless you were re-embursed fully by the employer.

7) IF you are able to use the Schedule A; make sure that you look at the Fomr 2106 for business expenses. That allows the cost of job hunting, etc for both of you for all of 2005.
Resume prep, mailing, travel, meals, lodging, internet costs for job searches, phone calls, newpapers, etc.
Anything directly related to the search and indirectly (proportionally) that support the search.

 

[AnyMal]

First of all, thanks for the service, guys!

Here's my question: I had to put my 9 y/o in an afterschool YMCA program for which I pay $50.00 weekly. Can I claim any of it as a Child Care Credit?

Thanks in advance.

 

[EagleKeeper]

Originally posted by: AnyMal
First of all, thanks for the service, guys!

Here's my question: I had to put my 9 y/o in an afterschool YMCA program for which I pay $50.00 weekly. Can I claim any of it as a Child Care Credit?

Thanks in advance.

Yes - You will just need to ask for a tax id number to complete the paperwork. No ID, no credit

 

[AnyMal]

Originally posted by: EagleKeeper

Originally posted by: AnyMal
First of all, thanks for the service, guys!

Here's my question: I had to put my 9 y/o in an afterschool YMCA program for which I pay $50.00 weekly. Can I claim any of it as a Child Care Credit?

Thanks in advance.

Yes - You will just need to ask for a tax id number to complete the paperwork. No ID, no credit

Thank you!

 

[EagleKeeper]

Originally posted by: Doghouse
Childcare expenses. Our child care expense have gone through the roof with a second child. Our childcare expenses are now 20 to 25% of our gross income. Besides the normal child deduction and the pre-tax $5000 max per year/family cafeteria plan are there any other deductions when it becomes this high?

None that I am aware of.

Make sure that each of you uses the cafeteria plan if possible.

You may wish to look at the overall cost of childcare and either find quality at a lower price (if possible) and/or determine if the cost benefit and stress is worth the second person working.

 

[LordSnailz]

Hope this is the right question --
In the past I've been doing my own taxes but this past yr. I just a got a new house and I wanted to have someone do that the taxes for me, just to make sure everything is covered.

Any suggestions on the best place to go? Something general or specifc, either way would really help.
I'm from the bayarea if that helps

 

[CupCak3]

Originally posted by: EagleKeeper

Originally posted by: CupCak3
First off, thanks alot to CPA and everyone helping in this thread. I finally finished reading this whole thread, and sweet lord did it take some time.


Anyways, my wife and I just finished our college degrees this last summer and got married after graduation. Before being married, we were both dependants of our parents for health insurance reasons. She's been working her job since late in the summer but do to the area we moved, I was not able to find a job in my field until mid December. When hired, I filled out my Tax form as being an independant but now looking at it, since I only have a couple thousand dollars of taxable income for 2005, can we fill out our tax returns as her as head of household and me as a dependant? (since I was pretty much relying off her for several months) Are there any pros or cons of filing our taxes this way? Also, I'm setting up a 401k for me through work and a Roth IRA for both of us, should watch out for anything?

Also, we both have student loans and havenot deducted any of the interest from them on our taxes. Can we deduct all our acrued interest on the loans up to this point (since we haven't before) or only the interest for this year? Also, are there only certain loan types that apply?


Thanks!

1) IRS - FAQ - Head of Household

Head of Household: Generally, you may claim head of household filing status on your tax return only if you are unmarried and pay more than 50% of the costs of keeping up a home for yourself and your dependent(s) or other qualifying individuals.

2) It is to your benefit to file joint unless there is a large discrepency in income and itemized deductions.

3) The IRAs through work will handle all the paperwork for you and unless you are paid as a pure independent (1099/corp) will also take care of theappropraite paperwork/numbers adjustments in your tax documents.

4) Interest is only for the amount paid in that year. Anything else would be fraud.

5) You both can apply the Lifetime Learning Credit to the tutition for 2005.

6) Because you moved do to employment, the costs of moving can be expensed out using the form 3903 unless you were re-embursed fully by the employer.

7) IF you are able to use the Schedule A; make sure that you look at the Fomr 2106 for business expenses. That allows the cost of job hunting, etc for both of you for all of 2005.
Resume prep, mailing, travel, meals, lodging, internet costs for job searches, phone calls, newpapers, etc.
Anything directly related to the search and indirectly (proportionally) that support the search.

omg that is exactly what I needed!!!!

Thanks you soo much!

:beer:

 

[woowoo]

In my state public school kindergarden is free for the half day class, you have to pay extra for full day.
Is there a way to recover the extra? ($1400).
Were would that go on federal tax form?

 

[dullard]

I've got a question about Schedule A, Line 22, Other Expenses. The instructions say this:

Enter the total amount you paid to produce or collect taxable income and manage or protect property held for earning income...Examples of expenses to include on line 22 are: Certain legal and accounting fees.

I think I may be reading these to be too general. So I came here first.

I have a partial rights to a patent and several more pending. In the past the patent has generated royalty income and I have paid tax on it in the past. In 2005, I got a divorce and the biggest stumbling block (and most of the lawyer fees) had to do with who got the patent royalties. Would these legal fees count as "protecting taxable income earning property"? If so, could I claim the entire legal fee, or just the portions I can document related to the intellectual property?

Thanks.

 

[EagleKeeper]

Originally posted by: LordSnailz
Hope this is the right question --
In the past I've been doing my own taxes but this past yr. I just a got a new house and I wanted to have someone do that the taxes for me, just to make sure everything is covered.

Any suggestions on the best place to go? Something general or specifc, either way would really help.
I'm from the bayarea if that helps

There is no reason why you can not use tax S/W to do the job. Paying some else $100-$300+ seems to be a waste; when you will still have to do all of the leg work anyhow.

The software wil walk you through the steps needed.
You will just have to locate the closing documents and identify the appropriate items.
Last years tax thread spelled out how to identify what is able to be deducted as closing cost items.

 

[EagleKeeper]

Originally posted by: woowoo
In my state public school kindergarden is free for the half day class, you have to pay extra for full day.
Is there a way to recover the extra? ($1400).
Were would that go on federal tax form?

See the post by AnyMal just above.

 

[EagleKeeper]

Originally posted by: dullard
I've got a question about Schedule A, Line 22, Other Expenses. The instructions say this:

Enter the total amount you paid to produce or collect taxable income and manage or protect property held for earning income...Examples of expenses to include on line 22 are: Certain legal and accounting fees.

I think I may be reading these to be too general. So I came here first.

I have a partial rights to a patent and several more pending. In the past the patent has generated royalty income and I have paid tax on it in the past. In 2005, I got a divorce and the biggest stumbling block (and most of the lawyer fees) had to do with who got the patent royalties. Would these legal fees count as "protecting taxable income earning property"? If so, could I claim the entire legal fee, or just the portions I can document related to the intellectual property?

Thanks.

Because the fees are tied to the divorce; you would be best to get a statement from the lawyers to indicate the seperation or costs. Only use those costs as indicated by the lawyer. by having the statement to back you up, you are then covered.

Uncle could detect the divorce (based on change of filing status) and question the fees.
If you are having impure thoughts, you know that Uncle will have them 10 fold.