Tax questions anyone?
 

It's that time of year in the US, and since I've been lurking for a while, thought I'd contribute something back to the board besides "Whoa, funny" in the humor section.

So...

If you have any tax questions, post them here, and I'll try to answer them.

Disclaimer - you get what you pay for! This is no way meant to be the end-all, do-all of your tax advice. Please consult your own tax professional for advice.

Guess no questions for now - back to lurking!

*Lurk lurk lurk*

Okay, I have one...

How does the deduction work for SUV's for small business?
I heard you can deduct upto $35000 purchase price of one?

Well I'm actually Canadian, but the software in question likely has appropriate versions.

I have a small business and have been using "Quickbooks" from Intuit since 2001. Using it on a regular basis and being somewhat happy with it, after the initial battle to get my accounts set up just right.

For reasons/excuses that I can understand but are exaggerated (support issues,etc), I have been informed by the folks at Quickbooks that my copy of 2001 is no longer valid. I will be unable to register it, which is required to access all my records and reports and to export to Quicktax.

Now then, although I like the product, I was given no warning that this would happen, that suddenly my software will no longer work. I'm not a big business or anything like that and accounting costs are a signigicant consideration. Intuit has pissed me off with thier tactics- I pretty much need to upgrade to thier newest version or I will loose a large amount of work and records.

So is there a better program out there? Any recommendations?

Quickbooks is probably the best small business software out there, unfortunately. The software should still install just fine, if you have the registration code and install #'s written down somewhere.

It kind of sucks, but like I said, there's not much better out there. Sorry. But it should still work fine, I've never heard of a version that just stopped working one day.




Depreciation question -

Due to the federal tax law changes in May 2003, depreciation just got a whole lot more complicated. Give me a few days to throw together some charts and examples for you.

Okay, here's one for you...

I put my fiancee on my employer's medical coverage for domestic partners. I pay about $1500 a year towards it with the company picking up the rest (about $5k). The employer's contribution counts towards my "Salary" for tax purposes obviously.

She didn't have a job when I put her on my plan but in Feb of last year she got one that offered benefits but they were more expensive and offered less flexibility so she stayed on mine. She is 26 years old and works full time. Can I get credit for any of what I pay for her in my filing? Can she be claimed as a "dependent"?

I have one!!

As a US Citizen who is working overseas in Austria through my own UK Limited Corporation...am i required to fill out US income taxes?? I know that the UK has double taxation agreements with the UK, therefore I know that there are laws pertaining to this, however, I am not sure what exactly I need to do! :)

(Sorry if it was a tough one) ;)

Need to know some details.

A) New or used
B) Date purchased
C) Weight of vehicle

I have one... why is it that I (single male) make $30,000 in a year and only get like $600 back, but my friend who worked maybe 3 months last year (single male as well) part time, and made $14000 (including unemployment) is getting back almost $2000?

A) Used
B) October 2003
C) About 3994 (I have to look, but this is from the Jeep website)

Another tax question!

I did some work as a contractor. I submitted an invoice for my last period of 2003 work in December, but I still haven't been paid (and probably won't for another month). I got my 1099 from them but it doesn't include the last period of pay they owe me.

Does this money that I'm going to get eventually count as 2003 income or 2004 income?

Sorry, you're going to be limited to around $3,360 of depreciation.

New autos get more based on the new tax laws, especially ones purchased after 5/6/03.

Also, if it weighs more than 6,000 lbs, you'd get a lot more, which is why Hummers and Excursion, suburbans, etc. are so popular with small business owners.

This assumes that you paid more than $16,800 for it, and it is classified as a "luxury auto." If you paid less, you can depreciate the cost of the asset times 20% (first year MACRS depreciation % for a five year asset, half year convention) and also may chose to 179 it if possible.


You can only use 179 if you're going to have positive taxable income for the year as well.

If you're including this on your schedule C and are on a "cash basis" reporting schedule (most schedule Cs are, which is your self-employment schedule) than you report the income when you get the cash. Which means get the check in your possession, like in the mailbox or your hot little hands, NOT when you chose to cash it.
Which looks like 2004.

More questions will be answered, getting the easy ones first!

There are five rules that must be met to claim a dependent.

Here is the first one:

"The claimed dependent in 2003 must have less than $3,050 of gross income for the calendar year. This gross income test does not apply if the dependent is a child of the taxpayer and either is under age 19 at the close of the calendar year or is a full-time student under age 24 at the end of the calendar year."

Based on her working full time, I'd say that one fails. Looks like no depdendency claim for you! Not to mention, she's probably claiming an exemption for herself on her return, which a dependant is not allowed to do.

As for the insurance payments for her, since she's not a dependent of you, I'd guess that you can't claim the payments. An itemized deduction is allowed for expenses paid during the tax year for the medical care of the taxpayer, the taxpayer's spouse, or a dependent.

So you probably can't do it. But be thankful, for keeping your fiancee healthy, right?

Just because he's getting more back doesn't mean he's paying less in taxes. He might have paid more in during the year.

People don't realize - if you're getting a huge refund, it's because you've given the government an interest free loan during the year. You've lost out on the earnings potential of that cash, and Uncle Sam gets to invest it.

A qualifying individual who works abroad may elect to exclude from gross income $80,000 of foreign earned income (for 2003) attributable to the period of residence by the individual during the tax year in a foreign country (Code Sections 911 (a)(1) and (b)(2)).

Foreign earned income includes wages, salaries, professional fees, and other amounts received as compensation for personal services actually rendered when the taxpayer's home was located in a foreign country and the taxpayer met either the bona fide residence or physical presence test (Code Sections 911(b)(1) and (d)(2); Reg. 1.911-3). If the taxpayer engages in a trade or business where both personal services and capital are material income-producing factors, no more than 30% of the taxpayers share of the profits can be treated as earned income.

So, basically, you need to be living there for most of the year. If you're not there all year , you get to exlude a portion of the $80,000 earned income, but not all.

Also, unearned income (interest, dividends, etc.) do not fall into this category.

Also:

A qualified individual must make a separate election with respect to the foreign earned income exclusion. The elections are made by filing form 2555 with the taxpayer's timely-filed income tax return (including extensions), amended return, or a late-filed return if filed within one year after the due date for the first year for which the election is to be effective. Once made, an election will remain in effect for the tax year in question and all subsequent years unless revoked with approval from the IRS.
Generally, a taxpayer must file Form 1040 by April 15th of the following year. However, an automatic two-month extension will be granted to qualifying US citizens or residents if on the normal due date his or her tax home and abode, in a real and substantial sense, are outside of the US and Peurto Rico. The automatic extension also applies to the payment of tax but interest will be charged from the original due date.


Also, check with an Austrian tax professional - they might be more "with it" on international taxation than I am! Don't see it very often.

Thanks for all the great advice, gar1976!

Thanks gar, yeah I figured I wouldn't be able to claim her but it doesn't hurt to ask. Just gonna have to start a business and make her an employee I guess. :)

ok I have one more fo you now, let me try to explain it...
A coworker of mine is divorced and remarried, he now has 2 step children and another child of his own to his current wife. His wife works as well. His EX, however will not work a job and keeps taking him back for child support every three years for the 2 children he had to that wife. When she takes him back, will the tax return he gets count as income for that year, or the year before?

Thanks a ton! I plan on being here over a year...let me ask you...so anyhting over 80K is taxable in the US? What if I am also paying UK corporation/residence tax?

Thanks again! :)

Thanks!

Simple one...are there any basic guidelines for those who itemize re: what % of their income can be deducted as charitable giving without triggering audits (I've already filed for this year but can see a major loophole for cheats with this one - that and "home office" deductions.)

Thanks!

Might want to sit down and consult with an accountant for all this, since I haven't dealt with them much, but here goes:

Unearned income (interest, dividends, etc.) will be double taxed at both the foreign and US level. Same with earned income over $80k US. However, you will get to file form 1116 to claim a foreign tax credit, which will reduce the amount of US tax you owe.

You might search the internet. The Wall Street Journal publishes stats every year or so, and it might be widely spread around.

The IRS won't disclose the rules used to trigger audits (duh!) but some professions/tax forms are more likely to be audited. The two off the top of my head are Schedule C (self-employed) and attorneys.

Child support is not deductible to the payor, or income to the payee.

Alimony, however, would be deductible to the payor and classified as income to the payee as long as it meets certain requirements.

Also, your friend and his ex might be able to hammer out an agreement as to who gets to claim the children as dependents on the return, since both of them can't claim them at the same time.

He should see an accountant (quickly, before any agreement is signed) and also consult with his attorney on this one.

I have a q-
We made well over 50k last year, sold our house in July, and we aren't sure if we will need to owe anything. What do you think? We are taking our time, because we don't have the money to pay right now, because my husband's job is in slow season and has been unemployed since December.

Well, as my management professor was fond of saying, "it depends."

As for your $50k - how was it earned? If salary, you probably had withholdings, and as long as you following the number of exemptions based on the W-4 you filled out when you started working, you'll probably get cash back.

If the $50k was earned through self-employment, did you make estimated tax payments? (Federal and state/local, if applicable).

As for the house - how much did you originially pay for it, and how much did you sell it for? Married filing joint couples are allowed to exclude up to $500k of gain on house sales, provided you meet several rules, one of which is that you used the house as a primary residence for 2 of the last 5 years, give or take. Note: "Gain" is not cash received, but the difference in cash received minus your tax basis in the house (Note again - your basis usually is the amount paid for the house, plus significant additions done, like a new roof, addition, remodel, etc.).

Lastly, any other income? If you are collecting unemployment, that is taxable, however there is usually no income tax withheld on this - leading to a nasty tax bill when it comes time to file.

Any kids/dependents? Disabled? Interest/dividend income? Capital gains?

You might be in for a bit of a shock when it comes time to file - you might want to get started now, since all of your 1099, 1098, W-2 should have shown up by now. If you can't afford the taxes, it might be best to know what the bill is now, when you have some time to save up for it.

You can pick up a copy of turbotax for around $30-40, and I think H&R Block/Jackson Hewit do returns for around $150-200, which is about as cheap as it gets here where I live.

^^^^Sorry I didn't specify beforehand:
We owned the house for a little over 2 yrs.
paid about $141,000
It is salary-based income.
claiming 1 dependent.
1 mo. approx. of unemployment for my husband.

Off the top of my head, you should be OK, or have to pay in a little. Like I mentioned earlier, you might want to get started sooner rather than later to avoid any surprises!

Good luck with it, hope your Husband gets employed again soon.

I have a sum in box 14 on the W-2 form. It is listed as 125P. Happen to know what that is?

Section 125 plan. When you have a set amount withheld from your check pre-tax for medical expenses.

Only really need it if you efile to enter in the software, otherwise it's info only.

Thanks, have asked at work but the lady really didn't know.

What you get back has nothing to do with how much you paid in taxes. He could have filled out his withholding form different from you. He may have a lot withheld every check.

Good thread!

I have probably an easy one, I just don't know where to start.

I've been pondering the idea of starting to sell stuff on ebay for profit. I was intending to buy items and sell them at a mark up. How much would my net profit be before I had to file, and if I did have to file it, how would I file it? Do I have to prove both what I paid and what I made, or just the total net gain?

If you already have a job and want to do this for profit, you should run it through your schedule C (self-employment income). You'd report your profits, less cost of items for a gross profit, and then deduct any commissions, fees, shipping, etc. from there for a net profit which would be taxed.

Hi Gar. Thanks in advance!

Couple of questions:

1) I refinanced my home last year and was told at the time I did it that the refianance costs associated with the loan could be written off on my taxes. I've always done my taxes with the TurboTax program, and I've never seen a field where I can enter information regarding refinance costs. Is there a special form I need to fill out to claim these costs, or was I mislead and these fees cannot be written off?

2) My wife and I had our first baby last year and since the birth she has been a stay-at-home mom (unemployed). Occasionally (2 - 3 times a month) my wife will baby-sit another child, and get paid for it. Do we have to claim this as income, and if so, what is the best way to do it?

I have a question for you, if you don't mind.

I am about to begin making a relatively high income, and have absolutely no tax shelters other than my retirement accounts.

I am 20 years old and live in an apartment. Within the next year, I will probably make 150k-250k, and I am unsure as to what I can write off.

I will be using my personal money for business expenses, as well as my own vehicle, and I believe that I can write that off, but other than purchasing real estate, do you have any suggestions?


Also, to write off utilizing my personal funds for business expenses, how exactly would I go about doing that? Do I keep reciepts? Log the mileage on my car?


Thanks in advance!

Not necessarily the refinance costs. You can write off points (as long as they are based on a % of the total loan), and NOT the other costs. You're stuck with those.

When you refinance, the points won't be reported on a 1098 (which you get from you bank showing the mortgage interest paid). You'll need to look on your HUD closing statement (stamped final), and they're usually on the second page near the top (around 2-3 legal size papers stapled together). These get amortized (or written off) on the "straight-line" method over the life of the loan, usually 15 or 30 years. It gets included as an itemized deduction on schedule A, and included with your mortgage interest paid.

If you paid no points, tough titties. No write-off for you!

The IRS would have a hard time tracking your wife's baby-sitting income, especially if it never got deposited into your bank account. Being realistic, I wouldn't worry too much about it, since it doesn't sound excessive.

Your business should reimburse you for expenses you're paying. Hit them up first. If not, you file a 2106, unreimbursed business expenses. Car costs and out-of-pocket costs get included on the same form. Keep a log for car milage (if not reimbursed), and try to update it at least monthly. Keep all business receipts.

As for hiding your income, it's tough to complain making $150k a year, especially at 20 years old. Be happy.

On a tax note, you're screwed. Our system is designed to allow house-owning families with kids the largest write-offs, or business owners. So contribute all you can to a 401(k) or other retirement account, save cash for a nice down payment, and buy a house in a year or two. At your income level, you try to hide too much of your income you'll get hit with AMT (alternative minimum tax) eventually, so consult a tax professional.

Personally, I'd save up, find out where I want to live, and buy a house first. You'll be able to write off your property taxes and mortgage interest. Rental homes can be nice, but can also tie up your liquidity which you might need should a problem arise.

Thanks for your reply - I figured I would be screwed tax-wise... but, thank you for your advice. I was actually planning on purchasing a home relatively soon, but I figured that since I was changing jobs I should hold off till things stabilize a bit.

Thanks Again!

NoSoup

Thanks for the reply.

So in regards to a house refinance, if I paid 2 points for the loan, and no straight fees, I should be able to write off the 2 points? And I can just include the monetary value associated with these points on the same form (schedule A?) that I claim my mortgage interest on? Also unclear as to whether this is a one time deal, this year only, where I claim the entire 2 points, or if I write off a portion of the "point fees" every year for the life of the loan. Any clarification would be appreciated.

Thanks again.

You'll be able to write off the points. You say "2 points" so I'm assuming it's 2% of the loan cost (eg, 2% of $150k is $3k in points). You'll do what's called "amortizing" the points over the life of the loan.

So....

If the loan is 15 years, aside from the normal interest expense deduction, you also get $200 of deductions for point amortization that will go on your schedule A ($3k / 15). This gets prorated monthly if you refinanced during the year. So if you refied 7/1/03, you get $100 this year and $200 for years 2-15, and $100 the last year.

Now, if you still ahd points that you haven't written off yet and you refinance again, then you get to write off the full amount of the old points as well as amortize any new ones.

For 2003, it goes on line 12 of Schedule A.

http://www.irs.gov/pub/irs-pdf/p936.pdf

Page 5 has got your point info, and it goes to page 7 as well. Turbotax, although I haven't worked with it in like 10 years, should have a simple way to enter in the info. Check the help menu if you're still confused.

And you paid no other fees? What you're thinking of as "points" might not be points. The only points that are deductible are points paid to lower your interest rate. Unless you did a "no-cost" refi, where the lending costs are buried as a higher rate.

Thanks Gar, I think I have it figured out now.

I did do a "no-cost" refi and paid two points to lower the interest rate back down. I paid these two points up front, completely, during the refi, and so I believe that the full cost of these points can be deductable this year. The mortgage lender recomended formating the loan this way specifically so that I could get the tax break. Do you think this is a good way to go (if I ever have to do it again)?

Close....but not quite. Since you refi'd and did not buy a new home, the points need to be spread out over the life of the loan, not all in the current year.

Hi gar1976 - I don't have a tax question - but on behalf of the board this is a really cool thing you're doing for folks.

For the Canadians - I may have a tax Shelter program available in a few months that would save you a lot. (apx 40% or so). I'll make a new post sometime around then.

I commend you for volunteering you expertise.

Here's another one for you:

Due to a less-than-successful surgery (euphenism) in 1989, my wife is in severe chronic pain and cannot work. She collects Social Security Disability - about $800/mo. Peanuts compared to what she used to make.

My question - why should we have to pay taxes on that money? Hasn't that money <i>already</i> been deducted from our paychecks once? And why is paying taxes on it dependent on <i>my</i> income? We never had to claim it until my income reached a certain level. Seems like the gov't is double dipping us on that - and since there's nothing deducted beforehand, we get the added burden of never getting refunds anymore - it's all "additional income." I realize I could have more deductions on my paycheck every payday, but this seems really unfair.

Income as a whole is dependent on the family unit, not just the taxpayer. So your income factors into the taxability, to avoid tax evasion by shifting income to one spouse or the other.

As for taxing the check, that's the way it goes. Our tax system taxes you when income is realized, not much you can do about it.

Best wishes to you and your wife.

I did my taxes through H & R Block's website last year and this year. 2002 I grossed about $13,000 (only worked part time) and for 2003 it was around $27,000. For 2002 I got back around $700 federal. For 2003 I got back about $350. What gives? My tax status hadn't changed. Did I screw up? Or is that just what I should have gotten as a return?

I don't know, it just seems like I was really shafted. Since I've obviously already received the return for 2002 and as well as for 2003, can I go to H & R Block and have someboby look at the returns? I'm really hoping that I screwed up with the online taxes and may get some more money back.

What should I do? :confused:

The May 03 tax law changed withholding tables, lessening the amount withheld. You pay the same total tax, you just get more back during the year than at 4/15 when filing.

And in 2002, you probably got some low-earning credits (earned income credits, etc.) that you might not have been eligible for in 2003.

Thanks again...the only thing is that I think it might be hard to get US tax advice over here in Austria :(

Ill figure it out, i guess!!

Hi. Really simple basic question here, but one I have not been able to find an answer to anywhere else:

If I KNOW I'm getting a refund, Do I still have to file by April 15?

Details:
I've worked through TurboTax for/on the web and It tells me I'm getting close to $1000 back. I just haven't sent it in yet because I'm still waiting for a Rent certificate form back from an old landlord, and will be out of town when tax day hits. So it's either send it in before the 15th, minus the homestead credit claim (WI), which I know I can file for later, or wait until after, when I have all the paperwork, if that's possible.

You can do two things.

File an extension for all showing no tax due by 4/15, and then just file your taxes in the summer.

Or just file fed and extend the state, again showing no tax due.

And yes, even if you're getting money back, you either need to file the return or an extension.

OKay what about this I worked at this place in the mall i quit after 2 weeks I got my w2 from them and i just threw it away could i get introuble for not filing? I filed my w2 from college and from my other job.

Expect a notice from the IRS and ODR. They get copies, and expect your returns to match up.

Sounds like you filed your other returns. Try not to throw your tax stuff away next year.

I went out and bought Turbo Tax, worked through it and when I printed out my returns, the summary pages said to mail it by Aug 16, with no mention of having to file for an extention. Just wondering if they forgot to mention it, or if it's really not necessary, since I show refunds on both federal and state.
Your thoughts?

You still need to either file the return or an extension by 4/15 for federal.

For states, it depends on the state (you'll need to look itup). In Oregon, a properly filed federal return will extend an Oregon return automatically.

However, know that filing an extension DOES NOT get you off the hook for paying. You still might need to pay some in on 4/15 or be subject to state/federal penalties 'n' interest.

I didn't file state last year (2002's).
I read somewhere that if I am due a refund...that I have up to three years to file it in order to get the refund. Is this true, or will I have a penalty to pay for last years state taxes even though I was due a refund?
Thanks.

Depending on the state, you might have a failure to file penalty.

Most tax jurisdictions give you three years.

And considering they owe you money, why have ou not filed? Your laziness is costing you cash returns on your investment. Get cracking!

Just turned 70--wife is 62---payed $1093 in taxes last year----have some investments..

When can I stop fileing income tax???

When you no longer have any taxable income or stock transactions.

Essentially, if you have income/dividend/wage income under the standard deduction, you won't need to file. Check with a CPA for your particular situation.

If you're paying in tax still, you need to file, no matter how old you get.

I have some US savings bonds. I don't recall if they are the EE ones or what year they are from but they are mature now.

What's the tax implications?

I am a new homeowner. I bought the house using an 80/20 loan so I did not put anything down and the sellers paid all of my closing costs. I ended up with 13.50 out of pocket at closing. No points were paid.

I am trying to figure out tax wise, what is/was deductible. I realize all interest is deductible....but how does that work? Lets say I will pay 12,000 in interest this year, what percentage is generally given back to me? Certainly not more than I paid in taxes and does this come back to me via federal or state taxes? If you could speak s-l-o-w-l-y (ha) I would appreciate a little breakdown in how this works.

Also, my home taxes are deductible?.?...

Thank you, in advance!! :)

When bonds mature.....

nothing happens. You'll get a 1099 with interest income for the interest earned during the year. But when bonds mature, you have no gain or loss on the maturation, so the only taxation issue is the interest gained.

Also depends on whether they were zero-coupon bonds or not, and a host of other factors.

All interest is deductible, and should be the amount on the 1098 received from your lending institution. I'm assuming that you didn't own a home prior to this one, otherwise there will be a difference.

The interest is included as an itemized deduction on Federal Schedule A. This has the effect of reducing your federal taxable income. And yes, real estate taxes are also a deduction, but these will be effected by your closing statement.

If you pay state income tax, usually (depends on the state) the itemized deductions for the state are pulled directly from the federal amounts, and are modified by any state taxes, so your interest paid will effect both federal and state taxable income.

Don't get confused with "mortgage payment" = interest. As with all loans, your payments (unless you got an interest only loan) consist of both principal and interest amounts. So you either need to run an amortization schedule yourself, or use the bank provided documents.

Oh, and in regards to my previous post, NOT all home mortgage interest is deductible, but in the prior case, it looks as though it is. There are some cases where the interest is not deductible.

Thanks gar1976! So let me get this straight... basically, what you are saying is the interest I pay via home mortgage reduces my taxable income. ie.. if I make 3800.00 a month/salary and pay 800.00 a month/in mortgage interest, then the IRS only wants their taxes based on 3000.00 of salary? Woohoo! Every little bit helps.

thanks!!!

Did a quick search, but didn't find anything about it, so hope it's not already been asked.

I have a full-time job, but want to start a side business. I plan to file a DBA (doing business as) with the county. Do I need and EIN?

According to the IRS website, you will need an EIN if you answer "Yes" to any of the following questions:

Do you have employees?

Do you operate your business as a corporation or a partnership?

Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?

Do you withhold taxes on income, other than wages, paid to a non-resident alien?

Do you have a Keogh plan? <--- No idea what that is.

Are you involved with any of the following types of organizations?

* Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
* Estates
* Real estate mortgage investment conduits
* Non-profit organizations
* Farmers' cooperatives
* Plan administrators


I answered no to all of those, but I know of some other people at work here who run a side business who do have an EIN. Do I need it? What are the benefits?

Thanks

I believe the Keogh Plan is a form of retirement account that a self employed person can set up for for his employees... it is the equivalent of a small companies 401(k)

Gotha, thanks. I guess that is a definate no then as well.

uhhh....that's a bit of an oversimplification, but sure, why not.

You need an EIN if you want to be something other than self-empoloyed, such as....

Partnership
LLC
LLP
PC
C corp
S Corp

If it's just you, and only you, then you usually just use your social security number, for all the applicable federal, state, and county/local forms.

Watch out - if you live in a non-community property state (for example, here in Oregon), and you have a spouse that also works in the business as a co-owner, you must file as a partnership and not as a Schedule C.

Thanks for the info. That is very helpful.

Buy yourself a beer on me next time you go out.

cheers

Or you could mail me one. Usual rate is $150/hour, fellas.

Kinda spaced on an importamt thing here -

you need to find out if they are EE or not. Any docs you get should state if they are. This has some large tax implications.

I'm entering college in the fall, and I will be receiving Financial Aid and scholarship money. I will be living with my parents and will not be working. I will be claimed as a dependant. Will I have to file a tax return, and would this negatively affect my parents' tax return?

Quick answer = no. Unless you're working and get w-2 income, which means you should probably file anyways. You'd file your own return with 0 exemptions, since you're being claimed as a dependent on someone else's return.

gar, one clarification on the EIN issue. He could create an LLC and treat it as a disregarded entity and just use his SS number.

This is probably the way to go as you could segregate the assets from his personal stuff.

Just a thought...

I prefer to err on the side of caution, and try as hard as possible to keep the corporate shield "unpierced." Also, it helps the clients keep their info straight if they know there's "business assets" and "personal assets."

Good point, though. You could do it.

buddy you are most definitely in a nightmare of tax complicance, your case is a classical example of international assignment pothole

there is a tax treaty between US and UK, but it is for you to pay the highest of the rates between two countries, and btw US citizens are taxed on citizenship, not residence, so you are required to pay US tax regardless of where you are,

since you work for your own companies, you will have to dish out around $2000 for tax consultant fees to file a Austria tax return, a US tax return with foreign tax credits, and possibly a UK corporate tax return,

good luck

Gar,

This one comes up every year at tax time at my office. I work for a company that makes video games. Some of my coworkers claim that they can deduct the cost of video games and consoles that they personally buy saying that it can be claimed as 'research' or 'education' as to what is current to keep them competitive in our field. Most of them don't have kids, so they say they would be the only ones using the console and games. Is this proper? And if so, what are the rules to do so?

Thanks in advance.

Whatever floats their boat.

The way this starts is that probably, at one time, one guy did have a legitimate reason to do so, told his buddy what he was doing, and the habit spread.

Legitimate, unreimbursed business expenses are allowed as a miscellaneous itemized deduction subjet to the 2% AGI floor. What your pals are doing is a bit agressive, but in all actuality probably isn't doing them much good. Would I do it? No.

Here's a random question, assuming you're still looking at this now that questions have dried up a bit:
My gf underwent hospitalization that was totally uncovered by her insurance. I don't suppose she can deduct those costs(about $5000) or some fraction thereof?

Depends on what the surgery was for. Typically, totally cosmetic costs are not deductible. If however, the surgery was necessary for some reason or another, than it goes on schedule A as an itemized deduction subjet to a 7.5% AGI reduction.

It was ER time, including ambulance costs, and 5 days in a state mental hospital. Suicide attempt. Her insurance rejected it as self-inflicted, and I wondered if the IRS would too. Since she's worked only 3 months this year and will only work a total of perhaps 6(and those second three at a considerably lower wage than before) her AGI will be pretty low -- is it going to be worth deducting it?

Sorry to hear about it. IMO (check with a paid tax professional here, folks!) I'd go for it. Why not.

She could only deduct it if she itemizes. If she uses standard deduction, you can't itemize. Keep all your receipts and keep track.

Hope she starts doing better.

okay... i've been sitting on this for too long, so just kick me in the head after giving me the answer.

i did my taxes through hrblock(head)'s online dealie, but because of my filing status, married filing separately, they didn't allow it to e-file. instead, the had me print out the pre-filled forms and mail those in, along with w2's. get a letter a month or two ago from the irs, stating that i owed, instead of getting a refind as hrblock had led me to expect. the reason? even though i specified and hrblock marked the paperwork as married, filing separately, they still checked off my (now ex) wife as a decuction (which the nice lady at the irs said is a big no-no). as of right now, i owe the irs about 270 dollars, but what recourse do i have against hrblock for misleading me with incorrect paperwork from the get-go?

From what I understand, you did the taxes with H&R's software, printed out the returns, and mailed them in yourself.

You can call and hollar, but you won't get very far. They might offer to do next year's for free. They would argue that although it was through their software, you were the one inputting the information and should have double-checked it. And besides, you would have owee the $270 whether or not the taxes were filed properly, you just would have needed to pay them earlier.

Gar, with respect to the medical expense question regarding the suicide attempt, I would definitely take the deduction. Treasury Regulation Section 1.213-1(e)(1)(v)(a) states:

"Where an individual is in an institution because his condition is such that the availability of medical care in such institution is a prinicipal reason for his presence there, any meals and lodging are furnished as a necessary incident to such care, the entire cost of medical care and meals and lodging at the institution, which are furnished while the individual requires continual medical care, shall constitute an expense for medical care. For example, medical care includes the entire cost of institutional care for a person who is mentally ill and unsafe when left alone."

The IRS would be hard pressed to claim that provision doesn't apply to a suicide attempt.

p.s., I'm a paid tax professional

Without spending too much time looking it up, I figured the IRS would allow it too. And by all means, feel free to answer some of these too if you want.

Gar, just curious, what do you do for a living?

CPA.

ah, a brother in arms. public or private?

Doesn't CPA mean Certified Public Accountant?

Hi,

I have a question related to mortgage interest. It goes on the Schedule A of itemized deductions, right? If you claim mortgage interest as a deduction, do you have to itemize all of your other deductions as well, or can you take the standard deduction+mortgage interest?

Thanks,

Haze

Hazelman, you would have to itemize all of your deductions

Oh, and Kadath, yes that is what it stands for, although the way I have been being walked all over as of late by certain pompous partners, it could just as easily stand for Car Parking Attendant

Hi, I have a question about filling out W-4 form. How can my husband get more money like say $150 extra on his bi-weekly paycheck through out the year? His Income was $48,702 year 2003, right now he is claiming 3 dependent, we have 6 people in our household, three children for child tax credit this year, we want to be able to claim more on his W-4 and get more money through out the year, we live in the State of SC, but we do not want to owe taxes to IRS either.

Cut and paste accounting.

Public, BTW.