Ask the Tax guy - Page 7 - Tilted Forum Project Discussion Community

Lubeboy · 02-29-2008, 12:54 PM

Thanks Cynthetiq! Do you know if it's too late for me change it since I've been at my current job for 2 years?

invalidiuser · 03-11-2008, 10:04 AM

Got a question and just wondering if I have to file in both states or just one. Tax was deducted in that other state also. I use worked for a place that was located in Massachusettes for about a month and the position was closed. I then worked in Conneciticut for the rest of the year of 2007. I made about 1300 dollars during the time that I was with the company in Massachusettes and tax was deducted.

I do have to file in both states, correct when filing using Turbo Tax?

Thanks for any suggestions.

The_Jazz · 03-11-2008, 10:13 AM

It doesn't matter if you're using Turbo Tax or not, you need to file in both.

Cynthetiq · 03-11-2008, 11:34 AM

Quote:

Originally Posted by Lubeboy

Thanks Cynthetiq! Do you know if it's too late for me change it since I've been at my current job for 2 years?

Sorry didn't see this until today.

Yes you can change it any time you like. go to your HR representative (if you have one) or your adminstrator for payroll. Tell them you need to change your W2.

good luck.

abaya · 03-11-2008, 03:32 PM

Cyn, any clue about tax agreements between Iceland and the US?... do we have to report our worldwide income, etc. etc.

Cynthetiq · 03-11-2008, 03:52 PM

Quote:

2007 Foreign Earned Income Exclusion Rises to $85,700

The foreign earned income exclusion for 2007 has been increased to $85,700. That is the good news. Under the new law came into effect in 2006, all of your foreign earned income above the exclusion will be taxed at the effective rate for that level of income as though the excluded amount had also been taxed. That means for each additional dollar above the exclusion the Federal tax rate will be at least 28% or more, though may be offset if you pay any foreign taxes by the foreign tax credit. One solution is to open an IRA by 4/15 if you earned more than the exclusion and deduct as much as the IRA will permit based on your age. Remember you can only open an IRA if you foreign earned income exclusion and foreign housing exclusion or deduction taken together are less than your total foreign earned income (from wages or self employment income) and the amount contributed to the IRA does not exceed the difference.

http://www.usexpatriate.blogspot.com/

You should only be taxed on the amount above $85,700.

I'd ask any of the expats that you know there if they have any accountants that do US expat taxes. There may be other exclusions for your housing and for your travel that you may be able to deduct.

Quote:

IRS BOOTS 2007 HOUSING COST ALLOWANCES FOR THOSE WORKING ABORAD IN HIGH COST AREAS

Notice 2007-77, 2007-40 IRB
A new Notice effectively increases the maximum housing cost exclusion for U.S. citizens and residents working abroad in specified high-cost locations. The increases are made based on geographic differences in foreign housing costs relative to U.S. housing costs.

Background. A qualified individual may elect to exclude from U.S. gross income his foreign earned income and housing cost amount. (Code Sec. 911(a)) Under Code Sec. 911(c)(1), the maximum excludable housing cost amount is calculated by way of a complex formula.
The excludable housing cost amount is the excess, if any, of (1) the individual's allowable housing expenses for the year (i.e., the housing expense limitation) over (2) a base amount. For 2007, a taxpayer's allowable housing expenses, assuming he is eligible for entire year, generally can't exceed $25,710; subtracting the base amount of $13,712 yields a generally applicable maximum housing amount exclusion of $11,998.

IRS may issue regs or other guidance providing for the adjustment of the maximum allowable housing expense limitation on the basis of geographic differences in housing costs relative to housing costs in the U.S. (Code Sec. 911(c)(2)(B))

Increases for high-cost areas. Notice 2007-77 makes adjustments for housing costs during 2007 in high-cost foreign areas. Specifically, it contains a table that (1) identifies locations within countries with high housing costs relative to U.S. housing costs, and (2) provides an adjusted annual maximum and daily housing expense limitation for a qualified individual incurring housing expenses in one or more specified high cost localities in 2007 to use (instead of the otherwise applicable annual housing expense limitation of $25,710, or the prorated daily amount) in determining his housing expenses. A qualified individual incurring housing expenses in one or more of the high cost localities identified in the table for the year 2007 may use the adjusted limit provided in the table (in lieu of $25,710 or the prorated daily amount) in determining his housing cost amount on Form 2555, Foreign Earned Income.

Example: A U.S. taxpayer is posted to Paris, France, for all of 2007. His maximum housing cost exclusion is $73,488 ($87,200 full year limit on housing expense in Paris − $13,712 base amount).

Many, but not all, of the maximum housing expense limitations for specified high cost localities are higher for 2007 than they were for 2006. For example, for 2007 the maximum housing expense limitation for Toronto, Canada, is $46,000; it was $41,500 for 2006. On the other hand, for Vienna, Austria, the maximum housing expense limitation remains unchanged at $28,824.

BogeyDope · 03-16-2008, 01:10 PM

How can I invest money for my future without being taxed for it [i.e. CD's, Stocks, IRA's, what should I use]?

Tully Mars · 03-16-2008, 01:47 PM

Quote:

Originally Posted by abaya

Cyn, any clue about tax agreements between Iceland and the US?... do we have to report our worldwide income, etc. etc.

Basically the same as Cyn said, but here's more of the same:

http://www.taxmeless.com/IRS593Publication.htm

This guys given me reasonably good advice in the past. I sat reasonably because I don't really have anything to compare it to.

Cynthetiq · 03-16-2008, 07:35 PM

Quote:

Originally Posted by GeneralMao

How can I invest money for my future without being taxed for it [i.e. CD's, Stocks, IRA's, what should I use]?

there is no such vehicle that alows you to invest money for future without being taxed. you will be taxed in some fashion, and the idea of this game it to minimize the amount of money you will be taxed.

if you have 401k available via your company, then put in the maximum you can. You're paying that 401k with pretax dollars. When you retire, you'll withdraw monies from those accounts and pay taxes at that point in time.

Use an IRA and put the maximum towards that. CD's you'll pay alot in taxes, you'll pay first with the income tax, so the dollars you've put in have already been taxed once. When you make any gains via interest, you're going to be taxed on that also.

yellowmac · 03-18-2008, 07:53 PM

Quote:

Originally Posted by Cynthetiq

there is no such vehicle that alows you to invest money for future without being taxed. you will be taxed in some fashion, and the idea of this game it to minimize the amount of money you will be taxed.

Well, a Roth IRA is pretty close to ideal. You can't deduct on your tax return what you contribute to a Roth IRA, but all of the earnings that grow in a Roth IRA grow tax-free.

Xazy · 03-19-2008, 04:44 AM

Quote:

Originally Posted by yellowmac

Well, a Roth IRA is pretty close to ideal. You can't deduct on your tax return what you contribute to a Roth IRA, but all of the earnings that grow in a Roth IRA grow tax-free.

True, but still not tax free. I am a huge fan of the Roth though!

yellowmac · 03-19-2008, 06:30 PM

Quote:

Originally Posted by Xazy

True, but still not tax free. I am a huge fan of the Roth though!

How is it not tax free? Am I missing something? My understanding is that as long as you withdraw the earnings after age 59 1/2 and the account has been open for 5 years, those earnings are tax free. If you withdraw your earnings early, that's when you get hit with taxes and penalties, though there are some exceptions. You can always withdraw what you've contributed to the IRA at any time without penalty.

Tully Mars · 03-19-2008, 07:46 PM

Quote:

Originally Posted by yellowmac

How is it not tax free? Am I missing something? My understanding is that as long as you withdraw the earnings after age 59 1/2 and the account has been open for 5 years, those earnings are tax free. If you withdraw your earnings early, that's when you get hit with taxes and penalties, though there are some exceptions. You can always withdraw what you've contributed to the IRA at any time without penalty.

This is the way I understand it:

With a Roth IRA you put money into it after you're taxed on the money but you're not taxed on your withdrawals since you already paid taxes on it . With a standard IRA or 401K you can not take money out until you're 59 1/2 and your withdrawals are taxed at that time. The benefit is you're income is likely to be less so your tax bracket will be lower when you retire.

Cynthetiq · 03-19-2008, 07:54 PM

Quote:

Originally Posted by Tully Mars

This is the way I understand it:

With a Roth IRA you put money into it after you're taxed on the money but you're not taxed on your withdrawals since you already paid taxes on it . With a standard IRA or 401K you can not take money out until you're 59 1/2 and your withdrawals are taxed at that time. The benefit is you're income is likely to be less so your tax bracket will be lower when you retire.

The idea was told to me like this if you don't live to collect your Roth, you already paid the tax.

If you don't live to see your IRA, you paid with pre-tax dollars anyways.

Either way you're dead and don't collect your IRA, but with the regular IRA you didn't pay the taxes at all.

Tully Mars · 03-20-2008, 04:53 AM

Quote:

Originally Posted by Cynthetiq

The idea was told to me like this if you don't live to collect your Roth, you already paid the tax.

If you don't live to see your IRA, you paid with pre-tax dollars anyways.

Either way you're dead and don't collect your IRA, but with the regular IRA you didn't pay the taxes at all.

Well once I'm dead I'm not sure I'll care much about taxes. Man, I hope not.

But you still (if you're alive) pay taxes on IRA and 401K's, when just depends on whether it's re-tax or post tax contributions, right?

Xazy · 03-20-2008, 05:10 AM

Quote:

Originally Posted by yellowmac

How is it not tax free? Am I missing something? My understanding is that as long as you withdraw the earnings after age 59 1/2 and the account has been open for 5 years, those earnings are tax free. If you withdraw your earnings early, that's when you get hit with taxes and penalties, though there are some exceptions. You can always withdraw what you've contributed to the IRA at any time without penalty.

Sorry Roth IRA you pay tax before you get in, so it is taxed before not after. So to put in 3000 for instance costs you more since it is 3000 posttax, but you pay nothing at the end. Which is better.

Other IRA & 401k is taxed after not before. Which means you end up paying more taxes at the end.

But as Cynthetiq said, if you do not live you paid taxes either way on it. Personally I have a 401k plan and a Roth. If your company has a matching plan in retirement, you should use it since that is part of their salary to you. They figure out how much you are worth and a good portion of it is the benefits, including the 'free' money (not free since they plan it but most of us see it that way sadly) they will put in your retirement.

03-11-2008, 10:13 AM	#243 (permalink)
The_Jazz Asshole Administrator Location: Chicago	It doesn't matter if you're using Turbo Tax or not, you need to file in both. __________________ "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin "There ought to be limits to freedom." - George W. Bush "We have met the enemy and he is us." - Pogo

03-11-2008, 03:32 PM	#245 (permalink)
abaya Location: Iceland	Cyn, any clue about tax agreements between Iceland and the US?... do we have to report our worldwide income, etc. etc. __________________ And think not you can direct the course of Love; for Love, if it finds you worthy, directs your course. --Khalil Gibran

03-16-2008, 01:10 PM	#247 (permalink)
BogeyDope Crazy	How can I invest money for my future without being taxed for it [i.e. CD's, Stocks, IRA's, what should I use]? __________________ Focus. Control. Conviction. Resolve. A true ace lacks none of these attributes. Nothing can deter you from the task at hand except your own fears. This is your sky.

02-29-2008, 12:54 PM	#241 (permalink)
Lubeboy Crazy	Thanks Cynthetiq! Do you know if it's too late for me change it since I've been at my current job for 2 years?

03-11-2008, 10:04 AM	#242 (permalink)
invalidiuser Upright	Got a question and just wondering if I have to file in both states or just one. Tax was deducted in that other state also. I use worked for a place that was located in Massachusettes for about a month and the position was closed. I then worked in Conneciticut for the rest of the year of 2007. I made about 1300 dollars during the time that I was with the company in Massachusettes and tax was deducted. I do have to file in both states, correct when filing using Turbo Tax? Thanks for any suggestions.