gar1976

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.

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Blistex, in regards to crappy games -

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

gar1976

Guess no questions for now - back to lurking!

*Lurk lurk lurk*

dragonhawk

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?

__________________
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"Our lives begin to end the day we become silent about things that matter."
Rev. Martin Luther King, Jr.

Bossnass

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but are exaggerated (support issues,etc), I have been informed by the folks at Quickbooks that my copy of 2001 is no longer valid.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?

gar1976

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.

__________________
Blistex, in regards to crappy games -

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

onetime2

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"?

__________________
Strive to be more curious than ignorant.

zenmaster10665

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)

__________________
"Beware of the man who works hard to learn something, learns it, and finds himself no wiser than before.
He is full of murderous resentment of people who are ignorant without having come by their ignorance the hard way."
-Kurt Vonnegut

gar1976

Need to know some details.

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

__________________
Blistex, in regards to crappy games -

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

KrazyKracka

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?

dragonhawk

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

__________________
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"Our lives begin to end the day we become silent about things that matter."
Rev. Martin Luther King, Jr.

lordjeebus

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?

gar1976

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.

gar1976

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.

gar1976

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

gar1976

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?

gar1976

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.

gar1976

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.

lordjeebus

Thanks for all the great advice, gar1976!

onetime2

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.

__________________
Strive to be more curious than ignorant.

KrazyKracka

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?

zenmaster10665

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!

__________________
"Beware of the man who works hard to learn something, learns it, and finds himself no wiser than before.
He is full of murderous resentment of people who are ignorant without having come by their ignorance the hard way."
-Kurt Vonnegut

dragonhawk

Thanks!

__________________
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"Our lives begin to end the day we become silent about things that matter."
Rev. Martin Luther King, Jr.

apetaster

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!

gar1976

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.

gar1976

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.

gar1976

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.

:::OshnSoul:::

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.

gar1976

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.

:::OshnSoul:::

^^^^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.

gar1976

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.

santafe5000

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

__________________
When all else fails, QUIT.

gar1976

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.

santafe5000

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

__________________
When all else fails, QUIT.

BigBlueWrecking

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.

Bamrak

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?

gar1976

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.

synic213

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?

NoSoup

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!

gar1976

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.

gar1976

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.