4th Annual Tax Thread - 2006

[Eos]

I'm a simple 1040EZ guy, so no questions about me. It's my g/f with the complicated tax return.

1) Money is deposited into our bank account quarterly from the Washington state something or other and we cut a personal check (for the same amount as was deposited) to Sallie Mae for her school loans. Will this money be counted as income, and if so, what do we do?

2) She either flies or drives (800 miles each trip) every 6 weeks or so at our expense to take care of her great aunt. Does care of a family member count for anything?

3) Bought a house. Closed on November 29th. What is our best move regarding the house? We put zero down and had $1711 returned of $1900 earnest money given to the builder.

4) related to 3; moving expenses?

Thanks a bunch!

 

[EagleKeeper]

Originally posted by: eos
I'm a simple 1040EZ guy, so no questions about me. It's my g/f with the complicated tax return.

1) Money is deposited into our bank account quarterly from the Washington state something or other and we cut a personal check (for the same amount as was deposited) to Sallie Mae for her school loans. Will this money be counted as income, and if so, what do we do?

2) She either flies or drives (800 miles each trip) every 6 weeks or so at our expense to take care of her great aunt. Does care of a family member count for anything?

3) Bought a house. Closed on November 29th. What is our best move regarding the house? We put zero down and had $1711 returned of $1900 earnest money given to the builder.

4) related to 3; moving expenses?

Thanks a bunch!

Depending on why the funds are deposted, it could be classified as income. Any interest earned on the account is taxable.

Care of a family member earns bonus warm fuzzies only. If she is responsible for the care of the person and covers expenses for the person, the the aunt may be able to be classifed as a dependant. At that point different rules on deductible expenditures will apply.

If both names are on the title; then you have the option of splitting the expenses 50/50 or proportionally based on income. Otherwise the person that is legaly responsible should use the Schedule A. Look above in this thread and other previous tax threads for closing costs that are deductible.

Moving expenses are only applicable for work related relocation.

 

[Eos]

Originally posted by: EagleKeeper

Originally posted by: eos
I'm a simple 1040EZ guy, so no questions about me. It's my g/f with the complicated tax return.

1) Money is deposited into our bank account quarterly from the Washington state something or other and we cut a personal check (for the same amount as was deposited) to Sallie Mae for her school loans. Will this money be counted as income, and if so, what do we do?

2) She either flies or drives (800 miles each trip) every 6 weeks or so at our expense to take care of her great aunt. Does care of a family member count for anything?

3) Bought a house. Closed on November 29th. What is our best move regarding the house? We put zero down and had $1711 returned of $1900 earnest money given to the builder.

4) related to 3; moving expenses?

Thanks a bunch!

Depending on why the funds are deposted, it could be classified as income. Any interest earned on the account is taxable.

Care of a family member earns bonus warm fuzzies only. If she is responsible for the care of the person and covers expenses for the person, the the aunt may be able to be classifed as a dependant. At that point different rules on deductible expenditures will apply.

If both names are on the title; then you have the option of splitting the expenses 50/50 or proportionally based on income. Otherwise the person that is legaly responsible should use the Schedule A. Look above in this thread and other previous tax threads for closing costs that are deductible.

Moving expenses are only applicable for work related relocation.

The money is payback for working in health care in an under served area. For living in a rural area, she gets $25k a year for loan repayment.

It never sits long enough for interest to accumulate.

 

[EagleKeeper]

Without knowing all the details, my best guess is that it will be considered some type of income.

If the funds are coming from Washington State, she should receive a 1099; depending on how the state views the income, it will have classification codes. These codes will provide some guideline on how to file/report that income.

 

[Eos]

Thanks.

 

[homestarmy]

Originally posted by: EagleKeeper

Originally posted by: chambersc

Originally posted by: dquan97

Originally posted by: chambersc
I'm a student. Do I have to fill out anything to get some money back from my tuition (or anything that I've spent on my university, frankly)? Since I'm a dependent, do I not have to worry about anything and that's my parent's responsibility?

It's your parents' responsibility to report the tuition paid by them to the university as an education credit (either Lifetime or Hope, depending on your standing as a 1,2,3, or 4th yr)

what if they've contributed nothing and I've payed it all?

If you are classified as a dependant - you loose.

Try your negotiating skills on your parents.

And note you can only get back what you payed in. So if you get 20% of tuition and that's $500, if you were not taxed $500, you wouldn't get that much back. If you were taxed $250, you would only get $250 back for instance.

If you're really paying for everything, by all means, claim independent.

 

[dxkj]

Originally posted by: EagleKeeper

Originally posted by: dxkj
I started a side thing this year that started as a hobby, but has grown into something I plan on doing for money in the future. IE I spent more on it than i would have if it was just a hobby.

Basically raising and breeding animals and selling them, with the associated costs of cages/enclosures etc.

Is there a limit to how much I can deduct this year from this? Should I treat this as a hobby or as a small side business that I am attempting? I have made $0 this year in this venture, but spent a good amount.

I cashed out some stock to pay for this, and did not pay taxes at that time so hopefully this will partially offset that?

Edit: Also I am using 2 rooms in my house EXCLUSIVELY for this hobby/business and my entire garage. Can I depreciate or deduct anything additional for this? I also use gas in the garage for heating and at least $100 in electricity each month (I can calculate this more accurately fairly easily) Another deduction?

If the intent is to turn this into a small business and show income/profit within a 5 year period, then you can use the Schedule C and start deducting the expenses.

I would go easy on the actual room depreciation, but the utilites as a percentage would be fair.

Interesting... so there is no limit to how much I can deduct against my other incomes? (IE, salaried job, selling stock, etc)

 

[EagleKeeper]

Originally posted by: dxkj

Originally posted by: EagleKeeper

Originally posted by: dxkj
I started a side thing this year that started as a hobby, but has grown into something I plan on doing for money in the future. IE I spent more on it than i would have if it was just a hobby.

Basically raising and breeding animals and selling them, with the associated costs of cages/enclosures etc.

Is there a limit to how much I can deduct this year from this? Should I treat this as a hobby or as a small side business that I am attempting? I have made $0 this year in this venture, but spent a good amount.

I cashed out some stock to pay for this, and did not pay taxes at that time so hopefully this will partially offset that?

Edit: Also I am using 2 rooms in my house EXCLUSIVELY for this hobby/business and my entire garage. Can I depreciate or deduct anything additional for this? I also use gas in the garage for heating and at least $100 in electricity each month (I can calculate this more accurately fairly easily) Another deduction?

If the intent is to turn this into a small business and show income/profit within a 5 year period, then you can use the Schedule C and start deducting the expenses.

I would go easy on the actual room depreciation, but the utilites as a percentage would be fair.

Interesting... so there is no limit to how much I can deduct against my other incomes? (IE, salaried job, selling stock, etc)

Business losses can be used to offset other income. The loss/expenses must be able to be documented and considered to be reasonable within that type of business.


The IRS gets to determine is the activity should be classified as a business or a hobby if they come knocking. A business needs to show some profit within a 5 year period or else....

 

[Leejai]

2 friends and myself formed a Small Business Partnership.

Does the business file taxes separately? Or do we each divide everything by 1/3 (3 partners) and file accordingly on our individual tax returns?

 

[EagleKeeper]

Originally posted by: Leejai
2 friends and myself formed a Small Business Partnership.

Does the business file taxes separately? Or do we each divide everything by 1/3 (3 partners) and file accordingly on our individual tax returns?

It depends on how the business is structured.

 

[Leejai]

Originally posted by: EagleKeeper

Originally posted by: Leejai
2 friends and myself formed a Small Business Partnership.

Does the business file taxes separately? Or do we each divide everything by 1/3 (3 partners) and file accordingly on our individual tax returns?

It depends on how the business is structured.

Business was filed in San Francisco as a Partnership. It is our first year of doing business and have a minor loss (should be profitable by next year if that matters).

EDIT: Don't know if it helps to say we have no employees.

EDIT2: First off, thanks EagleKeeper, and I must say it doesn't hurt to search the IRS website. There's actually quite a bit of info there. I found IRS.GOV FAQ. It sounds like the Partnership has to file Form 1065?

So my question is now do we get any added benefit from deductions? Mileage or costs not reimbursed via the business bank account? Our records are up to date and most expenses were reimbursed to keep good records. Yet, I do give the added effort and do items which aren't reimbursed.

EDIT3: I guess this statement from Form 1065 answers my question, but I want to assure any non-reimbursed items I can still deduct on top of this?

From Form 1065: A Partnership does not pay tax on its income but 'passes through' any profits or losses to its partners.

 

[dxkj]

Originally posted by: EagleKeeper

Originally posted by: dxkj

Originally posted by: EagleKeeper

Originally posted by: dxkj
I started a side thing this year that started as a hobby, but has grown into something I plan on doing for money in the future. IE I spent more on it than i would have if it was just a hobby.

Basically raising and breeding animals and selling them, with the associated costs of cages/enclosures etc.

Is there a limit to how much I can deduct this year from this? Should I treat this as a hobby or as a small side business that I am attempting? I have made $0 this year in this venture, but spent a good amount.

I cashed out some stock to pay for this, and did not pay taxes at that time so hopefully this will partially offset that?

Edit: Also I am using 2 rooms in my house EXCLUSIVELY for this hobby/business and my entire garage. Can I depreciate or deduct anything additional for this? I also use gas in the garage for heating and at least $100 in electricity each month (I can calculate this more accurately fairly easily) Another deduction?

If the intent is to turn this into a small business and show income/profit within a 5 year period, then you can use the Schedule C and start deducting the expenses.

I would go easy on the actual room depreciation, but the utilites as a percentage would be fair.

Interesting... so there is no limit to how much I can deduct against my other incomes? (IE, salaried job, selling stock, etc)

Business losses can be used to offset other income. The loss/expenses must be able to be documented and considered to be reasonable within that type of business.


The IRS gets to determine is the activity should be classified as a business or a hobby if they come knocking. A business needs to show some profit within a 5 year period or else....

I dont get the or else? What happens if the business fails, or if I decide to start up an official business with someone else incorporating what Ive created on my own in the first year or two?

 

[EagleKeeper]

Non re-embursed items from the partnership are not able to transfer to a Schedule C but can be used with Schedule A and Form 2106.

 

[EagleKeeper]

Originally posted by: dxkj

Originally posted by: EagleKeeper

Originally posted by: dxkj

Originally posted by: EagleKeeper

Originally posted by: dxkj
I started a side thing this year that started as a hobby, but has grown into something I plan on doing for money in the future. IE I spent more on it than i would have if it was just a hobby.

Basically raising and breeding animals and selling them, with the associated costs of cages/enclosures etc.

Is there a limit to how much I can deduct this year from this? Should I treat this as a hobby or as a small side business that I am attempting? I have made $0 this year in this venture, but spent a good amount.

I cashed out some stock to pay for this, and did not pay taxes at that time so hopefully this will partially offset that?

Edit: Also I am using 2 rooms in my house EXCLUSIVELY for this hobby/business and my entire garage. Can I depreciate or deduct anything additional for this? I also use gas in the garage for heating and at least $100 in electricity each month (I can calculate this more accurately fairly easily) Another deduction?

If the intent is to turn this into a small business and show income/profit within a 5 year period, then you can use the Schedule C and start deducting the expenses.

I would go easy on the actual room depreciation, but the utilities as a percentage would be fair.

Interesting... so there is no limit to how much I can deduct against my other incomes? (IE, salaried job, selling stock, etc)

Business losses can be used to offset other income. The loss/expenses must be able to be documented and considered to be reasonable within that type of business.


The IRS gets to determine is the activity should be classified as a business or a hobby if they come knocking. A business needs to show some profit within a 5 year period or else....

I don't get the or else? What happens if the business fails, or if I decide to start up an official business with someone else incorporating what Ive created on my own in the first year or two?

The IRS expects a business to show a profit. It expects that to be able to happen with 5 years. When that does not happen, they get suspicious that what is being declared as a business, may be a tax write-off. Tax write-offs to them smell like fraud and they love to track down fraud.

 

[Yreka]

Ok my situation.
Married, wife works very little outside of the home ( less than 5k per year).
1 kid (hers) but we get to claim him as he is with us the majority of the time.
1 kid on the way, due in March.

What should I claim on my W4 ? I want to stay as close to even as possible without having to pay each year. Right now, I claim 1 (me)

As for filing, what is the best way to file with this situation ? Can I claim her as a dependant, or is it "head of household"? Not sure about all that stuff, my taxes were MUCH simpler last year ( Single, no dependants, 1040EZ heh)

TYIA

 

[CTrain]

Always been a 1040EZ guy but this is the first year I get to itemize.

I'm from Florida. Bought a house in Sept 2005.
So this is the first complete year I've owned a house.
Things that I know I can itemize.

- Mortgage interest. (~$4400)
- Property tax (~$2800)
- Sales tax ?? Florida extended this provision just lately. Where is the chart as to how much I can deduct ??
- Theft. My car was stolen in Oct 2005. I sold it in Feb 06 for $1K..A loss of I say $6K-$7K. Can I claim this as theft loss for 2006 ??

Any other important itemize I'm missing ??
Thanx.

 

[amol]

Whoops, nvm!

 

[EagleKeeper]

Originally posted by: Yreka
Ok my situation.
Married, wife works very little outside of the home ( less than 5k per year).
1 kid (hers) but we get to claim him as he is with us the majority of the time.
1 kid on the way, due in March.

What should I claim on my W4 ? I want to stay as close to even as possible without having to pay each year. Right now, I claim 1 (me)

As for filing, what is the best way to file with this situation ? Can I claim her as a Dependant, or is it "head of household"? Not sure about all that stuff, my taxes were MUCH simpler last year ( Single, no Dependants, 1040EZ heh)

TYIA

Tax S/W FTW

You are now married (file jointly).
You have one Dependant - you will need to enter the child name & SS# when requested

Depending on the child's age, you will be eligible for extra specials.
If the child was in any type of daycare, you may get some credit for that. You will need the provider tax ID#

You can easily boost your W4 to 4 without incurring any possibility of tax liability, given the fact that the evidence of you fooling around is ready to become proof.

 

[EagleKeeper]

Originally posted by: Amol

Originally posted by: EagleKeeper
a knuckle-clenching, bullet sweating April 15th midnight

Tax day in 2007 is April 16

Just a little reminder to everyone that you have an extra 24 hours.

EDIT: And if you live in a state that observes Patriots' Day (April 16, 2007), don't you get until April 17?

Problem with boiler plate comments. 15th is considered to be tax tax in general.

If you look deeper into the OP; you will find the proper dates are bolded along with explainations

 

[EagleKeeper]

Originally posted by: CTrain
Always been a 1040EZ guy but this is the first year I get to itemize.

I'm from Florida. Bought a house in Sept 2005.
So this is the first complete year I've owned a house.
Things that I know I can itemize.

- Mortgage interest. (~$4400)
- Property tax (~$2800)
- Sales tax ?? Florida extended this provision just lately. Where is the chart as to how much I can deduct ??
- Theft. My car was stolen in Oct 2005. I sold it in Feb 06 for $1K..A loss of I say $6K-$7K. Can I claim this as theft loss for 2006 ??

Any other important itemize I'm missing ??
Thanx.

There are sales tax tables based on income that can be used. Along with that table value, you can also use big ticket items.

w/ respect to the theft/loss
Pub 584
Pub 547
Form 4684

You should be able to treat the loss as taken when you sold the vehicle (2006)

 

[Netopia]

I have a friend who volunteers 15-20 hours per week at his church. He's been told that there are other churches that cut a 1099 at the end of the year for hours volunteered times a set amount (like $7.50 or $8.00 ) so that the person can deduct their volunteer hours from their taxes.

Is this legal? If not, what other ways are there to recoup some of the expense of volunteering?

BTW, this guy is in South Carolina and doesn't know if the 1099s are used for state and federal taxes or just state.

Joe

 

[EagleKeeper]

Originally posted by: Netopia
I have a friend who volunteers 15-20 hours per week at his church. He's been told that there are other churches that cut a 1099 at the end of the year for hours volunteered times a set amount (like $7.50 or $8.00 ) so that the person can deduct their volunteer hours from their taxes.

Is this legal? If not, what other ways are there to recoup some of the expense of volunteering?

BTW, this guy is in South Carolina and doesn't know if the 1099s are used for state and federal taxes or just state.

Joe

Volunteer time is not deductible on the Federal level.

Having a 1099 cut exposes the person to additional taxes for income not received. What is does it allow the church to commit fraud for their bookkeeping.

Expenses incurred while volunteering can be applied to the Charity section of the Schedule A.

 

[Yreka]

Will do,

Thanks Eagle

 

[newb111]

Firstly, thanks EagleKeeper for this great help. Second, could you explain the below situation for someone who is not a dependent? This year I am not a dependent so I should get to deduct my tuition/expenses now correct? If you could detail it a little, I would be grateful.

Originally posted by: chambersc
I'm a student. Do I have to fill out anything to get some money back from my tuition (or anything that I've spent on my university, frankly)? Since I'm a dependent, do I not have to worry about anything and that's my parent's responsibility?

 

[Mermaidman]

CHARITABLE DONATIONS - CASH

Is it too late to donate money to a non-profit for TY 2006? We didn't donate much $ last year, and I was going to right before New Year's, but proscrastination . . .