gar1976

Build up your post count in another thread!

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

Ribijk122

Hey ,
I also have been thinking about buying items then marking them up for sale on ebay. I am sorry to have to ask this again but i didnt wuite understand the reply to the other post. Can i just file my income from it on my personal tax returns and if i can witch section would i use to note this on the state/federal tax forms. Hehe its not that i dont wanna pay tax its that i dont now how too!!!!! hehehehe

mused76

hi taxman. i have some bonds that my grandparents bought for me many years ago. my question is i know that there are taxes related to these bonds if i cash them which sucks. what's the best way to make sure i get the lowest amount of taxes taken out of my bonds. how do i file my taxes if i cash these bonds with the receipt the bank gives me? is it possible for the band to take the taxes directly out as i cash the bonds to save me the hassle of filing taxes and claiming the bonds? thanks in advance!

pterrier

I am starting a small home-based business that buys and resells merchandise on an extremely small scale. On my startup inventory purchases can I categorize that as expense on part V of schedule C, or do I have to use the inventory section.

My main question is if I spend $3000 starting my business and do not have any profit by the end of the year, can I show a $3000 loss?

Thanks.

Agang579

Gar, thanks for taking your time for this post. Maybe you can clear up something for me. My wife and I file a joint return. We each claim no exemptions on our withholdings so as to have the max withheld. I do the same for my Navy retirement pension. We do not itemize and we take the standard exemption. I have one dependent chlid under 18. My AGI is 65K. Bottom line is I still end up paying a significant amount of tax (600-1200) over and above what was withheld. Is this normal?

gar1976

I'm going to chalk this one up to "can't read, and I'm too tired to translate."

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

gar1976

Depends on the bonds. If they pay interest over time, then you'd be getting a 1099 and paying interest every year.

I'd need to know the type of bond, some of the goverment bonds have some weird quirks to them.

You can ask your financial institution to withhold some, but I don't see why you'd want them to.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

gar1976

If you don't have much inventory, I'd probably just expense it all as a purchase in the cost of sales section. Otherwise, you'd need to calculate out your purchases if you decide to record inventory.

Cost of sales + beginning inventory - ending inventory = purchases, IIRC.

And if the $3,000 is for legitimate business expenses, probably. Don't forget, there's other costs as well, such as business use of the home and auto milage.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

gar1976

I believe this was answered in another post because my lazy ass was busy.

Don't itemize? There's ways around that, such as bunching your expenses (property taxes, donations, state taxes) so that every other year you can itemize and not lose out on some deductions.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

Agang579

That sounds interesting. I don't have state tax, so the mortgage interest and property taxes, & donations would be it. How would I go about bunching these? Thanks for your reply!

gar1976

Here in OR, we have an option of paying all our property taxes at once in November, or paying 1/3, 1/3, 1/3 spread over a few months. The idea is to pay 1/3 in one year, and 2/3 in the second. In the second year, you then pay your property taxes in full that November, so you wind up with 5/3rds of a deduction in one year. You then make all of you charitable contributions in the second year, and hope you can get over the standard deduction hump.

Also, with the new tax law, you are allowed to deduct an estimated amount of state sales tax based on your income and state of residence. That, combined with a mortgage, should get you over the hump. Heck, even without that your mortgage interest should get you close with property taxes.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

Agang579

Thanks for the info Gar, I'll look into that!

lightsey

here's one (i hope it hasnt been talked about already)....concerning states that have no income tax. im sure that money must be made up somewhere, so what's the compensation? ive heard that property taxes higher, but how does that affect someone renting an apartment? (completely in the dark on this one)

Captain Nemo

A state can compensate for the lack of income tax revenue by increasing other taxes, such as sales tax. Michigan is a prime example of this. A while back they made a big deal on how they were reducing the income tax rate, but at the same time they increased the sales tax rate.

pook

This is a 401(k) question. I want to max out my 401(k) for 2005. I'm told the max contribution is $14,000. Is this correct?

What happens if you contribute more?

gar1976

Sounds about right, I'd need to check for '05.

You're forced to withdraw the contribution if you exceed the limit, and if you don't, there's a fairly hefty penalty. Screwing around with your retirement funds is NOT something the government wants you to do.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

pook

What does that mean, "You're forced to withdraw the contribution?" So if I put too much money in then I get the balance back (and, I'm guessing, must pay taxes on that).

gar1976

They mail you a check.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

Phant84

ok, i have a question for you.
i kinda forgot about taxes (i really did, not "forgot") the first year i was supposed to do them. how would i go about fixing it?

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Phant

Irrationality is the square root of all evil

Captain Nemo

Phant84, how far back was this first year?

Stompy

For 2003, I received a check for a few grand... and what I wanted to do was set my dependents high enough so that I didn't get ANYTHING back for 2004. A few grand split across 12 months is a few extra hundred I could use right away instead of waiting a year. I own a house, so I have a lot to write off when it comes to interest/property taxes.

So, the guy I had prepare my taxes suggested I raise my dependents to 2 to kinda balance it all out.

I know NOTHING about taxes, but what I did was briefly went over last year's forms with this year's numbers... and it appears by entering 2 dependents that I'm getting even MORE back. That doesn't seem right...

Now, I'm assuming I did the form wrong, but how does one generally work something like this out? Would setting it to 2 balance it all out?

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I love lamp.

gar1976

You're not calculating the taxes like you've got two dependents, you're calculating the withholdings like you do.

More dependents = less withheld, so you get less back on 4/15.

If you want to pay in the least amount possible, you really only need to pay in 100% of the prior year tax to be "penalty proof." You can then pay in as needed on 4/15 should anything change.

There's an art to this, so check with your accountant.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

gar1976

File amended returns, federal form 1040X. Or just fill out originals and file those, the IRS website might have old copies in PDF. I'd say either way would work at this point.

Same with your state, if you have state income tax.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

Stompy

Damn, come to think of it, I didn't file for '96 (or '97, don't remember)! There's probably a few extra hundred bucks I can get back! I worked in fast food at the time, so I can get a good amount of all I made back

I'm assuming I'd have to go to my old employer to get my tax info from that time period?

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I love lamp.

BonesCPA

Too late. The IRS and most states do not give refunds beyond three years of the original due date of the return. Assuming an April 15th due date, at this point the only years you can amend (or originally filed) and get money back are 2001, 2002 and 2003. If you owe money on a nonfiled year, their is no statute of limitations in order for them to collect the amount due. Generally, if a return is filed and an error was made but undetected by the taxing agency, they only have three years from the due date of the return to adjust you return and request the additional funds. If an amount is owed to a taxing agency, and a return has been filed, in most cases they have ten years to collect the amount due.

Bottom line, you have three years to get money back, they have much longer to collect money from you.

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Back into hibernation.

gar1976

If he only worked part time in food, his income might not have been high enough to require filing, and the IRS just didn't bother. They might still have his amount on record, though. I'd say it wouldn't hurt to ask, but you might dig around your old records first to confirm this.

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

Phant84

it was for 2003. are there going to be any fines that i should be looking forward to?

thank you so much for your help

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Phant

Irrationality is the square root of all evil

LLL2

My question is when kinda an payroll tax thing...


When I fillling out my W2(?) at a new job it had how many claims do you have,Some people say claim myself and you get more money on the pay day,other people say don't claim anyone and less money to pay at the end of the year ,or more money you get back.

I guess my question is what is best way to keep my money.Man,i hope this makes sense.

braisler

I have a question regarding allowable medical expense for deduction on our taxes. My wife has a subluxed (sp?) rib that she has been seeing a chiropractor for over the past two years. One of the possible therapies that was suggested to assist her recovery is hydrotherapy. I have heard from other friends that if you can demonstrate medical neccessity, you can deduct the cost (some or all) of a home whirlpool spa for hydrotherapy.

Do you know if this is the case? If so, what is needed to demonstrate medical need or neccessity? Is it as simple as a doctor's note or prescription? Are there any limits or requirements on the type or cost of spa? We are looking into it, but it looks like it will cost us in the neighborhood of $6K to have one installed at our house.

Thanks in advance.

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You do not really understand something unless you can explain it to your grandmother.
- Albert Einstein
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alien

I guess I'll pipe in here and ask my question. Got married in March '04 and changed my W-4 immediately to married status. My wife, however, just now changed her w-4 to reflect her married status. I claim zero dependents (yearh, I know interest free loan to Uncle Sam) and she claims herself.

We both make roughly the same amount of green (~70k/year a piece). How should we file? Joint income or married filing seperately? Do the benefits of the lower tax bracket outway the marriage penalty? Also, does her w-4 have to say she is "married" before we can file joint? I always contribute about $25 a paycheck just to make sure I get a refund will the ~650 bucks help cover the so-called "marriage penalty" if that's the case?

Captain Nemo

Alien, filing "married filing separately" will not help you if you and your wife are in approximately the same income level. If you look at the rate structure, they effectively took the various tiered income levels and cut them in half for the Married Filing Separately table.

For example, at 140,000K of taxable income you would pay $29,158 in income taxes using the married filing joint table (140,000 - 117,250 = 22,750*28% = 6,370 + 22,788 = 29,158).

If you were to calc. your liabilities separately you would owe $29,380 (70,000 - 57325 = 12,675 * .28 = 3,549 + 11,141 = 14,690 * 2 = 29,380)

If you were both single, you'd be paying $28,692 in taxes using the single tables, so you are paying approximately $466 more in taxes using the married tables.

Just a rough approximation, as I didn't factor in itemized/standard deduction and personal exemptions. Also, married filing separately is used, for example, when one spouse has income greatly in excess of the other

Captain Nemo

LLL2, it depends on whether you can budget for the taxes you are going to owe. I always screw around with my W-4 towards the end of the year and exempt myself to take my total taxes paid in for the year to 90% (or as close as I can). I take the excess withholdings and dump them in a short term CD and make some earnings off of them before remitting them on 4/15. If cash management is difficult, try to project out what you think your tax liability will be for the year and claim enough to have you at approximately 100% paid. Then when you file you don't have to pay but you don't get a refund.

PM me if you would like some assistance on how to project this. I have some excel worksheets that work quite well. I would just need to update them for 2005.

Oh, and if Gar doesn't get to you others first, I'll answer them tomorrow. My assistant is giving me the evil eye for not being out the door already, as I owe her some Cosmopolitans.

Later

alien

Thank's Nemo, I figured that was the case, but it never hurts to ask questions

Captain Nemo

Braisler, you will have to show that the primary purpose of the expenditure is for medical reasons, and that the recreational value of the cost was not the primary purpose of the whirlpool. Even then, it looks like an uphill battle based upon the court cases out there where taxpayers have installed pools or whirlpools for medical reasons. There is this, however, that may be in your favor (sorry for the length, but I thought it was the best way to get you the ruling):

Rev. Rul. 83-33, 1983-1 CB 70, (Jan. 01, 1983)

Section 213.--Medical, Dental, etc., Expenses

26 CFR 1.213-1: Medical, dental, etc., expenses.

Medical expenses; swimming pool; capital expenditures.--
Taxpayer's cost of constructing a special exercise or "lap" swimming pool to treat severe osteoarthritis, to the extent the expenditure exceeds any resulting increase in the value of taxpayer's related property, is deductible as a medical expense under section 213 of the Code. Rev. Ruls. 54-57 and 59-411 modified.

ISSUE

Are expenditures for the costs of constructing, operating, and maintaining an exercise pool deductible as medical expenses under section 213 of the Internal Revenue Code?


FACTS

A, an individual, has severe osteoarthritis, a degenerative disease that results in a progressive weakness and decreased use of the knees and legs. To slow the effects of this disease, A's physician prescribed a treatment ofswimming several times a day. A constructed an indoor "lap" pool in order to follow the prescribed, daily exercise.

The pool, which is attached to A's residence, is 8 feet wide by 36 feet long and varies in depth from approximately 3 feet to 5 feet. The pool does not have a diving board and is not suitable for general recreational use. The stairs for the pool are specially designed with wider steps and smaller risers to enable A to safely enter and emerge from the pool. The pool also has a hydrotherapy device to aid in A's treatment.

LAW AND ANALYSIS

Section 213(a) of the Code allows a deduction in computing taxable income for expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, the taxpayer's spouse, or a dependent, subject to certain limitations. The term "medical care" is defined by section 213(e) to include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, for the purpose of affecting any structure or function of the body, or for transportation primarily for and essential to these purposes.

Section 1.213-1(e)(1)(ii) of the Income Tax Regulations provides, in part, that deductions for expenditures for medical care allowable under section 213 of the Code will be confined strictly to expenses incurred primarily for the prevention or alleviation of a physical or mental defect or illness. However, an expenditure that is merely beneficial to the general health of an individual is not an expenditure for medical care.

Section 1.213-1(e)(1)(iii) of the regulations provides, in part, that capital expenditures are generally not deductible for federal income tax purposes. See section 263 of the Code and the regulations thereunder. However, an expenditure that otherwise qualifies as a medical expense under section 213 shall not be disqualified merely because it is a capital expenditure. Moreover, a capital expenditure for permanent improvement or betterment of property that would not ordinarilybe for the purpose of medical care may, nevertheless, qualify as a medical expense to the extent that the expenditure exceeds the increase in the value of the related property, if the particular expenditure is related directly to medical care.

The test whether a capital expenditure is deductible under section 213 of the Code as a medical expense is whether the expenditure is incurred for the primary purpose of, and is related directly to, the taxpayer's medical care.

The courts have distinguished personal expenditures that are merely beneficial to the general health of the individual from those that have as their purpose medical care, the prevention or alleviation of a physical or mental defect or illness. Thus, not every expenditure prescribed by a physician or for the physical comfort of the individual will be considered a medical expense. Seymour v. Commissioner, 14 T.C. 1111 (1950). For example, the costs of transportation expenses to and from a golf course where golf was recommended for a victim of pulmonary emphysema are not deductible. Altman v. Commissioner, 53 T.C. 487 (1969). The costs of vacations or athletic club fees, while beneficial to the general health of a taxpayer, are also nondeductible personal or living expenses under section 262 of the Code. Havey v. Commissioner, 12 T.C. 409 (1949). An expenditure that merely serves the convenience of the taxpayer is not considered a medical expense. Worden v. Commissioner, T.C.M. 1981-366. Deductions under section 213(e) are confined strictly to expenditures for medical care.

In the present situation, A's physician prescribed swimming in order to alleviate A's osteoarthritis. In order to follow the prescribed treatment, A constructed a shallow "lap" pool incorporating specially designed stairs for ease of entry and exit and a hydrotherapy device. The specially designed exercise pool is not suitable for general recreational use.

HOLDINGS

A's cost of the pool is an expenditure incurred for the primary purpose of, and is directly related to, the taxpayer's medical care and, to the extent the expenditure exceeds the increase in value of A's property as a result of the installation, is deductible under section 213 of the Code.

A's costs to operate and maintain the special purpose exercise pool are deductible in the tax year paid as medical expense under section 213 of the Code.

EFFECTS ON OTHER RULINGS

Rev. Rul. 54-57, 1954-1 C.B. 67, holds that a deduction is not available for capital expenditures that increase the value of the taxpayer's property. Rev. Rul. 59-411, 1959-2 C.B. 100, holds that expenditures made for medical purposes will not be disallowed merely because they are of a capital nature. Rev. Ruls. 54-57 and 59-411 are modified to the extent they indicate that a capital expenditure for medical purposes may only be deducted as a medical expense if it does not increase the value of the taxpayer's property.

Captain Nemo

Phant84, it is possible that you could avoid fines by filing the return now and paying the applicable interest on the taxes that you owe. I have had clients in the past that have come forward voluntarily and paid the tax (including the interest) and I have included a letter asking for a waiving of the late filing and late payment penalties due to the taxpayer's acquiesence.

Still, you're dealing with the IRS so all bets are off. For the record, did you earn enough that you had a filing responsibility?

braisler

Captain Nemo, thanks for answering my question. I found out some of the same information myself, ie. that it would be fighting an uphill battle. I found out that it is your responsibility to get an appraisal of your property done before the improvement, followed by one directly after. Then you only get to make a deduction on the amount that the improvement cost minus the increase in appraised value of your property. Now, you've raised the issue of recreation vs. medical use. Seems like it would be more hassle than the potential tax savings are worth. Thanks for your time in constructing a detailed answer though.

gar1976

Damn Nemo, you should send that guy a bill!

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Blistex, in regards to crappy games -

They made pong look like a story driven RPG with a dynamic campaign.

kurty[B]

Couple questions

1) - I sold shares from my Employee Stock Purchase Plan that I acquired back in 2003 (15 months after purchasing the shares). Should I be receiving a W-2 form from that company even though I did not work there during 2004?

2) - Currently I'm looking at e-filing, but also have a 1098T form for tuition and scholarships? Do you have any suggestions for sites/programs to use for e-filing?

Glory's Sun

ok I got a 1099 from my employer.. which tax form do I fill out

it was my only income for the year. ..

thanks in advance

f6twister

Post removed.

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A little rudeness and disrespect can elevate a meaningless interaction to a battle of wills and add drama to an otherwise dull day. Calvin