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I'm curious, is AMT avoidance a real thing, where people might want to spend more money in certain categories in order to avoid AMT and pay less tax overall? I know in normal tax circumstance that usually doesn't work out.
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Oct 28, 2013 13:18
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smackfu posted:I'm curious, is AMT avoidance a real thing, where people might want to spend more money in certain categories in order to avoid AMT and pay less tax overall? You find creative ways around it. Here in Oregon, since state tax is an AMT preference item, the state sells tax credits that pay $0.75 for every dollar spent on the credit. Since your state tax drops, it drops your AMT as well. When you're in the AMT phaseout, your effective rate is 35%, not the 28% AMT rate.
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Oct 28, 2013 16:47
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Niwrad posted:We used to pay down our Amex card before the end of the year to count it on that tax year. FYI, you don't need to do this. If you've incurred the charge, it counts as an expense when charged, not when paid. Save your cash and pay off invoices instead.
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Oct 28, 2013 16:48
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I'm still considering what to do with my Roth IRA that I have over funded by 3k due to low income this year. From Form 5329 it looks like I can pay a 6% fee to leave it in. Some quick math in excel assuming 15% marginal tax and 2% growth shows that leaving it in and eating the fee is better in the long run after only 10 years. With more aggressive growth or higher marginal tax the break point happens even faster. Am I missing something here? Because the implication here is that even if you are not eligible for IRA contributions due to lack of W2 income it is still worth it to do so if you are able.
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Oct 28, 2013 20:14
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Xenoborg posted:I'm still considering what to do with my Roth IRA that I have over funded by 3k due to low income this year. From Form 5329 it looks like I can pay a 6% fee to leave it in. Some quick math in excel assuming 15% marginal tax and 2% growth shows that leaving it in and eating the fee is better in the long run after only 10 years. With more aggressive growth or higher marginal tax the break point happens even faster. Am I missing something here? Because the implication here is that even if you are not eligible for IRA contributions due to lack of W2 income it is still worth it to do so if you are able. It looks like what you are missing is that your 3k excess this year will also end up on line 9 of form 5329 next year, and will have to be balanced out on line 10 by contributing 3k less than next year's max to avoid paying the 6% penalty again. Essentially, your excess contribution counts towards next year's maximum and you pay the 6% penalty.
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Oct 29, 2013 07:00
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Kilty Monroe posted:It looks like what you are missing is that your 3k excess this year will also end up on line 9 of form 5329 next year, and will have to be balanced out on line 10 by contributing 3k less than next year's max to avoid paying the 6% penalty again. Essentially, your excess contribution counts towards next year's maximum and you pay the 6% penalty. Great catch, you just saved me a huge headache.
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Oct 29, 2013 08:55
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If you're married, how do you know if it's better to file singly or jointly? My husband and I just got married in June. I haven't changed my name. Neither of us make much money. I'm employed by the state and make ~22K a year before taxes, he's considered an "independent contractor" with his family's business and makes around 12K a year before taxes. Usually we both get almost all of our tax money back since we make so little. We don't have kids or plan to have kids, we don't own a house or plan to purchase one any time soon. Is there anything we may be missing out on by filing separately? He says filing his taxes as an independent contractor is somewhat of a hassle and we're thinking maybe we should just file separately this year so I don't have to get involved in that. I'm thinking that it probably doesn't matter for us poors, and a quick Google search just mentions stuff about not being eligible for certain childcare and housing credits that we wouldn't be eligible for anyhow. Any thoughts? Thanks!
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Oct 29, 2013 22:22
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razz posted:If you're married, how do you know if it's better to file singly or jointly? The OP posted:If you are married, you can not file single. Your choices are Married Filing Joint (MFJ) or Married Filing Separate (MFS) Please note that the MFS does not stand for Married Filing Single! Nearly every time one benefits by filing joint with their spouse. In fact, if you are trying to compare the two and find that MFS is even slightly more advantageous than MFJ, I can almost guarantee that you are overlooking something.
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Oct 29, 2013 22:27
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That's what I meant, should we do Married Filing Joint or Married Filing Separate. I guess we'll do Joint 
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Oct 29, 2013 22:31
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razz posted:That's what I meant, should we do Married Filing Joint or Married Filing Separate. I guess we'll do Joint You're pretty much disallowed from every credit if you do MFS (amongst other negatives - the IRS/Congress intentionally made it the worst filing status to prevent structuring returns favorably using your marital status as a shelter), so it's virtually never going to be the better option than filing MFJ.
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Oct 29, 2013 23:46
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razz posted:That's what I meant, should we do Married Filing Joint or Married Filing Separate. I guess we'll do Joint I probably should have put emphasis on the "Nearly every time one benefits by filing joint with their spouse" part.
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Oct 30, 2013 04:05
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Speaking of AMT mentioned on this page, I'm looking into exercising some stock options I have in a private company, as the expiration of said options will happen within about two years or so (and I'd like to structure things so that I can purchase them gradually over time rather than all at once). I've poked around a bit, and I've found some troubling things like how I would be subject to AMT if I did so - is this the case? I'd rather not exercise and then discover I have to pay thousands of dollars more in taxes. I'd rather not post my family's income publicly on the internet, but let's say that it's a very healthy margin above the median family income for Illinois. edit: I'm 99% sure that these are Incentive Stock Options. edit 2: I realize I'm probably posting far too little information to figure out what I should do; In the end I may wind up just contacting a professional. crazyfish fucked around with this message at 23:53 on Oct 31, 2013 |
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Oct 31, 2013 23:22
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One last question, since I don't think I can actually trust the accountants I was using (they screwed up on several things for my filings I've since had to fix, and for the friend who had referred me to them they messed up on some paperwork sent to the IRS by not putting his EIN on them). I had originally asked them what my options were involving pulling my income out of the s-corp, since currently my income is low enough that I'm not seeing any benefit to running it through the corp - 95% of it is coming out as payroll anyways. They suggested that if I didn't want to get rid of it because at some point in the future my income may be high enough to justify dealing with the time and cost involved, I could just basically stop doing business through it, and leave it inactive next year. I was planning on paying myself the remaining balance and then closing the corporate bank account the last week of December, then just letting the corp sit there doing nothing (no money in, no money out) in 2014, barring an improvement on my income to the point it makes any sort of sense. I know I'll still have to file a 1120-S for 2014, as well as quarterly payroll reports for both the IRS and the state (and, related, the self employment quarterly payments), and the Texas franchise tax paperwork - but are there any downsides/problems/things I'd get screwed on doing this?
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Nov 1, 2013 03:12
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cstine posted:One last question, since I don't think I can actually trust the accountants I was using (they screwed up on several things for my filings I've since had to fix, and for the friend who had referred me to them they messed up on some paperwork sent to the IRS by not putting his EIN on them). You'd still have federal and state filing requirements for the S-Corp, regardless of whether it has activity or not. For the filing requirements to cease, you'd have to dissolve the S-Corp entirely. Why is 95% of the income being run through payroll? Aren't you taking any distributions from the S-Corp?
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Nov 1, 2013 13:37
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crazyfish posted:Speaking of AMT mentioned on this page, I'm looking into exercising some stock options I have in a private company, as the expiration of said options will happen within about two years or so (and I'd like to structure things so that I can purchase them gradually over time rather than all at once). I've poked around a bit, and I've found some troubling things like how I would be subject to AMT if I did so - is this the case? I'd rather not exercise and then discover I have to pay thousands of dollars more in taxes. Even if you were hit by AMT for exercising the stock options, you'll get an AMT credit that you'll be able to apply against regular tax the following year (assuming you're not normally in AMT). Is your taxable income above 150k? If not, I wouldn't stress about AMT implications of these stock options. Admiral101 fucked around with this message at 13:44 on Nov 1, 2013 |
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Nov 1, 2013 13:41
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Admiral101 posted:You'd still have federal and state filing requirements for the S-Corp, regardless of whether it has activity or not. For the filing requirements to cease, you'd have to dissolve the S-Corp entirely. Because frankly I'm not making very much right now - in 2012 the s-corp's gross was just $28,000 (only 3 quarters, but). I don't mind the filing, especially since filling out all zeros on everything is pretty simple - my question more revolved around 'is there anything OTHER than the filing that I should be aware of'.
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Nov 1, 2013 15:10
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Admiral101 posted:Even if you were hit by AMT for exercising the stock options, you'll get an AMT credit that you'll be able to apply against regular tax the following year (assuming you're not normally in AMT). Does that 150k include AMT income (i.e. the difference between the exercise price and value at exercise)? I have enough options and there's a big enough difference that it could very well matter.
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Nov 1, 2013 17:25
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crazyfish posted:Does that 150k include AMT income (i.e. the difference between the exercise price and value at exercise)? I have enough options and there's a big enough difference that it could very well matter. I was referring to AGI. Okay, quick (simplified) rundown on how this AMT stuff works. Sorry if I'm repeating poo poo you already know, but I'm explaining the logic behind my $150k number. The income number you START with is taxable income before exemptions (but AFTER itemized deductions). You then add poo poo to it like state/local taxes you deducted on your itemized deduction sheet. You will also add your stock option AMT adjustment. To compensate for these addbacks, you now get $78,750 flat AMT income deduction if you're MFJ (think of it as a replacement to the personal exemption). This $78,750 is what prevents most people from having to pay AMT every year. Any income left over is taxed at the 26% tax rate (or 28%, if high enough), resulting in alternative minimum tax. This is the minimum tax you must pay, meaning it's only relevant if this amount exceeds your regular tax (the amount on line 44 of the 1040). I said $150k as a ballpark number, because people under 150k are normally knocked out by the 78,750 flat exemption. A lot of this will boil down to your individual tax makeup. Does this help at all? Again, I emphasize that you WILL be getting a tax credit for any AMT tax you pay (from the stock option being exercised), so even if you pay a higher tax in 2013 due to AMT, you'll have a lower tax bill in 2014 once you're outside of the AMT thresholds. This is really just a timing difference. Admiral101 fucked around with this message at 18:05 on Nov 1, 2013 |
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Nov 1, 2013 18:00
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Admiral101 posted:I was referring to AGI. Okay. The AMT stuff is extraordinarily confusing, but it looks like it won't be as bad as I imagined bill-wise. I'll run a couple scenarios and see how it'll impact me if I start exercising next year. Thanks a lot.
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Nov 1, 2013 21:23
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I have a question about IRS Form 8880 (Credit for Qualified Retirement Savings Contributions). I am a student, and the form's instructions say this credit cannot be claimed "if during any part of 5 calendar months of 2013 you were enrolled as a full-time student at a school". Does anybody know what is considered full time enrollment in this case? I will have completed 40 credit hours during 2013, but because I took classes through the summer and my school has an unusual academic calendar with four 11-week semesters, I was only enrolled in 9 credit hours during 8 of the 12 months. Does anybody have experience with this type of situation with this tax credit? EDIT: I just noticed here that the definition of full time is up to the school, and my school defines full time as 12 credit hours. So I guess my question becomes did I overlook anything that would prevent me from taking advantage of this credit? (I'm nowhere near the AGI limit and not a dependent) JohnnyPalace fucked around with this message at 00:57 on Nov 2, 2013 |
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Nov 1, 2013 23:07
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Going into month 6 of my amended returns-turned-audit-reconsiderations being processed by the IRS. They sure like to take their time...
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Nov 2, 2013 05:38
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I had asked this in the legal questions megathread and someone suggested I ask this here.quote:
I figured someone may be able to direct me to some information on 501c3s
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Nov 7, 2013 08:48
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Hollismason posted:I had asked this in the legal questions megathread and someone suggested I ask this here. I don't really get what you're trying to structure here. Schools are already non profits, so re-donating the money doesn't make sense for them. They won't get any real benefit from it. And yes an organization could pay for a volunteer's classes, but that will end up being taxable income to the volunteer. These are sweeping general answers that can change depending on the circumstances of the school, the charity, and whatever clever poo poo that you or someone you know is trying to cook up.
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Nov 8, 2013 01:12
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Admiral101 posted:I don't really get what you're trying to structure here. This scheme did stink a little bit.
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Nov 8, 2013 01:33
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It's not a "scheme" , it's a way to encourage volunteers to volunteer for a After School Program that teaches theater and arts programs. The school in question is a for profit theater company that offers classes. For Profit Theater School -> Donates classes with a value to Non Profit organization that uses volunteers to teach theater and art in After School Program, it then gives those classes to it's volunteers/interns Can the school write that off on taxes since it's a 501c3 This isn't a money making or anything else scheme , so don't imply that thanks. I'm just trying to figure out how to encourage more volunteers for the program and this was what I came with as a possible way to get more volunteers and create a win win situation for the benefit of volunteers the school and the program and students. Do the classes they donate have value? So that the volunteers wouldn't have to report that as income? Could the school donate for instance gift certificates for a class but then attach a value even though there is no face value on the certificate? Hollismason fucked around with this message at 19:18 on Nov 15, 2013 |
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Nov 15, 2013 19:14
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Hollismason posted:It's not a "scheme" , it's a way to encourage volunteers to volunteer for a After School Program that teaches theater and arts programs. All the for-profit theater school is donating is the time value of their teachers. You can't deduct "time value" off on taxes. It'd be the equivalent to a doctor that spends a few hours caring for sick people at a shelter. He can't get the value of his time as a tax deduction. The for-profit isn't going to get any kind of tax benefit for simply giving away free classes. Whether the volunteers would have to pick up income on the classes in YOUR situation? - to give a definitive answer would require research. I don't know. My gut tells me that they would, unless the classes are somehow related to their volunteer work. quote:Could the school donate for instance gift certificates for a class but then attach a value even though there is no face value on the certificate? I have no idea what you're describing here.
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Nov 15, 2013 20:00
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Admiral101 posted:All the for-profit theater school is donating is the time value of their teachers. You can't deduct "time value" off on taxes. It'd be the equivalent to a doctor that spends a few hours caring for sick people at a shelter. He can't get the value of his time as a tax deduction. The for-profit isn't going to get any kind of tax benefit for simply giving away free classes. The for profit company is not recording taxable revenue, which is it's "tax benefit" for donating the class rather than charging for it. If a company could deduct the value of time on top of not booking revenue, it would be double dipping. And no, gift certificates for services that the company provides are not tax deductible either.
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Nov 15, 2013 20:03
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I am considering taking a job that would be a remote position. I currently work and reside in NYC, and would continue residing here for at least another year. I want to make sure I'm not going to be taxed by BOTH NYC and the state the company is in. I'm pretty sure that's not the case, and I'll continue paying NYC taxes as I currently do, but I just want to make sure I won't be extremely surprised if I took the job upon receiving my first paycheck.
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Nov 20, 2013 18:00
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cletus42o posted:I am considering taking a job that would be a remote position. I currently work and reside in NYC, and would continue residing here for at least another year. I want to make sure I'm not going to be taxed by BOTH NYC and the state the company is in. I'm pretty sure that's not the case, and I'll continue paying NYC taxes as I currently do, but I just want to make sure I won't be extremely surprised if I took the job upon receiving my first paycheck. Typically you are taxed based on where you earn the money not where the company you work for is based out of.
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Nov 20, 2013 18:24
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I can't speak to your specific situation but I've been a cross-state remote employee for about 6 years now. I've telecommuted to Alaska from Pennsylvania for the last 2 years, and from Iowa for the four years before that. The reason I can't speak to your exact situation is because AK doesn't have a personal state income tax. However, I have had to pay the income tax of the state I'm working from/living in. Based on my reading while I was figuring this out, I would be surprised if you had to pay state income tax in both states, usually just the state you're living in and working from. While trying to figure out Iowa state income tax law, I did a little reading about Iowa/Illinois cross-border work since I guess that's fairly common, and the big take-away was that you'd only pay one state's income tax. Obviously it'll vary depending on the state you're in and the state you're remoting to...There are 50 states, so figure about 2500 different special cases for each possible arrangement of to/from state. But in my extremely limited experience: no, you do not pay state income tax for both states.
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Nov 20, 2013 18:26
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Thanks, that's what I figured and matches up with what I had found out via Google. Obviously, there still may be some special rules in my specific situation, but if I take the job, I'd most likely be paying someone to assist with my taxes at filing time anyway.
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Nov 20, 2013 22:28
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cletus42o posted:Thanks, that's what I figured and matches up with what I had found out via Google. Obviously, there still may be some special rules in my specific situation, but if I take the job, I'd most likely be paying someone to assist with my taxes at filing time anyway. Neighboring states often have reciprocal agreements in place that dictates who gets to tax revenue earned in one state by residents of the other state (especially on the East Coast, where it is more common to work in a state other than where you live). Absent such an agreement, it is generally safe to figure that you will pay tax based on your state of residency. Now, whether your company's payroll department understands this might be another matter all together...
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Nov 21, 2013 18:35
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If they're offering him a remote position and he's not the first one to do such a thing at that company, they'll probably be able to work through it. Now, in my case, I was the first one to do this sort of thing. They screwed it up pretty hard for a while, withholding income tax for a state I wasn't a resident of for a while, and then when I moved again, they decided to withhold income tax from both the previous state AND the current one as if I was a resident in both states, which is obviously hosed. I got that money back eventually, but what a hassle. But yeah, as long as you're not the guinea pig, it'll probably work fine. And even if you are, once the kinks are sorted out, working remotely is awesome. 
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Nov 21, 2013 19:43
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Is it correct that there is a $1500 limit on the deduction for capital losses against other income?
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Nov 24, 2013 23:35
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asur posted:Is it correct that there is a $1500 limit on the deduction for capital losses against other income? It's $3,000 per year in net capital losses that can be offset against ordinary income, actually (unless you're married filing separately, in which case it's $1,500).
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Nov 24, 2013 23:54
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ThirdPartyView posted:It's $3,000 per year in net capital losses that can be offset against ordinary income, actually (unless you're married filing separately, in which case it's $1,500). That dollar amount has been around for decades, and they really need to adjust it for inflation.
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Nov 25, 2013 17:56
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AbbiTheDog posted:That dollar amount has been around for decades, and they really need to adjust it for inflation. I'm sure they'll get to it once it's time to pass a comprehensive tax reform bill
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Nov 25, 2013 22:36
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scribe jones posted:I'm sure they'll get to it once it's time to pass a comprehensive tax reform bill That sounds like accountant sarcasm. Edit for fun: Here are the 1986 Form 1040 instructions (year of the sweeping tax reform act) showing the same $3,000 on page 23: http://www.irs.gov/pub/irs-prior/i1040--1986.pdf Edit part II: using an inflation calculator for CPI from 1986 through 2013 would have the amount be closer to $6,400. AbbiTheDog fucked around with this message at 23:30 on Nov 25, 2013 |
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Nov 25, 2013 23:23
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scribe jones posted:I'm sure they'll get to it once it's time to pass a comprehensive tax reform bill vvvv Oh, right, I forgot that the largest US companies actually only have costs in this country. All profits are made through offshore call centers. PhantomOfTheCopier fucked around with this message at 14:58 on Nov 27, 2013 |
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Nov 26, 2013 15:00
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PhantomOfTheCopier posted:Corporations now having personhood, they can only deduct $3000/yr in capital losses, unless they're filing separately? That ought to go a long way to clearing the national debt. Under current rules Corporations cannot deduct any net capital losses, so that would actually be a step backward...
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Nov 26, 2013 18:41
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