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When the IRS asks if you are "covered by a retirement plan at work", what date or time period is this referring to? On December 31, 2015 and for all of 2015 I will have been covered by a retirement plan at work. However, at the time of filing in 2016 I will not be covered by a (US) retirement plan at work. After this year, I will be working for a foreign employer that only participates that country's work plan - a payout at separation from employment based on duration of service. My understanding is that this then means I will be eligible for deductible contributions to an IRA no matter my income. Do I have this right?
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Nov 10, 2015 09:45
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If I moved from DC to Texas mid-year, should I let DC know that I moved or just file a partial-year return? I've thought about sending a certified letter just to say "hey letting you know" because I'm now an expat living out of country.
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Nov 19, 2015 11:30
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For the deductibility of IRA contributions, does "covered by an employer plan" mean at any point in 2016, for most of 2016, or at the end of 2016? I will be leaving my employer effective 12/31/2015 but my final paycheck will be in January 2016 and contain a 401k contribution for 2016. After that, though, no more employer plan.
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Dec 12, 2015 09:15
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Hadlock posted:Also, my old company cashed out my 6 weeks vacation as a lump sum bonus and taxed it as such (@ 39%?) - can I claim this as wages owed and have them taxed at the appropriate income tax rate, rather than as a bonus? This would move my tax rate on those funds ($6500 or so) from 39% down to about 25% At least on these two, you're mixing up how much the withholding is vs how much your tax rate will be. Companies generally withhold any lump sum payment at the "bonus" rate that you see there. But you'll be taxed at the appropriate rate when you file (and thereby refunded much of what was withheld). Irritating, but you won't get taxed more just because of how it was paid to you. Income is income. On the latter, they're withholding as though you had earned that salary all year...but when you file, again, you'll be taxed at the appropriate rate for your bracket, and refunded any over-withholding (federally). I can't tell you about California though.
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Jan 13, 2016 09:38
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Leperflesh posted:Turbotax wants me to upgrade from Deluxe to Premiere, for +$20, in order to report my stock sales activity. In 2015, I made exactly two sales of stock, both for losses. One was short-term, a loss of $246.68; the other was long-term, a loss of $693.99. I am married filing jointly, and we itemize (we have a mortgage). There are other online programs that will file that sort of thing for free (TaxAct, I think, did last year at least when I had this exact same problem).
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Apr 3, 2016 11:09
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I wanted to confirm my understanding of this situation: For the first 6 months of the year, I was an employee of a foreign company residing abroad (I qualified for the FEIE via physical presence). For the latter six months of the year, I will still be an employee of the same company, but residing in the US and working remotely. The company is pretty small. My understanding is that for the first six months of the year, I am subject to income tax but not to medicare/social security taxes. I'm not sure how to report this, though. The IRS lists a bunch of rules under which you might be subject to SS/MC taxes, and I don't meet any of them, nor was I self-employed. For the second six months of the year, I understand that I am subject to SS/MC tax because my work is performed in the US (albeit for a foreign employer). However, my employer will not register in the US or withhold any of those taxes. In that case, do I then have to file as "self employed" even though I am not, in fact, "self employed"?
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Jun 13, 2016 20:28
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asur posted:The physical presence test is in a 12 month period, but that 12 month period doesn't need to align with the US tax year so if he was in that country in the previous year he may qualify. Correct, I lived there in the preceding year, so I qualify. This is the year I moved home, so it's pro-rated for just the six months-ish that I was overseas.
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Jun 13, 2016 21:58
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kaishek posted:I wanted to confirm my understanding of this situation: I hate to self-bump, but is this the kind of thing I just need to talk to a tax professional about? It seems like there is very little about this online - there's a lot about americans abroad, but not about this situation.
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Jun 15, 2016 16:43
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Thanks everyone for their advice. I had hoped that after paying a pro $1300 this year to fill out my expat tax return I could go it alone this year using last year as a guide. But I guess this year will be even more complicated.
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Jun 17, 2016 22:53
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Boris Galerkin posted:I'm a US citizen and have been working abroad since January. I'm working for a local company, being paid in the local currency, and will pay income taxes to this country. I understand that I need to report my income to the IRS nonetheless but I have the option to claim the FEIE (I don't earn anywhere close to $100k) or a foreign tax credit. How do I decide which one is more tax advantageous for me? In order to avoid penalties for underpayment, you have to pay at least as much in taxes as you paid last year OR within 10% of your tax liability for this year. So you could get away with paying as close as possible to your estimated taxes for this year. You did, however, also miss the second 1040-ES deadline, June 15. But if you're living abroad the full year, and being paid much less than $100k, your tax liability is likely to be $0 or pretty close to it, so it may not matter. In order to figure out which of the two is more advantageous, you'd need to figure out your US tax liability (as though you weren't living abroad). If your foreign tax liability is higher, that may be the more beneficial credit for you. The FEIE (for your first year, probably based on physical presence) requires that you not be in the US for 330 days out of a 365 day period, so if you're traveling back into the US much you may fail to qualify.
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Jun 29, 2016 15:49
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Boris Galerkin posted:Right, so let's assume I take the FEIE which gives me an AGI of $0 so I'd owe nothing for 2016 to the IRS. How do I handle the estimated payments then? Can I just ignore them until I file taxes in April or do I still need to do something stupid like mailing them the quarterly forms with $0 written on a check? My understanding of this (not a tax attorney, but talked to one about this issue) is that for the FEIE unless you lived in said foreign country from midnight on New Year's Day to midnight on New Year's Eve, you need to claim physical presence. So if you lived abroad for 5 years, your first year and your last year abroad you'd claim physical presence, and all the years in between you can claim bona fide residence. In your case, you said you moved in January, so unless by "January" you meant "December 31 of the preceding year" you'd probably need to do physical presence. But, as you point out, you'll likely owe nothing. In that case, I believe that you can safely not pay estimated taxes because your estimated tax burden is $0. Just don't forget to file by June 15, the extended deadline for those living abroad.
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Jun 29, 2016 20:51
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I plan on living here for at least 5 years and I have literally no property of any sorts left in the US so I figured that would pass.
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Ur Getting Fatter posted:If they were filing after the due date or not making quarterly payments then they should've emailed us before not doing so since both result in basically having to pay more money. Neither the client nor me know US tax law which is what they're presumably being paid for. If they're incurring penalties for late filing, and then passing those penalties on to you, that is stupid and dumb and you should be mad at them.
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Jul 21, 2016 01:09
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I'm trying to set up insurance for my LLC w/ S-corp election that employs my wife and me. Within the S-corp, I draw most of the income and so have a full salary. She works part time and so receives a smaller regular monthly wage. In buying insurance, one of us has to be "single employee" and one has to be "employee with children" - the insurance broker recommended making my wife the "employee with children" but the monthly premium would exceed her monthly wage. The broker said this didn't matter because our incomes are combined marrying filing jointly so as long as total premiums are less than total income, it doesn't have any impact. Looking at the Self-Employed Health Insurance Deduction Worksheet, it makes no mention of joint income and seems to limit the deduction to the reported Medicare wages on the W-2. Is this on a -single- W-2 (i.e. each person calculates the deduction separately) or on both W-2s combined? I referenced this: https://www.irs.gov/publications/p535/ch06.html
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Jan 23, 2017 16:33
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AbbiTheDog posted:Your deduction for S Corp SEHI will be limited to the amount of wages that you pay payroll taxes on. EG - SEHI was $12k, you had $10k of W-2 wages, so you only get a $10k deduction on your 1040. If you dig deeper into the SEHI rules, basically ANY insurance paid for your family will qualify, so even if the coverage is in your wife's name and exceeds her W-2 wages, you can put the wages on YOUR W-2 as SEHI. Awesome, so the exact distribution of who gets the insurance for who doesn't matter as long as it's all within the single family - as long as I report the excess she pays on my W-2 instead of hers.
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Jan 23, 2017 20:20
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AbbiTheDog posted:I'd ask why she's paying anything if it's just you two on the payroll - just have the LLC pay the whole thing. You put after-tax premiums on, so if your agent setup a pre-tax plan for just the premiums, and you don't have any other employees, you might be wasting money on the pre-tax plan. We haven't set up anything for the time being - but I was under the impression that based on this: https://www.irs.gov/pub/irs-drop/n-08-01.pdf We were required to report any payments the LLC makes on our behalf for insurance as wages (exempt from SS/Medicare) and deduct those payments as SEHI. If we can just have the LLC (with S-corp election) make the payments (and thus have it not be taxed because we would never realize it on either a W-2 or K-1) that would be easiest for all of us.
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Jan 23, 2017 20:36
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BAE OF PIGS posted:I should have looked this over before I submitted, but I put $1655 into my roth ira this last year, and my AGI was 44,510. Shouldn't I have gotten a credit of $166? Line 34 of my 1040A is showing up blank. Unless you're married filing jointly or head of household, the income cap for this credit was $30,750 for 2016.
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Jan 28, 2017 04:04
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fyallm posted:Ugh, loving hell. I just tried the little calculation thing and it says we both have to put 0 and I should add in like 200 per paycheck to cover it. That can't be right at all. They really do make this as confusing as hell. It probably did import right, and you probably do just owe for a variety of complicated reasons. Having two working spouses makes the calculation pretty complicated, and very very dependent on your income.
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Feb 14, 2017 23:20
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I have an IRA contribution question: I fall within the range of the IRA deductibility phase-out (98-118,000 MFJ), but well under the limits for Roth contributions. I understand that I am entitled to a partial IRA deduction calculated by some means. Let's say I do the math and come up with a partial deduction of 2500 out of the 5500 limit - does this mean that I can contribute 2500 to a Traditional IRA and 3000 to a Roth IRA, and have the 2500 Traditional contribution be fully deductible? The language confuses me because "partial deduction" to me implies that only a portion of your contribution is deductible - like 20% is deductible of your contribution up to 5500. But in reality, your contribution is fully deductible, up to a portion of the contribution limit.
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Apr 7, 2017 22:19
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ohgodwhat posted:Do backdoor Roths, sheesh Backdoor Roth would be overkill, I think - I think for both of our questions we can just...contribute directly to a Roth because we're under the income limit for that. But the phaseout for Roth is like $181,000 while the phaseout for deductible IRA contributions is $98-118,000. If I can make a deductible IRA contribution I would like to, just want to make sure I have it right! Income under $98k: contribute directly to either one Income between $98-118k: contribute up to the deductible limit to Traditional, top up to $5500 in Roth Income between $118k-181k: contribute to Roth Over $181k: Backdoor Roth
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Apr 8, 2017 22:58
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Blinky2099 posted:any recommendations for how I can figure this out? do I just need to go hire a tax person? etrade wasn't any help when I messaged them At least according to this, check your W2, or a pay slip from around that time? https://thefinancebuff.com/rsu-sell-to-cover-deconstructed.html
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Apr 9, 2017 14:42
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drat Bananas posted:I'd like to get something straight, make sure I'm reading everything in my situation correctly. If my company opened a SEP IRA for me and put money into it, not out of my salary or anything, just contributed to it themselves, that means that I can't take the full 5500 deduction from my Traditional IRA? The amount you can contribute to an IRA doesn't change, because the employer and employee limits are different - only the employee side is linked to your IRA limit of $5,500. However, because you had a retirement plan available through work, your ability to deduct may be limited if you fall above the deductibility phase-out described here: https://www.irs.gov/retirement-plan...nt-plan-at-work Single and AGI between $61-71k deduction is limited, above $71k no deduction MFJ and AGI between $98-118k deduction is limited, above $118k no deduction Are you in or above those ranges?
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Apr 13, 2017 03:57
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I have a consulting LLC with my wife and I as joint owners 50/50. We are both employees and receive reasonable salaries, and elected taxation as an S-Corp. I know that health insurance premiums paid by the company are reported as income (done via our payroll software) and then deducted later on our returns. I have read conflicting things about whether or not the business can pay "educational expenses" - in this case, a cybersecurity training course - that would improve my ability to do my job (and not prepare me for a new trade). If there are only two employees, my wife and I, and the opportunity is equally available to both of us, can the business expense up to $5,250 without reporting it as income? Or is this disallowed because the only recipients would be the shareholders.
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Sep 19, 2017 01:31
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MadDogMike posted:Take this with a grain of salt since I'm not doing S Corps yet, but based on my reading you may be conflating two separate things. The $5250 thing is for general education assistance (i.e. you offer college aid as a fringe benefit) and you wouldn't be eligible for that as more than 5% owners. Continuing education expenses are something else. If you take a class that either "maintains or improves skills required in your trade or business", OR "is required by law or regulations to maintain your license to practice/status/job", it's a business expense and no real limit per se on that. It just can't be any classes for a new occupation, only your current one. Seems like cyber security training should qualify under that. Gotcha, thanks!
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Sep 19, 2017 22:43
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