ATOT's Second Annual Tax Time Thread!

[LordSnailz]

Originally posted by: 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.

Thanks for the reply, I guess I got to start with a more general question.

My finacee and I will be getting married in June and we?ll be getting our first house in the near months --
1. How should we file our taxes? Married filing jointly or separately?
2. You mentioned that each $2k of taxes and interest equates to 1 exemption, does that mean 1 exemption for my fiancée and I ?

Thanks for the help

 

[jtusa]

Originally posted by: 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.

Nope, I didn't. I was thinking that's what it meant but wasn't sure. Thanks.

 

[EagleKeeper]

Originally posted by: LordSnailz

Originally posted by: 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.

Thanks for the reply, I guess I got to start with a more general question.

My finacee and I will be getting married in June and we?ll be getting our first house in the near months --
1. How should we file our taxes? Married filing jointly or separately?
2. You mentioned that each $2k of taxes and interest equates to 1 exemption, does that mean 1 exemption for my fiancée and I ?

Thanks for the help

If you both are working, it is best that at least one of you claim at least one exemption less than normal. Withholding taxes are calculated based on individual income. The sum of your incomes could push you into a higher tax bracket.

Usually it is best to file married-jointly unless there is a great desparity in income and deductions or there is paranoia over who's income belongs to whom.

The advantage of Tax S/W is that it is easy to build a married-jointly data file and then make copies of it to play what if scenarios.


Think of exemptions being a total for the family unit.

Example Only:
If the family would be allotted 5, then combination between what both spouses claim on the W4 should add up to 5. (5-0,4-1,3-2,2-3,1-4,0-5). If both work, then is would be best that even though the family unit would have 5, the W4 exemptions would add up to 4 to take into account a possible tax bracket creep.

 

[Baked]

Got my Cali tax refund today. Damn, that's fast. I did it online at the Cali franchise tax board site

 

[juiio]

I've got a Form 1099-R that I received (for distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc). Basically what happened is that my grandfather died, and I was one of the beneficiaries.

I know that he paid the taxes on a large percentage of the distribution. This seems to be reflected in the fact that box 1 (gross distribution) is much larger than box 2a (taxable amount).

The question is this:
He lived in a state without a state income tax, and I live in a state with a state income tax. Do I pay taxes on the gross distribution (box 1), the taxable amount (box 2), or none of it? Box 12 (state distribution) is empty. Prior to the distribution, I told them to take out 8% for state, because I assumed it would be taxed, so box 10 (state tax withheld) has 8% of the gross distribution in it. But now no value is shown in box 12. Isn't the amount in 2a (taxable amount) only applicable to federal taxes and not state taxes? Also of note is that the percentage that I told them to take out for federal taxes came from box 2a, while the percentage that I told them to take out for state taxes came from box 1.

Any help would be appreciated. Thanks.

 

[p0ntif]

Okay here is my situation.
This tax year I was a student with a scholarship/stiped up until May (i.e. no medicare or SS taken out).
Then from mid-may until now, I have been a NON-resident employee of the university of puerto Rico in Puerto Rico.
I have W2s from my stipend earnings, and I have my W2s from my puerto rico employment. I went to the irs site and it is pretty confusing. Have any suggestions on where to read to figure out who i owe taxes to? I assume I owe taxes to the U.S. (still a U.S. resident) but do I also owe additional taxes to puerto Rico? How does this work? thanks.

 

[EagleKeeper]

Originally posted by: p0ntif
Okay here is my situation.
This tax year I was a student with a scholarship/stiped up until May (i.e. no medicare or SS taken out).
Then from mid-may until now, I have been a NON-resident employee of the university of puerto Rico in Puerto Rico.
I have W2s from my stipend earnings, and I have my W2s from my puerto rico employment. I went to the irs site and it is pretty confusing. Have any suggestions on where to read to figure out who i owe taxes to? I assume I owe taxes to the U.S. (still a U.S. resident) but do I also owe additional taxes to puerto Rico? How does this work? thanks.

Starting point for Puerto Rico.

Because each state has different tax rules, we try to avoid sticking our fingers into that mess.

Tax S/W should allow you to interpret the Federal situation. You can always try before you buy to see if it makes sense.

 

[CPA]

Originally posted by: juiio
I've got a Form 1099-R that I received (for distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc). Basically what happened is that my grandfather died, and I was one of the beneficiaries.

I know that he paid the taxes on a large percentage of the distribution. This seems to be reflected in the fact that box 1 (gross distribution) is much larger than box 2a (taxable amount).

The question is this:
He lived in a state without a state income tax, and I live in a state with a state income tax. Do I pay taxes on the gross distribution (box 1), the taxable amount (box 2), or none of it? Box 12 (state distribution) is empty. Prior to the distribution, I told them to take out 8% for state, because I assumed it would be taxed, so box 10 (state tax withheld) has 8% of the gross distribution in it. But now no value is shown in box 12. Isn't the amount in 2a (taxable amount) only applicable to federal taxes and not state taxes? Also of note is that the percentage that I told them to take out for federal taxes came from box 2a, while the percentage that I told them to take out for state taxes came from box 1.

Any help would be appreciated. Thanks.

Actually the difference between box 1 and box 2a is related to the taxability of the distribution, not whether he had tax taken out. If box 1 is greater, then it is because a certain portion of his distribution was not taxable due to various reasons. Some questions first:

1) When was your grandfather born?

2) Which box is checked in 2b?

3) Is ther an amount in box 4?

4) What exactly was the distribution for?

5) as for why box 12 is empty it may be because your state does not tax benefiary income from certain transactions or the payer did not know what state you file in, so did not determine the state distribution.

 

[Yossarian]

employer's state ID no. on the W2: xxx-xxxx      2

Is the "2" part of the id no?

if I haven't received 1099's from banks yet, do you think there's any problem in just using MS Money to total interest for the year? is it a red flag to the IRS if the amounts are off by a dollar or two compared to what the banks report?

 

[richardycc]

I have an underpayment penalty from selling some stocks, does this consider "other unusual circumstance" so I can waive the underpayment penalty?

 

[Epoman]

Hi guys it's me again, one more question.

Do I have to report money that was given to me by my father as a gift/loan?
It was more than $500.

Thanks guys.

 

[p0ntif]

Originally posted by: EagleKeeper

Originally posted by: p0ntif
Okay here is my situation.
This tax year I was a student with a scholarship/stiped up until May (i.e. no medicare or SS taken out).
Then from mid-may until now, I have been a NON-resident employee of the university of puerto Rico in Puerto Rico.
I have W2s from my stipend earnings, and I have my W2s from my puerto rico employment. I went to the irs site and it is pretty confusing. Have any suggestions on where to read to figure out who i owe taxes to? I assume I owe taxes to the U.S. (still a U.S. resident) but do I also owe additional taxes to puerto Rico? How does this work? thanks.

Starting point for Puerto Rico.

Because each state has different tax rules, we try to avoid sticking our fingers into that mess.

Tax S/W should allow you to interpret the Federal situation. You can always try before you buy to see if it makes sense.

Actually I am interested in how I file my U.S. federal 1040. I am being taxed in PR and the foreign tax credit pubs are confusing. How much of the amount that I am being taxed in PR can I claim as a foreign tax credit? I know that for PR taxes, I only pay fro the amount I made in PR. For U.S. taxes (as I am a U.S. resident and citizen) I will pay taxes on both income sources, but I know that in order to avoid double taxation and due to exisiting regulations (outlined in pubs 54 and 570) that I am likely eligible to claim the amount taxed by PR as a foreign tax credit (form 1116). Any clues?

 

[CPA]

Originally posted by: Yossarian
employer's state ID no. on the W2: xxx-xxxx      2

Is the "2" part of the id no?

if I haven't received 1099's from banks yet, do you think there's any problem in just using MS Money to total interest for the year? is it a red flag to the IRS if the amounts are off by a dollar or two compared to what the banks report?

Usually you would round anyway. Most likely it wouldn't be a problem, but it's your call.

 

[CPA]

Originally posted by: richardycc
I have an underpayment penalty from selling some stocks, does this consider "other unusual circumstance" so I can waive the underpayment penalty?

My initial reaction is no, but I'm not sure what you mean by "other unusual circumstance". Can you be more specific?

 

[CPA]

Originally posted by: Epoman
Hi guys it's me again, one more question.

Do I have to report money that was given to me by my father as a gift/loan?
It was more than $500.

Thanks guys.

No, gifts are not taxable to the recipient, they are taxable to the giver IF over $11000.

 

[CPA]

Originally posted by: p0ntif

Originally posted by: EagleKeeper

Originally posted by: p0ntif
Okay here is my situation.
This tax year I was a student with a scholarship/stiped up until May (i.e. no medicare or SS taken out).
Then from mid-may until now, I have been a NON-resident employee of the university of puerto Rico in Puerto Rico.
I have W2s from my stipend earnings, and I have my W2s from my puerto rico employment. I went to the irs site and it is pretty confusing. Have any suggestions on where to read to figure out who i owe taxes to? I assume I owe taxes to the U.S. (still a U.S. resident) but do I also owe additional taxes to puerto Rico? How does this work? thanks.

Starting point for Puerto Rico.

Because each state has different tax rules, we try to avoid sticking our fingers into that mess.

Tax S/W should allow you to interpret the Federal situation. You can always try before you buy to see if it makes sense.

Actually I am interested in how I file my U.S. federal 1040. I am being taxed in PR and the foreign tax credit pubs are confusing. How much of the amount that I am being taxed in PR can I claim as a foreign tax credit? I know that for PR taxes, I only pay fro the amount I made in PR. For U.S. taxes (as I am a U.S. resident and citizen) I will pay taxes on both income sources, but I know that in order to avoid double taxation and due to exisiting regulations (outlined in pubs 54 and 570) that I am likely eligible to claim the amount taxed by PR as a foreign tax credit (form 1116). Any clues?

Yes, you should file a form 1116. As it seems that none of your income is exempt from taxation, your foreign tax credit should equal your income reported on the 1040. You may want to also call the PR Tax authorities to make sure you file appropriately.

 

[iamwiz82]

Originally posted by: CPA

Originally posted by: Epoman
Hi guys it's me again, one more question.

Do I have to report money that was given to me by my father as a gift/loan?
It was more than $500.

Thanks guys.

No, gifts are not taxable to the recipient, they are taxable to the giver IF over $11000.

$11000 from one person, or total?

 

[EagleKeeper]

Originally posted by: iamwiz82

Originally posted by: CPA

Originally posted by: Epoman
Hi guys it's me again, one more question.

Do I have to report money that was given to me by my father as a gift/loan?
It was more than $500.

Thanks guys.

No, gifts are not taxable to the recipient, they are taxable to the giver IF over $11000.

$11000 from one person, or total?

$11000 Per giver.

They are taxed to the giver, not the recepient.

 

[juiio]

Originally posted by: CPA

Actually the difference between box 1 and box 2a is related to the taxability of the distribution, not whether he had tax taken out. If box 1 is greater, then it is because a certain portion of his distribution was not taxable due to various reasons. Some questions first:

1) When was your grandfather born?

2) Which box is checked in 2b?

3) Is ther an amount in box 4?

4) What exactly was the distribution for?

5) as for why box 12 is empty it may be because your state does not tax benefiary income from certain transactions or the payer did not know what state you file in, so did not determine the state distribution.

Thanks for the help. Here are the answers that you asked for
1) He was born in 1914.

2) Neither of the boxes in 2b are checked.

3) There is an amount in box 4. I asked them to withold a certain percentage for federal taxes, and the total in box 4 is that percent of the value in box 2a.

4) It is from an annuity. There were four beneficiaries: my father, aunt, sister, and myself. It was a totl distribution between the four of us.

5) Box 11 (for state/payer's state number) has my state and a number in it, so my uneducated guess is that they do know my state.

Thanks again for the help, I appreciate it.

 

[richardycc]

I was told that home improvement spending is tax deduction? is it true, is so, how do you deduct it, and can I deduct the home improvement spending from previous yr or the yr before that I "forgot" about?

 

[Yossarian]

I used my car for fewer business miles this year, dropping total biz usage under 50%. turbotax popped up a screen saying that because it was below 50%, I had to declare previous years' excess depreciation as income this year. do you have any details on how that works, or a link where I can read up myself?

 

[EagleKeeper]

Originally posted by: richardycc
I was told that home improvement spending is tax deduction? is it true, is so, how do you deduct it, and can I deduct the home improvement spending from previous yr or the yr before that I "forgot" about?

Sales taxes on major home improvements fall under the sale tax deduction option for the Schedule A for 2004 only. However, you much choose to either use the income tax deduction of the sales tax deduction. You can not use both.

 

[EagleKeeper]

Originally posted by: Yossarian
I used my car for fewer business miles this year, dropping total biz usage under 50%. turbotax popped up a screen saying that because it was below 50%, I had to declare previous years' excess depreciation as income this year. do you have any details on how that works, or a link where I can read up myself?

IRS - FAQ - Transportation

Reduction in business use. To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Any section 179 deduction claimed on the car is included in calculating the excess depreciation. For information on this calculation, see Excess depreciation later in this chapter under Car Used 50% or Less for Business.

80% of the way down the section

Car Used 50% or Less for Business
If you use your car 50% or less for qualified business use (defined earlier under Depreciation Deduction) either in the year the car is placed in service or in a later year, special rules apply. The rules that apply in these two situations are explained in the following paragraphs. (For this purpose, ?car? was defined earlier under Actual Car Expenses and includes certain trucks and vans and electric cars.)

Qualified business use 50% or less in year placed in service. If you use your car 50% or less for qualified business use (defined earlier under Depreciation Deduction) in the year the car is placed in service, the following three special rules apply.
You cannot take the section 179 deduction.

You cannot take the special depreciation allowance.

You must figure depreciation using the straight line method over a 5-year recovery period. You must continue to use the straight line method even if your percentage of business use increases to more than 50% in a later year.


Instead of making the computation yourself, you can use column (c) of Table 4-1 to find the percentage to use.

 

[joelmold]

quick question to help prepare for next year's taxes: i carried a balance on my personal credit card for a business expense this year. this business is a side business that I own/operate in my spare time (i do have a business/resellers license if that matters). income this year will be about $10K. can i deduct my credit card interest related to this expense anywhere on my taxes?

thanks!
joel

 

[EagleKeeper]

Originally posted by: joelmold
quick question to help prepare for next year's taxes: i carried a balance on my personal credit card for a business expense this year. this business is a side business that I own/operate in my spare time (i do have a business/resellers license if that matters). income this year will be about $10K. can i deduct my credit card interest related to this expense anywhere on my taxes?

thanks!
joel

Interest Expense on Schedule C