Tax Time

(Snuffy/6247) has nothing to do with itemization.

Snuffy@rss.iscabbs.com — Sat, 18 Feb 2012 11:12:00 -0600

has nothing to do with itemization.
It goes on the line after your wage W2 and tip income.
the line before dividends.
You won't need a separate schedule listing it though, just list the $11
($9.99+$1.20=$11.19).

(Rick Jenkins/6246) See, I have a checking and savings account with the same bank. T...

Rick Jenkins@rss.iscabbs.com — Sat, 18 Feb 2012 10:01:00 -0600


See, I have a checking and savings account with the same bank. The interest on
the savings account last year was $9.99 (seriously) and on the checking account
was like $1.20. I didn't get anything from my bank in the way of tax forms, and
when I called them AND when I went to a branch, both times the answer I got was
"Well, it either got lost in the mail or you didn't earn enough interest for us
to send you one" and nobody could tell me which of those two was accurate.

Since I itemize, I should just report $12 in additional interest income and
leave it at that, just to have all the i's dotted and t's crossed?

(Chaos And Void/6245) No. That's the minimum amount that the entity paying the interes...

Chaos And Void@rss.iscabbs.com — Sat, 18 Feb 2012 06:52:00 -0600


No. That's the minimum amount that the entity paying the interest has to report
to you (and to the IRS about you). The minimum you have to report to the IRS is
$1. Always, regardless of type of income or how it was paid. The only exception
is if your total income is so low that you don't have to file a tax return at
all.

(Wang Master/6244) http://www.irs.gov/instructions/i1099int/ar02.html

Wang Master@rss.iscabbs.com — Sat, 18 Feb 2012 05:20:00 -0600

http://www.irs.gov/instructions/i1099int/ar02.html

10 bucks or 600 bucks depending on how it's paid.

(Rick Jenkins/6243) Is there a minimum dollar amount in interest one must earn on an...

Rick Jenkins@rss.iscabbs.com — Fri, 17 Feb 2012 16:55:00 -0600


Is there a minimum dollar amount in interest one must earn on an account for it
to be necessary to claim the interest on their taxes?

I'm talking about interest that would normally show on a 1099-INT.

(Chaos And Void/6242) Oh yes, part-year resident in both states, which could include s...

Chaos And Void@rss.iscabbs.com — Sun, 12 Feb 2012 07:55:00 -0600


Oh yes, part-year resident in both states, which could include some complicated
apportionment. I'd totally hire a licensed tax preparer (CPA or EA) this year.

(Snuffy/6241) Income earned in each of the respective states must be reported ...

Snuffy@rss.iscabbs.com — Sat, 11 Feb 2012 17:31:00 -0600

Income earned in each of the respective states must be reported accordingly,
usually using non-resident/part-year resident forms.

One year I got to file non-resident MD, part-year resident OH, and part-year
resident IN, oh and yes non-resident VA.  Plus of course federal.

If you have other than plain old boring W2 income, there may be additional
exciting things to consider, as well.

(Rick Jenkins/6240) I moved from South Dakota to California one year, spending a ver...

Rick Jenkins@rss.iscabbs.com — Sat, 11 Feb 2012 17:15:00 -0600


I moved from South Dakota to California one year, spending a very similar
percetage of the year in SD as to what you did. I had to pay taxes to both
states. I think that was a CA thing so definitely check NE's policies. I'd
recommend calling them first thing Monday morning if you aren't able to get the
answer online.

(Mciangel/6239) silly question I hope. If we lived until Aug 27th in SD and move...

Mciangel@rss.iscabbs.com — Sat, 11 Feb 2012 16:43:00 -0600

silly question I hope. If we lived until Aug 27th in SD and moved to NE do we
need to file/pay NE state taxes this year or does it fall under the "majority
of the year you were in SD" logic? Thanks!

(Bristow/6238) KAM> That is funny. Maybe I should send them a letter.

Bristow@rss.iscabbs.com — Fri, 10 Feb 2012 19:02:00 -0600

KAM> That is funny.  Maybe I should send them a letter.

(KAM/6237) Hm. Perhaps Bristow can come up with a crazy enough excuse that ...

KAM@rss.iscabbs.com — Fri, 10 Feb 2012 18:23:00 -0600


Hm. Perhaps Bristow can come up with a crazy enough excuse that the IRS will
buy it and just write it off? :-)

http://chzparentingfails.files.wordpress.com/2012/02/crazy-parenting-fails-i-gu
ess-the-irs-appreciates-clever-exemptions.jpg (or http://is.gd/W5Bles )

(Bristow/6236) KAM thanks for the info.

Bristow@rss.iscabbs.com — Tue, 07 Feb 2012 01:42:00 -0600

KAM thanks for the info.

(KAM/6235) http://www.irs.gov/taxtopics/tc753.html

KAM@rss.iscabbs.com — Mon, 06 Feb 2012 17:58:00 -0600


http://www.irs.gov/taxtopics/tc753.html

An employee may want to change the number of withholding allowances or his or
her withholding rate (marital status) on Form W-4 for any number of reasons,
such as a marriage, a change in the number of dependents, or a change in the
amount of itemized deductions or tax credits anticipated for the tax year. If
you receive a revised Form W-4 from an employee, you must put it into effect no
later than the start of the first payroll period ending on or after the 30th
day from the date you received the revised Form W-4.

(Bristow/6234) Yeah I rather not take that route. Especially if an employer do...

Bristow@rss.iscabbs.com — Mon, 06 Feb 2012 16:24:00 -0600

Yeah I rather not take that route.  Especially if an employer doesn't let you
mess around with it. I'll find out tomorrow if we can change it more than once.
Thanks for the calculator.  That is really what we have needed to really know
what we owe.  I rather not mess with the withholdings other than decreasing
them but I'll do whatever we can to pay the tax ontime.

(MoonToad/6233) Make sure your job allows you to futz with the withholdings. My...

MoonToad@rss.iscabbs.com — Mon, 06 Feb 2012 15:42:00 -0600

Make sure your job allows you to futz with the withholdings.  My husband's job
only lets him change it once a year.  One of the places he worked fucked it up,
they put the wrong state in (we moved from one state to the other and they
didn't change that even though we told them to) and we had to pay 5k because
the taxes in this state are higher than the other state, and probably for some
other reason that made it so high.

(Heavenslice/6232) The IRS also has a withholding calculator to help figure out how...

Heavenslice@rss.iscabbs.com — Mon, 06 Feb 2012 15:02:00 -0600

The IRS also has a withholding calculator to help figure out how many
exemptions to claim:
http://www.irs.gov/individuals/article/0,,id=96196,00.html

(WORF/6231) Yes, you can change your withholdings.

WORF@rss.iscabbs.com — Mon, 06 Feb 2012 14:09:00 -0600


Yes, you can change your withholdings.

If you increase the withholdings you will get more money in your paycheck now,
but you will need to remember to reduce them again to make up for it otherwise
you'll have an even bigger bill next year.

It's probably a good idea to look at your income from last year and see if
you've had any big changes this year. If not, you should be able to guesstimate
how much (in total) you need to have the IRS withhold this year so you have a
minimal tax bill next year.

(Bristow/6230) Ok so I been trying to brain storm how to come up with the money...

Bristow@rss.iscabbs.com — Mon, 06 Feb 2012 14:03:00 -0600

Ok so I been trying to brain storm how to come up with the money for taxes. 
How does this sound.  Increase the holdings for a few weeks to get the added
money we need.  Then drop it back down to say Zero and call it good for the
rest of the year?

(Bristow/6229) Yeah I figured that my income has jumped up a lot the past year ...

Bristow@rss.iscabbs.com — Sun, 05 Feb 2012 17:20:00 -0600

Yeah I figured that my income has jumped up a lot the past year that it must be
why we need to pay more this year.  I am certainly making certain this doesn't
happen again.
I'll have to look at see what the pentalites and interest would be filling out
that form. Thanks for that info.  That is what I am looking for.  Now do I just
attach that to my tax return?  Last year I still did e-file but I was able to
pay the full amount by the deadline.  I want to get this done before turbo tax
increases the rate of their services.  Right now they are discounted.

Thanks for the help.  I am going to try hard to pay it all off before the
deadline but that might not be possible. WAy too much is due.

(Chaos And Void/6228) Yes, it is exactly that easy. State (and local) income tax shoul...

Chaos And Void@rss.iscabbs.com — Sun, 05 Feb 2012 16:27:00 -0600


Yes, it is exactly that easy. State (and local) income tax should be reported
on your W-2. Sales tax requires either tracking via receipts (or much more
commonly) using the sales tax tables.

(Rick Jenkins/6227) Can someone explain, simply, the deducting of either your state ...

Rick Jenkins@rss.iscabbs.com — Sun, 05 Feb 2012 16:19:00 -0600


Can someone explain, simply, the deducting of either your state sales tax or
state income tax? Obviosuly you have to be itemizing to do one or the other.
But is it as easy as adding up the state income tax that was withheld on your
W2s or adding up all your receipts that you paid sales tax on (or taking the
IRS' standard sales tax deduction) and deducting it?

(Chaos And Void/6226) IRS will never allow for an extension of time to pay your taxes....

Chaos And Void@rss.iscabbs.com — Sun, 05 Feb 2012 15:27:00 -0600


IRS will never allow for an extension of time to pay your taxes. The best you
can offer is to pay over time via an installment agreement. You must fill out
form 433D, found on the IRS website here:
http://www.irs.gov/pub/irs-pdf/f433d.pdf.

The reason that your tax increased after adding both incomes together is that
it probaby jumped you a tax bracket, and your individual withholdings each
assumed the lower tax bracket. Definitely lower your exemptions.

(Bristow/6225) KAM> so far when I looked that up you have to show all these rea...

Bristow@rss.iscabbs.com — Sun, 05 Feb 2012 11:11:00 -0600

KAM> so far when I looked that up you have to show all these reasons why they
should let you have an extention.  I'm trying to figure out a way to come up
with the money. I am so pissed that this happened.  Last year it wasn't too bad
this year it is way too much to have to pay in.

(KAM/6224) You can negotiate a payment plan with the IRS, so you don't have...

KAM@rss.iscabbs.com — Sun, 05 Feb 2012 08:54:00 -0600


You can negotiate a payment plan with the IRS, so you don't have to have all
the money at once.

(Bristow/6223) Ok that is what I thought was that the more exemptions the less ...

Bristow@rss.iscabbs.com — Sun, 05 Feb 2012 08:07:00 -0600

Ok that is what I thought was that the more exemptions the less you give the
government. I was confused because when I entered the other halfs info it said
we were getting a refund.  Then I entered mine and it said that we owed a shit
load.  It didn't make sense to me at all.  I was going to school when we first
got married.  Then I got a job so the other half never changed the withholding.
I know there is nothing I can do now to fix the 2011 tax bill.  The problem is
we don't have that kind of money to pay them that is the problem.  I'm so
pissed right now that I can't think straight.

We bought a new home in Nov 2010 and so I thought that paying the interest
would help our taxes but I didn't realize that you had to pay that much
interest to be above the regular deduction.  I hope that we never pay that much
in interest a year to be above that deduction.

Ok I looked and my employer is messed up.  They only took out 4% in fed taxes
of mine, which I claim one.  My other half claiming 3 had 6% taken out.  This
makes no sense to me at all.

(MIKEY/6222) sounds like your other half needs to decrease exemptions to matc...

MIKEY@rss.iscabbs.com — Sun, 05 Feb 2012 07:47:00 -0600

sounds like your other half needs to decrease exemptions to match yours as a
starter.   There is nothing you can do now to fix the 2011 tax bill.

(WORF/6221) The more exemptions you take, the less there is withheld.

WORF@rss.iscabbs.com — Sun, 05 Feb 2012 07:42:00 -0600


The more exemptions you take, the less there is withheld.

If you didn't have enough withheld last year than you should be taking LESS
exemptions, not more.

If you increase your exemptions, you increase your chances of having to pay in
when the tax bill comes due.

In an idea case, you should be paying a tax bill of somewhere between $0 -
$200.

If you're getting a big refund, you screwed up and gave the govt a free loan.
Increase your exemptions.

If you've got a big bill, you screwed up and didn't withhold enough. Decrease
your exemptions.

(Bristow/6220) I just started our tax return on turbo tax. Last year we had to...

Bristow@rss.iscabbs.com — Sun, 05 Feb 2012 07:07:00 -0600

I just started our tax return on turbo tax.  Last year we had to pay in.  I
figured it had to do with the fact that I didn't have enough exemptions. I
*thought* I fixed it last year but it doesn't look like they fixed it for me at
work.  Plus they are taking out taxes for a city I don't even live in. Figure
that one out.  Needless to say that HR person isn't with the company so they
will hear from me on Monday.
My question is if I claimed 1 for Fed and State and I am married no kids. What
should I be claiming next year?  My other half claims 3 Fed 2 State.  As of
right now Turbo Tax is telling me we owe a LOT in taxes.  I do not have this
money and I have no idea how to fix this problem.

(Guardian Angel/6219) TAP - I've been claiming 4 for yeeeears. Going from 2 jobs to 1 ...

Guardian Angel@rss.iscabbs.com — Mon, 30 Jan 2012 03:34:00 -0600

TAP - I've been claiming 4 for yeeeears. Going from 2 jobs to 1 job, and the
mortgage and kid, 4 or 5 is probably entirely reasonable.

(Chaos And Void/6218) I can't answer for sure without more specific numbers, but I'd t...

Chaos And Void@rss.iscabbs.com — Thu, 26 Jan 2012 17:51:00 -0600


I can't answer for sure without more specific numbers, but I'd totally guess
that your tax bracket will drop and that change is not excessive.

(The After Party/6217) W-4

The After Party@rss.iscabbs.com — Thu, 26 Jan 2012 13:36:00 -0600

W-4

  Hrm, doesn't going from 0 withholdings to 5 seem a bit much?
  We did add a kid and my wife quit her job so our income will be less than
  half, depending if she starts her own business or not (i'm guessing we'll
  loose money for 1-2 years, like normal).

(Chrijm/6216) Box 7 - Nonemployee compensation. All other numbered boxes are ...

Chrijm@rss.iscabbs.com — Wed, 25 Jan 2012 19:54:00 -0600

Box 7 - Nonemployee compensation.  All other numbered boxes are blank.

(Chaos And Void/6215) The real question is which box on the 1099-MISC is being used to...

Chaos And Void@rss.iscabbs.com — Wed, 25 Jan 2012 07:15:00 -0600


The real question is which box on the 1099-MISC is being used to report the
income. 1099-MISC is the correct form for other income than merely non-employee
compensation, including royalty income. But those other forms of income are
reported in other boxes.

(Tempestas/6214) You pay the most tax on self-employment income, because its subj...

Tempestas@rss.iscabbs.com — Wed, 25 Jan 2012 03:22:00 -0600

You pay the most tax on self-employment income, because its subject to self-
employment taxes in addition to regular income taxes. Its only a grand, which
really isn't 'much' money... I'd suggest you do your whole return, and put that
in LAST, see how much it'll actually cost in tax. If its bothersome, play with
the Sch C a bit... I've seen people bullshit expenses to reduce tax on their
self employment income, they mostly enjoy bs'ing on mileage. In the event of a
mileage audit, the IRS will want to see that you've kept a written record of
the mileage ie: where you went on what date, why you went there (work), and how
many miles.

(Chrijm/6213) Generally I would do self employment, but this yer it would only...

Chrijm@rss.iscabbs.com — Tue, 24 Jan 2012 19:07:00 -0600

Generally I would do self employment, but this yer it would only be for that
one check and it's only about $1000.  I can't stand these guys (part of why we
went our seperate ways) and would probably loose a few $ than call them.  I
wouldn't be suprised if they did this just to piss me off either.  Based on
similar check in the past, I think they consider it a dividend but have never
issued anything other than 1099-misc forms.
Would I pay more tax on, dividend, self employment, or royalties?  I should say
less tak on them.  If SE is the lowest I'd just do that and be on my way.
Damn those people.....

(Rainmaker/6212) Well, sorry - bad word choice... self-employment income perhaps ...

Rainmaker@rss.iscabbs.com — Tue, 24 Jan 2012 10:55:00 -0600

Well, sorry - bad word choice... self-employment income perhaps is more what I
was thinking

(WORF/6211) You would be wrong.

WORF@rss.iscabbs.com — Tue, 24 Jan 2012 10:36:00 -0600


You would be wrong.

If you report 1099 income as "ordinary income" you are underpaying your taxes
and will get fined if you're caught.

(Rainmaker/6210) Am I wrong that, so long as the individual who received the 1099...

Rainmaker@rss.iscabbs.com — Tue, 24 Jan 2012 10:13:00 -0600

Am I wrong that, so long as the individual who received the 1099 with
unexpected money would report it as "ordinary income" - he/she is paying the
highest possible rate of tax and therefore covering themselves in terms of
IRS>

If they want to reduce tax burden, then they'd need to contact the
company...but perhaps the increased tax payment is worth not having to contact
them?

(Tempestas/6209) Chrijm> If you got a check and you don't know what its for... So...

Tempestas@rss.iscabbs.com — Mon, 23 Jan 2012 17:44:00 -0600

Chrijm> If you got a check and you don't know what its for... Sorry, but a
phonecall to the company is in order. It does sound like they used the wrong
form, there's only one way to fix it, and it starts with a conversation. I
guess you could send a letter, or email, or carrier pigeon if you really don't
want to talk :)


RJ> oh boy, was this 1099 stuff sprung on your wife last minute? somebody kinda
screwed up at her workplace. 1099's gotta be postmarked by the 31st (same
deadline as W2s) I hope she's not an accountant for the church, because I want
her to call the church's accountant. The church's accountant is the
guy/gal that files the F.990. She's dangerously close to blowing a serious
deadline and she's failed to spend more than 13.5 seconds on the irs.gov
website... Blank forms are 2-clicks from the main page on the IRS website and
the IRS is open for phonecalls 12 hours per day... Sorry. But I'm laying this
out this way, because I don't think I'd recommend she do these 1099's without a
professional if she couldn't find where to order the forms in the first
place... If this was a stated job responsibility she's had since she started
the job... then she's the one that kinda screwed up, and I want her to have a
chance to cover her arse. I know this sounds like me being a jerk, I'm not
being judgmental, I like when people make mistakes on tax stuff, that's where I
make my living... "fixing" ... Hate to see her lose a job over a 1099 mistake.

IRS doesn't charge anything to mail a form or pub by US mail, but it takes 7-10
days to receive the forms... But so she knows her 2-clicks :
From the frontpage she would click "Forms n' Pubs" and then click "Forms n'
Pubs by US MAIL" Forget about ordering forms for TY2011 because we're too close
to the filing deadline.

Does she have W9's from all the contractors?

I would strongly strongly suggest she call the church's accountant or hire a
payroll service or accounting firm so these 1099's can get out on-time and
correct. The pro's can efile 1099's. It'll cost money to bring in a pro, but
next year she'll have the copies from this year to use as a guide/template.

Lastly on the states... IF applicable... usually the states pick up the 1099
information from the feds, but to be correct/complete, she should get a state
1096 form also. Some states will accept the printouts from their website, some
don't, depends on the state, she'll need to look at the website and call with
questions there too if she doesn't want to just have the church's
regular accountant handle the whole thing.

(Rick Jenkins/6208) Another 1099 question> My wife is the office manager/accountant ...

Rick Jenkins@rss.iscabbs.com — Mon, 23 Jan 2012 15:34:00 -0600


Another 1099 question> My wife is the office manager/accountant for a very
small church. She's under the impression that if the church hires someone for a
job and the person is paid more than $600 then the church needs to give that
person a 1099. How does one get a blank 1099? Evidently you can't print them
from online. Also, does the employer need to get a SSN or taxpayer ID number
for everyone they issue a 1099 to?

(Chrijm/6207) Speaking of taxes> So I used to do some contracting work for a ...

Chrijm@rss.iscabbs.com — Mon, 23 Jan 2012 14:41:00 -0600

Speaking of taxes>  So I used to do some contracting work for a company and
would get a 1099-misc each year.  One year I was paid in stock.  This year,
however I did no work for them, yet they sent me a check at the end of Dec and
a 1099-misc.  I have no idea what the $ if for.  As I did no work, I would
think royalties (though they are not obligated) or because I own stock.  But
then I would consider it a dividend.  So the question, do I treat it as
dividends (I got a misc not a div) or royalties (not sure why) or as business
income (as I used to, though I did no work)?
I don't really want to contact the company if I can avoid it.  It's worth
noting that the company is very disorganized and quite possibly didn't know
what form to send so they went with -misc.  In years past I got a check that
clearly said dividends (but no 1099 or any such form).  Ideas?

(KAM/6206) Yes, you need a 1099-MISC from the company, and you just need to...

KAM@rss.iscabbs.com — Mon, 23 Jan 2012 04:50:00 -0600


Yes, you need a 1099-MISC from the company, and you just need to file Schedule
C with your 1040.

(Indigo/6205) If I worked some last year as technically an independent contrac...

Indigo@rss.iscabbs.com — Mon, 23 Jan 2012 04:37:00 -0600

If I worked some last year as technically an independent contractor (did some
design work for 5 mos, made $6K), what do I need from the company I did work
for - a 1099-MISC form? And, we had previously filed online using taxcut or
turbotax 1040, but this year, what form do I use and do I need to include a
schedule c? We have no state income tax..just need federal

(Rainmaker/6204) But state taxes for an S-corp aren't paid by the S-corp...so in ...

Rainmaker@rss.iscabbs.com — Fri, 20 Jan 2012 08:37:00 -0600

But state taxes for an S-corp aren't paid by the S-corp...so in turn, they
don't show up on the 1120S for the corporation (at least in PA).

Earnings from an S-corp are passed through as income to the shareholder via an
RK-1 (state) and K-1 (fed).  In PA, the RK-1 gets reported as a line-item on
the individual's return and taxed as an individual.

With this said, does that change your answer as to the deductability of
personal state income tax payment for the S-corp when doing the federal S-corp
return?

(Chaos And Void/6203) S corp> State taxes paid by an S corp are deductible by the S co...

Chaos And Void@rss.iscabbs.com — Fri, 20 Jan 2012 03:24:00 -0600


S corp> State taxes paid by an S corp are deductible by the S corp on the S
corp's return. That income never flows through to the owner of the S corp, as
it was already deducted by the S corp, so, no, it's not deductible on an
individual return.

TurboTax> If you bought a standalone copy, the information only flows through
to the next year if you kept a copy of the data file from the prior year for it
to access. This is why I save all of my data files, as well as .pdf copies of
all the returns I file.

(KAM/6202) I'm not sure with the PC-based softare, but I know that Turbo Ta...

KAM@rss.iscabbs.com — Wed, 18 Jan 2012 15:45:00 -0600


I'm not sure with the PC-based softare, but I know that Turbo Tax online does
save all your past filings online.

(Rick Jenkins/6201) Last year I used Turbo Tax for the first time. Bought the softwa...

Rick Jenkins@rss.iscabbs.com — Wed, 18 Jan 2012 09:54:00 -0600


Last year I used Turbo Tax for the first time. Bought the software at the
store, very pleased with how everything went.

I would like to use it again this year. I know I have to either buy the new
edition at the store or download it, but if I am using a different computer
than I did last year will it still have all my information? Or is my
information that carries over year to year stored on a Turbo Tax server
somewhere?

(Rainmaker/6200) On federal taxes, rather than take the standard deduction...you ...

Rainmaker@rss.iscabbs.com — Wed, 18 Jan 2012 09:53:00 -0600


On federal taxes, rather than take the standard deduction...you can itemize
(including your payment of state taxes in that itemization)?

And if so, if you have an S-corporation that is taxed at the state level in
your personal income tax...can you include all the tax you paid to the state in
your federal income tax "itemized deduction"?



Many Thanks!

(Chaos And Void/6199) Generally, no. It could be paid in actual stock or inventory or ...

Chaos And Void@rss.iscabbs.com — Tue, 17 Jan 2012 06:38:00 -0600


Generally, no. It could be paid in actual stock or inventory or anything. That
doesn't change how you classify the expense because what is important is what
the expense is, not how it was paid.

(John Public/6198) If a small business pays a consultant in a percent of profit sha...

John Public@rss.iscabbs.com — Mon, 16 Jan 2012 16:51:00 -0600

If a small business pays a consultant in a percent of profit shares, is that
expense handled any different, for tax purposes, than if the business paid the
consultant a flat fee (i.e., not tied to profits) ?

(Tempestas/6197) So I'm not a happy camper with the COnnecticut state returns thi...

Tempestas@rss.iscabbs.com — Sat, 14 Jan 2012 07:27:00 -0600

So I'm not a happy camper with the COnnecticut state returns this year. CT
rolled out EIC for the state return and reduced the property tax deduction.
I've got customers getting $12k refunds after making $18k in wages. I have no
problem with low incomes getting the welfare assistance they need, I like
rental assistance programs and the foodstamp programs, I don't want people
homeless n' starving... But I'm not ok with this much *cash* being handed out.
I feel like our gub'nah is telling folks "don't make too much money" and "don't
you own property" after these changes. Ok, done venting for today :)

(Steppenwolf/6194) There's plenty on gift income requiring a completely disinterest...

Steppenwolf@rss.iscabbs.com — Thu, 15 Dec 2011 16:07:00 -0600

There's plenty on gift income requiring a completely disinterested generosity,
and how receiving a service from someone is usually not it.

I'll go find it, though.

(Rick Jenkins/6193) But he solicits the money because he doesn't get paid for the pr...

Rick Jenkins@rss.iscabbs.com — Thu, 15 Dec 2011 16:01:00 -0600


But he solicits the money because he doesn't get paid for the product he gives
away, insinuating that he needs to be compensated for the time he spends
working on it.

And I'm not saying that to reflect negatively on JL AT ALL. I just don't think
it's cut and dried that the money should be claimed as a gift and not as
income.

(WORF/6192) I only bring it up because no court that I know of would say tha...

WORF@rss.iscabbs.com — Thu, 15 Dec 2011 14:53:00 -0600


I only bring it up because no court that I know of would say that anyone who
gives him money has bought anything from him.

It fails under even the most basic definitions of contract law.

The software is licensed for free, it is not sold.

If I give him money and am not happy with the software, I have no legal claim
whatsoever to ask for the money back because I never purchased a license. I
would be interested (mostly for my own curiosity) in seeing a cite or legal
reasoning showing how money given to JL without any sort of contract or meeting
of the minds could be considered anything other than a gift.

(Steppenwolf/6191) Given that the income is in a sense in exchange for the program ...

Steppenwolf@rss.iscabbs.com — Thu, 15 Dec 2011 13:32:00 -0600

Given that the income is in a sense in exchange for the program he provides,
even though it's voluntary, the IRS would consider that a payment and thus
taxable income.

(WORF/6190) Wouldn't that money given to be JL be properly classified as a g...

WORF@rss.iscabbs.com — Thu, 15 Dec 2011 12:38:00 -0600


Wouldn't that money given to be JL be properly classified as a gift?

It was not received in exchange for anything.
There was no sale.
There was no legal contract.

I don't know if gifts would be treated differently as income, but it does seem
that anyone who sent him money would have been legally gifting that money to
him.

(Chaos And Void/6189) Yorick is right - if you're estimated payments are timely, they ...

Chaos And Void@rss.iscabbs.com — Thu, 15 Dec 2011 12:19:00 -0600


Yorick is right - if you're estimated payments are timely, they count for
safe-harbor calculations (100% or 110% of your total tax owed for 2010,
depending on AGI, 90% of tax owed for 2011, or whatever amount leaves you owing
less than $1,000). Timely estimated tax payments mean either spread out equally
over all four quarters, or else payments made in the same quarter the income
was earned. And while you may not require people to pay you for the software
you've written, as far as IRS is concerned that is totally earned income just
like anything from a job, and thus totally subject to self-employment tax.

(Egregious/6188) Yeah, some HR departments are really awesome about helping you. ...

Egregious@rss.iscabbs.com — Thu, 15 Dec 2011 12:06:00 -0600

Yeah, some HR departments are really awesome about helping you.  Others
are run by BOFHs.

Bake a big plate of cookies that your HR people like and take in your W-4.

(Yorick/6187) Later on the page explains (as I read it) that timely means eith...

Yorick@rss.iscabbs.com — Thu, 15 Dec 2011 11:44:00 -0600

Later on the page explains (as I read it) that timely means either 1) you paid
equal payments for all four quarters or 2) you paid it in the proper quarter.

It's a good point about withholding...I don't think that's subject to a
time-of-year test.  However:
* On 12/15, I think most companies aren't going to be able to modify
your witholdings without some special effort.  YMMV, of course.
* I belive that withholdings have to be done at the time
the wages were paid out.  Depending on your income and your underpayment,
one or two checks may not cut it.

(Egregious/6186) Huh, our sources do seem to disagree, and they're both from irs....

Egregious@rss.iscabbs.com — Thu, 15 Dec 2011 11:34:00 -0600


Huh, our sources do seem to disagree, and they're both from irs.gov.

One point is that your source says "timely" estimated tax payments.  I
think withholding is assumed to always be timely, although it actually
doesn't have to be.

So if you should have been making estimated payments in Q3 or earlier,
and want to avoid penalty, you can make up for it by withholding a lot
in December.

(Yorick/6185) Egregious: Where are you reading that you can't use the estimat...

Yorick@rss.iscabbs.com — Thu, 15 Dec 2011 11:08:00 -0600

Egregious:  Where are you reading that you can't use the estimated tax payments
to reach this platform?   That's never been my understanding, and this:
http://www.irs.gov/publications/p505/ch04.html#d0e14153 seems to confirm that.
"You will not have to pay a penalty for 2010 if any of the following apply:
*The total of your withholding _and estimated tax payments_ was at least as
much as your 2009 tax. (See special rules for certain individuals)."

Now, if your income was all in Jan, 2011 and you haven't paid, you may owe a
penalty.  But if most of the extra income was this quarter, you should be able
to file form AI (which would indicate you paid estimated tax in the appropriate
quarter).

(Egregious/6184) You're close, but I think you are off in a few details.

Egregious@rss.iscabbs.com — Thu, 15 Dec 2011 09:09:00 -0600


You're close, but I think you are off in a few details.

You need your -withholding- for FY2011 to be either 100% or 110% of
your total tax bill for FY2010.

For most people, use the 100% figure.  Use 110% if your AGI is over
$150,000.

You can't use estimated payments to reach this platform.  However,
you could probably ask the HR department of someone paying you a
salary to withold a shitload for your last pay period.

http://www.irs.gov/pub/irs-pdf/f1040es.pdf is where I double-checked.

(JL/6182) I'm trying to make sure that I don't have to pay a penalty this ...

JL@rss.iscabbs.com — Thu, 15 Dec 2011 08:59:00 -0600


I'm trying to make sure that I don't have to pay a penalty this year.

From what I understand, I need to make sure that I've paid 112% of my tax
liability from last year. Then, no matter how much I owe, I won't get
penalized.

A) Does this sound correct?

B) Any recommendation on how to find the best tax person to help me file this
   year? I have extra incoming ("donations") but I'd like to handle it the
   best way possible. I'm not sure how to find someone good.

On a related note:

C) With extra income, do you really need to claim it as Self Employment income?
   Having to pay double the medicare % that I usually do sucks. Surely there
   must be a better way? From what I've read, filing it as "misc income" is
   only intended for smaller amounts.

(KAM/6181) Yes, don't ever rely on the IRS to give you any advice on filing...

KAM@rss.iscabbs.com — Wed, 07 Dec 2011 10:23:00 -0600


Yes, don't ever rely on the IRS to give you any advice on filing your taxes.
They expressly disclaim any responsibility for them not knowing what to do.

(Smoke Eater/6180) You know that the IRS, if you make a mistake, can ding you even ...

Smoke Eater@rss.iscabbs.com — Wed, 07 Dec 2011 10:10:00 -0600

You know that the IRS, if you make a mistake, can ding you even if you relied
on THEIR advice, right??

(The After Party/6179) CaV

The After Party@rss.iscabbs.com — Wed, 07 Dec 2011 08:34:00 -0600

CaV

  I called the IRS, the agreed that I make a reimberment claim to both
  employers and pay income tax on the second $5k.

(Chaos And Void/6178) TAP> You're going to have to talk to HR on this. The taxability ...

Chaos And Void@rss.iscabbs.com — Tue, 06 Dec 2011 14:53:00 -0600


TAP> You're going to have to talk to HR on this. The taxability (or not) of
that income is reported by the employer on a W-2, so this needs to be fixed
before the W-2s are created. Hopefully, HR will also be able to tell you how to
(legally) get your money back out of the FSA.

(Spastic Chicken/6177) No.

Spastic Chicken@rss.iscabbs.com — Mon, 05 Dec 2011 13:52:00 -0600

No.

(Rick Jenkins/6176) Suppose an employer has the option for an employee to donate pai...

Rick Jenkins@rss.iscabbs.com — Mon, 05 Dec 2011 12:30:00 -0600


Suppose an employer has the option for an employee to donate paid time off to
another employee. For example, if the second employee is taking care ofa  sick
relative and they don't have the time to use the first employee can donate them
a week of their (the first employee's) time off.

If this is allowed by the employer, can the first employee deduct this from
their taxes? Like the amount they would have earned from the emplooyer had they
taken the paid time off themselves?

(Egregious/6175) FSA is not the same as a child day's care account.

Egregious@rss.iscabbs.com — Mon, 05 Dec 2011 12:00:00 -0600

FSA is not the same as a child day's care account.

Money left over in an FSA is definitely lost.  Go get your teeth capped
or something if you've got money left over.

(The After Party/6174) FSA

The After Party@rss.iscabbs.com — Mon, 05 Dec 2011 10:20:00 -0600

FSA

  So, my FSA says I can't get my money. I refused to let $5k disappear.

  Do I make a claim for $5k and my wife does the same and when we fill out
  our taxes for 2011, $5k will be for qualifying dependent care and $5k
  will be taxed as income?

(Spastic Chicken/6173) Yep... FSAs are a decent way to finance stuff over a year with n...

Spastic Chicken@rss.iscabbs.com — Mon, 05 Dec 2011 10:18:00 -0600

Yep... FSAs are a decent way to finance stuff over a year with no interest and
tax savings to boot.

(Knightshade/6172) Two different types of FSAs.

Knightshade@rss.iscabbs.com — Mon, 05 Dec 2011 10:17:00 -0600

Two different types of FSAs.

Childcare ones are funded as you go, that can't happen in that case.

medical ones are fully funded on day 1.

So if you spend it all on day 1, and quit on day 2, they're out all that money.

(The After Party/6171) Ozzy

The After Party@rss.iscabbs.com — Mon, 05 Dec 2011 10:16:00 -0600

Ozzy

  Are you Rainmaker's alt?

  My FSA is not yet maxed, so there doesn't seem to be a scenario where
  I could get all $5k and quit before the end of teh year...I call
  shenanigans

(Ozzy/6170) The dollars left in FSA accounts go to pay the expenses of runni...

Ozzy@rss.iscabbs.com — Mon, 05 Dec 2011 10:10:00 -0600

The dollars left in FSA accounts go to pay the expenses of running the plan,
and to recoup losses incurred by the company for the opposite scenario, where
you use up all your FSA dollars and then quit before the end of the year. The
company is on the hook for those dolalrs even though the employee didn't work
enough of the year to actually pay in those dollars.

There's also rules regarding what the "leftover" money can be used for, and I
believe if there is enough left over it has to go into the general pool for the
next year to bring the overall cost of the health plan down.

(The After Party/6169) Knightshade/Chaos And Void

The After Party@rss.iscabbs.com — Mon, 05 Dec 2011 10:00:00 -0600

Knightshade/Chaos And Void

  So we claim both but include $5000 as income?
  Because, in the past, if you don't make a claim, the money disappears.
  (That has to be a serious racket, FSA/Healthcare spending plans, you don't
  use it all, it disappears!)

(Chaos And Void/6168) Yeah, the excess will not be deductible and the extra $5k will b...

Chaos And Void@rss.iscabbs.com — Mon, 05 Dec 2011 09:40:00 -0600


Yeah, the excess will not be deductible and the extra $5k will be included in
your taxable income.

(Knightshade/6167) http://www.bankrate.com/finance/taxes/flexible-spending-account-...

Knightshade@rss.iscabbs.com — Mon, 05 Dec 2011 09:28:00 -0600

http://www.bankrate.com/finance/taxes/flexible-spending-account-limits.aspx


"Dependent care expenses are claimed on Form 2441. Under a flexible spending
account, an employee can exclude up to $5,000 in wages for dependent care. The
exclusion is the same for married and unmarried spouses. If both spouses
exclude more than the $5,000 limit, the excess is included as wages when
preparing Form 2441, Part 3.
"


"you and your wife can do the $10,000 flexible spending account, but you'll
include $5,000 in wages when preparing your Form 1040
"

(Spastic Chicken/6166) I'm not aware of a limit on number of FSAs set by the household....

Spastic Chicken@rss.iscabbs.com — Mon, 05 Dec 2011 09:28:00 -0600

I'm not aware of a limit on number of FSAs set by the household... but I'm only
familiar with FSAs for health care expenses.

(The After Party/6165) Dependent Care

The After Party@rss.iscabbs.com — Mon, 05 Dec 2011 09:20:00 -0600

Dependent Care

  So my wife and I both set assigned $5k for our childs day care (so we
  can work). My wife called her's to get instructions on how to claim and
  mentioned mine and said that the IRS limits it to one per .. house?
  I'm looking at irs.gov, haven't found this just yet...

(The After Party/6164) Wells Fargo

The After Party@rss.iscabbs.com — Wed, 24 Aug 2011 07:02:00 -0500

Wells Fargo

  I've had almost all of my home loans thru them and never received a call.
  I had a PMA (checking) account, closed it since it wasn't needed anymore.
  Never had any issues.

(Egregious/6163) ISTR one of the start-ups I worked for offering something like t...

Egregious@rss.iscabbs.com — Tue, 23 Aug 2011 06:11:00 -0500


ISTR one of the start-ups I worked for offering something like that.
I think they gave a grant upfront but reserved the right to buy back,
with the buy back rights scaling down over time.

It imploded (and still owes me some money) so it ended up not mattering.

(WORF/6162) It's really too bad one can't pre-pay for options as soon as the...

WORF@rss.iscabbs.com — Mon, 22 Aug 2011 13:52:00 -0500


It's really too bad one can't pre-pay for options as soon as they're granted,
but before they vest so you can lock in the option price as your basis.

(Guardian Angel/6161) And options are definitely counted as an asset.

Guardian Angel@rss.iscabbs.com — Mon, 22 Aug 2011 12:26:00 -0500

And options are definitely counted as an asset.
Usually, they're going to be attached to whatever brokerage the employer
dictates, too

(Egregious/6160) You may be able to purchase them on the open market in your Roth...

Egregious@rss.iscabbs.com — Mon, 22 Aug 2011 12:04:00 -0500


You may be able to purchase them on the open market in your Roth, but
you can't just transfer assets into your Roth at will.

(WORF/6159) Stock Options> I'm starting to wonder if it is possible to purch...

WORF@rss.iscabbs.com — Mon, 22 Aug 2011 12:01:00 -0500


Stock Options> I'm starting to wonder if it is possible to purchase options via
an IRA brokerage account, thus having all income flow to the Roth IRA as
non-taxable. Sure, I'd have to wait until retirement to cash out, but as I
said, it's not a huge amount anyway. Would be a nice boost to the Roth however.

(Raccoon/6158) Wells Fargo: I have savings, checking, and a Visa accounts with...

Raccoon@rss.iscabbs.com — Mon, 22 Aug 2011 11:29:00 -0500

Wells Fargo:  I have savings, checking, and a Visa accounts with them.  I've
*never* gotten any sales calls from them.

(Guardian Angel/6157) Which is why it's reeeeally good to have an options exercise act...

Guardian Angel@rss.iscabbs.com — Mon, 22 Aug 2011 06:24:00 -0500

Which is why it's reeeeally good to have an options exercise actually include
tax payment right off the top (which is what I did for the last one that I
did).

Better to pay a little bit too much upfront than not enough because you just
wanted the cash.

(Egregious/6156) Stock options:

Egregious@rss.iscabbs.com — Mon, 22 Aug 2011 06:15:00 -0500


Stock options:

As has been said, in general, when you exercise the options you have
immediate income.  If you buy $5000 worth of stock for $2000, that's
$3000 of income.

$5000 then becomes your basis.  You calculate your capital gain
(or loss) against that price whenever you sell.

This can get really complicated, especially with the AMT.  During the
dot-com bubble, some people got really really shafted by exercising at
huge margins, holding onto it, and then having the stock crash on
them.  They couldn't apply the capital loss against the income event,
and had huge tax bills that they had no hope of ever paying off.  (And
tax debts aren't dischargable in bankruptcy.)

If you're dealing with a lot of money, spend a few percent of it on
a tax advisor.  It shouldn't take them more than an hour or two.

IRAs:

Vanguard is pretty good, and pretty populist, too: Vanguard doesn't
have its own shareholders to please.  If you invest in, say, Fidelity,
there are also Fidelity shareholders that need to get paid.

$800 might be too small to avoid management fees.  I think you need
$1000 for that.  They may have some funds designed for low balances,
or you can scratch up another $200 to hit that plateau.

(Wang Master/6155) I have a wells fargo account and have had it since 1998 when the...

Wang Master@rss.iscabbs.com — Sun, 21 Aug 2011 05:03:00 -0500

I have a wells fargo account and have had it since 1998 when they merged with
wells fargo.  The last debit card I got clearly said you can call to activate
it, or use your pin at an ATM machine to activate it.

I also have a wells fargo visa card (i've never overdrafted, but my account
allows them to automatically charge my visa card without overdraft fees on myc
checking account if i were to ever screw up) and just had that replaced and
when i called to activate it, i was sold a credit alert service that i easiliy
declined.

That said, I've had the same type of quesitons activationg my costco amex and
my discover card, so I hardly see that out of the norm.

WORF: yeah what Chaos and Void said is basically it with stock options.

The way to think about it is, when you exercise your option, you were given a
"bonus" to buy those options.  That's the income that would be reported in your
W2.  The difference from your strike price and your sell price is capital
gains.

There's a wrinkle to this.  If you do a same day sale, where you exercise
and immediately sell the option, your work may include the sell price on your
W2.  My work did that.  Our W2 actually reports the sale price of a same
day sale.  The cute thing about it is, they don't take out etrade's transaction
fees, so back when I traded my options, I always ended up with a loss
on my tax return equal to the transaction fee :)

we've now switched to restricted stock grants which is a little easier
to figure out.

(Chaos And Void/6154) Stock Options> Depends on the type of options they are. Statutor...

Chaos And Void@rss.iscabbs.com — Sat, 20 Aug 2011 15:57:00 -0500


Stock Options> Depends on the type of options they are. Statutory (most
Incentive Stock Options are statutory) are treated differently than
non-statutory. Generally, though, if any income needs to be recognized when
options are exercised, it ends up getting reported by an employer on a W-2 that
year (and that amount is added to the actual purchase price of the stock for
basis). Otherwise, you can wait and report it as capital gains/loss when you
sell. See here for more: http://www.irs.gov/publications/p525/ar02.html#en_US_2
010_publink1000229198

(Rian/6153) My experience with Wells Fargo is like John Public's. I've neve...

Rian@rss.iscabbs.com — Sat, 20 Aug 2011 12:50:00 -0500

My experience with Wells Fargo is like John Public's.  I've never banked with
them at all, no IRA, anything, but a couple years ago, I purchased a new
matress set at Mattress Firm, and their financing is/ was through WF.  Almost
before the thing was set up (and I only exaggerate slightly; bought the bed on
a Saturday, it was delivered that evening, and the first call came Monday), I
started getting calls offering loans, other banking services etc.  This was
in... 2008 or 2009, I forget which.  And the calls wouldn't stop; I got several
of them before they finally transferred me to a supervisor and I told them I'd
asked for the calls to stop, that this would be the last one or I'd be filing
reports.
Needless to say, WF is at the bottom end of my list of banks to do business
with.

(Rick Jenkins/6152) I have Wells Fargo for checking and savings and have never had a...

Rick Jenkins@rss.iscabbs.com — Sat, 20 Aug 2011 11:24:00 -0500


I have Wells Fargo for checking and savings and have never had an issue with
them. Now, when I got my new ATM card I had a similar experience to what John
Public described...but that also happened to me the last two times I got
credit cards replaced that weren't affiliated with Wells Fargo.

I get a lot of junk mail from WF trying to get me to buy insurance and get a
home loan and stuff like that but I just ignore it and they never colicit me
by phone. Their online banking fits my needs.

I don't have an IRA with them so I can't speak to that specifically.

(John Public/6151) No experience with Wells Fargo as far as IRAs, but I find Wells ...

John Public@rss.iscabbs.com — Sat, 20 Aug 2011 09:56:00 -0500

No experience with Wells Fargo as far as IRAs, but I find Wells Fargo to be
unprofessional. Wells recently bought one of the banks I use, and since then I
receive cold-calls from them on a weekly basis trying to sell me some
unrelated bank product, such as identity protection, special offer credit
cards, etc. I tell them not to call me.

This is how low Wells Fargo is:  They sent everyone new debit cards in the
mail, with a notice requiring phone authorization. In reality, no phone
authorization was required. When you call, you get a lengthy sales pitch for a
credit alert service. When I asked to just authorize the damn card, they
jumped into the next pre-canned sales script. I was furious and said,
authorize the card right now or I'm hanging up. The guy jumped IMMEDIATELY to
the final script which said "Mr. So-and-So your card is now authorized,...".
He took no action to authorize it. He's a telemarketer.

I personally can't stand Wells and would not use them in the future. God, just
typing this makes me want to close my account first thing Monday.

(KAM/6150) Any opinion on Wells Fargo handling IRAs, then? I haven't read t...

KAM@rss.iscabbs.com — Sat, 20 Aug 2011 09:54:00 -0500


Any opinion on Wells Fargo handling IRAs, then? I haven't read through thei
r plan info they sent e yet.

(WORF/6149) Stock Option Question> So, I have some stock options that are du...

WORF@rss.iscabbs.com — Sat, 20 Aug 2011 09:04:00 -0500


Stock Option Question> So, I have some stock options that are due to be
exercised this year. It's not a lot of money, but the option price is lower
than the current strike price.

If I purchase those options with cash and do not sell any of them (just hold)
do I have to count the difference between the purchase (basis) and strike price
as "income" this year and then make the strike price my new basis price going
forward?

Or would I simply keep the basis at my purchase price and then realize any
income when I actually sell the shares?

Anyone have any good resources for this? It's difficult to tell, as it seems a
lot of the resources on the web assume you are cashing out some of your options
immediately in order to pay for the purchase cost when you exercise. In that
case, I an totally see how there would be an immediate income realized. A
simply purchase however, I'm not clear on.

(John Public/6148) Yeah, IRA. Whoever managed your 401K will do it for you in a jif...

John Public@rss.iscabbs.com — Sat, 20 Aug 2011 07:18:00 -0500

Yeah, IRA. Whoever managed your 401K will do it for you in a jiffy, and help
you decide which kind you want.  They'll probably do it at no cost either, as
long as you stick with them.  Especially since your new employer does not
offer a 401K, you'll obviously want to invest in SOME kind of retirement plan.
Rest assured that this is extremely common. We both did it when we went to
grad school. When I did it, I had to meet in person at a fancy office to sign
stuff and select asset allocations.  When my wife did it a just a couple years
later, it was 100% internet.

(Rick Jenkins/6147) This is a total layperson's answer, but convert it into an IRA.

Rick Jenkins@rss.iscabbs.com — Sat, 20 Aug 2011 06:46:00 -0500


This is a total layperson's answer, but convert it into an IRA.

Or, since it is a small amount of money as far as investments are concerned,
just cash it out and take the penalty.

(KAM/6146) I can't think of a better place to discuss this, please advise m...

KAM@rss.iscabbs.com — Fri, 19 Aug 2011 16:59:00 -0500


I can't think of a better place to discuss this, please advise me otherwise.

I have around $800 in my former employer's 401k, and I received a notice that I
have to do something with it. What would be the best thing to do? My current
employer doesn't have a 401k to roll it over into, I have no other investment
accounts either.

(Egregious/6145) Likely. (Although I am willing to lose my HID and health care

Egregious@rss.iscabbs.com — Wed, 17 Aug 2011 10:48:00 -0500


Likely.  (Although I am willing to lose my HID and health care
deduction.)  That may be the worst part of the current tax system
-- it's possible to lwoer taxes for yourself while raising them
on people you don't like.

(Knightshade/6144) I want them to eliminate all deductions except the ones I benefi...

Knightshade@rss.iscabbs.com — Wed, 17 Aug 2011 10:25:00 -0500

I want them to eliminate all deductions except the ones I benefit from.


Which is pretty much how everyone else seems to feel too.

(Egregious/6143) Most of these deductions are very popular things, like the home-...

Egregious@rss.iscabbs.com — Wed, 17 Aug 2011 10:17:00 -0500


Most of these deductions are very popular things, like the home-interest
deduction or the tax-free status of employer-provided health care.

Simpson-Bowles recommended it, and got ignored.  Voters seem to like
being told "your tax bill was $8000, but we gave you a discount so it's
only $6005!" better than "your tax bill is $6000."  The first lets you
talk about how much money you "saved" through your clever use of
deductions.

(Rian/6142) I'll agree compeltely with that last. Get rid of the huge deduc...

Rian@rss.iscabbs.com — Wed, 17 Aug 2011 10:14:00 -0500

I'll agree compeltely with that last.  Get rid of the huge deductions/
loopholes, actually have the tax rates mean what they say... and we'll see
revenues increase a great deal, solving a lot of the problem.  Of course, that
won't solve the deficit issues that've come about because of the years of
deflated revenues due to those loopholes... but that's not a tax matter per se
*heh*
And the recession ending seems to be a big 'if' in that statement as well. 
It's proving quite stubborn, as we can all see.

(Egregious/6141) (And I'll say that toady's taxes are probably too low, but this

Egregious@rss.iscabbs.com — Wed, 17 Aug 2011 10:12:00 -0500


(And I'll say that toady's taxes are probably too low, but this
doesn't at all mean that we fix it with higher rates.  Eliminate
all the deductions but keep rates the same and we're pretty close
to balanaced if the recession ends.)

(Egregious/6140) http://www.wolframalpha.com/input/?i=%28US+federal+government+re...

Egregious@rss.iscabbs.com — Wed, 17 Aug 2011 10:00:00 -0500


http://www.wolframalpha.com/input/?i=%28US+federal+government+receipts%29%2F%28
US+GDP%29

There's tax revenue as a percentage of GDP.  Try to find the places
where the tax rate was cut from 90% to 70%, or from 70% to 35%.

What you _will_ see on that chart is booms and recessions.

Top marginal tax rate is little better than a random number generator
at predicting government revenue.  Even that supposed 90% rate was
trivial to dodge by changing wages into capital gains, which were,
even in that enlightened time taxed at a significantly smaller rate.
Most countries treat capital gains more favorably than wages:
http://en.wikipedia.org/wiki/Capital_gains_tax

(Rian/6139) "There were MASSIVE loopholes in this system. You'll notice whe...

Rian@rss.iscabbs.com — Wed, 17 Aug 2011 09:55:00 -0500


"There were MASSIVE loopholes in this system.  You'll notice when
those rates got knocked down from 90% to 36%, there was not a
massive contraction in government revenue.  That's because they
cleaned up the tax code."

That implies there aren't massive loopholes now, however.  Fact is, there are -
we've seena  few of them illustrated here, and just in a broad sense, if they
weren't there, then however would Buffett have managed to reduce his tax rate
to under 17%?  The loopholes are still there.

As for the contraction of revenue: are you sure?  I do know that right now, tax
revenues are the lowest percentage of GDP they've been since the end of WW2,
and perhaps ever.  Is that contention true in raw numbers, or is it adjusted
for inflation? (That there's not been a reduction of revenues.)  Is it true
overall, or per capita?  It's a lot more complicated (as I realize we all know)
than _any_ surface measure would have it... but everything I read suggests that
revenues are way down by any sensible measure.  Which means the problem is in
revenues as much or more than spending.  I won't for a moment argue that
spending needs to come under control, but there's no question that revenues
need to increase, and the only place to do that is the tax code - which, as I
think everyone agrees, is an abject disaster.

(Egregious/6138) It's not some trick of the fatcats that lets money earn money. ...

Egregious@rss.iscabbs.com — Wed, 17 Aug 2011 09:44:00 -0500


It's not some trick of the fatcats that lets money earn money.  It's
because capital, alongside labor, is the key in any industry.

Say I have a $1000 machine, and every year I can hire $23000 worth
of labor to operate that machine and make output worth $26000.

But if I get a $5000 machine, for that same $23000 of labor input, I
can get $27000 of output.  So I can go to someone with capital and
say "give me $4000 now, and I will pay you $800 each year for the
next 8 years."  I sell my $1000 machine and use the $4000 to buy the
$5000 machine.  Out of the extra $1000 I get each year, $800 goes to
the

That right there is why money can earn money.  Until/unless you can
make capital not be useful in any industry, money will be able to
earn money.  (And that still leaves the time value of money.)

It's hard for people (like us software engineers and lawyers) who
mostly produce thought-stuff, but in a lot of industry capital costs
are much more expensive than any other input.

Most of the reason we get to live in a modern society is that we
have accumulated that capital over several centuries.  We no longer
need to spend 90+% of our labor growing the food we need to survive;
it's more like 2%.  All the farm equipment, as well as the machinery
needed to make that equipment, and the mining equipment needed to
dig up the metal, it's all accumulated capital that lets us use our
labor for other things, like writing software and debating law.

Now, to taxes.

If capital income were entirely like I described above, I'm not sure
it should be taxed at all, since that capital is just someone else's
accumulated wages.

But a big problem is that it's easy to change wages into sweat equity.
Instead of charging people $200,000 in wages for something, I can
start a company, pay myself a small salary, and leave that money in
the company, where it sure _looks_ a lot like capital.  It's a pretty
big loophole.

So we kind of split the difference, taxing capital gains at a lower
rate -- although we tax the corporation as well, so it ends up going
through similar levels of taxation -- but with so many combinations
that it's hard to figure out whether it really is less or more.

To simplify the tax system, I'd want to get rid of the corporate
tax, and just tax the profits when they hit the investor (either as
capital gains or as dividends) as that investor's individual rate.
This is more progressive than we have now (since a poor person's
$100 from Microsoft is taxed less than a rich person's $100 from
Microsoft) but it doesn't sell well with the public, because the
political challenger can say "the incumbent has lowered taxes on
corporations and raised them on teh ordinary peoples!"

> At what was arguably the most innovative period for American
> industry, the tax system was at its most graduated, with the upper
> income brackets paying 80% and even 90%...

There were MASSIVE loopholes in this system.  You'll notice when
those rates got knocked down from 90% to 36%, there was not a
massive contraction in government revenue.  That's because they
cleaned up the tax code.

There's a reason those super-progressive European countries seldom
(and barely, when they do) go over a top rate of 50%.

(Swinia/6137) JL> Because of the dividend double-taxation issue that John Pub...

Swinia@rss.iscabbs.com — Wed, 17 Aug 2011 09:40:00 -0500


JL>  Because of the dividend double-taxation issue that John Public mentioned.
And how does the lower dividend tax rate contradict with encouraging investors
to move their money off the sidelines?

As one pundit put it recently, the U.S. Tax Code is "legalized corruption". 
Most ridiculously long and complex code in the world.  Make it uniform and
simple and you'd save time and the expense of hiring 5 CPAs and 2 tax
attorneys.

That being said, I could feel a world-wide readership mouthing the words
"limousine liberal" as they read Buffet's piece.  Even he would rather put his
money into philanthropic organizations with Bill Gates than send it to the U.S.
tax system.

(John Public/6136) JL> I'm with you, capital gains should be taxed like regular inc...

John Public@rss.iscabbs.com — Wed, 17 Aug 2011 09:06:00 -0500

JL> I'm with you, capital gains should be taxed like regular income -- that's
what it is. It's income. You didn't have it yesterday, and now you have it
today. That's what income is.

But the problem isn't so much hoarding cash, since most investments (real
estate aside), even deposit accounts, go back into the system, and are
designed to grow businesses or exports. The problem is how much of that money
just circulates among the wealthy, and how little trickles down as salary.
The corporate double-taxation issue is the thorny one for me.

I'd like to see a truly "small business" enitity recognized and supported by
the tax code. The current definition of "Small Business" in the US is roughly,

    * up to 1500 employees.
    * up to $33.5 million in revenue.
    * at least 51% owned by US citizens or other US small businesses.

There is no "smaller" business entity recognized by the gov't. I'd like to see
a small business definition that corresponds to the "mom & pop" or "garage
startup" that most of us envision when we hear the phrase "small business"
repeatedly by politicians.

(Rian/6135) On the other hand (and this really is shading into a discussion ...

Rian@rss.iscabbs.com — Wed, 17 Aug 2011 09:16:00 -0500

On the other hand (and this really is shading into a discussion of policy as
opposed to taxes, I know...), tax revenues are down ridiculously compared to
what they used to be.  At what was arguably the most innovative period for
American industry, the tax system was at its most graduated, with the upper
income brackets paying 80% and even 90%... and yet it _was_ perhaps the most
innovative, prosperous period in American history.  Thisd being the postwar
period, in the 1950's largely.  So it can certainly be argued that the problem
now isn;t spending, it's revenues... and that higher taxation on upper brackets
helps, not harms, the overall economy.

(Steppenwolf/6134) "I say tax the hell out of the super-rich so they stop hording t...

Steppenwolf@rss.iscabbs.com — Wed, 17 Aug 2011 08:31:00 -0500

"I say tax the hell out of the super-rich so they stop hording their cash and
instead re-invest it into helping society grow."

And now you know why capital gains are taxed at a lower rate: to convince the
rich to stop hoarding their cash and invest it into helping society grow,
knowing those returns will be taxed at a lower rate!

That's the thing about the investment game; while it certainly does enable the
stock market stuff, it also encourages people to invest in new businesses and
ideas.

I'm on the fence about the capital gains rate, honestly; it does a lot of good
things, but creates some basic unfairness as well. We had a really good
discussion about this in my tax law class.

(JL/6133) I don't know why capital gains and dividends are taxed at a lowe...

JL@rss.iscabbs.com — Wed, 17 Aug 2011 08:24:00 -0500


I don't know why capital gains and dividends are taxed at a lower rate. It
seems dumb to me.

It encourages an industry built around making money on money. Adding nothing to
society other than shuffling money around and taking a bit in the process.

We should not be encouraging this, IMO. People should not get rich simply by
moving money around at strategic times. Or writing programs to do it for them.

Our economy should not be built around a big digital casino, which is pretty
much is now, IMO.

I say tax the hell out of the super-rich so they stop hording their cash and
instead re-invest it into helping society grow.

(And this coming from me, who works daily writing software for some of the
biggest hedge fund giants in the world, managing tens of billions of dollars. I
see all the shit that goes on. It's disgusting.)

(Snuffy/6132) I'm as concerned about the large percentage of folks who make no...

Snuffy@rss.iscabbs.com — Wed, 17 Aug 2011 05:28:00 -0500

I'm as concerned about the large percentage of folks who make no contribution,
based solely on law/regulation-based taxes due, which makes a "dependents vs.
supporters" arrangement.

At about this point, this becomes a social-issues argument and political policy
argument, and probably should leave Tax Time>.
^^^^^^^^discussion is a better word here

(Steppenwolf/6131) "Any time Mr. Buffett wants, he can just write a check to help:

Steppenwolf@rss.iscabbs.com — Wed, 17 Aug 2011 05:23:00 -0500

"Any time Mr. Buffett wants, he can just write a check to help:
  http://www.irs.gov/instructions/i1040/ar02.html#d0e59752
"

As I've said a billion times, then you have a system where people with social
conscience are supporting people who don't... a tax on goodness. And that's a
GREAT idea, isn't it?

This is such a facile sound byte. I can't stand it.

(Snuffy/6130) Mciangel: that "independent contractor" catagory is somtimes mi...

Snuffy@rss.iscabbs.com — Wed, 17 Aug 2011 04:52:00 -0500

Mciangel:  that "independent contractor" catagory is somtimes misused by
employers who don't want to deal with direct-employee-related issues.  The IRS
has a whole worksheet for the employer to clarify the relationship, including
things like scheduling of work / work hours, deliverables, etc.  Your comment
about direct-deposit made me wonder a little bit whether he really is a W2 or
//  employee or 1099 contractor.
See:
  http://www.irs.gov/taxtopics/tc762.html
  http://www.irs.gov/businesses/small/selfemployed/index.html


JL:
Note that a substantial portion of Mr. Buffett's income is long-term capital
gains and dividends, which are taxed at lower rates, specifically to foster
investment in things like Geico (heard any commercials lately?), Coke, etc.
Any time Mr. Buffett wants, he can just write a check to help:
  http://www.irs.gov/instructions/i1040/ar02.html#d0e59752
"
How Do You Make a Gift To Reduce Debt Held By the Public?
If you wish to do so, make a check payable to Bureau of the Public Debt. You
can send it to: Bureau of the Public Debt, Department G, P.O. Box 2188,
Parkersburg, WV 26106-2188.
"

(Guardian Angel/6129) Mciangel> Just SS and Medicare are ~15% by themselves. You shoul...

Guardian Angel@rss.iscabbs.com — Wed, 17 Aug 2011 04:57:00 -0500

Mciangel> Just SS and Medicare are ~15% by themselves. You should be banking
closer to 40% than 20%, and probably paying quarterly estimated taxes rather
than waiting until EOY to pay them all in one lump sum.

(JL/6128) Stop Coddling the Super-Rich

JL@rss.iscabbs.com — Wed, 17 Aug 2011 04:34:00 -0500


Stop Coddling the Super-Rich
by Warren Buffett

http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html

True. True.


"Last year my federal tax bill  the income tax I paid, as well as payroll taxes
paid by me and on my behalf  was $6,938,744. That sounds like a lot of money.
But what I paid was only 17.4 percent of my taxable income  and thats actually
a lower percentage than was paid by any of the other 20 people in our office.
Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
"

(Chrijm/6126) 20% seems too low, but that's just a gut reaction. Not sure of ...

Chrijm@rss.iscabbs.com — Tue, 16 Aug 2011 21:09:00 -0500

20% seems too low, but that's just a gut reaction.  Not sure of your state, but
the amount of state tax, self employment tax, and federal income tax can be
more than 20%.  It also depends on income levels.
Make sure you make estimated tax payments through the year or you may also get
hit with a penalty as well.

(Mciangel/6125) Sorry for the double. My income (our only for last years taxes) ...

Mciangel@rss.iscabbs.com — Tue, 16 Aug 2011 19:41:00 -0500

Sorry for the double. My income (our only for last years taxes) is from
disability so now we will have that and his contractor income to file on.
Thanks!

(Mciangel/6124) Husband just recently (4th of july) became and independent contr...

Mciangel@rss.iscabbs.com — Tue, 16 Aug 2011 19:35:00 -0500

Husband just recently (4th of july) became and independent contractor.. he gets
direct deposit and paycheck stubs but no taxes taken out at all. We are a
family of two *husband and wife* and are putting away 20% of what he makes each
time to plan for taxes owed. Does this seem about right, or too low? We know we
can deduct mileage and a room in our apt that he does his work in, looking for
more deductions, but just wanting to know if the 20% we are putting away now is
going to be even close or should we brace for me? Thanks in advance for any
advice!

(Chaos And Void/6123) I totally disagree, but then I've seen IRS come after clients fo...

Chaos And Void@rss.iscabbs.com — Tue, 16 Aug 2011 05:38:00 -0500

I totally disagree, but then I've seen IRS come after clients for much smaller
beans than that. I actually had a client get reamed in an audit once for not
being able to produce proper documentation splitting business versus personal
usage for cell phone minutes. Given that, and considering how much of a pain in
the ass tracking and documenting computer usage would be, and how little it'll
affect your final tax status, I'd probably not even bother deducting anything a
all. It's just safer.

(Tempestas/6122) SpasC> Yeah, but I'm thinking as a one time thing, the IRS doesn...

Tempestas@rss.iscabbs.com — Mon, 15 Aug 2011 13:19:00 -0500

SpasC> Yeah, but I'm thinking as a one time thing, the IRS doesn't 'like' it,
but their ability to do anything about it is limited and driven by $'s. Its all
a $'s game... And until I worked in the industry I didn't realize what a
heaping pile of bs our IRS generates.

I haven't personally seen the IRS aggressively pursue any taxpayer for a couple
hundred bucks unless its something absolutely idiotic (like my dear friend who
claimed he purchased a new hybrid vehicle 5 years in a row to get that credit
each year, it ended up totalling over $3k, so the IRS pegged him... I gotta
believe though, if he'd only claimed it twice, he probably would've gotten away
with it, because its a small $-amount and almost believeable that someone would
purchase a second vehicle)

in John's case, he misread the form and honestly thought he could take the
credit for every year he paid taxes on the car. Doesn't change the story he
told the IRS though...

#2- I recognize a couple hundred bucks in my pocket means something. That's a
month worth of free gas in a car. So I don't mind to encourage a short walk
into a grey area.

#3- In the event of a audit, its all about (a) what is the IRS looking at and
(b) how directly can I answer the inquiry and (c) is my answer reasonable and
within normal business standards... The truth doesn't matter. Patterns and
documentation and $-recovery is all the IRS cares about.

Violate one or more of those, and you'll end up in hot water... But still,
John's hybrid-car debacle... all he had to pay back was the credits plus
intrest. He still came out ahead of the game, IRS interest rate is lower than
most credit cards and many mortgages... I wouldn't even call that hot water for
John's situation, maybe luke-warm, kinda sucky, but absolutely not any sort of
nightmare situation.

(Tempestas/6121) Computer hardware is depreciated over 5 years for normal depreci...

Tempestas@rss.iscabbs.com — Mon, 15 Aug 2011 13:10:00 -0500

Computer hardware is depreciated over 5 years for normal depreciation
software is depreciated over 3 years

OR you can elect to use the special
Sec179 deduction (which is your current-year, 100% deduction)

In a nutshell for basic understanding of normal depreciation: When you have
mixed use of a business property, you have to figure out how much you use for
the work, and how much for personal. If you work on the PC 100 hours, but 1000
hours for personal, then you have a 10% business use... So you take the
depreciable value (your purchase price, Say $2k), 10% of that ($200), and
depreciate over 5 years... You don't get depreciation back dollar-for-dollar,
its like 10% on the dollar... Which is a real bullshit way to deduct the
expense since it doesn't really help reduce your tax (personally, I wouldn't
even use the deduction if you wanna go that route- its not worth the effort and
backup documentation requirements).

The Sec179 is especially useful with hardware and software, because the
lifespan on that stuff is often much shorter than the depreciation periods
allow.

*IF* you were going to be at this side gig for more than a couple years... When
you do the 5YR depreciation period, and the PC broke 2 years into your
ownership, you'd deduct the full balance of what you didn't depreciate in prior
years in the tax year of that failure. In part, I think that's why Sec179
exists (it existed prior to PCs, but PCs aren't the only piece of business
equipment that tend not to survive their depreciation periods... if you know
you're hard on a piece of business equipment and you know its not going to
survive 5 years, or 7 years, or 10 years, you can elect to use the Sec179... it
helps business tax plan, etc)



My opinion... I'd encourage you to Sec179 the PC, I would do it for myself.
Here's my view on it.

To get busted on a Sec179 deduction for personal use, it'd be A LOT of effort
on the part of the IRS and they'd only recover a couple hundred bucks... The
IRS has 3yrs to look at the return and send a letter if they're having a
problem with it. If the IRS did decide to examine you, for small items like
this its typically done by letter correspondence. No one is being asked to
appear at a IRS office and no one is coming to your house over a $2k PC
inappropriately depreciated. You're not getting $2k back on your refund if you
fully deduct/Sec179 the PC, it'd probably only give you a couple hundred on the
refund- IF that (!)

The IRS can't really obligate you to produce the PC... you probably won't even
own the PC anymore at that point... or, even more likely- after doing this
contract work, you'll have to remove and drill the hard drive to protect
project confidentiality, RIGHT?! Its normal and typical for retired business
PC's to have HDD's removed and drilled. Sure you kept some remaining components
for personal use, because you're a green-living sort of character.

ALL THAT SAID: I'm assuming you're not low-income and you don't receive Earned
Income Credit (EIC) for your children. EIC is part of the federal welfare
system and often pays out thousands per recipient with dependent children.

In that special situation, those taxpayers (ab)using SchC's- showing loss or
gain- in order to receive additional EIC- they always earn themselves some sort
of review or examination. They commonly (ab)use that SchC to net themselves
over a grand of 'extra' refund that they weren't entitled to. Its not pennies
here... That's a big fish for the IRS to catch and, of course, being welfare
fraud, its a IRS hot-button issue. People receiving Earned Income Credit pay no
federal income taxes, so they get all their withholdings back, plus the EIC,
and any other refundable credits... The only tax that reduces a refund for a
EIC recipient is the self-employment tax.
So Step, if you're a EIC recipient, we're back to the beginning of my post,
depreciating the 'right way' over 5 years really won't be worth the effort for
the little tax relief you'd get.

(Spastic Chicken/6120) Um... if you section 179 your computer the first year (only usin...

Spastic Chicken@rss.iscabbs.com — Mon, 15 Aug 2011 13:12:00 -0500

Um... if you section 179 your computer the first year (only using it for
business purposes) 100% and then in the second year use the computer for
personal use, you're expected to claim the market value of the computer as
income to yourself.

Same thing if you buy a computer, section 179 it, and then sell it the year
after... the amount you sold it for is taxable income (since you've already
deducted the full amount).

Now... will you ever get caught in the former case? Prolly not... but I'm sure
an auditor wouldn't look terribly kindly on purchasing things, section 179ing
them, and then "donating" those "worthless" items to yourself for personal use.

Easier to just deduct it at the percentage you actually use it for business
purposes and be... you know... honest.

(KAM/6119) You don't have to perform the work for the whole tax year, just ...

KAM@rss.iscabbs.com — Mon, 15 Aug 2011 08:57:00 -0500


You don't have to perform the work for the whole tax year, just simply refrain
from using it for personal use.

There's little point in dragging inexpensive electronics which will most likely
fail and/or be replaced in a few years through a seven-year amortization
schedule. That's why the IRS threw in the one-time deduction.

(Steppenwolf/6118) Honestly, I doubt I'll be doing this a full year. :)

Steppenwolf@rss.iscabbs.com — Mon, 15 Aug 2011 08:51:00 -0500

Honestly, I doubt I'll be doing this a full year. :)

(KAM/6117) Steppenwolf> If you can refrain from using it for personal use f...

KAM@rss.iscabbs.com — Mon, 15 Aug 2011 08:48:00 -0500


Steppenwolf> If you can refrain from using it for personal use for a year, you
should be able to deduct the full amount of the purchase as a one-time
deduction.

(Steppenwolf/6116) No, probably not--it's gotta be "detached and disinterested gene...

Steppenwolf@rss.iscabbs.com — Mon, 15 Aug 2011 08:41:00 -0500

No, probably not--it's gotta be "detached and disinterested generosity,"
whereas in this case there is definitely an interest--JL provided a service and
will continue to do so.
(That is, updates and the like.)

(Egregious/6115) I think a lot of JL's income is from monetary gifts that have no

Egregious@rss.iscabbs.com — Mon, 15 Aug 2011 08:33:00 -0500


I think a lot of JL's income is from monetary gifts that have no
consideration offered in return.  If that's right, can they be
counted as gifts?

(Steppenwolf/6114) So, I'm starting a job as a freelance writer. Not making a ton o...

Steppenwolf@rss.iscabbs.com — Mon, 15 Aug 2011 08:15:00 -0500

So, I'm starting a job as a freelance writer. Not making a ton of money--a few
grand by the end of the year.

What should I know about buying a new computer (to be used for this job, but
not exclusively) and trying to deduct it?

I imagine I can only deduct the percentage of the cost that corresponds to the
amount I use it for work--is that right?

(Tempestas/6113) Just because you have a full time job doesn't mean that 'donatio...

Tempestas@rss.iscabbs.com — Mon, 15 Aug 2011 07:59:00 -0500

Just because you have a full time job doesn't mean that 'donation' income isn't
subject to self-employment taxes. That's actually a incredible common
misconception folks have about the income they earn from 'side gigs'.

Regardless of whether a person has a day job, income earned on the side is
typically self-employment income... and from what you've described thus far, I
see no reason why this income wouldn't be self-employment income. All self-
employment income is subject to SE taxes.

Its not really 'donations' you're taking as income, you're calling it that for
marketing purposes, but unless you're a 501(c)3 organization, its not a
donation on the tax return.

Definitely consult a professional on this. Whether that donation income is
subject to SE taxes would depend on whether there's a profit, etc... It very
likely will be subject and its a good thing you've left about half that money
in a bank account to cover your tax obligation. You definitely won't be giving
up half your donations to the IRS or state, but it won't be a 'small' amount of
money on the large sums you've told us about. I'd loev to see you consult a
professional within the next month so you can do your tax planning thru the end
of this year. I'm not so concerned about underpayment penalties, you likely
aren't subject to them since (a) this is your first year (b) any accountant
worth his salt will request to have them waived- and they usually are because
this is your first year and (c) IF you do have to pay them, its small penalties
(generally under 200$)... Interest is also low, last I looked it was hovering
less than 5%- that's not something the IRS ever credits back, even if they do
waive a underpayment penalty, but even still- typically that's sucha low
interest payment because its just been a couple/few months.

Really now is just to focus on bookkeeping and tax planning and for going
forward- in case you want to do a llc or something with this beast. Congrats
(again!)

(Snuffy/6112) >So it's pure income from donations and some other sources, and ...

Snuffy@rss.iscabbs.com — Mon, 15 Aug 2011 07:05:00 -0500

>So it's pure income from donations and some other sources, and it'll be in the
tens of thousands for sure.

now you're just bragging *grin*

Whether Paypal reported it or not, you're responsible for the tax on the
income.
Handling the SE tax as part of writing it up as Schedule C sole proprietor
incomeis just one of those things to do.
It's not really all THAT hard and you're crossing into the amounts of income
where it's really worth it to do it "right enough."


good luck with it ... and congratulations on having a fun and profitable hobby!

(JL/6111) Thanks for the advice. It does get tricky, because I have ZERO e...

JL@rss.iscabbs.com — Mon, 15 Aug 2011 06:01:00 -0500

Thanks for the advice. It does get tricky, because I have ZERO expenses other
than my time. And this is purely side work that I do for fun. It's not a
business - or at least, I don't operate it like one.

So it's pure income from donations and some other sources, and it'll be in the
tens of thousands for sure.

I have to research more, but previously I've just added extra income to my tax
return and not paid any SE tax. Because, I'm not actually self employed. I have
a regular full-time job.

This kind of situation is really where I start despising our tax system and the
way we limit people. I spend a shitload of my own time, trying to build
something useful for thousands of people, and they send me a few bucks here and
there as a thank-you.

And it turns into a big pain in the ass to figure out how to even deal with it
and give the money-grubbing government its "share".

I think it prevents small-time people from trying to "hit it big" and do
something bigger and better. You have to start consulting with business people,
tax people, etc. You can't just get a few thousand people to send you a few
bucks each. Blah.

(And this wouldn't even be as big of a concern if PayPal wasn't being forced to
report to the IRS now. Fuck you, IRS)

(Tempestas/6110) JL> For now so you can play with/understand some of this better,...

Tempestas@rss.iscabbs.com — Fri, 12 Aug 2011 16:01:00 -0500

JL> For now so you can play with/understand some of this better, and maybe
before you go to a pro (and you should consult a pro on this, for about
$10k reasons- congrats)...
 and if your 2010 tax software is capable-
you can do some homework to prepare before meeting with the pro- and this might
hepl you limit some of their fees too

open your 2010 F.1040 in hypothetical mode. Hypothetically add a Schedule C.
You'll want to see your refund status every time you enter a bit of $-data, so
you can see how that refund changes based on what you're doing. I think its
really important you see what that $10k income does to your tax refund before
you start reporting expenses and depreciating property.

Enter your income on the income line... And then you'll see the second section
with the expenses. Expenses are categorized, and that'll tell you how to
categorize them for your bookkeeping going forward. If you can understand that
basics on the bookkeeping of this, you're running about 90% ahead of the
average client I've met with at this stage of the game.

You'll notice there's nowhere to categorize large expenses that basically
amount to your 'business property'. If you bought software or equipment, that
you'll want a professional to depreciate- but ask about Sec179'ing some (or
all) of that property... Especially if you expect donations to drop off in the
near future. You're just playing with $'s right now and don't worry about that
stuff for the moment. Just know in the back of your mind those will be a
additional expense you're reporting.

If this software income is hobby income (ie: you have a day job, and this
income isn't necessary to put food on the table or buy health insurance for
your kids)... You can write off expenses only up to the amount of income you
earned. So if you received $10k donations, but spent $20k, you come out even
(if it were a regular business, you would be showing a $10k LOSS, which carries
up to your F.1040, lowering your total wage income, dollar for dollar, which
usually enhances a refund).

If this income, after expenses, happens to weigh up to be a significant income
to your household- its very likely that you've sprung yourself into business
(thereby dropping that 'hobby' write-off limitation). This is why I'd like to
see you consult a pro, because I believe you may have sprung yourself into
business... This ain't much of a hobby anymore if you're having professional
meetings, have customer service issues you're being responsive and professional
towards, etc.


Play with the $'s as a regular business, and as a hobby-limitation. If your
software changes your refund status every time you enter a bit of data, watch
how that refund changes based on what you're doing.

If you can muddle through that, and understand some broad-strokes on the INCOME
and EXPENSES and how they affect *your* personal tax situation, I think you'll
be able to put together a really effective meeting and might be able to really
limit the amount of time (and expense) on the professional. Would be nice for
you to just go into one meeting now, deliver additional documents, and then
just have to go back in March to do your actual 2011 tax return.

If you need to do a LLC, you can probably do that w/ out a pro, unless you need
to bring in partners and other structures. Come back and chat again before
engaging a pro. They often charge very inflated fees. Secretary of state and
business license fees, for example, in CT are under 500$ in every case of
opening a LLC, but I've seen simple sole-member LLC's paying over a grand just
to get their LLC. Its a very common ripoff.

(Chaos And Void/6109) Check your last year's return and figure out what your tax brack...

Chaos And Void@rss.iscabbs.com — Fri, 12 Aug 2011 11:51:00 -0500

Check your last year's return and figure out what your tax bracket was. Take
that percentage and add 15.9% for SE tax, and multiply your total earnings by
that. Send it in quarterly as estimated payments, and that's a close enough
ballpark to keep you from hitting underwithholding penalties. The rest can wait
until next tax season when you'll want to hire a pro to do your first return
(make the pro show you how s/he prepared the schedule C, and you can probably
do it yourself after that). Unless you want to do a little tax planning, like
deciding whether or not to set up a home office to deduct some of your
household expenses from the income, or you're thinking of setting up a corp or
LLC as an extra layer of protection from liability. That you might want to find
a pro for now.

(JL/6108) It'll definitely be over $10k, so I think I will consult the adv...

JL@rss.iscabbs.com — Fri, 12 Aug 2011 08:26:00 -0500

It'll definitely be over $10k, so I think I will consult the advice of a
professional. I have saved 50% of all income so far, just to be safe, but I
haven't made any estimate payments.

Taxes suck. Fuck the IRS. ;)

(Egregious/6107) You probably claim it as hobby income on Schedule C. If it's ge...

Egregious@rss.iscabbs.com — Fri, 12 Aug 2011 07:25:00 -0500


You probably claim it as hobby income on Schedule C.  If it's getting
to be over ten thousand, though, you probably ought to hire someone.

(Snuffy/6106) If the amount of money coming in is going to cause you tax liabi...

Snuffy@rss.iscabbs.com — Fri, 12 Aug 2011 05:12:00 -0500

If the amount of money coming in is going to cause you tax liability in excess
of what is covered by (for instance) W4 withholding from your day job, then you
should pay in more tax either by increasing your W4 withholding or by making
estimated tax payments.  Estimated tax payments are due:
15-Apr, 15-June, 15-Sept[Oct?][check this], 15-January
for the previous quarter's income.
Essentially, the purpose of estimated tax payments is to provide
more-than-annual payments so that the gubmint doesn't have to wait for their
money and to help ensure that you actually have it to pay it, vs. forgetting
about it and not having it on the due date.
Penalties for not paying timely include having to fill out Form 2210, which
essentiallly measures your income inflows and tax payments to see that you are,
indeed, paying an appropriate amount on the time schedule the gubmint wants.
Don't forget your state's estimated tax (or increased withholding) too, if
you are in a state with an income tax.

Easy way, if it's not a lot of money:  bump up your W4 withholding a little.

(JL/6105) Hello? Anyone here?

JL@rss.iscabbs.com — Fri, 12 Aug 2011 05:01:00 -0500

Hello? Anyone here?

I receive donations for software I write.

I'm trying to figure out:
 a) If I need to make estimated tax payments
 b) How much they need to be
 c) When I need to make them

I can't make much sense of all the tax rules I'm reading. Do I really have to
go hire a tax expert? Or is there some way to figure out on my own what I am
supposed to do?

(Egregious/6104) Well, with cars you can't just claim "worth $3000" while the cha...

Egregious@rss.iscabbs.com — Tue, 19 Apr 2011 07:32:00 -0500


Well, with cars you can't just claim "worth $3000" while the charity
you donate it to sells it for $500.  The IRS hasn't gotten there yet
with Goodwill.

I offload all of the "what is this worth?" to ItsDeductible.com, which
is now part of Intuit.

(Knightshade/6103) Apr 18, 2011 18:49 from Gespalder

Knightshade@rss.iscabbs.com — Tue, 19 Apr 2011 03:26:00 -0500


Apr 18, 2011 18:49 from Gespalder
And with Goodwill the clothes you say are good enough to resell they might just
dump in the fabric baler saying they are not good enough to resell.
I worked at a Goodwill and stuff those of us at the donation door felt was
good enough to sell was instead tossed in the (trash) compactor or, when we had
this program, boxed up and shipped overseas.
[Tax Time> msg #6101 (1 remaining)] Read cmd ->



Nobody cares what they do with it after they give us the receipt for our taxes.

(Volvo Guy/6102) KAM: a lot of folks who own homes use up their $12K deduction in...

Volvo Guy@rss.iscabbs.com — Mon, 18 Apr 2011 18:03:00 -0500

KAM: a lot of folks who own homes use up their $12K deduction in writing off
interest on their mortgage.

(Gespalder/6101) And with Goodwill the clothes you say are good enough to resell ...

Gespalder@rss.iscabbs.com — Mon, 18 Apr 2011 14:49:00 -0500

And with Goodwill the clothes you say are good enough to resell they might just
dump in the fabric baler saying they are not good enough to resell.
I worked at a Goodwill and stuff those of us at the donation door felt was
good enough to sell was instead tossed in the (trash) compactor or, when we had
this program, boxed up and shipped overseas.

(KAM/6100) Here's the real question: is the amount of your itemized deduct...

KAM@rss.iscabbs.com — Mon, 18 Apr 2011 12:24:00 -0500


Here's the real question:  is the amount of your itemized deductions more than
the standard decution the IRS already credits you?

If so, then it's worth the time to document it to earn the deduction.

If not, then just donate your stuff and stop worrying about deductions, you're
not getting a better deal.

(Dr Johnny Fever/6099) Doesn't everyone donate $500 to Goodwill every year? I thought ...

Dr Johnny Fever@rss.iscabbs.com — Mon, 18 Apr 2011 12:06:00 -0500

Doesn't everyone donate $500 to Goodwill every year?  I thought that was a
given!

(Rick Jenkins/6098) I'm not trying to be difficult; maybe I just need to be educated...

Rick Jenkins@rss.iscabbs.com — Mon, 18 Apr 2011 11:56:00 -0500


I'm not trying to be difficult; maybe I just need to be educated. But, it seems
like overkill to photograph a shirt that I'm giving to Goodwill. If I'm giving
it away, it probably isn't worth very much anyway, right?

When you are giving these things away is it like from an estate and there's
like hundreds of dollars worth of clothes, some of it barely/never worn? I
could see keeping detailed records in that case. But if I have a cardboard box
with some jeans and t-shirts in it that I think is worth about $20, I'm just
going to put "clothes" on the Goodwill receipt and call it a day.

(Volvo Guy/6097) Deductions: If I donate clothing, I itemize and photograph eve...

Volvo Guy@rss.iscabbs.com — Mon, 18 Apr 2011 09:41:00 -0500

Deductions:   If I donate clothing, I itemize and photograph every piece of
clothing I give.  The only exception was this past year - my mother passed
away, and rather than photograph every single piece (which would have taken
hours) I just took a picture of her closet, drawers, and cabinets.  I also
photographed every piece of furniture I donated.

(Chaos And Void/6096) Commercial software does have a form function, it's just not alw...

Chaos And Void@rss.iscabbs.com — Mon, 18 Apr 2011 08:52:00 -0500

Commercial software does have a form function, it's just not always easy to
find. It's all I ever use though, which limits my ability to be decent tech
support for anyone who goes through the normal methods.

(Knightshade/6095) Goodwill gives me recipts that say I dropped stuff off on a give...

Knightshade@rss.iscabbs.com — Mon, 18 Apr 2011 08:45:00 -0500

Goodwill gives me recipts that say I dropped stuff off on a given date.

It doesn't say what said stuff was.

Which is a GREAT receipt in my book.

(Egregious/6094) Goodwill gives me crap receipts. I take pictures of everything,

Egregious@rss.iscabbs.com — Mon, 18 Apr 2011 08:44:00 -0500


Goodwill gives me crap receipts.  I take pictures of everything,
sometimes video, and I hope that this is good enough if the IRS
ever audits me.  They have bigger fish to fry, I hope.