5th Annual Tax Thread - 2007

[alkemyst]

Originally posted by: MrChad
I moved from NY to VA this year. I went through this process before (moving from MD to NY), but this time its trickier since I didn't change employers and all my income is on a single W-2.

1. I need to calculate my NY wages for the state return. Box 16 on my W-2 reports the same amount as my federal wages (box 1). Box 19 (local NYC wages) reports the correct partial wages that I earned while in NY (up until 7/31). My guess is that box 19 (which indicates the correct portion of my total wages that I earned while in NY) is the correct amount to report. Does this sound right?

2. My wife was a teacher in NY but resigned at the end of the school year (due to the move). Teachers salaries are prorated over the entire year, so she received paychecks up until the end of August (after we had moved to VA). Should her NY income be counted entirely to the NY return and be excluded entirely from the VA return?

We don't answer state questions as they have a ton of specifics that differ from state to state. You will need to get the workbooks they supply and figure it out or hire a tax pro.

 

[EagleKeeper]

Originally posted by: Falloutboy
I rent an apartment. my brother who is in college stays with me about half the year, when he is here he pays a nominal sum of the rent. (utils + rent cost me 800ish I charge him 250 a month when he stays with me) when he is at school he lives in school sponsored housing, his residence is with me (files from this address and his drivers licence shows as such) would this allow me to file as head of household? if I do so would that affect his return?

1) Can you show that you provide more than 50% of his support.

2) Who pays for his school costs?

3) Where does he get the income to pay you for the rent?

#1 had bettter be yes.
#2 should be you
#3 If he is working, every $ that he makes is one more $1 that you must show asyou covering his expenses.

 

[BKLounger]

I've almost finished my parents taxes i am just curious on one last item. They bought a new car this year. They live in Massachusetts. Yes they do itemize on their federal. Can i deduct the sales tax they paid on the new vehicle anywhere on the federal or state returns.

 

[EagleKeeper]

Originally posted by: BKLounger
I've almost finished my parents taxes i am just curious on one last item. They bought a new car this year. They live in Massachusetts. Yes they do itemize on their federal. Can i deduct the sales tax they paid on the new vehicle anywhere on the federal or state returns.

The can use the sales tax option instead of the state income tax option.
They can not use both.

I have not seen anything on the state returns regarding sales tax credit

 

[Falloutboy]

Originally posted by: EagleKeeper

Originally posted by: Falloutboy
I rent an apartment. my brother who is in college stays with me about half the year, when he is here he pays a nominal sum of the rent. (utils + rent cost me 800ish I charge him 250 a month when he stays with me) when he is at school he lives in school sponsored housing, his residence is with me (files from this address and his drivers licence shows as such) would this allow me to file as head of household? if I do so would that affect his return?

1) Can you show that you provide more than 50% of his support.

2) Who pays for his school costs?

3) Where does he get the income to pay you for the rent?

#1 had bettter be yes.
#2 should be you
#3 If he is working, every $ that he makes is one more $1 that you must show asyou covering his expenses.

yeah figured it was iffy. he pays for school with loans. he works when he is between terms for his co-op and I tihnk made about 8k-10k last year( I didn't help him that much besides cheap rent and paying for food and utils and such, (prolly max 400-500 a month), so prolly not going to fly, just wounderd if it was an option, didn't know the specifics of Head of household.

 

[IHateMyJob2004]

Do naked puts (writing puts against MSFT for example) need to be marked to the market? I am getting conflicting and sometimes confusing information on this. My 1099-B lines 8-11 all say $0, so I think not. I did have a few naked puts held over to 2008 so I want to figure this out. If marked to market, they would all be losses.

I am referring to December 31, 2007 and its impact on taxation. Do I need to report this in my taxes?

 

[HardcoreRobot]

Originally posted by: EagleKeeper

Originally posted by: HardcoreRobot
The GF and I bought a house in the middle of last year. Couple questions revolving around that... we opened an ING Electric account to pay our mortgages / bills from. Who has to report the interest. Our contributions to the account are equal (so our expenditures are guaranteed to be split). I opened the account, then added her as a joint account owner, but I am listed as the Primary holder and she the Secondary, if that has any impact.

How do we each claim the interest and other deductible amounts? All the payments have come from our joint account. Once we get all our tax forms, can we each claim half the amount? We are both listed on both mortgages (we did 80/15).

Ill probably have more questions later... thanks!

You can each report half the expenses (taxes/interest/etc) or have a statement that allows each to claim the full share on alternating years.

Look at the numbers to which will benefit the family unit as a whole.

OK, more related questions!

To further complicate things... we also rent out a room in this house. Im using tax cut to prepare both of our tax returns. I understand we need to claim the rental income, then depreciate the value of the house. We can also deduct a proportional cost of utilities based on the part of the house that is rented (one bedroom, with full access to rest of house), correct?

We intend to divide the rental income and each report half. When I calculate depreciation, do I do it the same way on both our returns - I used the full value of the property? Am I on the right track? SInce we are splitting everything evenly, should I use half the cost basis for each of us to determine depreciation?

 

[EagleKeeper]

Originally posted by: HardcoreRobot

Originally posted by: EagleKeeper

Originally posted by: HardcoreRobot
The GF and I bought a house in the middle of last year. Couple questions revolving around that... we opened an ING Electric account to pay our mortgages / bills from. Who has to report the interest. Our contributions to the account are equal (so our expenditures are guaranteed to be split). I opened the account, then added her as a joint account owner, but I am listed as the Primary holder and she the Secondary, if that has any impact.

How do we each claim the interest and other deductible amounts? All the payments have come from our joint account. Once we get all our tax forms, can we each claim half the amount? We are both listed on both mortgages (we did 80/15).

Ill probably have more questions later... thanks!

You can each report half the expenses (taxes/interest/etc) or have a statement that allows each to claim the full share on alternating years.

Look at the numbers to which will benefit the family unit as a whole.

OK, more related questions!

To further complicate things... we also rent out a room in this house. Im using tax cut to prepare both of our tax returns. I understand we need to claim the rental income, then depreciate the value of the house. We can also deduct a proportional cost of utilities based on the part of the house that is rented (one bedroom, with full access to rest of house), correct?

We intend to divide the rental income and each report half. When I calculate depreciation, do I do it the same way on both our returns - I used the full value of the property? Am I on the right track? SInce we are splitting everything evenly, should I use half the cost basis for each of us to determine depreciation?

Correct - everthing is worked in halves.

You are only depreciationing the room, not the whole house.
You should use the square footage percentage of the bedroom to the complete house.

The same percentage wll be picked up for utilities, repairs and maintenance by the S/W

 

[Turin39789]

My only real question is about vehicle taxes, I didn't save my reciepts as I didn't know that they were deductible. Is there a way to look these up/get them from the county clerk or am I SOL because I didn't save them?

And now for a general rundown of my tax experience -

Ugh. I always run my taxes through two software programs, and I'm glad I did. I was originally using turbotax because I get it free from state farm. I then went through Taxact and my return went up about $300. Didn't like the discrepancy so I emptied the turbotax and started over, still wasn't getting it. Finally found that turbotax was counting my employer contribution to my HSA as taxable income. It never gave me the option to enter my 1099-sa that I saw, nor to check that I had a HDHP all year.

Finally got it straightened out. I was really fighting with the TurboTax because I thought I got free state efile through the statefarm connection, but finally figured out that it wasn't included. Another problem I had with Turbotax was on my tuition. After my employer reimbursement I had $798 of money out of my pocket to deduct. Bot turbotax and taxact wanted me to take it as a lifetime learning credit, but I actually got an extra $7 by taking it as a deduction(-$40 from federal and +$47 to state). Taxact gave me the option to run it as hope/lifetime/deduction and see for myself, I can't for the life of me figure out how to make turbotax take it as an income deduction. But now that I'm going to be printing the return anyway, taxact it is.

 

[IHateMyJob2004]

Regarding the post, posts up:

(b) Section 1256 contract defined
For purposes of this section, the term ?section 1256 contract? means?
(1) any regulated futures contract,
(2) any foreign currency contract,
(3) any nonequity option,
(4) any dealer equity option, and
(5) any dealer securities futures contract.

(1)
A futures contract is not an options contract!
In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price.

A futures contract gives the holder the obligation to buy or sell, which differs from an options contract, which gives the holder the right, but not the obligation. In other words, the owner of an options contract may exercise the contract. Both parties of a "futures contract" must fulfill the contract on the settlement date. The seller delivers the commodity to the buyer, or, if it is a cash-settled future, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. To exit the commitment prior to the settlement date, the holder of a futures position has to offset their position by either selling a long position or buying back a short position, effectively closing out the futures position and its contract obligations.

(2)
I do not deal with this

(3)
I do not do options in indexes which is the closest thing in this category which I deal with

(4)
Over-the-counter options (OTC options, also called "dealer options") are traded between two private parties, and are not listed on an exchange. So, this can not be what I deal with.

(5)
See (1)

 

[jatwell]

I have a question regarding an Employee stock purchase plan (ESPP) and vested stock options.

I'm buying shares at $32 and they're worth $44-48. Is there anything I have to report before I sell them or is it just after I sell? As of now, I haven't sold any.

Also, I have 1000 options that vested 1/5/08 at the same $32. If I exercised the options and sold them immediately, would this be counted as capital gains or income?

 

[vital]

i mailed my 1040ez form in last week. when should I expect $$ in my checking account since I requested direct deposit?

 

[EagleKeeper]

Originally posted by: Turin39789

My only real question is about vehicle taxes, I didn't save my reciepts as I didn't know that they were deductible. Is there a way to look these up/get them from the county clerk or am I SOL because I didn't save them?

And now for a general rundown of my tax experience -

Ugh. I always run my taxes through two software programs, and I'm glad I did. I was originally using turbotax because I get it free from state farm. I then went through Taxact and my return went up about $300. Didn't like the discrepancy so I emptied the turbotax and started over, still wasn't getting it. Finally found that turbotax was counting my employer contribution to my HSA as taxable income. It never gave me the option to enter my 1099-sa that I saw, nor to check that I had a HDHP all year.

Finally got it straightened out. I was really fighting with the TurboTax because I thought I got free state efile through the statefarm connection, but finally figured out that it wasn't included. Another problem I had with Turbotax was on my tuition. After my employer reimbursement I had $798 of money out of my pocket to deduct. Bot turbotax and taxact wanted me to take it as a lifetime learning credit, but I actually got an extra $7 by taking it as a deduction(-$40 from federal and +$47 to state). Taxact gave me the option to run it as hope/lifetime/deduction and see for myself, I can't for the life of me figure out how to make turbotax take it as an income deduction. But now that I'm going to be printing the return anyway, taxact it is.

You can get a statement from the clerks office showing what the tax was.

TurboTax will only do your state free if 1) You are within certain states 2) You start through a certain portal - indicated in the OP of this thread 3) You meet certain income limits.

Tuition has actually 4 choices
a) Hope - first two years of post HS education
b) LLC - everythign afterwards - limitations
c) Tuition Expense - some crazy rules on using it vs the LLC
d) Itemized deduction using the Form 2106 and Schedule A

 

[EagleKeeper]

Originally posted by: jatwell
I have a question regarding an Employee stock purchase plan (ESPP) and vested stock options.

I'm buying shares at $32 and they're worth $44-48. Is there anything I have to report before I sell them or is it just after I sell? As of now, I haven't sold any.

Also, I have 1000 options that vested 1/5/08 at the same $32. If I exercised the options and sold them immediately, would this be counted as capital gains or income?

Just keep internal track of the share price when you buy and sell.
Without that you are liable for the full capital gains based on the selling price.
The time that you sell is when the income gets reported and the capital gains are calculated.

The income is the sale, the capital gains is the profit (selling price - purchase price - overhead costs/fees) Both must be ported on the Schedule D.

If the shares are vested, then unless they are reported by the employers on your W2 or 1099 previously, they should become income with a cost basis of 0 when they are sold.

 

[EagleKeeper]

Originally posted by: vital
i mailed my 1040ez form in last week. when should I expect $$ in my checking account since I requested direct deposit?

See original post.

If your income had allowed it (based on the fact you did an EZ), you should have e-filed for free.

 

[Turin39789]

Originally posted by: EagleKeeper

Originally posted by: Turin39789
snip

You can get a statement from the clerks office showing what the tax was.

TurboTax will only do your state free if 1) You are within certain states 2) You start through a certain portal - indicated in the OP of this thread 3) You meet certain income limits.

Tuition has actually 4 choices
a) Hope - first two years of post HS education
b) LLC - everythign afterwards - limitations
c) Tuition Expense - some crazy rules on using it vs the LLC
d) Itemized deduction using the Form 2106 and Schedule A

I'll call the clerk this afternoon. *edit - no I won't. It's presidents day. I am having bad luck with the clerk and holidays. Tried to transfer a car title, but it was new years eve and they had that off. Then tried again and it was mlk day. Now this!*


Sorry to bother again, but any idea where I can find the rules for taking tuition as a deduction vs the LLC? Taxact let me choose the deduction and I saw that it brought me out a few dollars ahead and it was good. Turbotax says I'm not eligible to take it as a deduction and I assumed this was because it had me taking it as the LLC.


I'm not itemizing, and Taxact is taking the tuition off on line 34 with form 8917. Just want to make sure I'm not getting myself into trouble for the extra $7.

 

[EagleKeeper]

Originally posted by: Turin39789

Originally posted by: EagleKeeper

Originally posted by: Turin39789
snip

You can get a statement from the clerks office showing what the tax was.

TurboTax will only do your state free if 1) You are within certain states 2) You start through a certain portal - indicated in the OP of this thread 3) You meet certain income limits.

Tuition has actually 4 choices
a) Hope - first two years of post HS education
b) LLC - everythign afterwards - limitations
c) Tuition Expense - some crazy rules on using it vs the LLC
d) Itemized deduction using the Form 2106 and Schedule A

I'll call the clerk this afternoon. *edit - no I won't. It's presidents day. I am having bad luck with the clerk and holidays. Tried to transfer a car title, but it was new years eve and they had that off. Then tried again and it was mlk day. Now this!*


Sorry to bother again, but any idea where I can find the rules for taking tuition as a deduction vs the LLC? Taxact let me choose the deduction and I saw that it brought me out a few dollars ahead and it was good. Turbotax says I'm not eligible to take it as a deduction and I assumed this was because it had me taking it as the LLC.


I'm not itemizing, and Taxact is taking the tuition off on line 34 with form 8917. Just want to make sure I'm not getting myself into trouble for the extra $7.

Looking at the instructions for Form 8917, the diffeence between the Tuition and LLC may be income levels.

Pub 970 may contain more clarification.

And you are correct - the tuition can not be declared in multiple locations. S/W should flag this as an error.

 

[charrison]

We had a large amount of medical expenses in 2007, which were barely enough to clear the standard medical deduction. We had another medical expense in 2008, can we put this on 2007 taxes as we have not filed yet?

 

[EagleKeeper]

Originally posted by: charrison
We had a large amount of medical expenses in 2007, which were barely enough to clear the standard medical deduction. We had another medical expense in 2008, can we put this on 2007 taxes as we have not filed yet?

No!

 

[BKLounger]

on the federal i used itemized deduction (some of which were salvation army and big brother big sister) do i need to mail in the sheets that list out everything i donated?

 

[Ns1]

Originally posted by: BKLounger
on the federal i used itemized deduction (some of which were salvation army and big brother big sister) do i need to mail in the sheets that list out everything i donated?

Under $500 is line 17 on form 1040. Over 500 and you need to fill out section A of Form 8283 and attach to 1040.

You don't need to attach support but you do need to keep a record. See this publication for complete details on record keeping requirements

http://www.irs.gov/pub/irs-pdf/p526.pdf

Note that the IRS has recently changed it's requirements for non-cash contributions. You can only deduct the fair market value if they're in good condition, and you need to keep in your records how you determined the fair market value.

 

[MSCoder610]

I received $3000+$700 in prize money from a competition in 2007, but I'm unsure of how this will affect my taxes.

I received two different 1099-MISC's, one had $700 as Other Income, the other had $3000 for Nonemployee Compensation.
Doing my taxes online right now, TaxACT says "More than $400 of other income has been included on Form 1040, line 21. The IRS will review your return and request an explanation for this Other Income which will delay the processing of your return. If you wish to avoid the delay please repeat the Q&A and remove the Other Income description and income amounts and include the amount in the Business Income topic instead."

I assume if I did that, it would be taxed more heavily, and counted as self-employment income.

Any advice?

 

[Ns1]

Originally posted by: MSCoder610
I received $3000+$700 in prize money from a competition in 2007, but I'm unsure of how this will affect my taxes.

I received two different 1099-MISC's, one had $700 as Other Income, the other had $3000 for Nonemployee Compensation.
Doing my taxes online right now, TaxACT says "More than $400 of other income has been included on Form 1040, line 21. The IRS will review your return and request an explanation for this Other Income which will delay the processing of your return. If you wish to avoid the delay please repeat the Q&A and remove the Other Income description and income amounts and include the amount in the Business Income topic instead."

I assume if I did that, it would be taxed more heavily, and counted as self-employment income.

Any advice?

Can you elaborate on the prize money?

 

[MSCoder610]

Originally posted by: Ns1

Originally posted by: MSCoder610
I received $3000+$700 in prize money from a competition in 2007, but I'm unsure of how this will affect my taxes.

I received two different 1099-MISC's, one had $700 as Other Income, the other had $3000 for Nonemployee Compensation.
Doing my taxes online right now, TaxACT says "More than $400 of other income has been included on Form 1040, line 21. The IRS will review your return and request an explanation for this Other Income which will delay the processing of your return. If you wish to avoid the delay please repeat the Q&A and remove the Other Income description and income amounts and include the amount in the Business Income topic instead."

I assume if I did that, it would be taxed more heavily, and counted as self-employment income.

Any advice?

Can you elaborate on the prize money?

The prize money was for the Imagine Cup competition, sponsored by Microsoft, aimed at college students. Winning at one of the competition levels resulted in a $12k cash prize for our team of 4, so $3k each.

To complicate things a little more, the tax documents I've received are from two different companies. The $700 one is from Microsoft - Accounts Payable, but the $3k one is from "Group O. Direct Inc.", whose name was also on the check IIRC.

 

[EagleKeeper]

Other income is for small amounts

Schedule C is for large amounts.
This exposes you to the self-employment tax - however, you also have now the ability to write off ANYTHING that is REMOTELY related to the income generation.