Today TaxMama® hears from tbachrodt in the TaxQuips Forum, with this question. “I recently filed my taxes. I am already receiving the American Opportunity Credit and Lifetime Credit. I just received an additional 1098T in the mail that I forgot was coming. Do I need to file an amended return, even though I am already eligible for the 2 education credits?”
Should I file again?
Today TaxMama® hears from Goran in the TaxQuips Forum, with this issue. “My client and his mom were on the mortgage together. That property went through foreclosure. Naturally, they file separate tax returns. Which one will report the 1099-C?”
Should Mom or son report the income?
Today TaxMama® hears from someone in the TaxQuips Forum, who keeps asking similar questions about California LLCs and Canadian Limiteds owning an S Corp. So, let me tell you a little bit about S Corporation rules.
Who can own an S Corp?
Today TaxMama® hears from RJ in the TaxQuips Forum, who asks an intriguing question. “I understand that both reinvested dividends and reinvested capital gains distributions get added into a mutual fund's Cost Basis. But what about Foreign Tax Paid? Does Foreign Taxes Paid also get directly added into a fund's Cost Basis?”
Do foreign taxes increase my basis?
Today TaxMama® hears from Front9532 in the TaxQuips Forum, who wants to clear up something confusing. “Both my wife and I have Health Savings Accounts (HSA accounts). In 2012 our health insurance plan qualified as a High Deductible Family Health Plan. I am ineligible to make a contribution to my plan since I am over 65. My wife turned 65 in July 2012. I'd like to know, what is the maximum contribution my wife can make to her HSA in 2012?”
How much may I contribute?
Today TaxMama® hears from JJ in the TaxQuips Forum, with an unusual situation. “I leased a car this fall. I paid for the entire sum up front, in a single payment. What is the correct deduction for federal taxes?”
Can I deduct it all?
Today TaxMama® hears from Chuck in the TaxQuips Forum, with this question. “So I received a 1099-MISC after I filed my taxes last year. (Yes I jumped right out there and got ‘em done and in.) What do I need to do to now so Uncle Sam doesn't come looking for me? Ahem... file a revised tax return? How do I go about doing that? Would it be better to mutter through it myself, or take this issue to someone that charges to do these things?”
Should I amend?
Today TaxMama® hears from Sheba in the TaxQuips Forum, who needs guidance. “My daughter is a first year college student out of state. She has a partial loan, partial scholarship and grants. I don't know what to do with the information from the 1098-T. I still claim her as a dependent and I pay part of her tuition, too. What form do I use for her, or should I just include it all in my own taxes.”
How do I report the 1098-T income?
Today TaxMama® hears from AK in the TaxQuips Forum, who is trying to understand. “My wife and I have 1 child who is 3 years old. We recently received our W2's and I started the process through Turbotax online. With just my income, it looked like we were going to receive the Earned Income Credit (EIC). Once I entered my wife's W2, the EIC dropped quite a bit. I started digging through the deductions and credits, and discovered that we are about a $1000 over the qualifying income to receive the EIC with 1 child. However, if either my wife, or I claim our daughter as a dependent, and file separate tax returns, we would qualify for it. My question is: What are the major pro's and con's of filing separately with a child in the mix - and is that even an option?”
We could get so much more back if we filed separately!>
Today TaxMama® hears from Roger in the TaxQuips Forum who is frustrated with the concept. “I guess my question would be, what is different about what I'm doing and, say, a general contractor ICing a plumber regularly to plumb houses he is building? Or a magazine that subs out to a freelance writer? These guys all own and service their own equipment, trucks and tools, buy their own gas and supplies, hire their own employees. I just don't see how they could consider that my employee. What is the distinguishing factor that says one is or is not an employee? Is this even something I should worry about?”
Why should I be penalized for hiring subcontractors? a>
Today TaxMama® hears from John in the TaxQuips Forum with a sensible question. “Are garage sales reportable? I have never heard of anyone reporting garage sales. I assume everyone guesses their basis exceeds the gross proceeds and personal losses are disallowed.”
Should you report garage sales? a>
Today TaxMama® hears from Larry in the TaxQuips Forum with a quick question. “If an employee pays for his family's health insurance through payroll withholding, is the amount he pays free from taxes? My clients paid $6,000 in 2012 through payroll withholding and his W-2 gross income in block 1 (and blocks 3 & 5) show only the reduced amount. I know that his coverage paid by the employer is not taxable but I have a problem with this treatment.”
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How come his taxes are reduced? a>
Today TaxMama® hears from bvmite in the TaxQuips Forum with a good question. “After filing 2011 return electronically, I noted that I did not report all IRA and pension rollovers on line 16a. Line 16b, AGI and taxes owed are not affected. Form 1040X, line 1 starts with a change in AGI; and in my case there is none. Should I just write to IRS and explain? Or is there another way to inform IRS?”
How do I tell the IRS about my mistake? a>
Today TaxMama® hears from Angel in the TaxQuips Forum with an interesting issue. “My client is a United Nations employee. Last year she earned [a modest sum] while working at the UN in New York City; then took a posting in Spain with the UN where she earned [well over the foreign earned income exclusion amount]. The UN does not withhold income taxes or FICA in either case. For the NY income we file a Schedule C and Schedule SE in order to ensure Social Security and Medicare are charged correctly. However, is the foreign earned income from Spain liable for FICA? Or should the foreign earned income be listed as other income on the 1040? Although Spain is listed as one of 24 countries with reciprocal agreements, I believe the UN is a completely separate government by itself.”
How do I treat the UN wages earned in Spain? a>
Today TaxMama® hears from Morri in the TaxQuips Forum with a rare question. “My son became emancipated in September. He has had his full time job since he graduated in June. He still lives with his mother and I paid my support until he became emancipated. Since I paid my support until this time and it is my year to claim him on taxes, do I get to claim him or is he on his own now?”
Who gets to claim the son? a>
Today TaxMama® hears from bhusler28 in the TaxQuips Forum with a good question. “I recently got divorced. Right now the deed is in my name, but the loan is in both my ex-husband’s name and my name. When we file our taxes, we are unsure as to who gets to claim the taxes from the property, school and what not. I have been paying on the house myself since February 2012.”
Who gets the house-related deductions? a>
Today TaxMama® hears from Dok0619 in the TaxQuips Forum with the eternal problem. “I am separated from my wife and she has our two kids. She left August of 2012. In November our lawyers made a temporary custody agreement for us and I have been voluntarily paying her child support until we finally go to court. It was signed by a judge in December. She says that I cannot claim our kids on my return because she is the "custodial parent" (I have filed for divorce and also filed for custody of our kids.) My question is, can I still claim my children for the 8 months of 2012 that we still lived together or not at all like she says?”
Who gets the child? a>
Today TaxMama® hears from Yazminia in the TaxQuips Forum with an apt question (rephrased). “I am over age 59 ½ and want to transfer money from my IRA to my Roth IRA tax-free. Based on my income level, how much may I transfer without generating taxes?”
Tax-free transfers to Roth? a>
Today TaxMama® hears from Hernandez in the TaxQuips Forum with good question. “I am one of two partners in a architecture service partnership. We are considering using life insurance, specifically whole life, as a way to save excess cash and lower our taxes. Are payments for insurance considered business expenses for a partnership? What is the limit of cash that I can stash away into a whole life insurance policy? If not a business expense can it be deducted on my personal tax return?”
Are life insurance premiums deductible at all? a>
Today TaxMama® hears from someone offline with this distressing observation. “A client for whom we do payroll has an entire team of high-powered accountants and attorneys. They got together and reviewed our client’s several business entities and decided to close a certain company as of the end of 2012. However, none of the experts bothered to look at the activities in this entity. This is where the payroll and benefit plans for all the owners and employees were set up for all the companies.”
Get all the facts a>
Today TaxMama® hears from CotoPop in the TaxQuips Forum with a good question. “A client purchases a high end car in January, 2010 ($52,000). It is only used for personal purposes in 2010 and 2011. In January 2012 client starts a new business and uses the car 80% for business. Client is going to use "actual expenses " for calculating the auto expense. When calculating depreciation should he use the original purchase price or the FMV at the time converted the vehicle to business use ?
What's the worst that could happen? a>
Today TaxMama® hears from Eliezer in the Tax Quips Forum with this question. “A client owes the IRS about $200 from 2011 taxes. He filed on extension and they sent him a notice for his balance due including penalty and interest, which is due Dec 10. I tried counseling him to pay what he could afford by April 15. Couldn't do it. By Oct 15. No dice. Dec 10 is around the corner and he says he still can't/won't pay all of it. His attitude: What's the worst that could happen? What are they gonna do to me? Are they going to throw me in jail for $200? If not, I'll pay some of it and let them send me another bill.
How would you respond?”
What's the worst that could happen? a>
Today TaxMama® hears from Sue in the Tax Quips Forum with this issue. “My parents are both unemployed and lived with me all year. My dad did receive unemployment, but it was about $3,300 for the entire year - my mom did not receive any unemployment. My younger sisters also lived with me - they are 13 and 17. I provided their support - I paid the mortgage (I own the home), paid for food, bills etc. Would I be able to claim my parents and my sisters on my 2012 tax return?”
How about my parents? a>
Today TaxMama® hears from Excel in the TaxQuips Forum with an interesting question. He asks how to write off his travel. You can read my answer to him in the TaxQuips Forum. But what I’d like to do today is to provide more general tips about how be a legitimate travel writer – for tax purposes.
what to do when you get an IRS audit notice a>
Today TaxMama® hears from Tax455 in the TaxQuips Forum with this question. “If I earned $50k through eBay buying and selling phones, and $12k was profit, should I get a business license or incorporate for tax purposes? I did not hit the 200 transactions so I’m not sure if eBay will send me a tax form. What’s the best way for me proceed for the tax year?”
Shut down on eBay a>
Today TaxMama® hears from BlueSage in the TaxQuips Forum with this question. “Is it better to declare 20 children and then store the tax one would pay in an investment account, and use that money to pay taxes at year end? Or is it better to declare the right amount of children, pay as you go, and maybe get a refund?
How many dependents? a>
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