CPA's Annual Tax Time Help - Filing Day is over. This thread can be unstickied.

[Crucial]

I started a small business last year with a partner and am trying to plow through all the tax mumbo jumbo. I also had a job for the first 3 months of 2003 and collected unemployment for several months. I am in the process of filling out the 1065 and schedule k1 forms for the partnership. I am unsure if these are all the forms I need or even how to fill them out. The instructions are helpful but there are clarifications needed that they don't clear up.

I also have no idea what to file for my personal use. I made about $28,000 between my job, unemployment and the business last year and was married in feb 2003. I am unsure what would be the best forms to fill out for myself and my wife and whether or not we should file jointly or seperately. I was always used to filing the 1040ez forms before this year so it is all new to me.

I am expecting to pay upwards of $3000 to uncle Sam and want to minimize what I owe. I am debating on whether or not to find a professional to do it all but I have no idea who to go to or how to find a reliable one.

 

[CPA]

Originally posted by: csaddict
I started a small business last year with a partner and am trying to plow through all the tax mumbo jumbo. I also had a job for the first 3 months of 2003 and collected unemployment for several months. I am in the process of filling out the 1065 and schedule k1 forms for the partnership. I am unsure if these are all the forms I need or even how to fill them out. The instructions are helpful but there are clarifications needed that they don't clear up.

I also have no idea what to file for my personal use. I made about $28,000 between my job, unemployment and the business last year and was married in feb 2003. I am unsure what would be the best forms to fill out for myself and my wife and whether or not we should file jointly or seperately. I was always used to filing the 1040ez forms before this year so it is all new to me.

I am expecting to pay upwards of $3000 to uncle Sam and want to minimize what I owe. I am debating on whether or not to find a professional to do it all but I have no idea who to go to or how to find a reliable one.

CS, not sure what your actual question is, but I think you are maybe stressing over the possible complexity of your filing. My professional opinion, based on the issues you provided, would be that if you're not fully comfortable in what you are doing, seek assistance of a CPA or tax professional. Just look in the yellow pages and start calling around and asking questions about their qualifications and rates.

One caveat: You have about 16 days to file, many people have waited, like you, until the last minute to file, so you *may* have to file an extension as your local pros are probably getting booked up with filers.

If you think you can do this yourself, then purchase tax software that will be able to handle both your personal taxes and business taxes. Try taxact.com, taxcut or turbotax. No need having to read all those instructions, when the tax software can lead you through step by step.

 

[alkemyst]

First I'd go through this whole thread and try to get ideas....being you are now working for yourself you get more freedom of writeoffs...the problem is there really isn't a list and even if there was they wouldn't necessarily be automatic.

Next make sure all the 1099-'s are in if your are getting them, you have a 1 in 7 chance roughly of being audited once you are a small business, any kinds of updates or revisions throws the spot light on you.

1040 is your tax form, maybe a 1040A....definitely not EZ

Schedule C (profit or loss), Form 4562 (depreciation), Form 8829 (business use of home), Form 4684 (casualties and theft), possibly 8863 (lifetime learning), form 8885 (health coverage)...perhaps more for you...this is what I have here being put together. I am also using TurboTax Premier or whatever the online small business package is called to make for a nice neat return and further keep the eyes away. It's doubtful if I got audited they'd find anything wrong, but speaking to other business owners it's time consuming and a very uneasy feeling.

You better get to work, a small business return takes a while to do, there is a lot of thinking about things and adding up receipts (things like quickbooks/quiken make it easier).

Å

 

[Crucial]

We have been using Quickbooks since we started so any reports or info that is needed is readily available.

I had planned on getting the taxes straightened out but time got away from me. When I had looked at it months ago it seemed like it was pretty straightforward but as I get deeper into it I am confused on a few things.

What are the beneifts of filing jointly or seperate for a married couple? How would one choose which to do?

 

[CPA]

Originally posted by: csaddict
We have been using Quickbooks since we started so any reports or info that is needed is readily available.

I had planned on getting the taxes straightened out but time got away from me. When I had looked at it months ago it seemed like it was pretty straightforward but as I get deeper into it I am confused on a few things.

What are the beneifts of filing jointly or seperate for a married couple? How would one choose which to do?

It generally doesn't matter anymore, particularly after the Bush tax changes. The only way to choose would be to perform both and see what comes out better. Just be careful, because it can get tricky splitting deductions and such.

 

[alkemyst]

Originally posted by: CPA

Originally posted by: csaddict
We have been using Quickbooks since we started so any reports or info that is needed is readily available.

I had planned on getting the taxes straightened out but time got away from me. When I had looked at it months ago it seemed like it was pretty straightforward but as I get deeper into it I am confused on a few things.

What are the beneifts of filing jointly or seperate for a married couple? How would one choose which to do?

It generally doesn't matter anymore, particularly after the Bush tax changes. The only way to choose would be to perform both and see what comes out better. Just be careful, because it can get tricky splitting deductions and such.

You also loose some deductions if you elect to file separately (educational especially)...also I believe the law still is written so one can't take a standard deduction if the other itemizes.

In my post above I mentioned schedule C and some forms that may not apply to your situation, but may be helpful to look at things they outline to get ideas. I read a ton of forms and publications that didn't apply to my situation but enlightened be to deductions I didn't think of.

Å

 

[anno]

I found another question..

if you file form 1040, you report any state income tax refund on line 10, and then you report state taxes paid on the schedule A.

we don't have enough deductions to make it worth itemizing this year.. first time since 1981 that's happened.. aging cars and that nifty refinance, I guess, it's odd. but.. since I'm goin' with the standard deduction, I opted to fall back to the 1040A..

1040A doesn't appear to ask for that state tax refund anywhere.. well.. it could be that I'm just overlooking it, I am kinda form-shocked by now..

that can't be right.. if it's income for some people it must be income for all people.. where the heck do I put that?

thank you again.

 

[anno]

nevermind, it looks like you can't report 'em on the 1040A and I'm stuck with the 1040.

 

[Parrotheader]

I think I have pretty much everything in order except for one loose end I want to make sure I tie up correctly as TaxCut isn't doing a good job of helping me answer the question (probably already covered, but this thread is mucho long now.)

We itemize and my wife's a teacher who spent well over the $250 line item deduction for educator expenses allowed on the 1040. Am I correct in assuming we can deduct the remaining expenses on line 20 of Schedule A? And do we need to attach Form 2106(-ez) for something like that? I need to tally up the receipts again because I originally did all this a couple months ago, but I think her total expenses were just a bit over $500.

 

[EagleKeeper]

Originally posted by: anno
I found another question..

if you file form 1040, you report any state income tax refund on line 10, and then you report state taxes paid on the schedule A.

we don't have enough deductions to make it worth itemizing this year.. first time since 1981 that's happened.. aging cars and that nifty refinance, I guess, it's odd. but.. since I'm goin' with the standard deduction, I opted to fall back to the 1040A..

1040A doesn't appear to ask for that state tax refund anywhere.. well.. it could be that I'm just overlooking it, I am kinda form-shocked by now..

that can't be right.. if it's income for some people it must be income for all people.. where the heck do I put that?

thank you again.

The State Tax refund does not have to be claimed as income unless you itemized the year the the refund was for.

The State tax refund will be identified on a W2-G. For the 1040A, it can be classified as a W2 income.

 

[EagleKeeper]

Originally posted by: AntMan530
taxes, when are they due? Im in California. I've done mine, but I'm curious what the last day is.

Thanks

In general the Federal taxes are due on 15 April. The states try to follow the Fed guidelines

 

[alkemyst]

anyone know the best way to set up a tax payment plan....I am not working and taking $2,000 out of the bank to just pay a tax bill isn't a smart move to me. I was going to purchase a house last year and when that didn't happen it skewed my tax deductions (I try to not have a big refund).

Unless I get over creative I am looking at owing $2000 or so (I am 1099/self employed), I don't want to start really stretching the truth on my deductables...I don't think that it's ethical even if most small businesses do so (for my income I am only claiming less than half the average deductions according to turbotax.com).

I guess it's some minimum fee to set up and 5% interest each month, I plan to pay it off as soon as I have a new job, I want to be able to choose the best job for me and not have to rush into one because the well is running dry .

Things I have claimed:
office space, car, computer, office furniture, internet, repairs to car and office, tax prep from last year, digital camera (small percentage only), 2nd phone, a couple trade subscriptions/fees....

A $1000 contribution to an IRA could save me $537...which I'd like to do as it would more or less still keep my own money in the bank.

Thanks

Å

 

[EagleKeeper]

Uncle has a form to setup a payment plan
IRS - FAQ - Filing an Offer in Compromise

Hope this helps.

 

[alkemyst]

Originally posted by: EagleKeeper
Uncle has a form to setup a payment plan
IRS - FAQ - Filing an Offer in Compromise

Hope this helps.

I will keep that one in mind as a last resort...this form is the one if you can not successfully work out a payment plan (I was looking for it as well previously to see how they did this).

Thanks

Å

 

[EagleKeeper]

Originally posted by: alkemyst

Originally posted by: EagleKeeper
Uncle has a form to setup a payment plan
IRS - FAQ - Filing an Offer in Compromise

Hope this helps.

I will keep that one in mind as a last resort...this form is the one if you can not successfully work out a payment plan (I was looking for it as well previously to see how they did this).

Thanks

Å

From TaxCut Help

What If You Owe The IRS, But Can't Pay?
If you find yourself in that unenviable position, you should still file a return. That protects you from the late-filing penalty that otherwise would keep digging you deeper into a hole. That penalty mounts up at a rate of 5% of what you owe per month. You avoid that penalty by sending in your return, even if you don't enclose a check for the balance due.

Attach to your tax return a Form 9465?Installment Agreement Request?asking the IRS to set up a monthly payment plan to pay off what you owe. That's not as unusual as you might imagine: About 2.5 million taxpayers are currently paying off their bills under such an arrangement and recently the IRS made it easier to qualify. In the past, before the IRS would okay an installment plan, the agency demanded a look at your finances?your assets, liabilities, cash flow and so on?so it could decide how much you could afford to pay. That's no longer required in cases where the amount owed is under $25,000 and the proposed payment plan doesn't stretch over more than five years.

Don't think the IRS is a patsy, though. You may be better off if you can borrow the money to pay your bill, rather than go on an installment plan which means, effectively, borrowing from the IRS. First of all, the IRS now charges a $43 fee to set up an installment payment plan. The IRS interest rate on late payments was 4% for the third quarter of 2003 and can change quarterly. That might not sound bad, but that's not all you have to pay, either. There's also late-payment penalty of 1/4 of 1% a month in 2002. The 4% interest rate plus 1/4 of 1% a month adds up to the equivalent of 7% a year. Of course, that's a heck of a lot better than most credit cards.

If you need an installment agreement, TaxCut will generate the Form 9465 request form.

 

[EagleKeeper]

Originally posted by: alkemyst

Originally posted by: EagleKeeper
Uncle has a form to setup a payment plan
IRS - FAQ - Filing an Offer in Compromise

Hope this helps.

I will keep that one in mind as a last resort...this form is the one if you can not successfully work out a payment plan (I was looking for it as well previously to see how they did this).

Thanks

Å

From TaxCut Help

What If You Owe The IRS, But Can't Pay?
If you find yourself in that unenviable position, you should still file a return. That protects you from the late-filing penalty that otherwise would keep digging you deeper into a hole. That penalty mounts up at a rate of 5% of what you owe per month. You avoid that penalty by sending in your return, even if you don't enclose a check for the balance due.

Attach to your tax return a Form 9465?Installment Agreement Request?asking the IRS to set up a monthly payment plan to pay off what you owe. That's not as unusual as you might imagine: About 2.5 million taxpayers are currently paying off their bills under such an arrangement and recently the IRS made it easier to qualify. In the past, before the IRS would okay an installment plan, the agency demanded a look at your finances?your assets, liabilities, cash flow and so on?so it could decide how much you could afford to pay. That's no longer required in cases where the amount owed is under $25,000 and the proposed payment plan doesn't stretch over more than five years.

Don't think the IRS is a patsy, though. You may be better off if you can borrow the money to pay your bill, rather than go on an installment plan which means, effectively, borrowing from the IRS. First of all, the IRS now charges a $43 fee to set up an installment payment plan. The IRS interest rate on late payments was 4% for the third quarter of 2003 and can change quarterly. That might not sound bad, but that's not all you have to pay, either. There's also late-payment penalty of 1/4 of 1% a month in 2002. The 4% interest rate plus 1/4 of 1% a month adds up to the equivalent of 7% a year. Of course, that's a heck of a lot better than most credit cards.

If you need an installment agreement, TaxCut will generate the Form 9465 request form.

 

[oldfart]

Nice idea to do this....

My wife had a little home based business selling scrapbooking supplies (Creative Memories). She had $2510 in inventory left @ the end of 2002 (Sched C line 41). She didn't do anything with the business at all in 2003. No new inventory, no sales, nothing has changed from 2002. She has closed the business. She is stuck with that inventory. Can that be written off as a loss of any sort? What do we do with Sched C this year?

 

[alkemyst]

Originally posted by: EagleKeeper
Attach to your tax return a Form 9465?Installment Agreement Request

Thanks, that's the one...i have no idea why I couldn't find it.

Å

 

[fjorner]

I got a tax bill for $600 from the feds and $400 from the state.

Is it true that I could send $1000 to my Traditional IRA instead of paying up?

 

[alkemyst]

Originally posted by: fjorner
I got a tax bill for $600 from the feds and $400 from the state.

Is it true that I could send $1000 to my Traditional IRA instead of paying up?

It's not one to one....my $1000 only buys me a $537 savings from the feds. I am not sure on the state as florida doesn't tax income.

Still it's better than that amount being out of pocket.

Å

 

[abc]

question, if i sell a stock i possess and through this realize a capital loss of 3k (amt not important, could be $1 or $3001.00) but I dont need to use this loss for deduction, can i carry over EVERY penny until a find a tax year in the future, that I can use it?

 

[alkemyst]

Originally posted by: abc
question, if i sell a stock i possess and through this realize a capital loss of 3k (amt not important, could be $1 or $3001.00) but I dont need to use this loss for deduction, can i carry over EVERY penny until a find a tax year in the future, that I can use it?

The way it works (outside of any time period limitations which I don't think there are) is you need to factor it in each year. If you don't get a 'benefit' you can move it forward. You have to apply what you can though I believe, however, they don't expect you to waste any of it.

Also make sure you are computing the loss correctly, many mess that up. You need to know your basis and you cannot get that or less back.

For example you buy a stock at $6000, it goes to $10,000...you pay the gains....and it keep doing so at is steadily rises the next 3 years to $30k lets say...right after you pay out gains for that tax year the stock plummets to $5,000 and you sell as it's apparent the company is folding. Your loss is only $1,000 in this case, not $25,000. (you may have paid way more in taxes on the gains and if in a payment plan through the IRS may still have to pay gains for years to come)....I know a guy that was given stock that ballooned to about $350k during the dot com bloom. Instead of cashing out he kept the investment and set up a payment plan with the IRS to pay the gains (I think the gains were more than he netted in income that year)...it tanked and he was still paying on it (maybe still) for about 4 years after. He had no write off persay since it was a gift and not tied into his job or anything (I don't know the full details). That really sucks.

Å

 

[Crucial]

Just wanted to say thanks for the guidance.

 

[CPA]

Originally posted by: alkemyst

Originally posted by: fjorner
I got a tax bill for $600 from the feds and $400 from the state.

Is it true that I could send $1000 to my Traditional IRA instead of paying up?

It's not one to one....my $1000 only buys me a $537 savings from the feds. I am not sure on the state as florida doesn't tax income.

Still it's better than that amount being out of pocket.

Å

Also, make sure you are even allowed to take the deduction. There are requirements.

 

[bleeb]

Does being a sole proprietor mean I have to still be registered with the state (oregon) to get my EIN??