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

[Zebo]

Originally posted by: CPA

Originally posted by: Vic

Originally posted by: CPA

Originally posted by: SuperTool
Do I have to live in a house to deduct the interest?

No, as long as you don't rent it out. If you rent it out, there are tests that must be passed in order to get the interest deduction on schedule A.

Actually, IIRC, you have to live in the house at least 14 days a year.

Correct, that is part of the tests that must be passed.

Cliffs: easier to get forgiveness than permission

 

[CPA]

Originally posted by: FelixDeKat

Originally posted by: CPA

Originally posted by: FelixDeKat
The claim was that shareholders were induced to purchase securites at an inflated price due to the fraudelent representation of its supposed value by the defendants. The dist was to considered as if it was paid directly by them to us.

From the IRS website:

Court awards and damages. To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Include the following as ordinary income.

....

Compensation for lost wages or lost profits in most cases.

.....



So, it seems that you have a taxable proceed and must include it in ordinary income.

And thats where I would disagree. The original securities were wiped out and are currently worth .0005 per share. So I would think that Im still under water on this. A lost profit would imply that not only did I receive my original capital back but was entitled to something in addition. As it stands, I am still under by $8,000 for qualified amounts and $16,000 total. The rest have been written off as capital losses.

hmmmm, my initial thought would then be that your capital losses would need to be adjusted. But since gains/loses are an income before adjustments item (just like earnings), then it's neither here nor there, just a difference of what line it's reported on..

The test would be, if you had received the fair value when "sold" then would your loss be less? I would say yes, and then your capital loss deduction would be less.

You may want to take this to a more knowledgeable person, though, because the only awards that I see that are not included in income are those related to compensatory damage for injury or sickness.

 

[dirtboy]

I've got a question... I'm self employeed so I can write off my car for work related expenses. In the next year or two I'm planning on replacing my car and getting a new/newer one. I currectly just take mileage.

I'm thinking about taking actual expenses next time around and I'm also thinking about leasing, but I just can't grasp the IRS law on this.

Is it better to take actual expense over mileage? Is it better to buy or lease?

Thanks!!

 

[Homerboy]

SSB may send you something, but it's not necessary since you don't send it 1099s. As long as you can prove it in an audit, then you are clear.

As stated in an above topic of capital losses, you must first offset the loss against any gains. Assuming you had 0 gains for the year, you can only claim $3000 as a loss in the current year. Next year, you can use the remaining $300 to offset any gains, or barring any gains, as a reduction to income.

Assuming gains, you can use all of the $3300 to offset them.

Ok so simply claim it on my returns (with or without SSB forms) and if audited then just have the documentation to back it up (SSB could CERTAINLY provide this).

Time to start warming up that Turbo Tax .exe

 

[CPA]

Originally posted by: Homerboy

SSB may send you something, but it's not necessary since you don't send it 1099s. As long as you can prove it in an audit, then you are clear.

As stated in an above topic of capital losses, you must first offset the loss against any gains. Assuming you had 0 gains for the year, you can only claim $3000 as a loss in the current year. Next year, you can use the remaining $300 to offset any gains, or barring any gains, as a reduction to income.

Assuming gains, you can use all of the $3300 to offset them.

Ok so simply claim it on my returns (with or without SSB forms) and if audited then just have the documentation to back it up (SSB could CERTAINLY provide this).

Time to start warming up that Turbo Tax .exe

Just make sure YOU have documentation. Like the statements showing your purchase and anything you have that shows the dissolution of the company.

 

[EagleKeeper]

Originally posted by: CPA

Originally posted by: EagleKeeper

Originally posted by: CPA

No, as long as you don't rent it out. If you rent it out, there are tests that must be passed in order to get the interest deduction on schedule A.

If the house is used as a rental, the Schedule A interest is not the appropriate place to record this. The interest becomes an expense against the rental income.

This is what I was referring to from IRS website:

"A second home can include any other residence you own, and treat as a second home. You do not have to use the home during the year. However, if you rent it to others, you must also use it as a home during the year for more than the greater of 14 days or 10 percent of the number of days you rent it, for the interest to qualify as home mortgage interest. "

You are treating this as a home mortage interest - where is a house to live in.

I was looking at it from the point as a pure investment rental.

It will depend on what the original intent is.

 

[alkemyst]

Originally posted by: dirtboy
I've got a question... I'm self employeed so I can write off my car for work related expenses. In the next year or two I'm planning on replacing my car and getting a new/newer one. I currectly just take mileage.

I'm thinking about taking actual expenses next time around and I'm also thinking about leasing, but I just can't grasp the IRS law on this.

Is it better to take actual expense over mileage? Is it better to buy or lease?

Thanks!!

I don't know if self-employed or not makes a difference as long as you are using the car for business and not already getting paid for it.

The expense vs mileage and buy vs lease are answered by doing the worksheet of form with your info. Keep in mind also that going to and from work even if self-employed doesn't count also mileage for groceries and the Saturday mall trip either usually....

The more you drive/use your vehicle the more sense a lease makes I believe....I use my vehicle very little for business....maybe 25% of my total mileage due to out of state driving occasionally...if not for those longer trips only 10% maybe would be work-related.

Å

 

[EagleKeeper]

Originally posted by: dirtboy
I've got a question... I'm self employeed so I can write off my car for work related expenses. In the next year or two I'm planning on replacing my car and getting a new/newer one. I currectly just take mileage.

I'm thinking about taking actual expenses next time around and I'm also thinking about leasing, but I just can't grasp the IRS law on this.

Is it better to take actual expense over mileage? Is it better to buy or lease?

Thanks!!

I have always prefered actual expenses over mileage. If you do not drive the vehicle much related to business, the overhead expense of the vehicle will easily exceed the mileage deduction.

The cost of insurance/ fuel and repairs rise much faster the the mileage deduction.

Best bet is to look at the actual numbers and compare.

Once you start a method, that method must be used for the life of the vehicle.

Leasing is an vehicle expense, just like fuel, insurance, etc.
Because you do not own the vehicle, you can not take the mileage anyhow.

Choice of purchase/lease is up to you and your cash flow.

 

[dirtboy]

Originally posted by: EagleKeeper

I have always prefered actual expenses over mileage. If you do not drive the vehicle much related to business, the overhead expense of the vehicle will easily exceed the mileage deduction.

The cost of insurance/ fuel and repairs rise much faster the the mileage deduction.

Best bet is to look at the actual numbers and compare.

Once you start a method, that method must be used for the life of the vehicle.

Leasing is an vehicle expense, just like fuel, insurance, etc.
Because you do not own the vehicle, you can not take the mileage anyhow.

Choice of purchase/lease is up to you and your cash flow.

I use my vehicle about 80% of the time for business. When I started working for myself, it wasn't my intent to stay that way, so I just kept track of mileage and nothing else.

That is why I am curious to see what other people do. Purchase or lease, I make enough money to pay for either, so that isn't the issue for me. I wonder which will give me the most bang for my dollar.

My dummy interpretation of the tax law says to me that I can only lease so much of a car... that I don't understand. I would assume that since I use my car 80% of the time for business, that I can write off 80% of my lease, gas, tires, oil, etc, etc??

The question is, can I get away with leasing something baller or can I only go so high on the value of the car or the lease payment?

 

[alkemyst]

Originally posted by: dirtboy
I use my vehicle about 80% of the time for business. When I started working for myself, it wasn't my intent to stay that way, so I just kept track of mileage and nothing else.

That is why I am curious to see what other people do. Purchase or lease, I make enough money to pay for either, so that isn't the issue for me. I wonder which will give me the most bang for my dollar.

My dummy interpretation of the tax law says to me that I can only lease so much of a car... that I don't understand. I would assume that since I use my car 80% of the time for business, that I can write off 80% of my lease, gas, tires, oil, etc, etc??

The question is, can I get away with leasing something baller or can I only go so high on the value of the car or the lease payment?

Thing is you can only deduct as much as your income allows. That is why you need to sort of work it out. If you only make $10k a year, getting a $2000 per month lease is going to not do so well....if you are pulling in $120k+ it will help you a lot more. You dont get back more than you pay in.

Å

 

[dirtboy]

Originally posted by: alkemyst

Thing is you can only deduct as much as your income allows. That is why you need to sort of work it out. If you only make $10k a year, getting a $2000 per month lease is going to not do so well....if you are pulling in $120k+ it will help you a lot more. You dont get back more than you pay in.

Å

Sweet!! If I make 10k a year I wouldn't get qualified for a $2k/mo lease either.

 

[DevilsAdvocate]

Would I have to report any monies that I obtained while pimping? It is mostly cash.

What should I list as my profession? I thought "Human Resources" was appropos.

Man, pimpin' ain't easy.

 

[cchen]

Originally posted by: EagleKeeper

Originally posted by: cchen
My mom made about 48k, I made about 10k. I'm paying all of my college tuition myself. What of the following options would benefit us the most financially?

1. file as dependent of mother, she claims deduction of 4k for "tuition and fees deduction"
2. file as dependent of mother, she claims lifetime learning credit of 2k
3. file as independent, i claim lifetime learning credit
4. file as independent, i claim deduction of 4k

Tax S/W will easily allow you to perform what ifs

Set up two scenerios.

a) Your mother w/ you and play with #1,2 - record the best option
b) You as an indendent - record the best option


Then choose the number that makes the most sense to the overall household.

The Hope deduction for the $4k (tuition?) will have a greater impact on reducing the bottom line (50% = $2K) than the Lifetime Credit(20% = $800).

Normally, the larger amount that can be removed from the higher income level, the better benefit to the bottom line

ie. The tax rate on $48K is higher than that on $10K - therefore either type of reduction should be worth more to the $48K income

I'm a little confused... according to this document I the lifetime learning credit is 2k? My tuition is about 12k after financial aid and grants.

 

[EagleKeeper]

Originally posted by: DevilsAdvocate
Would I have to report any monies that I obtained while pimping? It is mostly cash.

What should I list as my profession? I thought "Human Resources" was appropos.

Man, pimpin' ain't easy.

What monies do you get that is not cash. Who provides you with a cheque?

 

[EagleKeeper]

Originally posted by: cchen

Originally posted by: EagleKeeper

Originally posted by: cchen
My mom made about 48k, I made about 10k. I'm paying all of my college tuition myself. What of the following options would benefit us the most financially?

1. file as dependent of mother, she claims deduction of 4k for "tuition and fees deduction"
2. file as dependent of mother, she claims lifetime learning credit of 2k
3. file as independent, i claim lifetime learning credit
4. file as independent, i claim deduction of 4k

Tax S/W will easily allow you to perform what ifs

Set up two scenerios.

a) Your mother w/ you and play with #1,2 - record the best option
b) You as an indendent - record the best option


Then choose the number that makes the most sense to the overall household.

The Hope deduction for the $4k (tuition?) will have a greater impact on reducing the bottom line (50% = $2K) than the Lifetime Credit(20% = $800).

Normally, the larger amount that can be removed from the higher income level, the better benefit to the bottom line

ie. The tax rate on $48K is higher than that on $10K - therefore either type of reduction should be worth more to the $48K income

I'm a little confused... according to this document I the lifetime learning credit is 2k? My tuition is about 12k after financial aid and grants.

Difference between the expense and credit. 10K expenses @ 20% = 2K credit.

You had previously not stated what the tuition was. I was using the 4K figure that you had provided as the tuition cost.

At $12K expense for tuition, your mother is the one that should take it under the Hope option.

You can not use it all, and it can not be broken apart.

 

[DevilsAdvocate]

Originally posted by: EagleKeeper

Originally posted by: DevilsAdvocate Would I have to report any monies that I obtained while pimping? It is mostly cash. What should I list as my profession? I thought "Human Resources" was appropos. Man, pimpin' ain't easy.

What monies do you get that is not cash. Who provides you with a cheque?

You have never paid for a whore on credit? Wow... You must be from one of those places where they spell check with "que."

 

[EagleKeeper]

Originally posted by: DevilsAdvocate

Originally posted by: EagleKeeper

Originally posted by: DevilsAdvocate Would I have to report any monies that I obtained while pimping? It is mostly cash. What should I list as my profession? I thought "Human Resources" was appropos. Man, pimpin' ain't easy.

What monies do you get that is not cash. Who provides you with a cheque?

You have never paid for a whore on credit? Wow... You must be from one of those places where they spell check with "que."

You must be from one of those places where they spell check with "que."

Was just working with a Brit - forgot how to type.

You have never paid for a whore on credit?

I was raised to never use credit on a disposable item. Cash only.

 

[alkemyst]

Originally posted by: EagleKeeper
I was raised to never use credit on a disposable item. Cash only.

Sort of unrelated but why do they still teach that? If you pay your bill monthly you now have a trackable history of payments....now Debit Cards work just as well of course.

In business, you use cash for something makes bookkeeping harder in my opinion.

Å

 

[cchen]

Originally posted by: EagleKeeper

Originally posted by: cchen

Originally posted by: EagleKeeper

Originally posted by: cchen
My mom made about 48k, I made about 10k. I'm paying all of my college tuition myself. What of the following options would benefit us the most financially?

1. file as dependent of mother, she claims deduction of 4k for "tuition and fees deduction"
2. file as dependent of mother, she claims lifetime learning credit of 2k
3. file as independent, i claim lifetime learning credit
4. file as independent, i claim deduction of 4k

Tax S/W will easily allow you to perform what ifs

Set up two scenerios.

a) Your mother w/ you and play with #1,2 - record the best option
b) You as an indendent - record the best option


Then choose the number that makes the most sense to the overall household.

The Hope deduction for the $4k (tuition?) will have a greater impact on reducing the bottom line (50% = $2K) than the Lifetime Credit(20% = $800).

Normally, the larger amount that can be removed from the higher income level, the better benefit to the bottom line

ie. The tax rate on $48K is higher than that on $10K - therefore either type of reduction should be worth more to the $48K income

I'm a little confused... according to this document I the lifetime learning credit is 2k? My tuition is about 12k after financial aid and grants.

Difference between the expense and credit. 10K expenses @ 20% = 2K credit.

You had previously not stated what the tuition was. I was using the 4K figure that you had provided as the tuition cost.

At $12K expense for tuition, your mother is the one that should take it under the Hope option.

You can not use it all, and it can not be broken apart.

Why do you say that I cannot use it at all? The document says that I can (meaning either my mother or me chooses to claim it). The 4k figure I got was from "Tuition and fees Deduction" on page 28 of the document. It says that this is taken as a deduction rather than a credit

 

[CoolTech]

I did not file federal taxes last year cause I read somewhere that you did don't have to if you make less than a certain amount, I made 2288 in 2002 and 3.58 fed tax was withheld, was I right in not filing?

 

[Bleep]

 

[Bleep]

"Thats right but you better keep a journal/log of your profit intent (who you meet with, work done, business plan, etc) or it will be disallowed under audit."

This is also untrue. You do not only know what you are speaking about but giving bad advice at the same time, your other statement regarding the irs being notlegal was uncalled for and of no interest to anyone here.
I have been in business all my life and have done many capital investiments and either taking them off one time or depreciating then out over time. I or no one else has to keep a journal of people they talk to or things they think. There are many companies that never have made a profit but are still operating even after 10 or more more years. No business plan is required by the IRS, you need to study the code just a little more and quit putting out information that has no truth.
You must work for the IRS that imposes scare tactics on the small income person to try and wring every last dollar out of them that you can.

Bleep

 

[Zebo]

Everything I've read, my accountant and this site verifies just what I said. You must prove intent to seperate business from a hobby. How you do this?>>>
Text

Following is a Four-Point Quick Check list for assessing whether your business would be deemed a hobby or a legitimate business.

-I work my business regularly. This work should be at least 45 minutes per day at least 4 out of 5 days in the week. Alternatively, you could work at least one full day per week in your business.
-I document all my business activity. This means you should keep an appointment book showing all your business activities. You should keep a mileage log for business miles and you should keep your receipts filed and well organized.
-I use my home office exclusively for business. This means you should protect your home office deductions by only using it for business. The only exception to exclusive use is inventory storage. You are allowed to deduct the portion of a space where you keep your inventory.
-I keep a separate set of books and maintain good tax records. All serious business professionals need to keep records. You are in business to make money ? you simply won?t know how you?re doing unless you keep good records. Another advantage to this is that you can see areas where you can change what you?re spending and/or focus on the products that are bringing in the most revenue.

Perhaps universally bad advice? Best to be safe IMO.

Another link

Making the transition

Many of the things you should do to convert your hobby into a business dovetail nicely with what the IRS may look at when determining that you have "a business intent." (For more tips on how to turn your hobby into a business, see this article.)

Here are five areas on which to focus when ramping up your hobby into a business:

Give the business your time, and keep track of that time. We all know this instinctively: Something that takes up hours of your time every weekend and many weeknights is more likely to be a business than something that you approach once a month. Give your activity the time and attention a profit-seeking venture deserves.

Pay some attention to your record-keeping. Business-like records are going to help you. Keeping track of your expenses and receipts as you incur them, entering those records into a computer program or paper log, tracking your business mileage ? this is the kind of record-keeping that helps build a case that you are indeed in business.

Know the history of startups like yours. Losses are the norm in the initial years for many types of business. You are more likely to survive any questions about losses if your track record is consistent with those of other businesses in your industry. A venture that is moving toward profitability is also more likely to be looked upon favorably than one that just runs up increasing losses.

Don't be afraid to turn to outsiders. Spending money on consultants, attorneys, tax professionals and other outside experts helps establish that you're running a business rather than just doing something for fun.

Open up separate business checking and credit-card accounts. It's possible to use your personal checking account and credit card to track all the expenses and income of an unincorporated sole proprietorship. In fact, I have several clients in my tax business who do exactly that.

But it's easier to keep track of things ? and to show that you do have a separate venture ? if you use separate accounts for your business venture.

 

[BrunoPuntzJones]

Unfortunately, I am a tax accountant, my specialty :disgust:

Hopefully not for much longer anyway. It's gearing up for tax season and that means business audits and returns. I'll answer what I can when there is time. I don't really get to do much outside of work :|

I also know state stuff pretty well (generally speaking) for TX and AR.

If you really want to do yourself a favor, try to find a copy of the US Master Tax Guide which CCH puts out. Infinately easier than actual IRS publications to understand. Pretty much any CPA firm uses it for tax work.

Originally posted by: CoolTech
I did not file federal taxes last year cause I read somewhere that you did don't have to if you make less than a certain amount, I made 2288 in 2002 and 3.58 fed tax was withheld, was I right in not filing?

You're fine, really only need to do a return unless you're making close to $8k. Some exceptions, but meh, I wouldn't worry about it for making 2288.

If there is anyone who made under $15k and put $2k away in a 401k or qualified retirement plan, you get a whopping $1000 credit. Doubt there are many people who can use it (can't be a dependent), but it's a helluva credit for those who do. It phases out as you approach $50k joint, 25K single.

Here's the table: Link

Hopefully someone can use it. At our firm no one even knew about it until someone asked. Can go back 2 years as well.

Link to the credit

 

[jmcoreymv]

Originally posted by: BrunoPuntzJones
Unfortunately, I am a tax accountant, my specialty :disgust:

Hopefully not for much longer anyway. It's gearing up for tax season and that means business audits and returns. I'll answer what I can when there is time. I don't really get to do much outside of work :|

I also know state stuff pretty well (generally speaking) for TX and AR.

If you really want to do yourself a favor, try to find a copy of the US Master Tax Guide which CCH puts out. Infinately easier than actual IRS publications to understand. Pretty much any CPA firm uses it for tax work.

Originally posted by: CoolTech
I did not file federal taxes last year cause I read somewhere that you did don't have to if you make less than a certain amount, I made 2288 in 2002 and 3.58 fed tax was withheld, was I right in not filing?

You're fine, really only need to do a return unless you're making close to $8k. Some exceptions, but meh, I wouldn't worry about it for making 2288.

If there is anyone who made under $15k and put $2k away in a 401k or qualified retirement plan, you get a whopping $1000 credit. Doubt there are many people who can use it (can't be a dependent), but it's a helluva credit for those who do. It phases out as you approach $50k joint, 25K single.

Here's the table: Link

Hopefully someone can use it. At our firm no one even knew about it until someone asked. Can go back 2 years as well.

Whats that credit called, I may be able to use it.