ATOT's Second Annual Tax Time Thread!

[MikeyIs4Dcats]

I was doing my taxes on H&R Block's webfile last night, and it prompted me to include information about my vehicle property taxes. I've never heard anything about them being deductible before. Is this true? This is in Kansas.

 

[Jay59express]

My wife had two coaching positions in 2004 which she earned $500/season for, and one short term substitute teacher position which she earned $475 for. In these three seperate W2's (and of course in her paychecks) they took out SS and state taxes but took $0 in federal income. Why would they not take federal tax out? Is there a tax law dealing with wages under $500? She also had another short term position paying $6xx and they took federal taxes out of this one. Will these at all change how we file for our taxes?

Just trying to better understand the process. Thanks!

I probably won't check this too often, if someone could shoot me an email to jaytylerwilliams@gmail.com I would appreciate it. I also started a thread (before I knew of this one entitled 'Quick tax question', I will check that one still).

 

[EagleKeeper]

Originally posted by: jEnus
In 2003 I was in my 2nd year of college. Why would I want to change that to a LLC and then have to pay taxes? Since that was the 2nd time of using the Hope Credit on me (1st by my parents when I was claimed as a dependent), how would this be fraud?

My fault - I mis-interpreted it the original information that your parents used the Hope Credit twice on you.

Since they only did one year (2002) and you did 2003, then you have used it all up but are in the clear. You can only use the LLC from now on.

 

[EagleKeeper]

Originally posted by: MikeyIs4Dcats
I was doing my taxes on H&R Block's webfile last night, and it prompted me to include information about my vehicle property taxes. I've never heard anything about them being deductible before. Is this true? This is in Kansas.

Taxes of vehicle value required by the state are considered to be deductbile if you itemize Schedule A/1040

It is considered to be a personal property tax. Many states have this. Some bury it in the registration fees, some break it out when you register the vehicle, some send a seperate bill.

As long as the fee is based on the value of the vehicle, it becomes a deduction.
It can be a one time deal when you first register a vehicle or every time the vehicle registration is renewed.

It does not just apply to only personal cars.

 

[EagleKeeper]

Originally posted by: Jay59express
My wife had two coaching positions in 2004 which she earned $500/season for, and one short term substitute teacher position which she earned $475 for. In these three seperate W2's (and of course in her paychecks) they took out SS and state taxes but took $0 in federal income. Why would they not take federal tax out? Is there a tax law dealing with wages under $500? She also had another short term position paying $6xx and they took federal taxes out of this one. Will these at all change how we file for our taxes?

Just trying to better understand the process. Thanks!

I probably won't check this too often, if someone could shoot me an email to jaytylerwilliams@gmail.com I would appreciate it. I also started a thread (before I knew of this one entitled 'Quick tax question', I will check that one still).

1) Thread will be respond to only here. PMs will be used if information is not relevant or personal only.

2) You can subscribe to the thread if you choose to want notification when a pposting has been done.


Now on to your questions.

Federal taxes are calculated based on the projected income level based on the pay period.
For a couple of those positions, for all intents and purpose, your wife was being paid $500 for the complete year; therefore Federal Income tax liability on $500 is zero.
For another, they may have been paid slightly differently (paperwork wise) and therefore the projected income moved into a taxable level.

When one fills out a W4 you can ask for extra withholding if it becomes a concern.

What happens when you file is that all the W2s information will be consolidated into one number for each category.

It wil end up looking like one big W2 when the final calculations are started.

 

[archcommus]

For any PA e-filers, you have to register an e-signature account at pa.direct.file.state.pa.us, then print, sign, and fax in a form to validate your SSN. I just did it last night, still waiting for approval. I'm concerned, though, because I typed in the number from the form on my fax machine, and then it changed it to a different number and proceeded with the fax. Could that just be them routing it to an available machine? Or did someone intercept my fax?

 

[babanewbie]

Originally posted by: EagleKeeper

Originally posted by: babanewbie
my wife sold some stocks for her first time and got a hunk a change from it, now do we have to wait for a certain W-form for doing that and should we expect a good or bad thing from it? we just dont want to owe anything. thanks.

You should get a 1099 from the broker.

In reality, you should have already the transaction statement.

Use the Schedule B/1040 to list the transaction.
You will fill out what the initial cost total was and what the cost total that the stocks were sold. Subtract fees from buying/selling and the difference will be capital gains.

You will then have to calculate the tax on the gain and add it to the tax on your income.

The same goes for stock losses.

Thanks! got it figured out now.

How about if we bought a new car last year? anything we can do for taxes on that?

 

[EagleKeeper]

Originally posted by: babanewbie

Originally posted by: EagleKeeper

Originally posted by: babanewbie
my wife sold some stocks for her first time and got a hunk a change from it, now do we have to wait for a certain W-form for doing that and should we expect a good or bad thing from it? we just dont want to owe anything. thanks.

You should get a 1099 from the broker.

In reality, you should have already the transaction statement.

Use the Schedule B/1040 to list the transaction.
You will fill out what the initial cost total was and what the cost total that the stocks were sold. Subtract fees from buying/selling and the difference will be capital gains.

You will then have to calculate the tax on the gain and add it to the tax on your income.

The same goes for stock losses.

Thanks! got it figured out now.

How about if we bought a new car last year? anything we can do for taxes on that?

If you itemize (Schedule A/1040) then you can attempt to takes the vehicle sales tax deduction.
You may have to choose between using the sales tax or income tax write-off.

 

[classy]

I have good question, I don't know if this has been touched on yet though. I took a class at a Tech school. In Dec of 2003 I took out an education loan to take class at a Tech School. The school recieved payment in Dec 2003 for the first half of the class and in Feb 2004 the loan company paid the school the rest of the money to cover the remainder of the program. I claimed the tuition money paid to the school in 2003 under the Hope credit last year. Can I now claim the money paid to the school in 2004 under tuition costs for this year?

 

[Gillbot]

I have a 1099-R from a IRA distribution but when I use the online tax preparator, it doesn't tell me where the amount needs entered.

 

[EagleKeeper]

Originally posted by: classy
I have good question, I don't know if this has been touched on yet though. I took a class at a Tech school. In Dec of 2003 I took out an education loan to take class at a Tech School. The school recieved payment in Dec 2003 for the first half of the class and in Feb 2004 the loan company paid the school the rest of the money to cover the remainder of the program. I claimed the tuition money paid to the school in 2003 under the Hope credit last year. Can I now claim the credited money paid to the school in 2004 under tuition costs for this year?

Yes - Funds paid to a school for tutition are usually credited in the year paid.
The same goes with interest on school loans. Interest paid gets charged to the year it was paid.

 

[EagleKeeper]

Originally posted by: Gillbot
I have a 1099-R from a IRA distribution but when I use the online tax preparator, it doesn't tell me where the amount needs entered.

IRS - FAQ - Tax on Early Distributions from Traditional and ROTH IRAs

The 10% tax is reported on Form 5329 (PDF). However, you do not have to file Form 5329 if your Form 1099-R (PDF) shows distribution code "1" or "J" in Box 7. In this instance, you need only enter the 10% tax on line 59 of your Form 1040 (PDF). If you meet one of the exceptions to the tax, and your Form 1099?R does not have a distribution code "2", "3", or "4" in Box 7, or if the code shown is incorrect, you must file Form 5329 to claim the exception.

Federal income tax withholding is required for distributions from IRAs unless you elect out of withholding on the distribution. However, if you elect out of withholding, you may have to make estimated tax payments. For more information on estimated tax payments, refer to Topic 355, or to Publication 505, Tax Withholding and Estimated Tax.

IRS - FAQ -Early Distributions From Retirement Plans
The S/W should ask you about early distributions of IRAs.

 

[shira]

Is the following really true about incentive stock options and AMT:

I know that if I execute an ISO stock option, the difference between the value of the stock on the day the option is exercised and the option price is counted in the year of exercise as AMT income. So, I MAY be subject to AMT if the amount of AMT income is great enough. As I said, I know this is correct.

Here's the complication: Suppose I pay AMT tax based on exercising the option. It would SEEM that the fair thing would be for the stock to now have some sort of adjusted basis. But my understanding is that if I sell the stock in a year OTHER than the year in which the ISO options was exercised, I'm going to be subject to capital gains tax on the difference between my sell price and the option price. That is, I'm being taxed twice on the same gain, once for AMT and once for the gain. This, in theory, could make the federal tax rate on profits from ISO 63% (28% ISO rate + 35% federal rate [assuming it's a short-term gain]). And the only way to avoid this sort of double taxation is to sell the stock in the same year I exercise the option. Is this actually correct?

I should add that, if my understanding is correct, it's impossible to take advantage of long-term capital gains rates on ISO options that have signficant value, since if you wait a year from the time of exercise, you'll definitely be in another tax year, and you'll get hit by both AMT tax + the long-term capital gain.

 

[Gillbot]

Originally posted by: EagleKeeper

Originally posted by: Gillbot
I have a 1099-R from a IRA distribution but when I use the online tax preparator, it doesn't tell me where the amount needs entered.

IRS - FAQ - Tax on Early Distributions from Traditional and ROTH IRAs

The 10% tax is reported on Form 5329 (PDF). However, you do not have to file Form 5329 if your Form 1099-R (PDF) shows distribution code "1" or "J" in Box 7. In this instance, you need only enter the 10% tax on line 59 of your Form 1040 (PDF). If you meet one of the exceptions to the tax, and your Form 1099?R does not have a distribution code "2", "3", or "4" in Box 7, or if the code shown is incorrect, you must file Form 5329 to claim the exception.

Federal income tax withholding is required for distributions from IRAs unless you elect out of withholding on the distribution. However, if you elect out of withholding, you may have to make estimated tax payments. For more information on estimated tax payments, refer to Topic 355, or to Publication 505, Tax Withholding and Estimated Tax.

IRS - FAQ -Early Distributions From Retirement Plans
The S/W should ask you about early distributions of IRAs.

Thanks!!

The esmart file thing messed it all up but TurboTax did it right so I just used that instead!

 

[lastig21]

Last year I earned about $39k of taxable income, and had $3645 in taxes taken out. Filling out an online 1040ez shows that I owe Uncle Sam about $850. I am not married, have no kids, and rent an apartment. Last year I purchased a $900 laptop for work and had my car broken into to the tune of about $800. If all my other purchases remain average for the typical American spender, could I significantly reduce my $850 payment by itemizing?

Also, could clothing purchased purchased/worn exclusively for work (but could be worn on other occasions) be considered a business expense?

 

[EagleKeeper]

Originally posted by: lastig21
Last year I earned about $39k of taxable income, and had $3645 in taxes taken out. Filling out an online 1040ez shows that I owe Uncle Sam about $850. I am not married, have no kids, and rent an apartment. Last year I purchased a $900 laptop for work and had my car broken into to the tune of about $800. If all my other purchases remain average for the typical American spender, could I significantly reduce my $850 payment by itemizing?

Also, could clothing purchased purchased/worn exclusively for work (but could be worn on other occasions) be considered a business expense?

No and No

You would need about 5K in expenses to make it worthwile to itemize.

That shows up usually from income tax (which you do not have), property tax and interest (no go for renters).

Clothing is not deductible unless it is for work and unacceptable for outside work.

The only way to reduce your tax load would be to setup some type of IRA if you choose to keep the same lifestyle.

The IRA will probably take your tax liability close to zero if you fund it before 15 Apr for 2004.

 

[lastig21]

Thanks for the quick response!

 

[b0mbrman]

Here's a question for next year. Can I deduct the cost of uniforms and uniform cleaning/alterations that I purchase for work even if I received a one-time uniform stipend two years ago? Note that the uniform stipend didn't even cover my uniform costs for that first year

 

[EagleKeeper]

Originally posted by: b0mbrman
Here's a question for next year. Can I deduct the cost of uniforms and uniform cleaning/alterations that I purchase for work even if I received a one-time uniform stipend two years ago? Note that the uniform stipend didn't even cover my uniform costs for that first year

See answer in my response above to lastig21

 

[b0mbrman]

What does "unacceptable for outside work" mean? The description is pretty vague - Link

Uniforms. You usually cannot deduct the expenses for uniform cost and upkeep. Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty.

If military regulations prohibit you from wearing certain uniforms off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

Expenses for the cost and upkeep of the following articles are deductible.

Military battle dress uniforms and utility uniforms if you cannot wear them off duty.
Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords.
Reservists' uniforms if you can wear the uniform only while performing duties as a reservist.

Where would stuff like my Stetson, spurs, and kevlar vest, fit into this?

 

[EagleKeeper]

Originally posted by: b0mbrman
What does "unacceptable for outside work" mean? The description is pretty vague - Link

Uniforms. You usually cannot deduct the expenses for uniform cost and upkeep. Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty.

If military regulations prohibit you from wearing certain uniforms off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

Expenses for the cost and upkeep of the following articles are deductible.

Military battle dress uniforms and utility uniforms if you cannot wear them off duty.
Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords.
Reservists' uniforms if you can wear the uniform only while performing duties as a reservist.

Where would stuff like my Stetson, spurs, and kevlar vest, fit into this?

It would depend on your line of work.

I have seen Stetson's worn out in public.

Items that are not normally seen in public or considered unappropriate for public display but are essential for your line of work, could be deductible.

The deduction will fall under the 2106 guidelines which require the Schedule A itemizations and a 2% AGI reduction of expenses.

 

[LordSnailz]

hey guys ... sorry for the noob question, tried searching but needed an explanation in layman terms.

I was talking to my co-worker the other day and he said that since I'm purchasing a house in the next month, I should change my exemptions to >10?! Can you someone explain how this exemptions work and how it affects my tax? Also, what is the "magic forumula" to determine how much I should put down as my exemptions.

thanks in adv!

 

[EagleKeeper]

Originally posted by: LordSnailz
hey guys ... sorry for the noob question, tried searching but needed an explanation in layman terms.

I was talking to my co-worker the other day and he said that since I'm purchasing a house in the next month, I should change my exemptions to >10?! Can you someone explain how this exemptions work and how it affects my tax? Also, what is the "magic forumula" to determine how much I should put down as my exemptions.

thanks in adv!

The number of exemptions entered on the W4 determine how much tax is taken out of your salary each pay period.

Increasing the number of exemptions reduces the amount of tax withheld.

Because you will be purchasing a house, you will then have property taxes and interest that you will be paying each month.

As a rough estimate, each 2K of interest and property taxes paid every year equates to 1 additional exemption that could be added against the withholding and still keep your tax liability even at the end of the tax year.

Keep in mind that you will have to use the 1040/Schedule A for itemization. Your state income tax will also come into play as well as misc business expenses and charity.

 

[jtusa]

Doing my taxes, have a quick question

"If any portion of the amount in box 1 includes a distribution from a Section 457(b) plan, enter the amount of that distribution here."

457(b) is my retirement from work since my company is non-profit. I put my amount from box 12, but what is that above statement asking for?

 

[CPA]

Originally posted by: jtusa4
Doing my taxes, have a quick question

"If any portion of the amount in box 1 includes a distribution from a Section 457(b) plan, enter the amount of that distribution here."

457(b) is my retirement from work since my company is non-profit. I put my amount from box 12, but what is that above statement asking for?

Since box 1 is gross wages, it is asking if you had any distributions from your 457(b) account that was recognized as wages. Did you take any distributions? If not, don't worry about it.