========================================================================= (C) 1993 by GEnie. May be reprinted only with this notice intact. To sign up for GEnie service, call (with modem) 800-638-8369. Upon connection type HHH (RETURN after that). Wait for the U#= prompt.Type XTX99437,GENIE and press [RETURN]. The system will prompt you for your information. ========================================================================== 2 Home Office/Small Busines Category 7, Topic 11 Message 1 Fri Jan 08, 1993 J.ATTARD [Janet(sysop)] at 20:52 EST How should students who are classified as a dependents on parents returns handle any unemployment benefits they received? How do the benefits affect the standard deduction? Or don't they? ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 2 Sat Jan 09, 1993 BRAD [Brad Solomon] at 07:48 EST Unemployment compensation is taxable income to anyone. Assuming that the student is a full time student and under 24 by the end of the year, there is no income test for you to claim them as a dependent. Otherwise, you could lose them as a dependent. The standard deduction for dependents is affected by EARNED income, and I don't believe that UC sis earned income. Jack? Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 3 Sun Jan 10, 1993 JSLICK [JACK] at 19:22 EST Brad, Right unemployment compensation is not earned income. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 4 Mon Jan 11, 1993 F.KEENEY1 [the needler] at 02:38 EST Unemployment income is included in gross income as it is taxable income. From what I can read in the pubs it is earned income, but i would like to see an irs ruling on that one. frances ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 5 Mon Jan 11, 1993 JSLICK [JACK] at 22:29 EST Frances, The code specifically states unemployment income is unearned income. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 6 Fri Jan 15, 1993 L.KOPETZ [G-DESIGN MAJ] at 19:25 EST But how would unemployment benefits affect a joint tax return? -*> Liz <*- An inquiring mind wonders about this. ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 7 Sat Jan 16, 1993 BRAD [Brad Solomon] at 02:18 EST L.KOPETZ [G-DESIGN MAJ] >But how would unemployment benefits affect a joint tax return? Unemployment benefits are taxable. I don't understand what you are asking. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 8 Sat Jan 30, 1993 A.USER [ Hank Greeb ] at 19:08 EST I've the simplest question - but don't see the answer here... Am I correct in assuming that there are no penalties if I have paid at least 90% of the personal income tax which is due? That's what I read, though there's other stuff about being less than $500 due, etc. Thanks in advance. Hank Greeb ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 9 Sat Jan 30, 1993 BRAD [Brad Solomon] at 23:46 EST A, If you've paid in at least 90% through withholding, or owed less than $500 over your withholding, you are safe. IF you estimate, then you also have to have paid it in quarterly, and the $500 doesn't apply. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 10 Sun Jan 31, 1993 JSLICK [JACK] at 23:58 EST Hank, As long as you have paid in 90% of the tax due for each quarter there are no penalties. Penalties may apply where you make the payment of the tax in December but income was evenly spaced throughout the year. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 12 Tue Feb 09, 1993 A.JOHN7 [Anil] at 21:39 EST Does anyone know if you can submit additonal forms with the new 1040PC form? I am using Taxcut and it does not have form 2555 but since I need to submit it, do I have to use the 1040 form or can I just submit the 2555 with the 1040PC. I am interested in the 1040PC since I am getting a refund and the IRS will direct deposit it. Anil __Baltimore/MD__ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 13 Wed Feb 10, 1993 JSLICK [JACK] at 22:42 EST Anil, What I have from my research service on this leads me to beleive that you can do so. It says that the 1040PC and any other required forms or documents are all mailed together to the IRS. Perhaps someone else has something more definite to add. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 14 Thu Feb 11, 1993 D.FABIANO at 20:33 EST My wife does a few returns for friends, etc. We have come upon a real stumper and need your HELP!!!, desperately and ASAP I need to know how to report a 1099-B, where each line goes. I know it's in Pub. 525 (I think), but I don't have it here. Any accountants out there? There are no proceeds from bartering, just line 3. All else is -00-. Diana*s ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 16 Sat Feb 13, 1993 R.HATTEN2 [Rose] at 15:23 EST I think I'm going to need a California tax package to file for a client. Does anyone have a number in CA I can call to get one? Thanks, Rose ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 17 Sun Feb 14, 1993 L.CARLSTROM [Cindy] at 04:18 EST Hi Rose, The number to call in California for information and forms is (800) 338- 0505. Hope this helps! Regards, Cindy in San Jose ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 19 Tue Feb 16, 1993 J.ATTARD [Janet(sysop)] at 13:20 EST btw, if you need numbers of state tax departments, you can get them in the BusinessResource Directory. Search the directory for tax and the two letter abbreviation for the state you need a number for. The Directory is on GEnie page 375. You can also get there fromthe HOSB main menu. ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 20 Tue Feb 16, 1993 JSLICK [JACK] at 23:03 EST Rose, If you use a income tax reporting service such as CCH or RIA in most cases those companies will send you a copy of any forms you need as long as your requests don't get out of hand. Other than that Someone with a CA forms packet will have to reply.:> Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 21 Wed Feb 17, 1993 H.ABNER [Howard] at 19:51 EST I can't believe some hasn't answered your question already. " If a taxpayer receives Form 1099-B for bartering income, you must complete Schedule D, Part VII, or the appropriate part of Form 6781." Reference my HR Block Tax Update Manual. I'm sure the Schedule D Part VII is what you're looking for. From the Schedule D, it gets carried to Line 22 of the 1040. Howard....... ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 22 Fri Feb 19, 1993 W.BASSETT1 [LINDA] at 19:18 EST I have a personal question. After many, many loans to my son (age 23 and on his own), which were not paid back, I decided to have him sign a contract for a loan of $500.00, which set up payment terms, etc. Well, needless to say, he did not honor the contract, and I didn't see one cent of the money. This was approx 3 yrs. ago. He needed the down payment for a car. Since there is no chance that I'm ever going to get paid back, if I have the contract, can I write it off on my taxes as a bad debt? Linda ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 23 Sat Feb 20, 1993 JSLICK [JACK] at 00:25 EST Linda, What have you done to enforce the contract? That's what the IRS is going to want to see before they let you write it off. If you have made good faith efforts to collect on your loan, then you can write it off, but just throwing up your hands and saying its not collectible isn't going to work. At a minimum I think you need to get a lawyer involved in trying to collect the funds (I know its your son, but if it wasn't wouldn't you try to collect the loan with any means you have at your disposal? You must do the same here) if the lawyer feels further pursuit is not warranted, then document it and take the write-off then. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 24 Sat Feb 20, 1993 W.BASSETT1 [LINDA] at 17:11 EST Thank you for your reply, Jack. Yes, he is my son, and the problem is in knowing that he is not in a financial position to pay it back at this time. I understand what you mean about enforcing the contract, but I just couldn't do anything legally. I just thought I'd ask about it. I had him sign the contract to make a statement, but I have learned, and have stopped the "free loans" since. Linda ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 25 Sun Feb 21, 1993 H.KONCZAK1 [Henry] at 10:54 EST A couple of years ago I did my taxes with Tax Cut and there was a section where, as a sole-proprietorship, I could allocate a portion of my income to my wife. We're musicains and have been working as such for 14 years. Last years version of TC did not allow me to do this so I filed as a sole proprietor. Will my wife loose credit on social security or would it figure out about the same? Or is it best to file as a partnership? Thanks Henry ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 26 Sun Feb 21, 1993 JSLICK [JACK] at 16:23 EST Henry, Technically if you and your wife both work the business you have a partnership. You would then need to fill out the partnership returns before you did your personal returns. Most people though report the income on one person or the other, and don't bother with the partnership route. One other method would be for you to pay your wife a salary for working in your business. To answer your question about social security, yes not reporting any income on her last year did affect the total amount of social security she would get down the road assuming that the income wasn't caught up at a later date. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 27 Mon Feb 22, 1993 H.KONCZAK1 [Henry] at 18:50 EST Thanks so much for your reply, Jack. If I paid my wife a salary out of my schedule C I assume that would come out the same as filing a partnership. What I need to know is... Would the amount of Social Security benefits be the same for both of us when we retire? Even though I claimed the income? I'm just trying to make sense of it. It seems that the partnership route is more complex and I'm used to using Sole- Proprietorhip. Does she get credit for Social Security through me? I'm looking for the best, and easiest, way to go here. Henry ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 28 Mon Feb 22, 1993 JSLICK [JACK] at 22:06 EST Henry, When you pay her a salary she gets credit for the amount you paid her. So basically if you pay her half of the business profits she will get credit for half of the earnings. The payroll taxes on her wages have to be withheld by you and paid into the government monthly as well as matching her withholding for FICA and Medicare. Other than that, it's a pretty simple thing to set up. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 29 Tue Feb 23, 1993 BRAD [Brad Solomon] at 04:13 EST Henry, Your wife is entitled to whichever is greater - social security on her own account, or as your spouse on your account. I'm not sure offhand, but I think she would be entitled to half of your social security. Now, if she hasn't earned anything before, and it is well into her prime earning years, it might not be of any use to add to her account. If she is 25, OTOH, and will be working for many years, than it might. Brad ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 30 Tue Feb 23, 1993 H.KONCZAK1 [Henry] at 18:49 EST Jack, thanks for such a quick reply but it seems even more of a hassle to pay fica and whatever else when we've been a sole- proprietorship for all these years. I'm 40 and Terri's 36. I belive up until last year she was getting credit in SS because of the way the taxes were filed. The Tax Cut program even ask, on a Sole-proprietorship, how much income you wanted to allocate to your spouse. Last year that feature wasn't in the program and I just want to be sure that my wife isn't gyped out of her SS. Now if she is covered under my SS then we don't have to change anything. I hope I'm not being a pest I'm just trying to understand the taxes as best I can... Brad... The Social Security payment is the same whether I allocate it under myself or both of us. The fact that we file jointly should make it clear that we're both covered. Or is that simplifying it too much? Thanks... Henry Henry ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 31 Wed Feb 24, 1993 BRAD [Brad Solomon] at 02:17 EST Henry, As you mentioned to Jack, there is the question of whether your wife's lifetime earnings would entitle her to a higher social security benefit on her own account or on yours. If hers would be higher, then allocating earnings to her could increase her benefit (although it would also decrease yours). If she will be collecting on your account, then allocating money to her would only lower both benefits. There could be other issues. We only discussed social security. F'r'instance, some states allow you to file separately, and this could make a difference. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 32 Sat Feb 27, 1993 T.COLLIER1 [TOM] at 02:00 EST Quick question on filing plan this year: I established residence in another state at the beginning of the 4th QTR, in order to take a promotion. My wife stayed behind and worked the entire year and maintained residence in the state I moved from. For state income tax purposes in the state I moved _from_, we intend married, filing jointly for 3 QTRS of my income and 4 QTRS of her. In the state I moved _to_, I will still file MFJ, but only on the last quarter's worth of my income. Federal's no problem. It's MFJ, clearly for both of us. Withholding was MFJ for the complete tax year. Anybody see any pitfalls? Thanks, Tom ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 33 Sat Feb 27, 1993 B.MORAVEK [Brad] at 17:22 EST I have a bit of a tax question; maybe you can point me in the right direction. 1. In 1991 tax year I was required to move over 1,500 miles from my old job. I was in the military, so that keeps things simple. 2. I placed my house up for sale, at that time I would have been required to put up 15,000 dollars to get the house sold. Did not have the money so I was forced to rent out the house until I could save up the money to sell the house. 3. In 1992 tax year I had saved up 10,000 dollars so I once again put the house up for sale. I was able to sell the house at a loss of 3,000 for points and 6,000 dollars for closing costs. I only rented the house for a total of 11 months, and did not sell it to the renter. 4. I did not buy the house to rent but live in it, which did for a total of 6+ years. Question: 1. Because I was required to move can I take the 6,000 dollars in closing costs off my 1991 taxes as a moving expence? There is a cap in 1991 taxes (about 3K) for moving expenses, anyway to take some off during 1992 taxes? 2. Because I was receiving rent, and reported it in 1991 tax year, how do I report the sale of my home. The way I look at it the sale of my home was the direct result from me moving. 3. I have not received a valid W-2 form for 1992. I have reported this to my former employer (United States Government) they indicated they might be able to solve the problem in the next few months. I was to receive a 15,000 (before taxes) lump sum on December 31, 1992 or receive 55% on 31 Dec and 45% 45 days later. I elected to split the amount to reduce my taxs for 1992. I figured that most of this money went to the sale of my home 15,000 miles from where I live. I only received 9,000 (7,200 after taxes) dollars on the 31 December, and received the balance Jan 23, 1993. They later indicated that the whole amount 15,000 would be reported in my 1992 W-2. Is that proper? All the paper work I was given indicated that I would might have to wait 45 days from the first check, it only took 21 days for the last payment. I timed the first check so the delay would put the second 1993 taxes. I do not have any paperwork on what taxes were paid, when they were paid, nor a valid w-2 form. Which direction do I punt? ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 34 Sun Feb 28, 1993 BRAD [Brad Solomon] at 06:26 EST Tom, The rules vary from state to state, but I don't think you can file MFJ while excluding the spouse's income for the period. I think you will have to file MFS for both states - full year for your wife, and two part year returns for you. -=-=-=-=-=-=-=-=-=-=-=-=-=- Brad (nice name ), You cover a number of things, and I don't quite follow everything you mentioned. Why were you putting up money to sell your hours? Did you expect to receive, net of commissions, less than the outstanding mortgage balance? The limitations of $1500 and $3000 for moving expenses applies to the single move, not the tax year. If you used the $3000 in 1991, then you get no moving expense deduction in 1992. Also, a loss on your residence is not deductable - moving expense or otherwise. You can, however, deduct expenses such as commissions (subject to the above limitations. The rental might just turn your loss into a gain, or less of a loss. You took depreciation during the rental period (and if you didn't, you should have). That lowers the basis by the amount of the depreciation. As for your deferred compensation, I'm not familiar with the particular US Gov't plan, so I can't address that issue. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 35 Sun Feb 28, 1993 JSLICK [JACK] at 15:47 EST Tom, In the states I'm afraid married filing separately is the manner in which you should file. Unles the state specifically states they allow you to do otherwise, the separate filing is the most proper way to handle this. For example Maryland does not allow for joint filers to have different periods in residence for the year and I believe that most other states would approach this similarly. Jack ___ Brad Moravek, If you have a loss on the sale of your residence the loss is not deductible. To determine whether you have a loss your original cost of the house, plus any improvements, minus any depreciation taken equals your basis to determine whether you have gain or loss. If that number plus your closing costs and points paid is less than the selling price of your home then you have a gain which is taxable or eligible for deferment if you purchase a new home within 2 years. If it is more than the selling price then the difference is a loss which isn't deductible. Certain costs are allowable as deductions under the moving expense deduction however, costs of selling your home is one of them, however those costs are limited to the $3,000 you mentioned and that limit is per move not per year. So you can't pay part in 1992 and 1993 and take the full deductions each time. Even thought the house was rented for a short period of time the intention was to sell it not hold onto it as a rental. Therefore the personal residence treatment still applies to the sale rather then the business property treatment. (In this case the business property treatment would be better if you could legitimately show that the house was held for investment and rental purposes following its use as a residence. Your message doesn't lead me to believe that this is the case but if it is, then the loss would be deductible by you. Again though the intent must have been there to turn it into business property.) Finally the lump sum payment is taxable when received so the portion that was deferred until 1993 should not be reported on your 1992 W-2, but should be on your 1993 W-2. On the other hand if they show it all on your 1992 form they will also include all the withholding too, so it might not be as bad as you think. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 36 Sun Feb 28, 1993 R.DYKHUIS at 21:00 EST I have a questioning involving the federal deduction for home property taxes. Like many others, I place money each month into escrow for payment of taxes. When I received my escrow statment from my mortgage holder this year, I discovered that they had only paid approximately half the amount I anticipated to be paid. Upon further investigation, I found that they had made three payments in calendar year 1991, including one that should have been made in January 1992. I did not notice the extra payment when I filed last year so did not get the deduction for the several hundred dollars. My question: Can I claim a deduction on this year's return for the total amount of property tax due in 1992, even though my mortgage company paid the January payment early (in December 1991) or do I need to file an amended return for 1991 to get the deduction? (I hope this is clear.) Thanks for any help. Randy ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 37 Mon Mar 01, 1993 BRAD [Brad Solomon] at 04:55 EST Brad, Jack mentioned that business treatment can allow the deductability of losses. Unfortunately, while business or investment use of a house does allow losses, you cannot convert to business use to take a pre-existing loss on a property. Jack was answering on the assumption that it was personal use (as it seems to be), but I want to make sure that you didn't misread his response. If you were to consider it as being converted to business use in 1991, then the business basis would be the lesser of your personal basis and the market value on that date. If it was already worth less than your basis (as you seemed to imply), then the loss up to that time would not be deductable. Any drop in value from that date could be deductable. -=-=-=-=-=-=-=-=-=-=-=-=-=- Randy, The bank probably included the taxes paid on the 1098 they sent you with the deductable interest paid. In any case, you cannot make up for the missed deduction this year, you have to amend last years return. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 38 Tue Mar 02, 1993 JSLICK [JACK] at 19:43 EST Brad & Brad :>, That's exactly what I meant about the business loss, and thanks for pointing out the part about not converting a pre-existing loss to a business loss. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 39 Thu Mar 04, 1993 M.MURRAY18 [big mike] at 00:40 EST Hi. I'm asking this question for my Dad. He says that he knows that the capitol gains go soemwhere but he's not sure where or on which form they go. Dad says, "I bought Zero coupon bonds in 1988 at a premium. I did not amortize the premium. I sold the bonds in 1992 at issue cost plus interest. How do I handle the capitol gains part of this?" Thanks, --Big mike ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 40 Thu Mar 04, 1993 BRAD [Brad Solomon] at 04:16 EST Big Mike, I'm not sure if I understand. You don't buy zeros at a premium, you buy them at a discount. Unless you mean a premium from the original interest schedule. Interest should have been reported to him on a 1099 all along, which should be reported on Schedule B every year. The sale, and any ensuing gain or loss from the adjusted basis (add in the reported interest), is reported on Schedule D. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 42 Sat Mar 06, 1993 A.BENSON [AngieB] at 01:32 EST Hi, I've been lurking around here and now I have a question. IN 1991, I started a business, a Multi-Level Marketing business. I filed Schedule C and ended up with a loss. I stopped participating in the business early in 1992. I made a trivial amout of money, less than $100. This year I started another business. Do I have to file a Schedule C for both businesses? Am I going to be in trouble with the IRS for not sticking with the first business longer -- will I have to pay taxes on the loss I took last year? If I can substantiate all my expenses/costs, is there any reason to be fearful of reporting a Schedule C loss on the new business? Thanks, AngieB ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 43 Sat Mar 06, 1993 M.MURRAY18 [big mike] at 23:19 EST Hi Brad. Here is my Dad's follow up to his question about zero coupons: "In 1988 I bought $7500 zero coupon municipal bonds for $4629.50 plus $187 commission. The bonds were purchased on the secondary market and at the time of purchase the face value + earned interest from issue to date of purchase was $215 per $5000 unit or $3225. "The broker did not provide year by year interest information, however the interest was tax exempt. "The bonds were called early on 8/1/92 at $378.04 per $5000 unit. Total interest from issue was $229.82 per $5000 bond or $3447.30. Thus, the payoff for the total package was $2238.30 plus $3447.30 interest. 1. Is there a capitol loss? 2.If so, is it the difference between $4629.50 and $2238.30, or is it the difference between $2238.30 and $4629.50? 3. Other? "Although the 1099B from the broker fails to provide the interest statement, I will report it as tax exempt interest for 1992. Do I report interest accrued from the issue date of the bond (1983) or from the date I aquired it? "Is the premium paid in aquiring the bonds also part of the capitol loss? The comission? "Please note- This was a botched deal on the part of the broker from start to finish. I plan to pass the details on to the proper authority." ********************************************** Thanks again for your time. I hope this all makes more sense to you than it does to me! --Big mike ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 44 Sun Mar 07, 1993 BRAD [Brad Solomon] at 07:38 EST Big Mike, I've tried to make sense from your note, and between typos and other things, I can't quite do it. First, I've figured that it must have been $75,000, not $7500 of face value, or 15 of the $5000 units. Next, if I understood it that far, the payoff was $2223.30 plus $3447.30, not $2238.30 plus $3447.30. In any case, there is a way of figuring out the actual amount of OID for someone who did not buy at original issue. This is explained in Publication 1212 (which I do not have). While the interest is not taxable, it is earned in each appropriate year, not the year sold, not all in the year redeemed. I suggest that you get the above publication (call 1-800-TAX-FORM), and figure out what the reportable interest is for each year. Whatever the total amount of interest he earned during his holding period is to be added to his basis (cost plus commission). That will determine whether he has a gain or a loss, which, in either case, would get reported on Schedule D. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 46 Sun Mar 07, 1993 B.MORAVEK [Brad] at 23:37 EST To: Brad Solomon From: Brad Moravek Not worried about the gross loss on the sale of my home. Big part of the loss was in commissions. I was not worth talking the moving expense deduction in 1992. No real cost that was not covered by me renting my home (getting the home fixed up so I could rent it) so I have the full amout for that move. Question: Do I file a 1040x for 1991 tax or do I just put this information on the 1992 tax form. Moved in 1991 sold home in 1992. Question: Which form do I file the sale of my home that I rented out until I sold it? From what I had been reading I figured that I could not do anything about the loss on this house. I had to ask just incase I happed to miss something. The money was set placed in a bank account dedicated to the house expenses. Easy to track the expenses when I work on the taxes forms. The information about all my rent going to sell the house was FYI stuff. It was just funny that it cleaned my account down to 124 dollars. I only had that because I sold a 30' ladder the week before for $100 bucks. I did take the depreciation, took me a good 2 months to figure it out and setup all my working papers. I had to sort 5 years worth of checks and sales slips to figure the "real" cost of the house. All that work has saved me 1000- 2000 real dollars. The gov't deferred compensation plan was to keep my money in their pocket as long as they could while forcing me to hopping around to find a job, and fill out their paper work stating that I did steal the Pentagon while they were not looking. Just picked up my updated W-2c form. It is also wrong, the 3rd version should be here in a few weeks. The gov indicates that they talked to IRS people and was told if I asked for the 5K to be billed in this tax year it is ok; however, they stated that the taxes paid on that amount still counts for the 1992 tax year. Because of a few other legal things, it might be best to take it in the shorts this year to keep my books clean. As it stands now I have over 20 pages of tax forms (via turbo tax) this year. Are we having fun now? Too bad I can't take the loss on this home and use in if I ever make money on a deal. Just my luck, the sale of homes is going up, and I may move back to take a full time job. Washington D.C. area has much to offer, but.... btw - nice 1st name (you don't have a brother called Scott that is working in the Wash area?) ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 47 Mon Mar 08, 1993 BRAD [Brad Solomon] at 03:26 EST Brad, The sale of your home gets reported on form 2119, in the year of sale. If that deferred compensation did become 1993 income, with the withholding being applied to 1992, you'd better make sure that you have enough paid in for your 1993 taxes, or you may end up being subject to a penalty. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 48 Mon Mar 08, 1993 JSLICK [JACK] at 23:41 EST AngieB, The loss you took on your prior years return shouldn't come back to haunt you provided you have the documentation to support the fact that you were in business to make a profit and that you quit the business when it became evident to you that a profit was not forthcoming. As to whether to file two schedule C's for 1992. If the amounts are truly trivial I would just combine the two on one Schedule C. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 49 Wed Mar 10, 1993 MONDAYS.MOM [Pat] at 20:42 EST Hi, everybody. I have a quick question. I've always thought that the only "home improvements" you can take as deductions are those that are business related. (building a home office, for example) A friend of mine is convinced that you can deduct "home improvements" that are not business related. What say you expert-types? Thanks :) Pat ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 53 Thu Mar 11, 1993 JSLICK [JACK] at 22:35 EST Pat, Now if the home office is being claimed on that house and the improvements indirectly benefit the home office there is a possibility that a portion of the improvement would be deductible, but I kind of got from the drift of your letter that this scenario is not what you were talking about. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 54 Sat Mar 13, 1993 MONDAYS.MOM [Pat] at 11:03 EST Jack... Nope, just generic home improvements. And no loan involved. Ah, well. Another question: A person buys a computer in December 1992. He goes into business (with the computer) in June 1993. Can he deduct any part of that computer in his 1993 tax returns? Thanks again :) -Pat ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 55 Sun Mar 14, 1993 BRAD [Brad Solomon] at 06:08 EST Pat, The computer would not have been eligible for depreciation last year (1992), since it was not placed in service until 1993. It will be available for depreciation for 1993, and since a mid-year convention is available, in effect you would get the full amount of depreciation for the year (1/2 years depreciation), but not until the return you file next year. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 56 Wed Mar 17, 1993 D.GOFF3 [Dr.G] at 06:25 EST Hi idon't know if this is the right place or not but here goes I have a full time babysitter for my kids and i need to give her a form 1099 i think? will "PARSONS" print it for me? thanks DR.G ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 57 Wed Mar 17, 1993 JSLICK [JACK] at 23:05 EST Dr. G, Actually a full time babysitter would come unde rth household help category and should be issued a W-2 and you should withhold the appropriate payroll taxes (a la Zoe Baird). But since you didn't I have no idea wheter Parson's would do it, however there is a Parson's support category over on the IBM RT if you can't get an answer from someone else here. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 59 Sat Mar 20, 1993 W.EISNER at 19:45 EST Hi: I browsed some of the messages hoping to find the answer to my utter confusion regarding what to report and where from a 1099-B my broker sent us. I follishly decided to be foolish and do my own ttaxes this year. We sold sll of our shares in a municipal fund and bought a tax free income fund with the proceeds. Our broker sent us a 1099=B showing the gross proceeds on line 2 but all the other lines have 0.00 except for dates of sale, CUSIP #'s and de- scription which have "various". Do I have anything to report? any ghelp would be deepl;y appreciated. ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 60 Sat Mar 20, 1993 J.SMITH52 [JuliAnna] at 23:01 EST Hi. I just got in over my head with my taxes! Maybe someone can help. I inhereted shares in three mutual funds in 1986/1987. I didn't actually inheret them, as they were already ina trust in my name, so I didn't pay inheretence tax. I sold them in 1992. So how do I figure out what taxes to pay? Cpapital Gains? Based on their original purchase price or the 1986/1987 price? (I've got Lasser's guide, but I still can't figure it out.) Thanks for any help! JuliAnna ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 61 Sat Mar 20, 1993 A.MCONEL [AMARIS] at 23:25 EST I've had a tax preparer do my taxes the last few years, and before that, my husband. I've reported business income and itemized business expenses for two years. Last year, however, I was employed fulltime and my biz sorta went into hibernation. As a result, the combination of my employment income and my biz profits does not require me to fuss with anything more complicated than the EZ form. My question is how do I document my biz income. Must I fill out a specific IRS form even though I'm not itemizing biz expenses? If so, which form? ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 62 Sun Mar 21, 1993 F.KEENEY1 [frances] at 21:43 EST W.Eisner: yes you need to report the proceeds on Sched D and you need to know your cost or basis in that mutual fund. Often the fund managers send you an explanation with the 1099. If not, you need to call them and find out the average cost( if you purchased over several years) JuliAnna; For reporting purposes you need to know the fair market value of the funds when you inherited them. That is your basis for capitol gains. I guess that would be the 1987 price. frances ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 63 Sun Mar 21, 1993 JSLICK [JACK] at 23:39 EST W.Eisner, You need to go back to the original purtchase date of the municipal fund shares to get a cost for the shares purchased, as well as find any statements that show purchases of shares after the date ,you originally bought into the fund. If you had the dividends reinvested then this means that you must have the reports for the fund from the time yhou originally bought it until the time you sold out. Those reports will detail the shares purchased and the cost which you will use to offset the selling price of the shares reported on the 1099B. Jack ___ JuliAnna, I think my answer above covers your situation too. Jack ___ Amaris, I assume by the EZ form you mean the schedule C EZ. If that's the case you just need to have a sheet of paper backing up your deductions and the receipts and/or cancelled checks to support your sheet of paper. :> Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 64 Mon Mar 22, 1993 BRAD [Brad Solomon] at 05:17 EST Amaris, If you are referring to the 1040EZ, then you cannot use it with business income. You have to use the full blown 1040, and report business income on either Schedule C, or Schedule C EZ. If the net was over $400, you also need Schedule SE. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 65 Mon Mar 22, 1993 A.MCONEL [AMARIS] at 22:48 EST Ah, Brad...Thank you for responding to my query. I won't quote you, but since my biz income amounts to $471. and does not take me into the bracket where I would owe the IRS anything (in fact, they will owe me, no matter what I do, what do you think would happen if I simply failed to report it? Would it have an effect on anything next year, or the year after, should my biz become more profitable? If I DID report it, then would I just list enough expenses to cancel it out, or would I have to list all my biz expenses? Why is this so complicated? ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 68 Tue Mar 23, 1993 JSLICK [JACK] at 22:44 EST Amaris, Technically you need to file the schedule C if you have any business income. You should list all the expenses as well. Any loss would reduce your taxable income from wages. If you are going to stop running the business then I would recommend doing it cleanly and not doing a few jobs on the side that end up generating a business loss. Too many years of losses gives the IRS the perception that the business is really a hobby and could be a problem for you when you get "serious" about the business again. Jack ___ JuliAnna, Your welcome! Your welcome, again! :> Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 69 Wed Mar 24, 1993 BRAD [Brad Solomon] at 05:38 EST You are required to file if you have net earnings from self employment of at least $400. And I would suggest that it would probably be a good idea to file, even if you do not have to. It establishes the zero, and can avoid later letters. I would list all expenses, even if you don't claim them because expenses exceed income. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 70 Wed Mar 24, 1993 M.MURRAY18 [big mike] at 19:50 EST Thanks again for the tip about the publications a while back. My dad wanted me to ask you a few more questions if you don't mind and then I promise we'll stop. Here's the background info in case you've forgotten: "In 1988 I purchased $75,000 face amount in zero coupons (tax exempt) in the secondary market for $4816.50. In 1992 the bonds were called due to default. They were paid at adjusted issue price. I don't know to handle the unamortized premium paid when purchased by me in 1988 in the amount of $1083.75" "I have IRS Publication 17 and 1212. I understand how to compute OID and I understand the term "adjusted issue price" and "aquisition premium". I do not know how to handle amortization of aquisition premium. 1. If an early call of the bonds takes place- how do I handle the aquisition premium that has not been amortized? 2. After OID is computed for a given accrual period, is it added to the adjusted issue price? 3. Since I aquired these bonds some four years ago and have not reported any interest income on them in any year, can you suggest a procedure for me to inform the IRS? Since the interest was tax exempt, I don't think I would owe any additional tax. The broker has never provided a 1099 OID, but has reported on 1099 B the gross procedes from the sale of the bonds." Thanks again. --Michael ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 73 Wed Mar 24, 1993 JSLICK [JACK] at 22:03 EST Mike, The unamortized premium is added to his basis to determine his gaain or loss from the redemption of the bonds. The OID is added to the adjusted issue price after it is reported as income ( the fact that the income is tax exempt doesn't matter it still gets added to the adjusted price). If the tax-exempt income would not have created additional taxable income in some way like causing social security benefits to be taxable then it owuld not be necessary to amend prior years returns to report the tax exempt interest. Just adjust the 'cost' of the bond for the OID recognized. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 76 Sat Mar 27, 1993 D.GAXIOLA [The Gax!] at 14:13 EST Hi everyone, I gave my son $2,000.00 during 1992. I remember reading in the local newspaper that cash gifts to children could some how be deducted if they claimed it as income. How do I do this and what form would I use? How would my son reflect this gift/income on his own tax return? Thanks in advance, Cecelia Gaxiola ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 77 Sun Mar 28, 1993 JSLICK [JACK] at 00:00 EST Cecelia, The only way to deduct it would be if you had a business and paid your child to work for your business. If that is the case there were a nmumber of things that needed to be done to claim the deduction. First the income needs to be reported on a W-2, the wages aren't subject to employment taxes, but could be subject to federal and state withholding. That's the only way I know of to make a payment to a child deductible. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 78 Sun Mar 28, 1993 BRAD [Brad Solomon] at 00:05 EST Cecelia, The only way I can see that you could deduct the payment to your child is if there was some taxable purpose for it that would be deductable to you. If the child did some work for your business, then the business could deduct it. If the child did it for, say, mowing your lawn, then technically it could be taxable to the child yet not deductable to you (just as if you paid a professional). Of course, you could consider it something like an allowance, as normal support, in that case. If you pay your kid that kind of allowance, would you consider adopting me? A case gift for no apparent purpose is neither taxable nor deductable. There IS a gift tax paid by the donor, but there is an exclusion of $10,000 per recipient per year, and beyond that, $600,000 lifetime between gifts and your estate tax. Brad ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 79 Sun Mar 28, 1993 W.KLEIN2 [Bill] at 14:57 EST Can someone help me with this? Given the following: - I work for the Acme Widget Company - The company used to be owned by the IMD Owner Company - IMD sold Acme to Dnew Owner Company in 1991 - I received a stock distribution in 1991 of 500 shares of IMD Owner valued at $1000.00 - I held onto the stock; I didn't roll it over, paying tax and penalties on my 1992 Federal Income Tax - The IMD Owner Company went bankrupt in 1992 - its stock is now worthless Can I take a $1,000.00 capital gains loss on my 1992 Federal Income Tax? If so, and assuming I use form D - Capital Gains and Losses, what do I put for date sold? Bill ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 80 Sun Mar 28, 1993 JSLICK [JACK] at 21:52 EST Bill, You have to be certain that the company will not emerge from bankruptcy and you will never see a return on that money invested. If that is the case then the date that the stock became worthless is the date you use for the sale. Keep in mind that companies enter bankruptcy with alarming regularity in these times, and some do survive. Filing for bankruptcy doesn't always mean the stock is worthless. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 81 Mon Mar 29, 1993 M.WHITMAN10 [Mark W.] at 22:38 EST I have a question about depreciating a rental condominium. In 1985, another couple and us (wife and I) purchased a condo at a ski resort. We used it less than 14 days per year so considered it a rental property and each couple reported activity on half of it on our respective tax returns. Suppose we had each depreciated 40% of it by 1991. In 1991, my wife and I bought out our partners' share. How do we handle depreciation on the entire property that we now own? Do we treat the 2 halves as 2 separate investments, continuing to depreciate the 1st half and starting to depreciate the entire 2nd half over it's useful life. Or do we treat it as one property that has already been 40% depreciated and continue from there. This effectively bars us from ever depreciating 40% of that 2nd half. The argument would be that our former partners already depreciated that part. For this example, it is OK to assume that the "buyout" price was close to the original purchase price. That is, we paid them approximately what they originally paid. ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 82 Tue Mar 30, 1993 F.KEENEY1 [frances] at 10:32 EST It seems that you have two peices of property and need to keep them separate. Your original half and the half you just purchased. Because of the tax reform act you may be depreciating each half over a different useful life. You will probably be depreciating the new half over 33 years. Your basis is your cost, and your partners have the profit on the sale( that is where the IRS gets their money) frances ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 84 Tue Mar 30, 1993 F.FRIED2 [FLORENCE] at 22:18 EST This is my first venture in this cat/top. I hope someone can give me some advice. My husband and I have always filed joint tax returns. Last May his children took him up North and put him in a nursing home. He had a stroke which damaged his brain and I could no longer care for him. His daughter asked me to continue taking care of his bookkeeping which I did. But she hasn't sent me any of his check stubs or bills since September. Without them I can not complete the tax returns. If I file separately, I would have no tax liability. But if I file separately and take no deductions, doesn't that mean he also has to take no deductions? I really don't know which way to turn at this point. Any advice would be greatly appreciated. Thanx. -=[ FLORENCE ]=- ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 85 Tue Mar 30, 1993 C.REID6 [Luc] at 22:35 EST Hi! Here's a question to show you how little I've done on my taxes to date. I own half a corporation, and I work out of a home office. So far most of the office expenses have come out of my pocket rather than from the corporation's. Are these expenses then tax-deductible as business expenses, or should they be expressed as investment in the corporation, and if the latter, how can I get some mileage out of them? Thanks. Luc ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 86 Tue Mar 30, 1993 S.CONROY1 [Sonsie] at 23:32 EST Brad, thanks for bringing up the issue of employing your child in your business. I'd like to know how to do this correctly. My 17-year-old son does odd jobs for both me and my husband, who both have home offices. As soon as he gets his driver's license, he will be running LOTS of errands for us! I would like to pay him officially for his work, but avoid as much paperwork as possible with the government. Can you give me some tips on how to handle this, and what problems I might encounter? Thanks in advance. (It would make life simpler if my husband and I could "share" his employment expenses...perhaps alternating months or something. Does this make sense, or should we pick one of us to be the "official employer" and leave it at that?) =Sonsie= ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 87 Tue Mar 30, 1993 B.COLLINS11 [Boyd] at 23:36 EST Can anybody point me toward a source for finding out about how best to account for the real capital gain (or loss) on a stock when one buys the stock over a long period of time in odd lots and sells it in the same way? Is there an averaging method? Could one average the buying price and the selling prices? Which is best? My tax preparation software (which will remain nameless) has no answers. ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 88 Tue Mar 30, 1993 JSLICK [JACK] at 23:51 EST Mark, Whatever you paid for the second half of the rental property is capitalized and depreciated starting on the date you purchased it. (I'm assuming when you bought it is when you started holding it out for rental) The method to use for depreciating the second half depends on when you purchased it from your previous partner. If prior to 1993 then you would use 27.5 years straight-line depreciation, if in 1993 well we will see won't we? :> Jack __ Bill, You are welcome. :> Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 89 Wed Mar 31, 1993 JSLICK [JACK] at 00:08 EST Florence, Actually its the other way around if someone filing married filing separate takes itemized deductions that automatically forces the other to have to use itemized as well. Good luck on getting the return filed. Jack ___ Luc, Actually where a corporation is involved the home office deductions do not qualify. Your best bet is to have a separate structure that you would rent to the corporation. You can't though rent just one room of your house. Sorry to be the bearer of bad news on this one. The reason for this BTW was to prevent people from taking the home office deduction who ordinarily would not qualify by paying themselves rent from their corporations. Unfortunately when you have rules that try to prevent something from happening they usually end up hurting those who legitimately should be able to take the deduction. Jack ___ Sonsie, It's pretty simple to pay your child. As long as the child is under 18 and you are a sole proprietorship you can pay your child and not withhold FICA or Medicare on the wages. In addition the wages aren't subject to FUTA taxes either. State unemployment depends on the state involved. All you do is pay your child, keep the time on a payroll card like you would any other employee, have your child fill out time cards, etc. There isn't any reason why you both can't pay your son, although that just means you both have to fool with payroll tax returns and the attendant hassles that go with filing them. There really isn't anything to look out for other than making sure the payroll tax returns are filed timely. Jack ___ Boyd, You can average the buying and selling price, use the first-in, first-out method, or specifically identify the stocks sold, which ever way is most comfortable for you. As to best if all the stock purchased was sold in this year all the methods will come up with the same amounts. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 90 Wed Mar 31, 1993 C.REID6 [Luc] at 05:07 EST Jack, Thanks for the information, however dispiriting. Will I be able to deduct money that I put into the corporation by way of purchasing office supplies, stationery, etc. . . . I get the impression that this is considered an investment rather than an expense, eh? Sorry, I really have not been thinking about this yet and am only now beginning to figure out what's what. -- Luc ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 91 Wed Mar 31, 1993 F.FRIED2 [FLORENCE] at 20:09 EST To: JSLICK [JACK] Jack, > Actually its the other way around if someone filing > married filing separate takes itemized deductions that > automatically forces the other to have to use itemized as > well. Good luck on getting the return filed. Thanks for your answer. But I guess I really want to know how to protect myself if I can't get the information to file my husband's return on time. My income is so low that I don't know if the IRS would accept an itemized return from me. -=[ FLORENCE ]=- ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 92 Wed Mar 31, 1993 JSLICK [JACK] at 22:49 EST Luc, The office supplies, etc. you put in should be reimbursed to you out of the company, or a formal loan document drawn up to cover the amounts invested. If you do that then the corporation can deduct the costs. Jack ___ Florence, If your concern is that you will file the return and then need to correct it then take the worst possible position. That would be married filing separately, and itemizing deductions. If you do that and still end up not owing any tax file the return to get it on record as to the approach you have taken. After that nothing your husband could do would force you to amend or refile your return. If you do end up owing some tax the question becomes one of whether yhou are willing to settle on paying the tax to get the thing over and done with, or whether you want to extend your return in the hopes that you can get all the information needed and file jointly to eliminate the tax. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 94 Tue Apr 13, 1993 J.PROBASCO [Jim Probasco] at 19:58 EDT I tried to post this question on 4/12 and don't think it made it. If this ends up being a duplicate please accept accept my my apologies apologies ... This is regarding a friend of mine named Marjorie ... Re: Claiming Dependents Marjorie's nephew (Gary - age 27) lived with her from March through the end of last year. During that time Marjorie provided nearly 100% of Gary's support while he attended college full time. (Gary only earned $625 income during that time.) Marjorie also paid all of Gary's tuition and fees to attend college. The catch: Gary is a citizen of Trinidad and here on a student visa. He is classified F-1. Marjorie did not claim Gary as a dependent for 1992. Could she have claimed him? If so, can she file an amended return? Thanks. JimP ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 95 Tue Apr 13, 1993 JSLICK [JACK] at 23:37 EDT Jim, Marjorie would be able to claim the dependency exemption because her nephew was in the US this year for more than the required 183 days which qualifies him as having a substantial presence in the US. This substantial presence gives her nephew the resident status needed for Marjorie to claim him as a dependent. So yes she can claim her nephew as a dependest. And an amended return is the proper way of claiming that dependency deduction. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 97 Fri Jun 25, 1993 NESTRICKLAND [Nade] at 21:29 EDT What is a sole proprietorship? My wife and I will be operating a direct sales home business. We are not a partnership, nor incorporated. It seems like sole proprietorship is the closest, but the term seems to exclude our situation. What I'm looking for is if we can use Schedule C for our situation. If we can't, what do we use? Nade Strickland ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 98 Sat Jun 26, 1993 D.A.SOUZA [Dan] at 00:32 EDT >>>>>>>>>>>> Nade <<<<<<<<< Ya, sole proprietorship is what you are or will be when you get going. As such you should file a "C" to claim income and expence. You also will have to file a 'SE' and get the to pay the full 15%+ rate! --Dan ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 99 Sat Jun 26, 1993 J.NELSON4 [JOYNEL] at 22:35 EDT ******* To: NESTRICKLAND [Nade] ******* > What is a sole proprietorship? Sole means just that....only one person. So, it means the business & you are all the same. Kind of like an AKA or DBA. It is really just you doing business for yourself. What this means is that it is an individual business. It cannot be owned jointly. It is subject to Self-Employment taxes and the credits for Social Security/Medicare get posted to YOU INDIVIDUALLY. > My wife and I will be operating a direct sales home business. We are not a partnership, nor incorporated. Why do you say that. It sounds like you may, indeed, be a partnership. To get around this, you may want to operate as 2- seperate sole-proprietorships. > the term seems to exclude our situation. What I'm looking for > is if we can use Schedule C for our situation. If we can't, > what do we use? That's cause you're (probably) technically a partnership. Most of my clients handle this situation in either of 2 ways. They hire their spouse as an employee, or their spouse doesn't have any involvement in the business (at least on paper). Your decision will depend on your situation. Are you in a community property state? Do either or both of you need social security credits? Are either or both of you drawing social security? And, to be realistic, how much is involved here? Sorry if my answer was long winded, but this is an area that you want to give some thoought to. There are both legal & tax consequences involved that should be considered. Hope it helped-- joynel Nade Strickland ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 100 Sun Aug 22, 1993 D.MULVANY [Dana] at 16:06 EDT Here's a question about deducting legal costs as an investment-related expense on Schedule A: If in 1992, I spent $2000 in legal fees which produced income in 1993, are those legal fees deductible in 1992 or 1993? Can I choose what year to deduct the legal fees? Do they have to produce income in order to be deductible? (I think the answer to this is yes, but if I'm wrong, I'd like to hear it!) Dana ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 101 Mon Aug 23, 1993 BRAD [Brad Solomon] at 01:54 EDT Dana, What were the nature of those legal fees? Litigation? Setting up a business? Investigating some investment? Be aware that investment expenses on Schedule A are only deductable to the extent that they exceed 2% of your adjusted Gross Income, and if you don't already itemize, you lose even more of the expense. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 102 Mon Aug 23, 1993 JSLICK [JACK] at 17:53 EDT Dana, You deduct the fees in the year you paid for them and if they were to produce or protect TAXABLE income then they are deductible. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 103 Wed Aug 25, 1993 D.MULVANY [Dana] at 04:03 EDT Jack and Brad, Thanks for getting back to me so quickly. I'm not done yet!!! If I were to spend $4500 this year on a lawsuit (for wrongful termination) but there's no known outcome this year, is that deductible as an investment-related expense? Certainly the intention is to produce taxable income eventually. What if this DOESN'T produce income for me? Also, would attorney's fees be subtracted right off any settlement or would I be expected to treat that portion as income even if my lawyer gets it right away? Could attorney's fees be designated separately from any money I win so I don't have to deal with them on the income tax return? (Who knows---I MIGHT need to know that this year!) Dana ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 105 Thu Aug 26, 1993 BRAD [Brad Solomon] at 05:21 EDT Dana, The legal expenses are deductable simply for attempting to produce taxable income. So, the $4500 you spend this year would be deductable. I'm a little confused. You talk about spending the money this year, yet later you imply that the lawyer is being paid on a contingency - how else could the fees be subtracted off the settlement? Be aware that, as Jack said, the expenses are deductable when paid. If they are deducted from the settlement (even if not on a contingency basis), then they couldn't be deductable until that time. I'm not sure if you could "take them off the top" in that case, and, in effect, have them be a legal expense to your former employer. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 106 Thu Aug 26, 1993 JSLICK [JACK] at 13:48 EDT Dana, What Brad said and has said. You can't escape the 2% of AGI reduction by taking the attorney's fees off the top. In a wrongful discharge case there is a possibility of punitive damages. Punitive damages aren't taxable income so you would have to allocate the lawyer's fees between the two if punitive damages are awarded. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 107 Fri Aug 27, 1993 J.NELSON4 [JOYNEL] at 21:25 EDT ******* To: D.MULVANY [Dana] ******* > If in 1992, I spent $2000 in legal fees which produced income in 1993, > are those legal fees deductible in 1992 or 1993? 1992 > Can I choose what year to deduct the legal fees? No > Do they have to produce income in order to be deductible? No. They just cannot be related to "non-taxable" income. If they are to produce or protect income you can deduct them in the year paid. Remember they go on your Schedule A and are subject ot the 2% AGI limitation. joynel ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 108 Mon Aug 30, 1993 D.MULVANY [Dana] at 05:11 EDT Brad and Jack, I'm glad to hear the fees are deductible even if they don't produce income. That's a relief. The arrangement I have with my lawyer is a cross between a contingency fee arrangement and a low fee. So I'm paying legal fees at a low rate with a low to average contingency percentage for the lawyer. This way, both of us are investing in this lawsuit and he's getting some income (but less than a third of his usual billing fee). I consider myself quite fortunate to have his backing... Jack, Thanks for pointing out that punitive damages aren't taxable. Are all other damages (general and compensatory) non-taxable as well? Dana ------------ 2 Home Office/Small Busines Category 7, Topic 11 Message 109 Mon Aug 30, 1993 JSLICK [JACK] at 12:44 EDT Dana, Compensatory can be either depending on what you ae being compensated for. For example since your case is for wrongful discharge the compensatory damages will be in the form of wages lost during the period between your firing and the decision in your favor by the court. I'm not sure what the general damages would entail (would these be the costs you had to outlay because of their actions?) if so their taxability would be based upon whether the other proceeds were taxable or not. If someone else has another opinion feel free to debunk me. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 12 Message 21 Mon Jun 22, 1992 R.CHEVRIER [Randy] at 19:31 EDT Everyone talks about tax planning BEFORE April 15th. Well I'm ready. It looks like our medical expenses will be pretty high this year. First all three in the family had the flu this winter (after Dec.) then my wife had sinus surgery. Now we find out we have twins on the way and our insurance pays a flat $1000.00 per pregnancy. The problem I am running up against is that the twins are due in January and the bills would normally be paid in January or later. Am I allowed to prepay these medical bills in December in order to add them to my previous 1992 medical expenses? If so I will easily exceed the 7.5% threshold in 1992 where as if I delay the birth bills to 1993 I probably won't get much of a deduction either year. Randy ------------ 2 Home Office/Small Busines Category 7, Topic 12 Message 26 Tue Jun 23, 1992 JSLICK [JACK] at 23:19 EDT Randy, Ken's wrong on this one, prepayments, unless there is a contractual obligation, or for medical insurance that covers an individual when they reach age 65 are not deductible in the year paid but when the service is performed. The reason for this rule is to get at exactly the reason you want to deduct the expenses in the first place, the 7.5% limitation loses its effectiveness when this is allowed. Sorry to be the bearer of bad news. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 12 Message 28 Wed Jun 24, 1992 BRAD [Brad Solomon] at 02:33 EDT While the prepayment would not generally be deductible, payments for prior years expenses are. So, if you expect to exceed the 7.5% next year, and can put off paying any expenses this year, anything you transfer will come right off the top. Of course, your doctor (etc.) would have to be willing to wait - although they might wait for a December bill, I doubt if they'd wait for a June one. Also, if you pay by credit card, the date charged is what counts, not when you pay it, so you can't use that to extend the date. Brad ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 11 Fri Dec 28, 1990 C.BERTINO1 [Andy] at 15:13 EST Hi, Is there a way for me, Mr. Citizen to file my short form in Washington via PC? I don't want to pay some firm 50 bucks to do data entry for me. Andy ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 12 Sun Dec 30, 1990 J.SLICKJR [Jack-CPA] at 21:54 EST Andy, Most of the programs I've seen are for the professional office who is providing this service for clients. By the way its too late this year to file these forms electronically with the IRS. I think I may have seen some programs in the IBM roundtable that will at least allow you to print the hard copy using your computer. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 13 Mon Dec 31, 1990 R.BARENT [rae-asst.] at 13:38 EST MYM's Tax Cut will file electronically, but there is a charge for it and a charge for the program, of course. H&R Block files their clients' returns electronically for a smaller fee. rae ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 14 Tue Jan 01, 1991 TAXES at 22:04 EST BASICALLY, YOU MUST USE AN APPROVED FILER FOR SENDING IN YOUR RETURN ELECTRONICALLY. FEE SHOULD RANGE FROM $20.00 TO $35.00. I CHARGED $20.00 LAST YEAR. ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 15 Wed Jan 02, 1991 T.TYLER4 [TIM] at 21:47 EST Mr. Taxes, How does a private citizen file an electronic return without using someone like TenKey, or H&R Block? (Unless I mis-read one of your previous posts, it seems that you charged $20.00 for electronic filing last year. Your post left me with the impression you had direct access to an electronic filing means.) Thanks, Tim Tyler -=-=-=-=-=-=-=-=- P.S. Don't let the CONSTRUCTIVE critism about "capitolization" bug you. The information you're providing is welcome and valuable. ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 16 Thu Jan 03, 1991 BRAD [Brad Solomon] at 01:00 EST Tim, A private citizen can purchase a tax package, such as TurboTax (street price around $40), plus the electronic filing option (about $5-15 last year, I don't remember), and file with the service they have. That service charged a fee per return, although I don't remember if the first one was included with the electronic option. Of course it required a modem, but a standard one (the ones to dial the IRS cost around $1000). In general, as currently available, electronic filing is a gimmick that is not worth the cost. If you have a big refund coming (generally poor planning, or something unforseen), then it MIGHT pay). There are other third party E-filing services, although I don't know if they are available to individuals - same deal, you can transmit your return, and they forward it to the IRS. No, I don't have details. Brad ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 17 Thu Jan 03, 1991 J.ATTARD [Janet(sysop)] at 09:05 EST BTW, what are the benefits of electronic filing other than maybe getting a faster refund if one is due? And are there any disadvantages? ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 18 Thu Jan 03, 1991 J.SLICKJR [Jack-CPA] at 23:30 EST Janet, The biggest so-called advantage is getting the refund faster. Don't count on it though. The next advantage is accuracy, you eliminate the keypunch entry of the return and the accompanying mistakes that might take place. Also you are certain that the return was received by the IRS since it accepts or rejects the return and informs the sender of such. Of course sending your returns certified accomplishes pretty much the same thing. Disadvantages: Haven't seen any yet and eventually this will probably become commonplace. Especially when balance due returns are added to the filing program. The biggest disadvantage I can think of is that once the return is transmitted and accepted by IRS it is filed, necessitating filing an amended return if an error is subsequently found. The same thing can occur with paper although the time between prep and mailing will likely be longer and the taxpayer will examine the return in more detail. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 13 Message 19 Fri Jan 04, 1991 BRAD [Brad Solomon] at 00:31 EST Another disadvantage to E-filing is the cost. In most cases, it just isn't worth the cost. I think most people using it just like the gimmick, the latest and greatest "technology". Brad ------------ 2 Home Office/Small Busines Category 7, Topic 18 Message 32 Sat Sep 19, 1992 STEVE.GANT at 18:13 EDT I'm a public school teacher in California, and I recently purchased a Canon PC photocopier for school-related purposes. I was hoping to place it in my classroom, but it seems like this may not be feasible. Is this high-ticket item deductible in total or in part? And what is the deductibility of computers when purchased through an educator-buy program? Thanks in advance for any help. Steve ------------ 2 Home Office/Small Busines Category 7, Topic 18 Message 33 Sun Sep 20, 1992 JSLICK [JACK] at 21:43 EDT Steve, You could depreciate the costs but they would be reported on your scedule A in the miscellaneous itemized deductions section and would be subject to the 2% of AGI threshhold. You likely wouldn't end up with much of a deduction. Each piece of equipment would have to be allocated between personal and business use if you didn't totally use them for business purposes. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 18 Message 114 Wed Feb 03, 1993 M.WOLFMAN at 05:16 EST What is the technical meaning of "statutory employee?" Don't quite know where this question belongs, but it's certainly related to taxes and home offices. Due to a decision by the I.R.S., a company I had been doing work for as an independent contractor reclassified all independent contractors as "statutory employees" beginning January 1 of this year. Attempts to get a formal definition of the term from them have been unsuccessful. I have been told informally that it means only that the company will withhold taxes and pay a portion of social security; nothing else is changed. My business expense and home office deductions are unaffected, and I receive no benefits from them. Is this the straight scoop? I am trying to assess where I stand, but lack of information is an impediment. --- Marianne ------------ 2 Home Office/Small Busines Category 7, Topic 18 Message 115 Wed Feb 03, 1993 HAL.DAY [DayCo] at 05:57 EST -=-=-=- To: M.WOLFMAN -=-=-=- I have been told informally that it means only that the company will withhold taxes and pay a portion of social security; nothing else is changed. My business expense and home office deductions are unaffected, and I receive no benefits from them. Marianne, Yes, this is the straight scoop! I was just reading about this in "Bottom Line Personal" the other day. Some companies do business exclusively through independent contractors...the IRS saw this as a circumvention of withholding rules and said the contractors are "statutory employees" and the companies were required to pay the employers portion of Social Security and payroll taxes. Personally, I like the idea...less paperwork and hassle for me! Hal "At the foot of Pike's Peak" ------------ 2 Home Office/Small Busines Category 7, Topic 18 Message 118 Wed Feb 03, 1993 JSLICK [JACK] at 23:16 EST Marianne, A statutory employee is a contractor that the IRS forces the company to withhold and pay matching FICA and Medicare contributions. Generally no other types of taxes are withheld. A statutory employee can use Schedule C to claim the deductions they are entiltled to, and are basically treated as if they were a proprietorship. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 21 Message 1 Sat Apr 10, 1993 M.DEYOUNG3 at 21:17 EDT Any tax pros out there? Here's one for you.... I bought a two unit rental home in Nov 89. (Rented out both units, did not live there.) I paid (round figures) $41,000 with $4,000 down, the balance on a land contract. Well, to make a nightmare of a story short, it turned into a real "money pit" and I sold it in June of 92' for $36,000. (The neighborhood went to hell after two houses right near my rental turned into "crack houses".) Now, question 1 is, can I deduct my loss some how? ($41k-$36k = $5k loss) If so, what form would I need? Also, am I to understand that there is no depreciation recapture any more on properties bought after 86'? Thanks for your time, -Mike- ------------ ------------ 2 Home Office/Small Busines Category 7, Topic 21 Message 2 Sun Apr 11, 1993 JSLICK [JACK] at 23:27 EDT Mike, There still is depreciation recapture on rental buildings bought after 1986. The determining factor is whether the buildings are owned by corporations or not. Since that isn't the case here, the next thing we need to deal with is that what you paid for the house when you bought it isn't the cost you deduct against the selling price. You have to deduct from your purchase price any depreciation claimed on the houses prior to the sale. You have almost three years of depreciation to deduct from the cost. Now if the cost after deducting the depreciation still exceeds the selling price less any expenses to sell the property, then you have a loss which gets reported on Form 4797 Section 1. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 1 Sun Feb 09, 1992 K.PHILLIPS4 [Ken P] at 23:03 EST How does one really go about classifying 1099-MISC income when the issuer only uses block 7, `Nonemployee Compensation'? Here are three that I had today!!! One gave examinations for the AirForce on a per session fee bases. Schedule C + SE Another company used Block 7 to report a car salesman's incentive awards. (they gave him a W-2 for all his commissions). I decided to call it a `KickBack' and went on. I have no earthly idea how this company runs its incentive plans. And last...... Rembursment for moving expenses. The receipitant could not offset it on Sched A, so I reported it as `other income'. Are we having fun yet?????!!!!!! Ken ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 2 Tue Feb 11, 1992 JSLICK [JACK] at 02:06 EST Ken, In the case of the salesmen incentives it's subject to SE also. The 1099 for moving expenses is wrong it should have been included in the W-2 and taxes withheld on it. Since they already screwed that up the options would be to go back to the company and get it corrected or pay the SE tax on it. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 3 Tue Jun 02, 1992 T.RHODES2 at 19:32 EDT Please help.... First of all I would like to state I know nothing about tax laws. I was told by my boss that he is going to 1099 me for the use of the company truck. He explained it would'nt cost me much in taxes since my income was below 18K. Situation: I work for a vending business as a repair/collection person. I keep all supplies on the truck and in my home and drive from home to fix machines. That is all I use the truck for. How can the IRS expect me to pay taxes on something I have to do for a living? Anyone please help me understand how this could be. I'm at a disadvantage because my boss is a CPA. Additionally, if there are any sources that one might seek to learn more about this "1099" I would like to know. ANY information is welcome and appreciated. ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 5 Tue Jun 02, 1992 JSLICK [JACK] at 22:13 EDT T. Rhodes2, A 1099 is a form that is issued by someone who pays you money for doing something for them but doesn't treat you as an employee. The income is subject to self-employment taxes. It sounds like he is going to issue the 1099 for the full value of the truck rather then issuing just for the commuting mileage. You might be able to get him to change this. If you don't use the truck for any personal mileage then the full amount of the 1099 would be deductible as business use of auto expense on form 2106. Unfortunately this would be subject to the 2% threshhold for miscellaneous itemized deductions. Technically your boss is wrong because he isn't supposed to give you a 1099 for this, he's supposed to include it in your wages and pay employemnt taxes on it. If you have personal use of the vehicle, then you would need to prorate the deductions between personal and business use basdon the mileage. You should keep a log. Am I understanding correctly that you work out of your home, and don't travel daily to your work? If so you could possibly argue that the mileage to and from everything but your workplace would be business mileage. Good luck with working this out with your boss. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 6 Wed Jun 03, 1992 K.PHILLIPS4 [Ken P] at 22:19 EDT WHO OWNS THE TRUCK??? AND WHO PAY THE EXPENSES ON IT? If he owns it then tell him thanks but no thanks. The truck have a value that will increase your income by the amount of the 1099MISC. You will pay taxes at the rate of 15% on the income PLUS a 15.6% Self- Employment Tax thereby making your effective tax rate on the Income from the use of the truck a whopping 30.6%. If you own the truck then you can get some releif by keeping up both your expenses and your mileage. theseexpenses will reduce the net value received thorugh the use of the truck. Boy is Jack going to love this one !!!!!! Just because he is a CPA dosen't mean he 1( has YOUR best interest at heart and 2( is a tax wizzard. Ken ==================== Jack.... If he puts this on a 1099 MISC we can use a Sched C and by- pass the 2% and the 2106. We can simply take ALL the expenses (mileage) as direct right- offs against the 1099. ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 7 Thu Jun 04, 1992 BRAD [Brad Solomon] at 00:38 EDT Ken, Amounts on the 1099-MISC (box 7 NEC) only go to Schedule C if you are self employed. Otherwise it should be reported with W-2 wages. I doubt if he could justify calling that self employment income. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 9 Thu Jun 04, 1992 JSLICK [JACK] at 21:25 EDT Ken, I thought about putting it on the schedule C but he is an employee. Two wrongs don't make a right. Anyway I agree with your assessment of the boss. :> If he raises enough a stink I think he can get the boss to treat it properly and report it on his W-2. Ideally only the commuting portion should be reported if any. The boss can also have the employees sign a form that prohibits personal use. This keeps him from making the employees keep track of business and personal mileage. Anyway in this case the boss is wrong in the manner he is handling this. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 10 Sun Feb 09, 1992 K.PHILLIPS4 [Ken P] (Forwarded) Many of the 1099Rs I am getting are from employees who are covered by a 401k or simular type plan. They either left to company and withdrew their money for the plan or the plan admistrator issed a 1099R that covered some move that he/she made that may or may not constiute a rollover but knows because they did not issue a letter of explanation. Comment?????? Ken ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 11 Mon Feb 10, 1992 BRAD [Brad Solomon] (Forwarded) Ken, I'm not sure I understand. When you take your 401K money, the company is required to issue the 1099R, even if you are going to rollover the money. If it IS rolled over, then report the taxable amount as zero. If you want to avoid questions, send in a copy of the 1099 with details of the rollover - where, when, account number, etc. Brad ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 12 Tue Feb 11, 1992 K.PHILLIPS4 [Ken P] (Forwarded) Brad... I know that and you know that. The problem is that the companies never give the employee enough information for the prepared to know how to treat the 1099R information. I had client tell me that the `disribution' on the 1099R was used to pay the premium on an issurance and the adminstrastor told them it was not taxable. Now maybe it was and maybe it wasn't we will never know. I just took the taxpayers word that it was rolled over into another part of the same 401k plan. Ken ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 13 Tue Feb 11, 1992 JSLICK [JACK] (Forwarded) Ken, There should have been some expanation as to what the form reports either in the code boxes or in a letter attached. A call to the plan administrator can usually clear it up though. Some thoughts that come to mind are that the plan was converted over from another type of plan which would trigger the need to report information on a 1099. Some plans allow the employees to invest the planaccumulations in certain ways were commissions and/or expenses are incurred that result in portions of the plan benefits being taxable to them. Just some thoughts. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 14 Thu Jun 11, 1992 C.VANDERFORD [Charlie] at 18:13 EDT My son just got a job as a personal fitness trainer in the Tampa Bay area. His "employer" will pay him as a contractor, an hourly wage for the actual hours he trains customers. Obviously, he will receive a 1099 at the end of the year. Since he's never been a contractor, he's looking for some guidance on how to prepare for the IRS. Appreciate it if anyone knows of a book or pamphlet that might be available in the local library or book store on the tax requirements of a contractor. Eg- Quarterly tax payments? What can he deduct? Business expenses? etc. My son wants to seek the advice of a very expensive accountant/CPA. Since he's 21 and just getting started in this "business" I thought he might be able to save some $$$ by reading up on the subject first. * * * Charlie * * * ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 16 Fri Jun 12, 1992 L.MERRICK [Lew Merrick] at 04:49 EDT Charlie, Tell your son to be careful. If he isn't set up as a business, the IRS may determine that the contractor relationship with the fitness center is a fraud. He will be liable for all sorts of penalties and extra taxes. (As a 1099 contractor, he IS liable for the full 15+% FICA tax.) This is an area where the IRS is specifically cracking down. It's gotten to the point where those of us who ARE fully in the business are having problems with clients being gun-shy of the furor. One of the main things that the IRS looks for is if the "contractor" is doing work that is normally done by employees of the company. If that is the case, you need to be able to prove that: A) You can suffer a loss in the course of business, B) That you work for multiple "client's" in the course of a business year, and C) That you advertise your services to the "general public". There's a list of 20 criterion that are used to determine your status vis-a- vis a 1099 contract. The IRS will review and make a determination for you if you request it. Failing to cover the bases here could cost serious $$$$. What's going down here is that the State and Federal Governments are worried about who pays unemployment insurance premiums and who is trying to scam their way out of taxes. They want the money and they want it NOW (gee whiz, what a suprise). Lew Merrick, P.E. Tangent Engineering ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 22 Sun Feb 14, 1993 R.BARBEE at 16:57 EST I WORKED FOR A COMPANY SEVERAL YEARS AGO THAT 1099 ME. IS THERE ANY WAY THAT I CAN GO BACK AND HAVE THE IRS DETERMINE IF I SHOULD HAVE BEEN PAID THAT WAY OR NOT. ALSO WHAT ARE MY RISKS IF I ASK FOR THIS. I HAVE ALREADY PAID THE TAX ON THIS MONEY. ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 24 Sun Feb 21, 1993 C.HAUGEN3 [GreenMama] at 18:59 EST I have a problem with a company I recently worked for. I work as a consultant (ie. I do short-term assignments because I can't find a fulltime job and still have to pay the rent). I work on the cash basis for paying taxes. When I get a check I count it as income. Big shock when I got my 1099 from this last company. They had paid me at the end of January, but back dated the check to 12-31-92. Then the 1099 showed that I had earned all the money they paid me in Jan as last year's income. They said they work on the accrual method of accounting. Now, I had based my payment of Jan 15 taxes on the money I actually GOT last year. I was upset because I felt their back dating the check and claiming it for Dec. was fraud. Do I now have to change my income for last year and claim it as 1992 income when I file in April? It will look suspicious to the IRS if I claim my income was thus and so, and they have 1099s from a bunch of places that add up to more than I am claiming, won't it? I can not use the accrual method as I never know when (or if) I will get paid. For example, I did some work for one guy last year, and ten months later he has not paid me. (I think he plans on not paying me). If I had claimed that money as income, I would be disappointed to pay the rent with it and get evicted. Thanks for your help, taxes confuse me, and I figure I get ripped off all the time because there is no other choice than working like this until the recession is over. GreenMama ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 25 Mon Feb 22, 1993 R.SCHENOT [Bob] at 07:46 EST GreenMama -- Did you save the envelope (with the postmark on it?) -BobSchenot ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 26 Mon Feb 22, 1993 JSLICK [JACK] at 22:07 EST GreenMama, As Rob mentioned save the envelope that the check was mailed in if you can. Other than that its going to be your word against theirs and I'm not sure whether it would be worth it to aurgue. You can report the income on your Schedule C in full and then in the Miscellaneous deductions area show income received in 1993, reported on 1099 in 1992 as a deduction. The net affect would be to remove the income, and shouldn't trigger a matching audit (an audit that is instituted because the 1099's for an individual don't match the amounts reported on returns). Your 1993 income then would be increased by this amount and again shouldn't cause a problem since the IRS is only concerned when the amounts reported as income are less than the amounts reported on 1099's. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 27 Tue Feb 23, 1993 C.HAUGEN3 [GreenMama] at 21:46 EST Unfortunately, they handed me the envelope, so there was no postmark, and I made a beeline out to the ATM machine and deposited it. That is the\ only dating method of showing when I deposited it. Jack, in the miscellaneous deductions on the schedule C is where I would deduct the amount? or on another form? Thanks, GreenMama ------------ 2 Home Office/Small Busines Category 7, Topic 29 Message 28 Wed Feb 24, 1993 JSLICK [JACK] at 10:55 EST GreenMama, The miscellaneous deductions on schedule C is where I would deduct it if it were me. Then I would show the income in 1993. Again though you won't have much evidence to back you up if the matter is ever que er questioned. :> Good luck! Jack ------------ 2 Home Office/Small Busines Category 7, Topic 30 Message 1 Mon Dec 10, 1990 J.NEUNER [John Neuner] at 22:39 EST I'm a Programmer/Analyst by profession but I do a lot of photography in my spare time. I'd like to start earning some extra $$ on the side with my photography. I am looking for books or other resources that can provide me with information about starting a part-time business. In addition to general information, I specifically would like to find out about the tax consequences. What can I deduct?, what kind of records do I need to keep?,..etc. There seem to be a lot of books on starting a small business. Most seem to focus on full-time busniess ventures, and I assume that the tax regulations are different for a primary business vs. a part-time venture. Any recomendation on good, current information on this subject Thanks ------------ 2 Home Office/Small Busines Category 7, Topic 30 Message 2 Tue Dec 11, 1990 J.ATTARD [Janet(sysop)] at 01:21 EST There are a number of files in the HOSB library that will help you. Here is a list of the ones you should look at. Since your business is something many people might do as a hobby, and there are limits on what you can deduct as hobby expenses (stricter limits), you'll want to pay particular attention to the file on hobbies vs business expenses. 1065 HOBBYEXP.TXT Desc: Hobby vs. Business: tax differences 357 IRSPUB.587 Desc: Deductions for Biz Use of Home 1219 TAXBOOK.TXT Desc: Which Tax Guide Should You Choose? 346 TAXCHANG.ART Desc: tax changes for writers,artists,etc 480 TAXRTC.TXT Desc: Transcript of RTC with IRS rep. 1009 TRAVLDED.TXT Desc: IRS rules on busines travel deducts 1102 HODEDUCT.TXT Desc: The HOme Office Deduction:explained --Janet ------------ 2 Home Office/Small Busines Category 7, Topic 30 Message 4 Tue Dec 11, 1990 FINZI [Jerry] at 22:26 EST John: I am a commerical photographer and would be glad to help in any way. First of all, besides the EXCELLENT, EXCITING, KNOWLEDGEABLE and PROFESSIONAL help you'll get here in the HOSB RT (that like you want it said, Janet?) don't forget to come over to the Photography RT BB area and talk to all the other photogs there. There is a Business category too. One good way to find out about the photo biz is to buy a few good books and perhaps join a good photo organization, like the ASMP (American Society of Magazine Photographers) or APA (Advertising Photographers of America. They have branches in most larger cities, otherwise I could get the numbers of their national headquarters for you. They also offer excellent seminars on the business side of things. Both of these organizations offer good photographer business practice and pricing handbooks. I'd also recommend a book like the 1990 Photographer's Market... it comes out once a year and has all sorts of business, sales and other advice for photogs in addition to listing some possible markets for selling your photos. In general, you are on the right track when wanting to check out the >business< side of photography before entering the profession full time. Most photographers forget that it IS a business and that no matter how talented you are in your craft, you can't make a living at it unless you hone your business and sales skills. Even if you want to do it "part time", you'll get better results if you take the marketing of your photos seriously and act professionally. From the sound of it you most likely have some existing stock photos that you want to market? If so, there is a lot to know about that side of the industry... --Jerry Finzi ------------ 2 Home Office/Small Busines Category 7, Topic 30 Message 5 Wed Dec 12, 1990 J.ATTARD [Janet(sysop)] at 01:06 EST Lorne, I saw the tax questions you brought up, and since this is the tax category, answered them. The reason you won't often find tax information in the general how-to-start a business books is because it changes too fast. I have to admit I kind of missed the first part of the question on how to start a business. If you're looking for books on starting a part-time business, look in the book store for any books on how to start a home business .that DON"T talk about getting rich in your spare time. Although a lot of the books are directed at people who run or want to run full-time businesses, there really isn't much difference between running a part-time business and running a full-time business.. except the amount of time you put into it. I think you'll find a lot of what you want to know by looking aruond the HOSB, and as Jerry suggested, the Photography RoundTable. ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 1 Sat Jan 19, 1991 T.SCANLON1 at 11:55 EST I have written a software program. If I collect royalties on this program is the income to be listed under self-employment inscome as well? It sure seems strange to have authorship royalties bundled with rental properties on the tax forms. I am dreading paying an extra 15.3% on this extra income. ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 2 Sat Jan 19, 1991 J.SLICKJR [Jack-CPA] at 21:17 EST T.Scanlon1, The royalties reported on Schedule E generally pertain to property, i.e. oil leases and the like. Without researching it in detail I believe that the type of royalties you are receiving would be self-employment income and you would have to pay the self- employment tax. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 3 Sun Jan 20, 1991 A.THORPE [Al] at 03:15 EST A frequently overlooked aspect of Schedule E is that rentals which belong there can include non real estate rentals, such as tangible personal property. But the rental of personalty is considered not exempt from the SE Tax. Copyright royalties are probably similar. As a practical matter, Schedule C is where self employment income goes. And then one gets into the subject of trusts. Trusts don't pay SE Tax. And if you gave away some portion of a royalty to a trust which was not described in IRC 671, the beneficiary of the trust would not have to pay the self employment tax. Then there is the corporation. If you assign a royalty to a corporation which has no other personal holding company income, isn't there an exception to the personal holding company rules? And even if you end up with a personal holding company it isn't all that much of an additional cost to distribute the after tax income to the shareholders if the corporation were not a professional service corp. Now that I [ANow that I've muddied up the water and it's fourth down, I'll punt. ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 4 Sun Jan 20, 1991 T.SCANLON1 at 22:34 EST Thanks Al, By the way, I understand that half of the SE 15.3% is for Social Security. What's the other 7.8% supposed to be? ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 5 Mon Jan 21, 1991 BRAD [Brad Solomon] at 00:14 EST T.SCANLON1, Set your name so we know what to call you. The SE tax is 15.3%, half of which represents the employee's share, and half of which represents the employer's share, which is deductable in a contorted way. I suspect your question refers to the fact that the employee's share is similar to the social security taxes paid by employees, and it is. The employer's share is similar to the payroll taxes paid by employers, and is similarly deductable (starting in 1990). Of that 15.3%, 12.4% is for old age, survivors and disablilty insurance, and 2.9% is for medicare. Starting in 1991, the rate base for the medicare portion is much higher than the OASDI portion. ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 6 Mon Jan 21, 1991 Y.GREENWOOD [Danny] at 01:19 EST All of the 15.3% is for Social Security. When you work for someone else, your employer pays an amount equal to about 7.6% "above" what he pays you, and deducts the other 7.7% from your check. Danny ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 8 Mon Apr 13, 1992 STEPHEN.KAHN at 10:13 EDT In the past, I've always put my book royalty income on Schedule E. This was on the advice of an accountant who is also a writer. This year I recived two different 1099-MISC forms from my publisher. One form lists several thousand dollars under box 2, Royalties. The other form lists several hundred dollars under box 7, Nonemployee compensation. According to my tax software, box 2 should go on Sched E, and box 7 should go on Sched C. All the income is from the same book and I have no idea why the publisher sent me two forms. (However, this publisher bought out my original publisher last year, and there has been some confusion in the changeover.) Bottom line -- how do I report it to the IRS? ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 9 Mon Apr 13, 1992 JSLICK [JACK] at 22:16 EDT Stephen, Your accountant friend who is also a writer was incorrect. All the royalty income from the books should go on Schedule C. Schedule E is only for royalties from oil & gas types of income. You also should have been paying self-employment taxes on the income in the past. Sorry to be the bearer of bad news. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 35 Message 10 Tue Apr 14, 1992 BRAD [Brad Solomon] at 00:41 EDT Stephen, The general rule of thumb is, Schedule C for royalties while you are an active writer, and Schedule E when you are living off the profits of your past career. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 37 Message 25 Tue Jul 28, 1992 PHOTOBASE2 [John Crane] at 23:14 EDT Does anyone have a simple explanation as to what is "related income" and "unrelated income" for a not-for-profit, educational magazine? (Not that I will _ever_ understand how _any_ income can be "unrelated") - John ------------ 2 Home Office/Small Busines Category 7, Topic 37 Message 26 Thu Jul 30, 1992 JSLICK [JACK] at 00:15 EDT John, I don't think we have a non-profit area in the tax cat, probably should start one up. Anyway unrelated income is income that is not related to the exempt function of the non-profit. A theatre group for example may charge admissions to their performances, the admissions would be related to their exempt purpose and would not be unrelated income. On the other hand if the theatre group ran a retail store to generate funds for the troop that would be unrelated income, even though the proceeds are used for the exempt purpose they don't relate directly to it. I.E. they don't further the arts simply by providing funds to do so. The IRS takes the position for the most part that where non- profits compete directly with for profit businesses that the income generated from that activity would be unrelated income and subject to corporate tax. Goodwill is a good example of a business (thrift shop) who's purpose is to provide job training for challenged individuals. Because the business directly relates to its exempt purpose the income generated by the thrift shop would not be taxable as unrelated income. It's hard to answer your question directly because it is really on a case by case basis. Perhaps if you could narrow it down a bit I can help you more. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 37 Message 27 Sat Aug 08, 1992 PHOTOBASE2 [John Crane] at 22:07 EDT My basic problem, Jack, is how advertising income (which the magazine couldn't survive without, can be called "unrelated income." But according to my accountant, that is the case. (Sorry for taking so long getting back. My macro was coming in here and typing REA ALL NEW MAR. There was never any messages. Finally I realized something was wrong and changed it to REA ALL NEW MAR CAT=1-99... now it works fine. I've only been on Genie for 7 years... give me time, I'll get it right :) ) ------------ 2 Home Office/Small Busines Category 7, Topic 37 Message 28 Sun Aug 09, 1992 JSLICK [JACK] at 21:44 EDT John, Yes but by taking advertising you are in effect competing against other magazines. Which makes it unfair for the for profit magazines. The same result would happen selling a mailing list. Advertising unless it's not on a regular basis is definitely one of the areas that the IRS looks heavily at. Not on a regular basis would be something like advertising in a program at an event if the event wasn't held regularly. Then it wouldn't count. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 1 Sat Mar 14, 1992 R.STEMBRIDGE at 11:48 EST I meet the requirements for moving on form 3903, but I can't figure out how to calculate my "qualified real estate expenses" since we bought our first home. I have reported the loan origination fee, discount points and interest on my schedule A, line 9a as shown on my 1098 form from the lender, but there are obviously more closing cost expenses that I don't know where to plug in: Here's a list: Credit Report Tax Service Fee Underwriting Fee Buydown Funds (our builder did a 2-1 buydown--this was over $2000) Inspection Fee Mortgage Insurance Premium Hazard Insurance Premium Hazard Insurance Mortgage Insurance County Property Taxes Title Exam Title Insurance Misc Attorney Fees (express mail, etc) Recording Fees State Tax Survey Could someone give me an idea of which items are deductible, and where? Thanks! ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 2 Sat Mar 14, 1992 JSLICK [JACK] at 20:43 EST R.Stembridge, The closing costs except for the hazard insurance, mortgage insurance(I'm assuming that this is insurance to pay off the loan in cas of your untimely demise) and any contributions to escrow for the real estate taxes would go on the Form 3903. Basically this means the title insurance, attorney's fees, ispection fees, title transfer taxes, mortgage recording costs, deed recording costs, and probably some others I'm forgetting. The property taxes should be deducted on your schedule A on line 6. Hope this answers your question. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 3 Sat Mar 14, 1992 R.STEMBRIDGE at 22:04 EST Thanks, Jack. The one remaining question would be whether or not I could deduct the buydown funds, since they were a one-time "buydown" of the interest rate that in effect reduces our interest rate over the next 2 years. Could I deduct this as points not shown on my 1098? Thanks... es ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 4 Sun Mar 15, 1992 BRAD [Brad Solomon] at 09:03 EST R.STEMBRIDGE, Points paid in excess of the normal amount (which is generally about 3 points) can only be written off over the life of the loan. In the case where it was just for a 2 year reduction, you may be justified in taking them off over just the 2 year period. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 5 Sun Mar 15, 1992 R.STEMBRIDGE at 15:01 EST Since the buydown is in effect, a pre-payment of interest, could I not list the total amount on my Schedule A, line 9b "Interest not reported on Form 1098"? If not, how would I break the deduction down over 2 years? Thanks, Ed Stembridge ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 6 Mon Mar 16, 1992 BRAD [Brad Solomon] at 00:08 EST Ed, It is precisely BECAUSE the buydown is a prepayment of interest, that you cannot deduct it up front. You are only entitled to a deduction for the expenses for the present year. You take 1/24 of the amount for each month. Report it on line 10, POINTS not reported on form 1098. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 7 Mon Mar 16, 1992 JSLICK [JACK] at 00:19 EST R. Stembridge, Wasn't the buydown paid by someone else? If not they coud be deducted also. Keep in mind whatever you take as a deduction reduces the basis of the house when you sell it in the future. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 8 Mon Mar 16, 1992 JSLICK [JACK] at 00:21 EST R.Stembridge, I think Brad's right on this one and I'm wrong, sorry about that. jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 9 Mon Mar 16, 1992 GREG.LEWIS [Greg] at 01:40 EST I too decided to change employers and move last year. Although I do not have a real estate sale to contend with, I do have some other questions regarding deductability of my out of pocket expenses in this matter. My profession did not change. Only my employer and locale. The seven week MANDITORY training was paid for by my new employer, who also supplied "dormitory style" room & board. The training was held in a city which was a couple of thousand miles from my home at that time. Knowing that I was going to be away for almost 2 months, I broke my apartment lease and put everything in storage. I had to pay for a hotel room and restuarant meals for the 2 weeks before going to training. Are these expenses deductable? During the 7 week training, I decided not to share a room with 3 strangers, or of eat cafeteria food, so I rented a hotel room and ate at local restuarants quite a bit durring my training. I also rented a car and made a number of long distance phone calls to family and friends during this time. Are these expenses deductable? My new employer REQUIRED me to relocate after the training. The distance between my old home/job and new home/job was aprox 5000 miles. All air travel costs (training and relocation) and the cost of shiping some (only 500 lbs out of 2000 lbs) of my personal belongings was also paid for by my new employer. However, I had to go back to my old home to arrange shipment of my belongings after I finished the training. Are the hotel and food expenses of my trip back home to ship my belongings deductable? Any insight into this situation would be greatly appreciated. Thankx, Greg Lewis ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 10 Mon Mar 16, 1992 JSLICK [JACK] at 21:56 EST Greg, The living expenses after you broke the apartment lease and meals wouldn't be deductible in my opinin because you could have continued in your ld lease during that time and broke it immediately prior to moving. The actual expenses of breaking the lease i.e. forfeiture of security deposit adn any penalty wuld be deductible, subject to the limitations on form 3903. The expenses while at training would be deductible as an itemized deduction subject to the 2% threshold for miscellaneous itemized deductions. You would only be able to deduct the amounts your employer didn't reimburse. The personal phone calls wouldn't be deductible at all. The trips back to ship your belongings would be deductible as well as the cost of acquiring a new lease or home. Again they would be subject to the limitations on form 3903. Your storage costs and moving expenses for the belongings would be deductible in my opinion. The amounts paid by your employer related to the job move should have been included in your W-2 for that year as well. You can also deduct costs for trips to find suitable housing in your new area of employment. Costs for temporary living expenses at your new place of employment would be deductible as well. Hope this covers your questions. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 12 Tue Mar 17, 1992 GREG.LEWIS [Greg] at 03:03 EST Thankx for all the help guys. I had a feeling the phone calls wouldn't be deductable but I wasn't sure. As far as the employer paid moving expenses, it was not a reimbursment situation. The expenses were billed directly to my new employer. Thankx again, Greg Lewis ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 13 Tue Mar 17, 1992 JSLICK [JACK] at 21:29 EST Greg, I understanf they were billed to your employer but the correct way to handle this whether the employer or you pays the bills is for the employer to include the amounts paid in your W-2 and then for you to report the expenses on your return. I really don't know what kind of exposure you have if they don't do this but that's the proper treatment. #### Ken, Yes it can be exempt from state and federal withholding but the FICA and medicare must still be withheld. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 14 Tue Mar 17, 1992 K.PHILLIPS4 [Ken P] at 23:31 EST Jack.... Read the firs one or two paragraphs of PUB 512. Ken ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 15 Tue Mar 17, 1992 K.PHILLIPS4 [Ken P] at 23:37 EST ooops.... Pub 521 `Moving Expenses' ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 16 Wed Mar 18, 1992 JSLICK [JACK] at 23:01 EST Ken, Reread my post I never said it souldn't be exempted from federal withholding, just that it wasn't exempt from FICA and Medicare withholding. Regardless of how its treated for federal purposes the FICA and Medicare must still be withheld. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 17 Thu Mar 19, 1992 GREG.LEWIS [Greg] at 07:26 EST Jack, The company I workfor is an international air carrier, so all the travel and transportation of personal belongings was done on them. It was not a "billed" expense, just an "non-revenue" situation. Thankx again for all your help. I'm off today so, with the help of a fresh pot of coffee, I'm going to try and finish up my return and send it out. Looks like I'm going to get audited this year. I've got a business loss, unreimbursed employee expenses, job hunt expenses, moving expenses, AND a casulty loss. Thank god I keep reciepts! Happy trails, Greg Lewis ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 18 Thu Mar 19, 1992 JSLICK [JACK] at 21:05 EST Greg, That really doesn't change anything Greg. If your employer provided you with services it still is supposed to be in your W-2 and deductedby you. Now would I make a federal case out of it, probably not but that doesn't mean it's right. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 19 Thu Mar 19, 1992 K.PHILLIPS4 [Ken P] at 22:46 EST Jack.... I know what you said and frankly, I agree with you. However, I got the shock of my little career when I read pub 521 page 6 column 3; WITHHOLDING AND ESTIMATED TAX 2nd sentence..... "Your employer is not required to withhold Income Tax, SOCIAL SECURITY TAX or MEDICARE TAX on allowances or reimbursements for moving expenses if your employer REASONABLY beleives....... According to the IRS and ohter experts the interperation of `reasonable' is so broad that it vertially voids the next pararaph. Don't ask me how this got in there, but there it is !!!!!!! Ken ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 20 Fri Mar 20, 1992 BRAD [Brad Solomon] at 03:45 EST Ken, That doesn't say that it isn't included in income, only that there's no withholding against it. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 21 Sat Mar 21, 1992 K.PHILLIPS4 [Ken P] at 00:05 EST brad... you are absolutly right it must be included in income. I had five clients that were issued W-2s by an employer who had them sigh a `reloaction agreement' in which they were advanced $7000. The W-2 had $7000 in block 10 and ZERO every where else. We filed the W-2, paid the Income tax and are going to let the employer worry about the SS, assumming anyone ever ask. Ken ------------ 2 Home Office/Small Busines Category 7, Topic 38 Message 22 Sun Mar 22, 1992 JSLICK [JACK] at 00:05 EST Ken, Well that's a new one on me, that it was exempt from FICA and Medicare withholding. Hmmm, gonna have to look into this. Sorry about that. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 41 Message 1 Tue Mar 17, 1992 M.JANE at 03:05 EST My fiance lived and worked in Massachusetts from Jan-Aug 1991, then was relocated and from Aug-Dec 1991 lived and worked in California. Will he have to file 1991 state tax returns for BOTH Massachusetts and California? I lived and worked in Florida from Jan-Aug 1991, then moved to California to live, but earned no income here from Aug-Dec 1991. I shouldn't have to file a CA state tax return if I didn't earn any income in this state in 1991, should I? ------------ 2 Home Office/Small Busines Category 7, Topic 41 Message 2 Tue Mar 17, 1992 AJ at 19:43 EST M.Jane: Your fiance will have to file in both states. As for your situation, I am not up on California's form numbers, but they probably have a form that covers your situation as a "part-year resident." That should take into account the origin of income. ==a.j.== (CT Tax Dept.) ------------ 2 Home Office/Small Busines Category 7, Topic 41 Message 3 Tue Mar 17, 1992 JSLICK [JACK] at 21:29 EST N.Jane, Aj's right, generally the states have a part year resident form that let's you report the income you earned for the number of months you lived in the state. Some states have the capability built into their normal returns other states require a special return. You'll have to check with CA & FL on what forms to file. The same would have to be done for your fiance. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 41 Message 4 Wed Mar 18, 1992 BRAD [Brad Solomon] at 02:58 EST M.Jane, As you probably know, FL has no income tax. You say that you had no income while you were in CA. Does that include interest, dividends, capital gains, and other "unearned income"? Because, that would be taxable - I believe CA taxes virtually everything. You will need to check their rules for "part year residents" to see their filing requirements - that MAY be based on your total income for the year. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 41 Message 9 Fri Mar 12, 1993 R.CHEVRIER [Randy] at 19:43 EST M.JANE, Last year (& this one too) I had a little gas royalty income from California. I needed some advice on how to report it to CA. (I live in Oklahoma.) I got a nice bit of help from a fellow here on GEnie that told me everything I needed to get the proper forms. I've included some of his instructions at the end of this note. FYI, I was a non resident and only had $116.00 of CA income and I ended up paying $0.00 CA tax, but the forms requested should take of both Non residents and Part year residents, if I remember right. You might also call 800 information (800-555-1212) for a toll free number of the California Franchise Tax Board. I think there is a number and this would be easier and faster than writing. Good luck. Its a confusing return but not a bad tax rate, IMO. (at least in my case. You income level may change that.) O O Randy Chevrier Tulsa, Oklahoma L Paintmaster Car & Truck Painting \___/ Apple ][GS -- "The Computer that wouldn't die" [Begining of Email Archive] 92/04/15 To: R.CHEVRIER Randal R. Chevrier Sub: CA TAXES Regarding your $116 of royalties, you would need to file CA540NR for non- residents. Order booklet #914 (Calif. Nonresident Income Tax Forms and Instructions) from: Franchise Tax Board, Tax Forms Request Unit, P.O.Bx 942840, Sacramento,CA 94270-0070. Frankly, I doubt you will owe anything in CA taxes on only $116 of Ca income. If you are worried, and want to be safe, [note this was April 15th...I was running out of time!] you could mail $10 to the tax board on a piece of paper stating "CA Form 3519" ( Payment Voucher for Automatic Extension for Individuals". The only information on that form is: Your name, address, SS#'s for you & your spouse, and the amount of $ payment you are making. Filing this form gives you until Oct.15,'92 to file all your forms. (It says " If no payment is due, do not file this form." As I remember the CA540NR form, you are taxed only on the percentage of your income that is derived from CA. Even if your total income was from CA and was only $116, your tax would only be 1% of the $116 if you got no standard deduction.......so I wouldn't be worried. Send the ba@#%&ds a $2 bill! Hope this is helpful. By the way, the CA extension Form 3519 should be mailed to: Franchise Tax Board, P.O.Bx 942867, Sacramento,CA 94267-0051 [End of Email Archive] ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 1 Wed Apr 10, 1991 B.FIKES1 at 17:34 EDT I wonder if anyone can help me with a question my sister had about her income tax. She and her husband bought their first home last year, and they aren't sure which of the charges on the closing statement are considered points that can be taken off their 1990 taxes and which are considered part of the basis. I'll give a list of the charges below 1. Loan Fee 1.000% ARCS MORTGAGE 2. Loan Discount 2.000% ARCS MORTGAGE 3. Mortgage Ins. Premium 4. Insurance Reserve 1 months @ $31.54000 per month 5. Tax Reserve 7 months @ $98.96000 per month 6. Interest from 7/31/90 to 8/01/90 @ $20.72000/day 7. Pay Fire Ins Premium 8. Pest Inspection 9. Escrow Fee 10. Title Ins. Prem. (CLTA) 11. Title Ins. Prem. (ALTA) 12. Recording Fees They are pretty sure that numbers 1 and 2 are included in the points, and they think that 9-11 are not, but they are not sure. The terms on the closing statement aren't the same as those on the tax instructions and the tax book we are using. The title company said to consult a tax consultant, but the only tax consultant in town is too busy until after the deadline. If anyone has had any experience with this subject or can tell us where to go for information, I'd appreciate it. Thanks, -- Brian ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 2 Thu Apr 11, 1991 BRAD [Brad Solomon] at 00:55 EDT Brian 1-2 represent the points, which (thanks to relatively recent rulings, can be currently deducted - for the primary residence). 3-4 look like personal insurance, and/or reserve for same, and doesn't count anywhere. 7-8 are similarly personal. 5 looks like it went to the bank escrow a/c (rather than to pay actual taxes, which would show up with an offsetting credit to the seller). In that case, it is included in the taxes the bank paid, and gets deducted when paid to the municipality, rather than to the bank. 6 is deductable interest. I'm not sure what 9 is. 10-12 get added to the basis of the home, to reduce your profit when you sell. Brad Solomon ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 7 Sun Mar 15, 1992 S.AMOS1 [fido] at 21:17 EST I bought my first home in September of '91 and have some questions about what is deductible and what is not. Reading the information on points in IRS publication 17 says"funds at closing at least equal to the points charged". The loan I used to by my hous had 3% as points. The loan was roughly for 100,000 and I paid over 6000 at closing so that's more than the 3% needed. The points were listed as paid from "sellers funds" on the title but nowhere in the loan agreement do I find a clause stating the seller must pay the points. When I asked my lawyer why I didn't pay the points from my (buyers) funds to be able to deduct them he said that is the way the state requires the fund transfers. Can I sti deduct the funds given the clause I quoted above and claim them on Schedule A under Points paid not on Form 1098? Points paid to purchase a primary residence are deductible in full the year you buy the house? They don't have to be divided over the term of the loan?*s ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 8 Mon Mar 16, 1992 BRAD [Brad Solomon] at 00:09 EST Fido, I'm not clear on what happened. Can you figure out from the closing statement whether or not you paid them? Did you get credit for $100,000 from the bank, or $97,000? Some loans may require that the seller pay all points, or all over a certain amount, so it IS possible that that was done. If you didn't pay the points, then there is no way that you can get a deduction for them, either up front or over the life of the loan. But then you got a better deal than you realized, not having to pay the points! Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 9 Tue Mar 17, 1992 S.AMOS1 [fido] at 22:04 EST The closing title statement says that they were paid from "sellers funds" and came out of their total. But read the definition of when to deduct popoints and follow the flow chart on page 133 of publication 17 (repeated ad infinitum in other publications) you would say they are deductible. It is almost as if they made an exception in my case by saying "Did you provide funds at closing at least equal to the points charged?" because I did they just weren't specific to "points". The amount the seller forked over was termed "sellers help" and was never specified as fees paid by the seller to arrange for buyer financing. As far as I can g gather, the state specifieds that any sellers help go towards payment of points first. The other odd thing is that I actually paid part of the points in my closing costs ($238) which was over and above the $3000 sellers help. This $238 was not reported on my form 1098. I think it was because my loan was transferred immediately after settlement. Thanks for your previous help.*S ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 10 Wed Mar 18, 1992 BRAD [Brad Solomon] at 02:58 EST Fido, Your last few lines changed my reply. If the seller paid your points, then they are not deductable to you. Period. However, if the $3000 was just listed as an expense to the seller and a credit to the buyer, and the points were also listed as either an expense to the buyer, or deducted from the loan proceeds, then you can deduct them. Clear? Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 11 Wed Mar 18, 1992 S.AMOS1 [fido] at 20:01 EST The only "listed" expenses I have are on the "TICOR TITLE INSURANCE - Settlement Statement". There is a section that summarizes monies paid by each party. The summary shows $3000 paid from sellers settlement funds for Origination Fee and Discount. It shows $264 coming from Borrowers Funds for the rest of the Discount. I do not have an itemized list form the mortgage company. I do have a sheet descrihbing terms and conditions and it does not state that the seller pay the Discount and Origination Fee. At any rate, if the points are deductible, can I deduct the full amount for '91 or do I have to spread the payments out over the term of the loan. Thanks again for your q response. Steve Amos ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 12 Wed Mar 18, 1992 JSLICK [JACK] at 23:01 EST Steve, You can deduct the ful amount, provided you determine what that is in this year. What Brad's trying to get at is whether you actually paid it or the seller. From your description of the transaction I'd say only the portion you paid, $264 is deductible by you. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 42 Message 13 Thu Mar 19, 1992 BRAD [Brad Solomon] at 03:20 EST Steve, Whoever filled out that settlement sheet did you a disservice. Had they made that $3000 from the seller a credit towards your downpayment, a general credit or a reduction in selling price, you would have been entitled to the deduction as points, with no difference to the seller. As it was done, all it does is lower your ultimate capital gain, years from now. Brad Solomon Marlton, NJ ------------ 2 Home Office/Small Busines Category 7, Topic 46 Message 1 Thu Aug 08, 1991 H.MCARTHUR [HUGH] (Forwarded) Hello, My name is Hugh McArthur and I am located in Dalton, Georgia - about 30 miles south of Chattanooga, Tenn. I ended up here because I am seeking information about setting up a small home business, to wit: An individual investment center to handle my own investments. The concern: Can I tax deduct my office area, my computer, related software, telephone for Schwab on-line business etc. After reading the index (categories) everything seems so interesting. I'm glad I took time to figure out how to get here, I am just learning my way around Aladdin and I do get myself into some interesting situations. (grin) Thanks for letting me come aboard for awhile! Hugh ------------ 2 Home Office/Small Busines Category 7, Topic 46 Message 4 Thu Aug 08, 1991 BRAD [Brad Solomon] (Forwarded) Hugh, The use of a home office for investment purposes is explicitly disallowed unless it is a business (I assume you're not a broker or dealer). Note the distinction between "business usage" and "investment usage." Depreciation of your computer (straight line over 5 years, and not a section 179 expense deduction), amortization of the software (I believe also 5 years), and actual telephone expenses (not including the basic line charge unless it is an extra line only used for that purpose) is deductable, but only as an itemized deduction, and only the amount that exceeds 2% of your AGI. In a shorter sentence, it's not likely that you'll get anything. Brad Solomon ------------ 2 Home Office/Small Busines Category 7, Topic 46 Message 6 Fri Aug 09, 1991 JSLICK [JACK] (Forwarded) Hugh, You're not going to be able to deduct the home-office, computer, etc. That's specifically forbidden by the IRS, sorry.:< If you have any other tax questions please stop by CAT 7 and drop a line I'd be happy to answer them for you. Jack ------------ 2 Home Office/Small Busines Category 7, Topic 46 Message 7 Sat Aug 10, 1991 BRAD [Brad Solomon] at 00:52 EDT Jack, As I already posted, I agree that the home office isn't deductible, but I still think the computer would be depreciable, at least to the extent it is used for the investments. Of course, the 2% renders that pretty useless. Brad ------------ 2 Home Office/Small Busines Category 7, Topic 46 Message 8 Fri Mar 20, 1992 B.BERGGREN1 [Bruce] at 20:48 EST Can subscriptions to investment publications (Wall St Journal, etc) be deducted as an investment expense? What about commisions on stock trades? What line of which form would they go on? I haven't been able to find this topic in my 1991 income tax instructions. Any help would be appreciated... Bruce Berggren Ft. Worth, TX ------------ 2 Home Office/Small Busines Category 7, Topic 46 Message 9 Sat Mar 21, 1992 BRAD [Brad Solomon] at 01:49 EST Bruce, Subscriptions to investment pubs are deductible as a Miscellaneous Itemized Deduction, but only to the extent that it, along with other such expenses, exceeds 2% of your Adjusted Gross Income, and even then, only if you itemize. Stock commissions are netted with the cost of the stock - you add them to the purchase price, and deduct them from the sale price. You report the net after commissions on Schedule D. Brad Solomon Marlton, NJ ------------