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Well, the last thread had grown to over 125 pages over 2 and a half years, so we figured it was time to start a new thread. Many thanks to Zeta Taskforce for taking time out of his busy day of I can't speak for any other contributor, but please note that I personally will be ignoring any question that can be answered by reading this OP, so please take a look before posting your question New US Income tax Megathread. The old one can be found here. What this thread is FOR
What this thread is NOT for
The following is a glossary of common tax terms that you will see over and over. It is by no means close to complete.
As you begin to think about your taxes, there are some questions you need to ask. First, what is my filing status? Note that your filing status is what you are on the last day of the year. If you are unmarried, you are divorced or legally separated, have no dependents, you are single. 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. If you are unmarried or your spouse abandoned you for at least the last 6 months of the year, and have cared for a dependent for more than half the year you may qualify for Head of Household filing status. This filing status has more favorable tax brackets and a higher standard deduction compared to filing as single or MFS, meaning you will pay less tax for any given income. If your spouse passed away within the last 2 years, have not remarried, and have a dependent, you can file as a Qualifying Widow/Widower. Your tax brackets and standard deduction are the same as MFJ. Second, will you will itemize or not? Everyone gets a standard deduction. Every filing status has a certain amount. You don't have to do anything to claim the standard deduction, but they give you a crack at adding up a series of unrelated deductions, and if you can do better, you then choose to itemize. They include, but are not limited to mortgage interest and property taxes on a first and second house, income taxes paid to your state and city, charitable contributions, unreimbursed work expenses that exceed 2% of your AGI, and medical expenses that exceed 7.5% of your AGI. Third, are you a dependent or not? Are you under 19, or under 24 and a full time student for at least 5 months of the year or permanently disabled? If so, did someone else provide more than half your support? If you answered yes to both questions, you are a dependent. A dependent may be required to file, but they do not get their personal exemption, nor are they able to claim most credits. Fourth, will you hire someone to do your taxes for you? There is no absolute answer to this question, but in general if your situation is simple (ie: all your income is wages, you are not self employed, do not own property, and your relationships to family members are pretty clear cut) it is probably within your ability to do it yourself. If you have rental property, are self employed, went through a major life change, just received a large inheritance, sold business assets or rental property, not saying you are required to hire someone, but most of these situations may be beyond the grasp of the average person and you might consider hiring someone to help you. Most people are somewhere in between. It really depends on how much time you have, your aptitude for it, and how scary numbers are to you. Common questions that come up over and over: What states do I need to file in? For tax purposes, you are a resident of the state you live in. This might not be the state you vote in or have your driver’s license from. That means if you go off to school in a different state, you are filing taxes over there as a resident. If you moved from one state to another, you may have to file taxes as a part year resident in both states. If you happened to earn income from a state you never lived in, you have to file a non resident return there, pay tax to them. Then you will file as a resident in the state you live in, include all income regardless of where you earned it, but you will get a credit (generally dollar for dollar) for taxes paid to the other state(s) so you won’t be double taxed most of the time. How come I have to make quarterly payments/have money taken out of every paycheck? Wouldn’t I be better off if I just send them one big check at the end? You would, but the government wouldn’t. The financing needs of the government are continuous, and they expect to be paid at the same time you do. Think of filing your taxes not as when you pay them, but more of an end of year accounting. You are figuring out your obligation for the loveliness of being a US citizen/resident and comparing that to how much you actually paid. If you paid too much in, they give you your money back in the form of a refund. If you didn’t pay enough, you then write a check made payable to “United States Treasury” Why do you tax preparers charge so much for typing in a few tax forms into a computer? I can pay a fraction of the cost and do it myself. No one is stopping you, and millions of people go that route. However, you are not buying a tax professionals data entry skills. You are buying their knowledge of taxes and finance. You are paying for the hundreds, perhaps thousands of hours of training and coursework they have taken in their careers, the skills they have picked up by doing hundreds or thousands of returns before yours. You are paying to avoid the frustration of dealing with ambiguous situations and for someone to represent you if you get audited or if the IRS questions what you did. It’s the same thing if you are trying to design a website. There are programs you can buy that do all the formatting for you and give you a reasonably professional looking end product. Yet there are people who design websites for a living and they are charging more than Best Buy does for the CD-ROM. I'm doing some independent contract work so no one is taking out taxes. How much do I need to pay? How do I do it? If you download Form 1040-ES, you will get the vouchers on the bottom. It also comes with about 11 pages of instructions, tables, guides, and worksheets to help you decide how much you will owe. You will pull out your hair if you try to absorb all of it. Your goal is to not hit the nail in the head, but rather somewhere in the ballpark. If you pay 25% to 30% of your profits in estimated taxes, you will probably do that. If you are on the lower end of the income spectrum and/or qualify for a bunch of tax credits, you can be on the 25% side of things. If you are on the higher end, especially if you don't have much in the way of credits and deductions, you may want to think about a third. Concerning how much to send in when, your two options for not getting in trouble are to send in 4 equal payments or if you send unequal payments, they have to match your income through the year. The alternative is if you are an employee somewhere, you can have them take out extra to cover your side gig. I had to buy [fill in the blank] for my job and they didn't pay me back for it. Can I write it off In theory yes. Maybe. Probably not. You would use Form 2106. You have three obstacles to overcome before you can. First. These expenses need to exceed 2% of your AGI. This is a lot. If you make $50,000, that means the first $1000 you don't get to claim. Second, you have to itemize your taxes. The amount that exceeds 2% goes onto Schedule A, and if the net result (combined with your other itemized deductions) exceeds your standard deduction, then go for it. Third, 2% deductions are an AMT preference item so if you are subject to alternative minimum tax you won't actually get any benefit even if you have more than 2% of your income to deduct and itemize. I asked a question and was told to go hire a professional to help me! I just wanted you to answer my question for free and not have to pay someone. You guys are all jerks! Please recognize that many of the people who answer questions in this thread (including myself) do this professionally for a living and are participating out of the kindness of our little accountant hearts. Some topics are simply too complex to go into over an internet forum, or require a lot of experience and expertise to answer properly. If you are told that this is the case for your question, I assure you we are (probably) not just being jerks, and that you probably really need to go seek professional assistance. DISCLAIMER: Please note that this OP is not meant to be an all encompassing guide to how to do your taxes. It barely scratches the surface on the very basics. All information given in this thread by definition came from a goon, and therefore should be used for entertainment value only, and no one may be held responsible for messing up your life if you choose to follow it. That is especially true if the person giving you advice doesn't like you. furushotakeru fucked around with this message at 01:26 on Feb 15, 2019 |
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Mar 6, 2011 00:16
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Jows posted:In 2010 I was without a job and drawing unemployment for the entire calendar year. When I lost my job I stopped my automatic savings into my ING account and told Fidelity to skip several of the upcoming months for automatic deductions into my Roth IRA, thinking the time I gave myself to "skip" was more than sufficient for me to find a job. I generally ended up forgetting about it though until I saw the deduction notice in my bank account. This happened a few times throughout the year, as I was always more overconfident in my ability to find work than reality allowed. Your Roth custodian should be able to undo your contributions for the year if you contact them and let them know that you put more in than you were allowed. If you do this by 4/18 you should not be penalized for the contributions, but will pay tax and penalty on any earnings.
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Mar 6, 2011 09:11
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I agree - best to do it right, sorry.
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Mar 9, 2011 03:18
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Zeta Taskforce posted:You can do a payment agreement with the IRS, but it is so stacked against you, you would do better getting a loan somewhere. You would do better getting a cash advance on a credit card if it came to that. I dunno about that, cash advances usually carry a 3% service charge and 30% interest, and even the IRS isn't that draconian. If he wants to pay with a credit card he should just do so - same 3% service charge but ordinary interest rates.
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Mar 10, 2011 06:46
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Analytic Engine posted:Is there a good resource for tax questions regarding graduate student stipends and graduate/undergraduate scholarships? My old university was incredibly unhelpful on this front, and I don't expect great things from my new program. Or should I just ask the IRS directly and save myself some fretting over the uncertainty? There is decent information available at http://fingate.stanford.edu/students/taxinfo/tax_citizen_residalien.html, and it isn't necessarily specific to Stanford.
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Mar 10, 2011 06:50
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Well to be fair you should probably also factor in the installment agreement fee of $105 ($52 if you agree to have the payments auto debited from a bank account rather than mailed in by check), which brings the effective cost to 15.1% or 13.6%, respectively (using your figures). Which is still a lot cheaper than a cash advance for the majority of credit cards.
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Mar 10, 2011 17:09
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CerebralDonut posted:Not sure if this is the right thread but here goes nothing. I just got my tax refund back, and uh I kind of hosed up while opening it. About a fourth of it is ripped. I searched google about what to do in this situation, but nothing useful came up. I'm sure this has happened to someone before, so I'm wondering -- What's the best thing to do in this situation? Should I call the IRS and explain the situation to them, or should I just mail back the ripped check with a note? Tape it neatly and try to deposit it? Checks are processed via optical scanner these days, I think there is a pretty good chance that it will go through OK. Your only other option is to call the IRS and ask them to re-issue the check, which will involve sending it back to them with a form you have to fill out and sign, and waiting for them to send a new one (which they will). This will most likely take several weeks.
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Mar 11, 2011 03:07
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Jose Cuervo posted:Two questions: If the income is reported in box 7 (non employee compensation) the IRS will presume that you are self employed. If it is listed elsewhere (most commonly box 3 - other income), then you may not be subject to SE tax. Yes your net income from the 1099 is earned income if you are self employed.
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Mar 12, 2011 23:34
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tolerabletariff posted:Why the gently caress does Massachusetts get to tax my D.C. income? I worked for a few weeks over winter break last year in D.C. (because I'm a VA resident I pay VA taxes, not D.C. taxes) but then worked in Boston all summer long. Doing my MA nonresident income tax form they had me add in my earnings from when I was living at home. That doesn't make a whole lot of sense--at the time I was living in VA I wasn't using any MA state services or anything, why should they get a bite out of that apple? If you were not a full year resident of MA, then they cannot tax your DC income. Perhaps you entered something incorrectly that made the software either think that you were a resident of MA or that the DC income was taxable to MA?
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Mar 15, 2011 06:15
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WorldTravelerX posted:OK, more HSA questions. If your W-2 lists $3,050 in box 12 code W then your contribution should already be excluded from your gross wages in box 1. If this is the case, then you have already received the benefit for the contributions and there is nothing further to claim. If it is not, then you should be able to deduct the HSA contributions that you made (not your employer) on your 1040.
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Mar 15, 2011 06:16
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AbbiTheDog posted:Wow, where did this come from? More realistic approach of under-reporting is a CP2000 matching notice and automatic calculation of tax owed. No need to frighten the poor person to death. What CP2000 notice? The income on the 1099 in question was already included on the schedule C.
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Mar 18, 2011 01:42
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Even a no change audit can be expensive (if you have a representative go in for you), invasive, time consuming, and an all around pain in the rear end. So even if you "have nothing to hide" it still usually isn't a pleasant experience for most people.
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Mar 18, 2011 19:40
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Audits are almost never random, they only audit your return if they think there is something to find. The way the local IRS agents describe it, the IRS computer looks at each filed return and assigns a Discriminate Information Function (DIF) score to it, and those returns with high DIF scores then get looked over by a revenue agent who then makes a recommendation as to whether or not the return should be audited, and whether it will be a correspondence audit or an office audit. If it gets sent for an office audit then the group manager decides whether it is an in-the-IRS-office audit or a field audit at the place of business/tax pro's office. Of course, what exactly determines the DIF score is a secret to keep people from gaming the system too much. All we know are general guidelines based on what issues are frequently audited (the so-called "red flags") and that the IRS systems looks for statistical anomalies on return such as abnormally high expense to income ratios, etc.
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Mar 18, 2011 23:50
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AbbiTheDog posted:We got stuck with a training audit this year. The local IRS office (San Jose) puts on "practitioner liaison meetings" three times a year, hosted by the Mission Society of Enrolled Agents. These meetings are usually attended by district and regional level management from the IRS. I don't think one of these meetings has gone by that I can remember that at least one person hasn't cracked a joke about sending the IRS a bill for training their greenhorn agents. The IRS is having a lot of problems with high turnover for agents, who are going through the IRS training and then quitting to go make money in the private sector before a year has gone by, so there is a shortage of experienced auditors out there and they are constantly hiring new ones.
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Mar 19, 2011 01:31
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KennyG posted:Without getting too political, this is what 2 year pay freezes, proposals for promotion freezes and all the federal funding budget politics do to the government workforce. Hard to argue that the IRS auditors are overpaid. The enforcement budget of the IRS has grown significantly every year for some time now.
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Mar 19, 2011 21:21
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I have a feeling it is more about the gigantic, enormous, stupendous, and unsustainable deficits the government runs each year, and somehow they keep growing. There seems to be a mentality that if they throw more money at enforcement they can solve these problems but instead there seems to be a point of diminishing returns that is not being acknowledged.
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Mar 20, 2011 00:49
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politics of taxation and auditing itt
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Mar 20, 2011 05:41
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AbbiTheDog posted:I'm going to disagree on this one, since your out-of-pocket costs are only $3,500. But it's not my return. Seconded. Use what you actually paid.
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Mar 21, 2011 09:10
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starcraft87 posted:I have a local tax question. I live in PA, but I think this is more of a theory question than something specific to my location. Well you should have not only a lease but cancelled rent checks or receipts so I don't see any reason to not submit the adjustment. The worst they will say is no.
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Mar 21, 2011 09:11
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Red Saucer posted:a quickie, I hope: Once the tax and penalties have been paid (or you enter into a formal installment agreement to pay them) you can apply for penalty abatement if you can convince the IRS that being unemployed is "reasonable cause" for not paying your taxes on time. I don't know whether or not this would fly but would lean strongly to the side of "not" as it is very hard to convince the IRS to abate anything. In reality it is most likely that the amount of money involved is simply not worth the amount of time and effort involved in requesting the abatement and seeing it through. Hopefully you will find work soon and then can make payments to take care of this ASAP.
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Mar 21, 2011 09:15
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Gimbal_Machine posted:Just wondering why you'd go with this? Is it just the 'safe play'? If I had kept the money and done the work myself and bought a new car then installed new windows at a later time using 8k of my own money, I would be able to make the deduction, right? Seems logical to me that the decision to spend the insurance proceeds on energy upgrades was my decision to make, no? Just since Abbi didn't really explain what he meant by involuntary conversion rules: the money paid by the insurance company is only non taxable if you use it to replace or repair the property that they were paying the claim for. However, you do have I think 18 months from the loss to spend it before it becomes income.
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Mar 21, 2011 20:19
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You are free to put whatever you want on your return. You asked what we would do and we have given our answer. If you disagree, then use what you want for your return. I think I have narrowed down why this doesn't pass the "smell test" for me: If you had received the insurance money and then paid $8K for the invoice, that would be one thing. However, the insurance company paid the installers the balance of the invoice directly. To me, this means that your cost for the repairs was the $3500 you actually paid and not the $8K total for the invoice. furushotakeru fucked around with this message at 22:36 on Mar 21, 2011 |
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Mar 21, 2011 22:29
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seiferguy posted:Random question, I feel like it's best to ask here: The IRS can provide a transcript of what was reported to them by your employer. Other than this, I don't know what you can get. The transcript will list the name, address, and FEIN for the employer as well as how much they paid you, so it may be good enough for your new job.
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Mar 30, 2011 06:15
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Mark Kidd posted:Basic self-employment question here: If you pay them more than $600 then you are supposed to issue a 1099 to the contractor.
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Mar 30, 2011 20:32
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zer0spunk posted:As a freelancer, if a client chooses to pay me in cash or a personal check, and it's under the amount required by the 1099-MISC, if I report it and it adds to my gross income, but they don't, what exactly happens? How would the IRS know who paid you if no 1099 was issued? Also, the IRS couldn't care less if someone is not claiming a deduction for something they could be, but it is their job to find people who are not reporting income that they should be.
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Apr 8, 2011 07:56
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I believe with HRB pricing also varies by region and by date. This close to the deadline I imagine that the rates are jacked up a bunch. I could be wrong about this though. Also, most HRB offices are franchises so I don't know if perhaps this varies from office to office as well, or if it is standard policy from the head office. furushotakeru fucked around with this message at 22:18 on Apr 11, 2011 |
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Apr 11, 2011 22:13
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Small White Dragon posted:Helping people save money on their taxes is God's work? It is all part of my multi step plan: 1) Slash taxes for billionaires for the next three years, reducing expected revenues to fall by about $860 billion. 2) As soon as this is done, make a big huge loving stink about the deficit and how we need to spend less money on government. 3) Hold the entire nation's government hostage until I secure ~$50 billion in spending cuts and then crow about how I am a champion for fiscal responsibility. 4) ??? 5) Profit. Just kidding. "???" is obviously "secure millions of dollars in contributions from rich friends as thanks for saving them billions in taxes and get re-elected until the end of time". 
furushotakeru fucked around with this message at 01:06 on Apr 12, 2011 |
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Apr 12, 2011 01:00
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Surreal Windmill posted:So I e-filed mid last month, and the Where's My Refund site says it was direct deposited into my account on the 8th. I call my bank yesterday and it was indeed deposited, but it tried to go into savings even though it was coded as savings (Can anyone explain this?). So instead of trying to fix something or contacting me they just like.. returned it. So now what? How do I figure out what the number is listed for them, can they even try again or do I have to wait for mail? Will they do that automatically or do I have to contact someone? The government will automatically mail a check to the address that is on the return you filed, but it will typically take an extra 2-3 weeks to arrive.
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Apr 13, 2011 08:17
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No. 9 posted:This might be stupid, but this is my first time filing. You won't owe much, if any, income tax on that but you will still owe 15.3% of self employment tax on the net income from your consulting work, after expenses are factored in.
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Apr 14, 2011 07:45
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AbbiTheDog posted:There are apps that do this, haven't tried any of them though. Trying to convince my clients to give it a shot. I like Trip Cubby for the iPhone.
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Apr 14, 2011 21:53
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AbbiTheDog posted:S Corp owners are probably taking a W-2 already and can adjust their withholdings. Yeah I have this one client who has a single member LLC and he refuses to stop paying himself W-2 wages. One day he woke up and found out that he had been turned into a toad. True story! Actually no he's done it that way for about 5 years and has never heard a peep from the IRS or CA EDD about it.
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Apr 16, 2011 07:10
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Small White Dragon posted:Why is this, incidentally? I have no idea. Unlike with an S Corp you still pay self employment tax on any profit in the company so there isn't really any benefit to doing this other than having withholding.
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Apr 16, 2011 07:11
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Hey look Abbi, Intuit's VP of professional products recorded a nice video to tell us how much they "appreciate" our business. Then they released next year's pricing and are waiting for us to bend over and take it up the shorts like they do every year. REP charges unlicensed individual states are increasing from $18 to $25. I guess they are providing 39% more value somehow? Oh look, it now "includes state efiling". Problem is, I already pay $1K a year for unlimited federal and state efiling so they are just finding creative ways to gently caress me out of more money. I guess now I only pay $1K for unlimited federal efiling now? REP for business entities is increasing from $54 to $60. Oh an apparently we now get to pay $500 for DMS, analyzer and tax planner. Yeah I used to just pay $150 each for DMS and tax planner and have absolutely no use for their worthless analyzer, but that's cool I guess. Just loving rape me for another $200 with no justification. I loving hate Lacerte so drat much every time I have to pay them. I mostly love the program when I am using it, so I wish there was a good alternative.
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Apr 21, 2011 22:12
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AbbiTheDog posted:I paid a grand total of $20k last year for it....grrrr...... But hey it's cool man... they "appreciate our business", right? I paid about $8K for 2010 between the software + REP, but I prepare about half as many returns as your office does. I'm guessing you do a lot more business returns than me.
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Apr 21, 2011 22:57
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Doing the math, it will cost me 15.34% more to do the same exact number and type of returns I did for 2010 in 2011. I somehow doubt my clients wouldn't bitch at me for raising my rates by 15% next year meaning I will be expected to eat the difference. This is loving outrageous. edit: oh and their pricing sheet still has the balls to say that individual modules come with unlimited individual federal and state efiling, and then still jack up the price of the state REP fees but say that "efiling is included" furushotakeru fucked around with this message at 23:56 on Apr 21, 2011 |
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Apr 21, 2011 23:51
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So, how about them taxes? [/derail]
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Apr 22, 2011 00:03
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Zquargon posted:They don't appreciate it enough to actually hire enough people to staff the phones for you guys during tax season either. I don't work there anymore, got way too fed up with management's terrible decision making. Hold time has never been an issue for me, fortunately. I rarely have to call in and when I do I never hold for more than a few minutes that I can remember.
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Apr 22, 2011 00:35
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AbbiTheDog posted:Learning curve is my issue. I have 4-5 staff who have been using it for years, we're paperless with the DMS program, yadda yadda yadda. Well that and the fact that it seems to crash several times a day. It does that more each year.
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Apr 22, 2011 17:05
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Call them today and make arrangements to take care of what is due. It won't go away if you don't contact them, they will just step up enforcement until you either contact them or everything due is forcibly collected. They are required to give you notice before levying a bank account. This typically happens as a certified letter. If you haven't received a certified letter from the IRS then you probably aren't about to be levied.
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Apr 27, 2011 19:56
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Pinkied_Brain posted:So, my company is giving out RSUs (so basically stock) as compensation bonuses. And in the schwab website (through which they process it) there is an option of how to handle the stock awards, and the default option is "sell for taxes". You will always pay tax on the value of the shares when they vest, and your company is required to withhold taxes from that amount. Whether you choose to pay the taxes on the vesting out of your normal paycheck or have them sell to cover is your choice. There is potentially a tax benefit to holding the shares for long term capital gains treatment (assuming the shares will appreciate), depending on your overall tax situation.
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Apr 27, 2011 21:47
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