US Income Tax Thread: Bank error in your favor! GO DIRECTLY TO JAIL.

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > US Income Tax Thread: Bank error in your favor! GO DIRECTLY TO JAIL.

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Hoodwinker: Nov 7, 2005

Blinkman987 posted:

I'm using FreeTaxUSA (thanks for the recommendation) and inputting my Roth 401K rollover to Roth IRA and have a question.

Background:
I had a Roth 401K with full employer match on the funds I had contributed rolled over to my Roth IRA in two equal checks, so I technically have 2 1099-Rs for the same distribution amount. I put each of the two in separately in as the boxes went, which were identical except one had a dollar amount for #5 (employee contributions) and the other had a $0. Both had $0 for 2a, Taxable Amount.

I then went to the next page which asked me if I had done a Roth Conversion, which I answered yes to. And I put in the amount of the gross distribution.

I then get hung up on the next question and its subsequent questions: "Have you ever made contributions to your pension plan using after-tax dollars?"

Questions:
I assume I'm supposed to answer yes on the one with the employee contribution, and no on the other. Is that correct?
And if that's correct, on the entry with the employee contributions, am I supposed to to input as my contributions the employee contributions amount (#5) or the gross distribution amount (#1)? I assume it's #5 by the way it's worded, but it also feels incorrect that I would be basically paying taxes on half of the fund growth on this rollover when the whole point of that growth is that I already paid taxes up-front on it.

Roth 401k is not a "pension plan," so unless you have both a retirement plan (the 401k) and a pension plan, the answer is no to both.

Regarding the Roth Conversion, was this done by converting the employer match (which by nature are always Traditional funds)? Just a point of clarity. A rollover is not a conversion, in case there was confusion here.

Additionally, while Roths are funded using after-tax dollars, there's specifically non-deductible after-tax contributions you can make to a Traditional retirement account (and I assume therefore something you can do to a pension plan) and I believe this is what the question was asking about.

Hoodwinker fucked around with this message at 14:46 on Feb 9, 2019

# ? Feb 9, 2019 14:43

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# ? May 25, 2024 00:09

Blinkman987: Jul 10, 2008; Gender roles guilt me into being fat.

Hoodwinker posted:

Roth 401k is not a "pension plan," so unless you have both a retirement plan (the 401k) and a pension plan, the answer is no to both.

Regarding the Roth Conversion, was this done by converting the employer match (which by nature are always Traditional funds)? Just a point of clarity. A rollover is not a conversion, in case there was confusion here.

Additionally, while Roths are funded using after-tax dollars, there's specifically non-deductible after-tax contributions you can make to a Traditional retirement account (and I assume therefore something you can do to a pension plan) and I believe this is what the question was asking about.

Got it. Thanks for your help. I do not have a pension plan.

Part of the confusion is when I click the Help question mark on 2A in their program, I see this:

https://imgur.com/axqj0lQ

quote:

What kind of distribution do you have?
I have an IRA distribution (IRA, Roth IRA, SEP IRA, and SIMPLE IRA)
I have a pension or annuity distribution (401(k), 403(b), 457(b))

So I assumed pension meant "retirement fund" and not "Pension".

So, this is what I believe I'm supposed to do:
First 1099 with the post-tax contribution dollars-- I answer that I did not convert to Roth IRA. The money was already post-tax. I just plain rolled-over.
Second 1099 with the $0 for #5- I answer that I did convert to Roth IRA. The money was the pre-tax employer contribution.

Is that correct?

# ? Feb 9, 2019 16:47

Hoodwinker: Nov 7, 2005

Blinkman987 posted:

Got it. Thanks for your help. I do not have a pension plan.

Part of the confusion is when I click the Help question mark on 2A in their program, I see this:

https://imgur.com/axqj0lQ

So I assumed pension meant "retirement fund" and not "Pension".

So, this is what I believe I'm supposed to do:
First 1099 with the post-tax contribution dollars-- I answer that I did not convert to Roth IRA. The money was already post-tax. I just plain rolled-over.
Second 1099 with the $0 for #5- I answer that I did convert to Roth IRA. The money was the pre-tax employer contribution.

Is that correct?

What you've said sounds accurate. The deeper question being answered by all of this is: "Do you have anything that results in a taxable event?" and if you converted Traditional money to Roth money in some capacity, the answer to that is "Yes" with the amount considered taxable being equal to the amount converted.

# ? Feb 9, 2019 17:22

Mister Fister: May 17, 2008; D&D: HASBARA SQUAD
KILL-GORE

I love the smell of dead Palestinians in the morning.
You know, one time we had Gaza bombed for 26 days
(and counting!)

Hi, my wife opened up an LLC to do accounting and investment valuation work for her prior employer. She wants to buy some CFA books to do studying so she can get her CFA designation. Can she expense that to her LLC to reduce her taxable income?

# ? Feb 9, 2019 18:16

Blinkman987: Jul 10, 2008; Gender roles guilt me into being fat.

Hoodwinker posted:

What you've said sounds accurate. The deeper question being answered by all of this is: "Do you have anything that results in a taxable event?" and if you converted Traditional money to Roth money in some capacity, the answer to that is "Yes" with the amount considered taxable being equal to the amount converted.

Thank you. I appreciate the help.

And of course I'd probably recategorize my conversion here for the first time ever, but... thanks Trump!

# ? Feb 9, 2019 19:14

Loel: Jun 4, 2012; "For the Emperor."

There was a terrible noise.
There was a terrible silence.

So this year I was single with low paying salary job. Next year I am probably going to be married with high paying salary job (assuming background check goes smooth etc). My buddy who works at the same place said he had to pay a lot for April income taxes - how can I set it up so its a 0 or small tax return?

# ? Feb 10, 2019 03:45

Motronic: Nov 6, 2009

Loel posted:

So this year I was single with low paying salary job. Next year I am probably going to be married with high paying salary job (assuming background check goes smooth etc). My buddy who works at the same place said he had to pay a lot for April income taxes - how can I set it up so its a 0 or small tax return?

Use the IRS withholding calculator to make sure your W2 is filled out correctly: https://www.irs.gov/individuals/irs-withholding-calculator

# ? Feb 10, 2019 05:22

sullat: Jan 9, 2012

Or just set it at Married 0.

# ? Feb 10, 2019 05:55

balancedbias: May 2, 2009; $$$$$$$$$

sullat posted:

Or just set it at Married 0.

This may not be accurate based on spousal income

# ? Feb 10, 2019 15:16

sullat: Jan 9, 2012

balancedbias posted:

This may not be accurate based on spousal income

It will (probably) prevent him from owing!

# ? Feb 10, 2019 18:02

Motronic: Nov 6, 2009

sullat posted:

It will (probably) prevent him from owing!

That is not the same thing as "zero or a small return", which requires accurately calculating your tax burden.

# ? Feb 10, 2019 18:12

smackfu: Jun 7, 2004

Last year, my employer incorrectly withheld some money in the wrong state. We filed two tax refunds and got the $400 in withheld taxes back from NY, but still had to pay taxes on the same income to CT. So it was mainly a wash.

Now I'm doing our taxes and the tax program wants to treat that $400 from NY as 2018 income. There doesn't seem to be any place to offset it with the amount we owed and paid to CT. Does this make sense if you think it through? Or is this just a weird edge case where we get a little screwed?

# ? Feb 10, 2019 20:10

MadDogMike: Apr 9, 2008; Cute but fanged

smackfu posted:

Last year, my employer incorrectly withheld some money in the wrong state. We filed two tax refunds and got the $400 in withheld taxes back from NY, but still had to pay taxes on the same income to CT. So it was mainly a wash.

Now I'm doing our taxes and the tax program wants to treat that $400 from NY as 2018 income. There doesn't seem to be any place to offset it with the amount we owed and paid to CT. Does this make sense if you think it through? Or is this just a weird edge case where we get a little screwed?

If you itemized last year, you included the taxes paid to NY in that amount and thus the refund is considered taxable income this year. The money paid to CT doesn�t directly offset that, but is added to the taxes you can itemize this year if you�re doing that.

# ? Feb 10, 2019 21:13

Gazpacho: Jun 18, 2004; by Fluffdaddy; Slippery Tilde

I have a tax problem involving excess contributions to IRAs, in prior tax years. I'm not sure who I should work with to resolve it.

The first impulse was H&R Block, first with a preparer then with a tax professional. But they're not familiar with this type of problem. Also the tax professional said that I can only amend returns three years back, which I'm pretty sure is wrong and makes me doubt that she is ready to work on a back-tax problem of any kind. The relevant pubs and instructions seem clear that the three-year limitation applies only to refund claims, not reporting back taxes.

The TP also told me to work with my investment company to get the excess contributions out. I'll start that process, though I'm not sure how much engagement I can get from them. The company's only US office is in New York, so I'll have to correspond.

My father is setting up a meeting with an accountant and he'll get back to me on what they say.

I wonder if there are any other, potentially better options.

# ? Feb 10, 2019 21:19

Loel: Jun 4, 2012; "For the Emperor."

There was a terrible noise.
There was a terrible silence.

Motronic posted:

Use the IRS withholding calculator to make sure your W2 is filled out correctly: https://www.irs.gov/individuals/irs-withholding-calculator

Splendid, thank you. Wife is stay-at-home, so no income there.

# ? Feb 11, 2019 00:53

sparkmaster: Apr 1, 2010

Few questions:

1) For an HSA, if the HDHP itself contributes to the HSA (as opposed to the employer) does that go on the W2 or will a 1099 be generated? I know there won't be any additional tax liability for this "income", but does it have to be included in Form 8889?

2) This one is a bit more complicated. In late 2017 my employer relocated me within State A, which does not have a state income tax. The employer paid for the move, but due to the timing of the move and paperwork requirements, the money wasn't disbursed until March 2018. The general relocation agreement that my employer gives to all employees, it agrees to pay an income tax allowance to pay the taxes on the amount of money disbursed for the relocation. In late February 2018, I accepted a transfer to State B, which does have a state income tax. I was "transferred" in our HR system the first working day after my last day on the job in State A, but I did not report to work until April. I was not paid during that time, nor was I physically present in the state. Strictly due to the timing of the paperwork being processed, state income tax was withheld from the relocation funds. To complicate things, a month after starting my new job in State B, I was transfered (no paid relocation) to State C, which also has no income tax.

So my big question is if I report my State B income as just the income I earned while working in the state as opposed to what my W2 says, how likely is it I get a nice phonecall from the dept of revenue? And how strong is my legal footing for excluding my relocation funds as state taxable income? Am I better off counting everything, biting the bullet, and not even try to get my $400 of incorrectly withheld income tax back?

# ? Feb 11, 2019 07:16

black.lion: Apr 1, 2004; For if he like a madman lived,
At least he like a wise one died.

Mister Fister posted:

Hi, my wife opened up an LLC to do accounting and investment valuation work for her prior employer. She wants to buy some CFA books to do studying so she can get her CFA designation. Can she expense that to her LLC to reduce her taxable income?

Yep, most tax softwares have "Continuing Ed" or somesuch on there as a business expense category - use that for this

# ? Feb 11, 2019 20:38

Gabriel Grub: Dec 18, 2004

Mister Fister posted:

Hi, my wife opened up an LLC to do accounting and investment valuation work for her prior employer. She wants to buy some CFA books to do studying so she can get her CFA designation. Can she expense that to her LLC to reduce her taxable income?

"To be deductible, your expenses must be for education that (1) maintains or improves your job skills or (2) a law requires to keep your status or occupation. However, even if the education meets either of these tests, the education can't be part of a program that will qualify you for a new trade or business or that you need to meet the minimal educational requirements of your trade or business."

# ? Feb 12, 2019 02:18

black.lion: Apr 1, 2004; For if he like a madman lived,
At least he like a wise one died.

The CFA is a designation though, not a license, so I'm pretty sure it doesn't "qualify [someone] for a new trade or business" it just makes you way more credible in one... am I wrong? Never something I've had to look into, just seems like it should be deductible...

# ? Feb 12, 2019 14:59

Residency Evil: Jul 28, 2003; 4/5 godo... Schumi

Fuuuuck USPS says I have a letter from the IRS coming today. :ohdear:

# ? Feb 12, 2019 15:58

Hoodwinker: Nov 7, 2005

Residency Evil posted:

Fuuuuck USPS says I have a letter from the IRS coming today.

They just want to tell you how good of a job you've been doing and that they're very proud of you.

# ? Feb 12, 2019 16:05

Residency Evil: Jul 28, 2003; 4/5 godo... Schumi

Hoodwinker posted:

They just want to tell you how good of a job you've been doing and that they're very proud of you.

Do audits typically happen after your return gets accepted/processed?

# ? Feb 12, 2019 16:07

Hoodwinker: Nov 7, 2005

Residency Evil posted:

Do audits typically happen after your return gets accepted/processed?

I don't have personal experience with it but I feel like this would be an extremely quick-response audit if it was the case.

# ? Feb 12, 2019 16:10

KillHour: Oct 28, 2007

Residency Evil posted:

Fuuuuck USPS says I have a letter from the IRS coming today.

If it makes you feel better, the last time this happened to me, it was a "We want to verify your identity so we don't give your awesome, giant refund to a scammer" letter.

# ? Feb 12, 2019 16:45

BonerGhost: Mar 9, 2007

Yeah I've kind of been telling all my VITA clients to make SSA online accounts if only so someone else doesn't do it first.

# ? Feb 12, 2019 21:04

Harik: Sep 9, 2001; From the hard streets of Moscow
First dog to touch the stars; Plaster Town Cop

Question about the solar tax credit that's phasing out after this year:

I make ~70-80k (70+unknown bonuses and contracts for 2019) and have 6 kids. My federal taxes amount to bupkis. What happens if I pay $20k for a solar install this year? As far as I can tell, I'll have a credit towards taxes I don't pay, which means either it rolls over until in 2021 when the poor-people taxes get jacked up or I get a raise to the point that I end up paying federal taxes, or it expires and is wasted.

I really hate regressive tax credits.

# ? Feb 13, 2019 01:02

The Gardenator: May 4, 2007; Yams Fan

Harik posted:

Question about the solar tax credit that's phasing out after this year:

I make ~70-80k (70+unknown bonuses and contracts for 2019) and have 6 kids. My federal taxes amount to bupkis. What happens if I pay $20k for a solar install this year? As far as I can tell, I'll have a credit towards taxes I don't pay, which means either it rolls over until in 2021 when the poor-people taxes get jacked up or I get a raise to the point that I end up paying federal taxes, or it expires and is wasted.

I really hate regressive tax credits.

If you claim the solar tax credit for tax year 2019, it will be at 30% and rollover each year if you cannot use it all each year. It will not be reduced in value if you already claimed it at 30%.

# ? Feb 13, 2019 02:33

sullat: Jan 9, 2012

Residency Evil posted:

Fuuuuck USPS says I have a letter from the IRS coming today.

If it's a certified letter it's probably a deficiency notice or a missing return notice. I don't think the refund letters are certified. In fact, I'm going to guess it's a CP518 or CP 59 (you need to file a return) or a CP 81 (you have an unclaimed credit that is about to expire).

# ? Feb 13, 2019 05:42

Residency Evil: Jul 28, 2003; 4/5 godo... Schumi

Residency Evil posted:

Fuuuuck USPS says I have a letter from the IRS coming today.

Nope, it was just the IRS telling me that they passed my income information to the Income based repayment people. Back in October.

:psyduck:

# ? Feb 13, 2019 11:06

Discussion Quorum: Dec 5, 2002; Armchair Philistine

I'm trying to understand the mechanics around mistaken HSA distributions but I am a little unclear on how to apply them to my situation. Everything I find via Google refers to either real mistakes ("oops I bought Taco Bell with my HSA") or one-and-done situations.

We were overbilled at the doctor's office by about $200. I paid our estimated obligation using an HSA debit card, and this particular doctor issues refunds by check . I know I can redeposit it as a mistaken distribution, but we are having a kid this year and so obviously will have many more medical expenses in the coming months. Can I apply the amount refunded to a future (or past) qualified expense, or would I have to repay and re-distribute?

And for future reference, how does the above situation change if the amount was credited against a future bill instead of refunded?

# ? Feb 13, 2019 20:24

AbbiTheDog: May 21, 2007

Discussion Quorum posted:

I'm trying to understand the mechanics around mistaken HSA distributions but I am a little unclear on how to apply them to my situation. Everything I find via Google refers to either real mistakes ("oops I bought Taco Bell with my HSA") or one-and-done situations.

We were overbilled at the doctor's office by about $200. I paid our estimated obligation using an HSA debit card, and this particular doctor issues refunds by check . I know I can redeposit it as a mistaken distribution, but we are having a kid this year and so obviously will have many more medical expenses in the coming months. Can I apply the amount refunded to a future (or past) qualified expense, or would I have to repay and re-distribute?

And for future reference, how does the above situation change if the amount was credited against a future bill instead of refunded?

That would be a lot of hassle over $200. I'd treat whatever year you pulled the $200 out as a normal medical withdrawal, and then just (if you want to be fair) pay $200 of bills with that money in 2019 for the kid delivery before touching the HSA again.

The IRS doesn't have any way to reference your medical bills.

# ? Feb 13, 2019 22:36

IOwnCalculus: Apr 2, 2003

AbbiTheDog posted:

That would be a lot of hassle over $200. I'd treat whatever year you pulled the $200 out as a normal medical withdrawal, and then just (if you want to be fair) pay $200 of bills with that money in 2019 for the kid delivery before touching the HSA again.

The IRS doesn't have any way to reference your medical bills.

Yep, this. Considering that the ask at the end of the year is "was any of this withdrawal used for non medical expenses", the answer would still be "no".

# ? Feb 13, 2019 22:50

Discussion Quorum: Dec 5, 2002; Armchair Philistine

Thanks, that's what I thought. We're on pace to hit our deductible in the next few weeks, which obviously limits our exposure to continued overbilling. In theory, anyways :haw:

e: since it was unclear, everything in my post above happened/will happen in 2019

# ? Feb 13, 2019 23:21

EAT FASTER!!!!!!: Sep 21, 2002; Legendary.

Residency Evil posted:

Nope, it was just the IRS telling me that they passed my income information to the Income based repayment people. Back in October.

I got this letter too and was sweating it super hard to my wife only to open it and be like, "oh."

THANKS FOR THE AGITA, ASSHOLES.

# ? Feb 14, 2019 16:47

No Butt Stuff: Jun 10, 2004

Still looking at the PATH act message.

Thanks, IRS.

I guess it'll possibly update tomorrow.

# ? Feb 14, 2019 17:05

IOwnCalculus: Apr 2, 2003

I'm still holding off filing because AZ still hasn't decided how the gently caress it's going to handle compliance with the tax law changes, but at this point I should probably just file and plan on amending the state return later.

# ? Feb 14, 2019 18:20

babydonthurtme: Apr 21, 2005; It's my first time...; Grimey Drawer

So my partner and I moved state last year for his new job, and while it went well, it meant that he ended up contributing too much to his 401k for last year. We rolled over the old 401k to an IRA at Vanguard; the new 401k is with Fidelity. We originally thought contacting Fidelity to have them return the excess contribution would work, but it turns out his new place's HR department is full of stupid people, and because they refuse to do anything about our request, Fidelity won't release the money to us without a letter from a tax professional.

I looked around for more options and saw we can just get the money out of his rollover IRA instead. Vanguard has a handy form for it, and it looks like a pretty simple process. Am I barking up the wrong tree here, and would it be easier to just have a tax professional handle it? Besides this one issue, our taxes aren't complicated enough to merit that.

# ? Feb 14, 2019 19:28

black.lion: Apr 1, 2004; For if he like a madman lived,
At least he like a wise one died.

Seems strange that Fidelity won't just do what you want them to with your 401k... I mean, if you're wrong (from their perspective) it's you that has to pay the tax + penalty... do they think they're protecting you from yourself? I'd call your rep there and tell them if they don't help you timely distribute the excess, and cause you to ultimately pay tax on the excess twice, that you're moving it to a competitor.

Did they give justification for why they want a tax professional to sign off on it?

# ? Feb 14, 2019 21:36

MadDogMike: Apr 9, 2008; Cute but fanged

black.lion posted:

Seems strange that Fidelity won't just do what you want them to with your 401k... I mean, if you're wrong (from their perspective) it's you that has to pay the tax + penalty... do they think they're protecting you from yourself? I'd call your rep there and tell them if they don't help you timely distribute the excess, and cause you to ultimately pay tax on the excess twice, that you're moving it to a competitor.

Did they give justification for why they want a tax professional to sign off on it?

Yeah, that does seem bizarre, I sure as hell am not the boss of my clients to give them "permission" to handle their own funds, and this is a pretty drat basic "too much was added" situation to boot I'd think. My only signing off on things I've done is things like confirming that we did the taxes for a client (sometimes confirming Schedule C income) to a loan place, or one time that there was an error on the original return so use X correct number instead. You'd think they could look at the numbers and see the issue here without a permission slip. I don't know that you can necessarily pull money out from an IRA to fix a 401k issue though, they're under different limits and everything I can see in Pub 525 and the other IRS info seems to say it has to come out of the same plan over-contributed to, or at minimum the same type of plan I'd think. I'll double check to be sure though.

# ? Feb 15, 2019 05:26

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# ? May 25, 2024 00:09

silence_kit: Jul 14, 2011; by the sex ghost

Do I need to file Form 8889 if all of the HSA contributions from my paycheck are pretax? Is this what the form refers to as a �cafeteria plan�?

I got a mailing from my HSA provider, after I did my taxes, unfortunately, that I need to file this form. I could file an amended return with this form, but it wouldn�t change the amount of tax I pay. It looks to me like if I were to file it, it would be entirely blank, since none of the HSA contributions are deductible and I did not take any distributions from the account.

# ? Feb 15, 2019 10:28

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > US Income Tax Thread: Bank error in your favor! GO DIRECTLY TO JAIL.

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