3rd Annual AT Tax Time Thread

[EagleKeeper]

Originally posted by: Phil21
Quick question, which seems like it should be on some FAQ's somewhere, but I cannot find it.

I currently "live" in MN, with a homestead property there. I also pay rent in IL, and spend roughly half my time in both locations. What is relevent I think is that I claim MN as my 'home state', and also declare my property in MN as homestead.

However, what I am confused about is my employer is based in IL - and I am W2'ed. The employer, while sending checks to MN, does withhold IL state income tax.

Where do I file? Do I file in IL, since that is the only state withholding tax? Or do I file in IL for a full refund or something, and then file in MN? The problem as I see it, is not only do I have the regular W2 income, I also have some "extra" (under $5k) 1099 income which I obviously will have to file for in MN.

Ugh.

Thanks for any help.

-Phil

This is a state tax question. therefore we can only give general advics.

You should be able to file MN taxes. MN should have a setup to process information for out of state income. You can look into IL as nonresident filing; however, if MN can handle the situation it may be better to go that route.

 

[pinoy]

One quick question:

Is educational plan (say, 529 plan) tax deductable? If so, is it just like a retirement plan that I can obtain before April and include my contribution to last year's ITR? If that's the case, is my full contribution tax deductable or just part of it?

Thanks in advance!

 

[CPA]

Originally posted by: pinoy
One quick question:

Is educational plan (say, 529 plan) tax deductable? If so, is it just like a retirement plan that I can obtain before April and include my contribution to last year's ITR? If that's the case, is my full contribution tax deductable or just part of it?

Thanks in advance!

Your state may, but not the Feds, as far as I know. Remember a 529 is in your kid's name. The money reverts to him when it is utilized.

Also remember that if you contribute more than $11K then you may be subject to gift tax.

 

[Iilac]

Quick question

I had some dental work done in 2005. I paid for my copayment in 2005 but found out in 2006 that it was not covered and paid the rest of it in 2006. Can I use the total amount in my deductions or can I only use the portion of the bill I paid in 2005?

Thanks

 

[Doggiedog]

My wife and I file our taxes jointly.

If we get divorced, what happens to our capital loss tax credits? Do they get split evenly?

 

[GeekDrew]

I calculated my Federal, State, Municipal, etc., taxes a couple of weeks ago, manually -- I didn't use any online services. Triple checked my math, and had someone else check my math as well. Shortly thereafter, I filed my State (Ohio) taxes online, because there is a free state-hosted tax filing app I could use. Same with school district income tax. Following that, I thought "what the hell, I suppose I could find some place online that will let me file my federal taxes for free" -- I hadn't filed them first, because I was planning on mailing them in the following day. So, I used H&R Block's online tax prep software, as well as a couple of others. There is a difference of $1 on my adjusted gross income.

I checked the math, and then double checked the instructions. 1040EZ's instructions clearly say to add together all W2 income figures, including cents, and then round to the nearest dollar. I did so, and got $x7.00. All of the online tax prep software that I can find is rounding the numbers before adding them together -- with a sum of $x8.00.

Is my math correct, and should I just file my 1040EZ through the mail, or am I missing something here? If I have a problem, I'll have to file adjusted forms for State & Schools... they're the only ones I filed before I found the discrepancy.

Thanks!

 

[CPA]

Originally posted by: GeekDrew
I calculated my Federal, State, Municipal, etc., taxes a couple of weeks ago, manually -- I didn't use any online services. Triple checked my math, and had someone else check my math as well. Shortly thereafter, I filed my State (Ohio) taxes online, because there is a free state-hosted tax filing app I could use. Same with school district income tax. Following that, I thought "what the hell, I suppose I could find some place online that will let me file my federal taxes for free" -- I hadn't filed them first, because I was planning on mailing them in the following day. So, I used H&R Block's online tax prep software, as well as a couple of others. There is a difference of $1 on my adjusted gross income.

I checked the math, and then double checked the instructions. 1040EZ's instructions clearly say to add together all W2 income figures, including cents, and then round to the nearest dollar. I did so, and got $x7.00. All of the online tax prep software that I can find is rounding the numbers before adding them together -- with a sum of $x8.00.

Is my math correct, and should I just file my 1040EZ through the mail, or am I missing something here? If I have a problem, I'll have to file adjusted forms for State & Schools... they're the only ones I filed before I found the discrepancy.

Thanks!

As long as it doesn't change your tax owed/refunded, it doesn't matter.

 

[CPA]

Originally posted by: Iilac
Quick question

I had some dental work done in 2005. I paid for my copayment in 2005 but found out in 2006 that it was not covered and paid the rest of it in 2006. Can I use the total amount in my deductions or can I only use the portion of the bill I paid in 2005?

Thanks

You can only use the amount that was actually paid in 2005. The amount that was not covered and then paid by you in 2006, has to be reported in 2006.

 

[CPA]

Originally posted by: Doggiedog
My wife and I file our taxes jointly.

If we get divorced, what happens to our capital loss tax credits? Do they get split evenly?

Is the stock owned jointly?

 

[GeekDrew]

Originally posted by: CPA
As long as it doesn't change your tax owed/refunded, it doesn't matter.

Thanks... it doesn't change the tax owed/refunded... but if it did, which calculation would have been right? (Feel free to ignore this if you're too busy to respond.)

 

[drewdogg808]

my preparer gave me an option of claiming the student loan interest that my wife and i paid as business interest since our combined income is over the limit (102k) that allows deducting the full amount (we paid ~10k in loan interest). he says since we're both independent contract optometrists, the loan was related to our business/profession. he says he didn't find anything that said we could or couldn't do that. is this allowed or would it raise a flag for an audit?

 

[Doggiedog]

Originally posted by: CPA

Originally posted by: Doggiedog
My wife and I file our taxes jointly.

If we get divorced, what happens to our capital loss tax credits? Do they get split evenly?

Is the stock owned jointly?

We have a whole bunch of tax losses from the bubble together. Its a significant amount. It was in a joint account.

 

[TuxDave]

I'm just trying to figure out what's the smallest form I need to file what I need to file. So I have short term capital gains and so I have a schedule D form printed out. What is the smallest 1040 form can I use that will allow me to report it? Until now, I've been using 1040EZ. I looked at the 1040 and it's huge. I was hoping there was a 1040 kinda-EZ.

Also, is relocation income taxable?

 

[dullard]

I just found out that I have a massive paperwork headache. And it MAY affect my tax bill.

I got divorced in 2005. In the divorce settlement I agreed to pay a little alimony and a little equalization payment (we couldn't split things 50/50 so I pay a little each month for 30 months to balance it all out). Alimony payments are pre-tax, so they affect the IRS. Equalization payments are post-tax so the IRS doesn't care.

Unfortunately there were some complications (ex wanted to be paid early so she could move out) which confused me, the judge, my attorney, and the clerk of the district court that collects the alimony payments. The result is that the court's computer system thinks the equalization payments I made in 2005 were alimony payments. In essence, I overpaid alimony by $1784.02 and underpaid equalization by $1784.02 in 2005.

My question, do I:
1) Claim on the 1040 that I paid the amount of alimony the judge decreed me to pay, which is the amount I truely did pay.
2) Claim on the 1040 for 2005 $1784.02 too much alimony and reduce my 2006 alimony claim by $1784.02. This is the amount the court's computer thinks I paid.
3) Claim whatever the heck my ex claimed on her 1040 and fix it all next year.

 

[CPA]

Originally posted by: GeekDrew

Originally posted by: CPA
As long as it doesn't change your tax owed/refunded, it doesn't matter.

Thanks... it doesn't change the tax owed/refunded... but if it did, which calculation would have been right? (Feel free to ignore this if you're too busy to respond.)

Either, I would have chosen the one that was favorable to me.

 

[CPA]

Originally posted by: drewdogg808
my preparer gave me an option of claiming the student loan interest that my wife and i paid as business interest since our combined income is over the limit (102k) that allows deducting the full amount (we paid ~10k in loan interest). he says since we're both independent contract optometrists, the loan was related to our business/profession. he says he didn't find anything that said we could or couldn't do that. is this allowed or would it raise a flag for an audit?

is you schooling related to your occupation?

 

[CPA]

Originally posted by: TuxDave
I'm just trying to figure out what's the smallest form I need to file what I need to file. So I have short term capital gains and so I have a schedule D form printed out. What is the smallest 1040 form can I use that will allow me to report it? Until now, I've been using 1040EZ. I looked at the 1040 and it's huge. I was hoping there was a 1040 kinda-EZ.

Also, is relocation income taxable?

In order to file schedule D, you will have to file a 1040. Certain relocation costs are adjustments to income. If you received a reimbursement from your employer then it would be included in your income and the relocation expenses would be adjusted out to get to your AGI (Adjusted Gross Income).

 

[CPA]

Originally posted by: dullard
I just found out that I have a massive paperwork headache. And it MAY affect my tax bill.

I got divorced in 2005. In the divorce settlement I agreed to pay a little alimony and a little equalization payment (we couldn't split things 50/50 so I pay a little each month for 30 months to balance it all out). Alimony payments are pre-tax, so they affect the IRS. Equalization payments are post-tax so the IRS doesn't care.

Unfortunately there were some complications (ex wanted to be paid early so she could move out) which confused me, the judge, my attorney, and the clerk of the district court that collects the alimony payments. The result is that the court's computer system thinks the equalization payments I made in 2005 were alimony payments. In essence, I overpaid alimony by $1784.02 and underpaid equalization by $1784.02 in 2005.

My question, do I:
1) Claim on the 1040 that I paid the amount of alimony the judge decreed me to pay, which is the amount I truely did pay.
2) Claim on the 1040 for 2005 $1784.02 too much alimony and reduce my 2006 alimony claim by $1784.02. This is the amount the court's computer thinks I paid.
3) Claim whatever the heck my ex claimed on her 1040 and fix it all next year.

hmmmm....what did the ex claim? I can't believe she would claim the overpayment because that is taxable to her. In fact, I can't believe she isn't pissed about it.

If the court is reporting it higher, I would ask them for a stamped/sealed letter describing the clerical error and the true amount of alimony. Attach this to your filing and use the correct amount.

Additionally, you may want to contact the IRS about this because there is some language in Publication 504 about clerical errors and their retroactive effect after correction.

 

[dullard]

Originally posted by: CPA
hmmmm....what did the ex claim? I can't believe she would claim the overpayment because that is taxable to her. In fact, I can't believe she isn't pissed about it.

I've got an email out to her, I'm just waiting for a response to see what she claimed (if she has filed yet that is). She should be happy about it, she won't be paying taxes in 2005 due to low income, so the more in 2005 and the less in 2006, the better for her.

If the court is reporting it higher, I would ask them for a stamped/sealed letter describing the clerical error and the true amount of alimony. Attach this to your filing and use the correct amount.

I have a printout from them. But I'll also ask for a sealed one.

Additionally, you may want to contact the IRS about this because there is some language in Publication 504 about clerical errors and their retroactive effect after correction.

I'll look at Pub 504. Thanks.

 

[CPA]

Originally posted by: Doggiedog

Originally posted by: CPA

Originally posted by: Doggiedog
My wife and I file our taxes jointly.

If we get divorced, what happens to our capital loss tax credits? Do they get split evenly?

Is the stock owned jointly?

We have a whole bunch of tax losses from the bubble together. Its a significant amount. It was in a joint account.

The splitting of the loss will depend on you state's laws regarding ownership of propery. Since New Jersey is a Common Law state and both of your names are on the account, you would split it evenly. For your case, this would also be true in the Community Property states.

 

[CPA]

Originally posted by: dullard

Originally posted by: CPA
hmmmm....what did the ex claim? I can't believe she would claim the overpayment because that is taxable to her. In fact, I can't believe she isn't pissed about it.

I've got an email out to her, I'm just waiting for a response to see what she claimed (if she has filed yet that is). She should be happy about it, she won't be paying taxes in 2005 due to low income, so the more in 2005 and the less in 2006, the better for her.

If the court is reporting it higher, I would ask them for a stamped/sealed letter describing the clerical error and the true amount of alimony. Attach this to your filing and use the correct amount.

I have a printout from them. But I'll also ask for a sealed one.

Additionally, you may want to contact the IRS about this because there is some language in Publication 504 about clerical errors and their retroactive effect after correction.

I'll look at Pub 504. Thanks.

I think it was on page 11.

 

[drewdogg808]

Originally posted by: CPA

Originally posted by: drewdogg808
my preparer gave me an option of claiming the student loan interest that my wife and i paid as business interest since our combined income is over the limit (102k) that allows deducting the full amount (we paid ~10k in loan interest). he says since we're both independent contract optometrists, the loan was related to our business/profession. he says he didn't find anything that said we could or couldn't do that. is this allowed or would it raise a flag for an audit?

is you schooling related to your occupation?

yes, it was optometry school.

 

[CPA]

Originally posted by: drewdogg808

Originally posted by: CPA

Originally posted by: drewdogg808
my preparer gave me an option of claiming the student loan interest that my wife and i paid as business interest since our combined income is over the limit (102k) that allows deducting the full amount (we paid ~10k in loan interest). he says since we're both independent contract optometrists, the loan was related to our business/profession. he says he didn't find anything that said we could or couldn't do that. is this allowed or would it raise a flag for an audit?

is you schooling related to your occupation?

yes, it was optometry school.

If you went to school while you were working (like as an assistant or tech) AND you were self-employed then I would say, no problem. But if you were doing other jobs not related to optometry, then I would be very hesitant to recommend it.

An audit could bring this out, and the IRS will most likely not determine it as a business expense. While the preparer may be right in saying he can't find anything against it, doesn't mean the IRS will allow it. The IRS can look and rule on intent.

I'll see if I find anything else on this, though.

 

[CPA]

Originally posted by: drewdogg808

Originally posted by: CPA

Originally posted by: drewdogg808
my preparer gave me an option of claiming the student loan interest that my wife and i paid as business interest since our combined income is over the limit (102k) that allows deducting the full amount (we paid ~10k in loan interest). he says since we're both independent contract optometrists, the loan was related to our business/profession. he says he didn't find anything that said we could or couldn't do that. is this allowed or would it raise a flag for an audit?

is you schooling related to your occupation?

yes, it was optometry school.

A quick look came up with two observations.

First, the IRS makes a distinction on how to expense school loan interest. That fact would indicate they take a hard line stance on the methods allowed to deduct school loan interest, which is the $2500 per year IF you don't hit the income ceiling.

Second, the IRS allows business expenses only if they are ordinary and necessary to the business. You would be hard-pressed to prove that your personal school loan interest for classes taken before you were an optometrist are ordinary and necessary expenses. (BTW, this should have been in my first response since I knew this already. sorry.)

 

[Maximus96]

Originally posted by: CPA

Originally posted by: Maximus96

Originally posted by: Maximus96
My dad passed away in the end of Nov 2005. Prior to his passing we all decided its best to add my name and my mom?s name to the deed of the house. The house was originally purchased for about $130k 15 years ago and is worth about $450k now. I?m getting conflicting answers as to how much tax I?ll have to pay if I sell the house.

My mom spoke to a lawyer or accountant that does a weekly radio show and thru some kind of voodoo math, he told her that I?ll be looking at about $40k in tax if I sell the house for $450k because I haven?t had ownership for 2 years since my name was recently added in Nov 05. I guess he accounted for the initial purchase price of $130k that somehow split amongst the 3 of us (me, mom and dad). I am not clear on the math because I heard it second-hand thru my mom and she?s not sure herself.

My buddy is a CPA and he tells me that?s nonsense and thru something called ?involuntary transfer?, the house has to be re-assessed no later than 6 month after my dad passed away. then the taxes, if any will be calculated from the sale price and the re-assessed value.

I?d like to seek a 3rd opinion. I?m not sure if it matters that the deed has all 3 of our names, but the title is only in my Dad?s name.

Thanks so much

any info on my question?

thanks

I'm going to have to look into this. It's a little out of my league. I'll let you know what I find.

any word on this?

my CPA that tells me there are no tax send me this link, http://www.irs.gov/faqs/faq-kw91.html and said only #1 and #2 applies to me.

thank you