IRS Tax Questions Thread

[Paelos]

How long has she been in the US over the last 3 years?

[Furiously]

How long has she been in the US over the last 3 years?

How much foreign income does she make?

[Viin]

Wrong questions.

Is she hot?

[Bann]

Shes a grad student, makes less than 30k here. She has no overseas income. She has been in the states for the last 5 years.

[Paelos]

Shes a grad student, makes less than 30k here. She has no overseas income. She has been in the states for the last 5 years.

Did she get her green card during 2012? If she's in the country on a student visa, she doesn't qualify for the substantial presence test for resident alien. The key factor here is resident v. nonresident aliens. Resident aliens can file joint with no special issues. Nonresidents have to jump through some more hoops.

Here's the reg on what to do if you want to elect to be nonresident electing married filing joint residency.

If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U.S. resident. This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year.

If you make this choice, you and your spouse are treated for income tax purposes as residents for your entire tax year. Neither you nor your spouse can claim under any tax treaty not to be a U.S. resident. You are both taxed on worldwide income. You must file a joint income tax return for the year you make the choice, but you and your spouse can file joint or separate returns in later years.

Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. It should contain the following information.

    A declaration that one spouse was a nonresident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year, and that you choose to be treated as U.S. residents for the entire tax year.

    The name, address, and identification number of each spouse. (If one spouse died, include the name and address of the person making the choice for the deceased spouse.)

[Johny Cee]

Shes a grad student, makes less than 30k here. She has no overseas income. She has been in the states for the last 5 years.

Did she get her green card during 2012? If she's in the country on a student visa, she doesn't qualify for the substantial presence test for resident alien. The key factor here is resident v. nonresident aliens. Resident aliens can file joint with no special issues. Nonresidents have to jump through some more hoops.

Here's the reg on what to do if you want to elect to be nonresident electing married filing joint residency.

If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U.S. resident. This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year.

If you make this choice, you and your spouse are treated for income tax purposes as residents for your entire tax year. Neither you nor your spouse can claim under any tax treaty not to be a U.S. resident. You are both taxed on worldwide income. You must file a joint income tax return for the year you make the choice, but you and your spouse can file joint or separate returns in later years.

Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. It should contain the following information.

    A declaration that one spouse was a nonresident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year, and that you choose to be treated as U.S. residents for the entire tax year.

    The name, address, and identification number of each spouse. (If one spouse died, include the name and address of the person making the choice for the deceased spouse.)

Some expansions on Paelos' advice and some general info:

1. The US taxes on world-wide income, as opposed to many nations that only tax based on source/residency.  What that means is that, for many countries citizens, they owe no tax to their home government if they are not a resident.  The US taxes on all of your income from anywhere no matter where you live if you are a US citizen, but grants Foreign Tax Credits/Foreign Income Exclusions which reduce your taxes by the amount you paid in income tax to a foreign country.

2. You said your wife is a Singapore resident, but then you said she's been here for five years.  Did you mean a citizen of Singapore, but she has been a resident of the US for five years?  All of her income is from US sources and not from foreign sources?

3.  You can choose to file Married Filing Joint if you are married, and it doesn't matter what the nationality/residency status of your spouse is.  The MAJOR downside to this is that your spouse would automatically be considered a resident alien for US tax purposes and thus all of their income from whatever country would be subject to US tax as per point 1.

As an example:  My brother is a US citizen who is a resident of Canada and married to a Canadian.  I would never recommend he file MFJ as this would then subject his wife to US taxation as a resident alien on her world-wide income.

4. In your case, your spouse is a US resident with no income outside the US and is married to a US citizen?  I think that's an argument for having her tax home here... but I don't know the vagaries of how her visa status would effect that, what class her visa is, and it's been too many years since I last had to research student visas.


YES, this is definitely a situation where a tax firm with appropriate experience dealing with crossborder issues could give you a great deal of peace of mind.

[shiznitz]

This thread is great. I never expected so many tax issues from a bunch of wise-ass former gamers.

[Furiously]

This thread is great. I never expected so many tax issues from a bunch of wise-ass former gamers.

What do you think tax people do for the rest of the year?

[Yegolev]

The people who spent their nights trying to figure out new ways to rob your bank in Brittain did eventually grow up.

[JWIV]

Just a little heads up from my discovery tonight -

Because of all the fiscal cliff shenanigans, the IRS is a bit behind on setting up their systems to handle things like Schedule C forms and a list of other credits/deductions via e-filing. Right now, they're saying end of February/beginning of March.   

[Paelos]

Yeah we got that heads up as well.

Our partners are chuckling about it, because we all know they were full of shit saying they could handle it by January 31. Then again, we don't file anybody's 1040s until after March 15th for the most part. I'm usually up to my eyeballs in corps.

[Abagadro]

So I decided to withdraw my 2011 contributions to my IRA out last year as they no longer qualified to be deductible based on my income. I read all the instructions, did all the worksheets, and managed to do it in the window where it would still be considered part of 2011.  Also engineered it so there was zero capital gains (that was somewhat fortuitous, but the market price when I was doing this was spot on) and coded it properly so it wasn't taxable on my return.  I filed the proper forms for it and created a 1099-R to reflect what occurred. Now Vanguard has sent me a 1099-R for 2012 showing the distribution.  Do I need to declare it again on my taxes and input the 1099-R with the coding for it to be nontaxable for 2012? 2011?  If I include it on my 2012 return do I need to amend 2011 to take it off? Do I ignore the 2012 1099-R and consider it already declared on 2011?  It won't result in any taxable income any which way I do it, but don't want my return to not have a 1099 on it that is reported to the IRS by the issuer as I imagine that might increase an audit trigger.

Sorry if this is too specific and understand that it might be something that can't be answered in this format.

[Johny Cee]

So I decided to withdraw my 2011 contributions to my IRA out last year as they no longer qualified to be deductible based on my income. I read all the instructions, did all the worksheets, and managed to do it in the window where it would still be considered part of 2011.  Also engineered it so there was zero capital gains (that was somewhat fortuitous, but the market price when I was doing this was spot on) and coded it properly so it wasn't taxable on my return.  I filed the proper forms for it and created a 1099-R to reflect what occurred. Now Vanguard has sent me a 1099-R for 2012 showing the distribution.  Do I need to declare it again on my taxes and input the 1099-R with the coding for it to be nontaxable for 2012? 2011?  If I include it on my 2012 return do I need to amend 2011 to take it off? Do I ignore the 2012 1099-R and consider it already declared on 2011?  It won't result in any taxable income any which way I do it, but don't want my return to not have a 1099 on it that is reported to the IRS by the issuer as I imagine that might increase an audit trigger.

Sorry if this is too specific and understand that it might be something that can't be answered in this format.

It's complicated.     I'll give you a top of my head take...

What distribution code is on your 2012 1099R?  Is it labeled a taxable or non-taxable distribution, in whole or in part?  Did you claim any benefit for the IRA contribution on your 2011 tax return?

If you didn't claim any tax benefit on your 2011 tax return, and the 2012 1099-R is coded as a non-taxable return of an excess contribution during the required time period, it shouldn't matter (ie when you enter it into the tax software it doesn't show up on your tax return because it's non-taxable).  If you filed your 2011 tax return with some tax benefit for the IRA contribution, you might need to amend your 2011 tax return.

This is an issue where I would really need everything in front of me.

THE PLACE TO START IS TO CALL VANGUARD AND HAVE SOMEONE WALK YOU THROUGH THEIR 1099-R, THEIR REASONING, AND IT'S EFFECTS ON YOU.  Many investment firms actually have decent customer support when it comes to tax effects as screwing this up is the easiest way to lose themselves alot of money.

This would also be a very good time to see a tax professional for piece of mind!  You may have done everything correctly, but Vanguard may have prepared their forms in full Cover Their Ass mode and assumed you messed up.  Did you keep Vanguard in the loop as to what you were doing?

Sorry, not tremendously helpful but it's tough to say anything for sure without having your prior year's return, the 1099s, etc. in front of me.

[Paelos]

Start by calling Vanguard and confirming the timing and why.

We'll go from there.

EDIT: JC basically went whole hog there on the details, but moving around IRA money is probably one of the more complicated things to discuss sans details. My guess is that Vanguard just made an error.

[Abagadro]

I probably made the error somewhere along the lines.  I didn't get any benefit for 2011 (or any penalty either). Since I did it after 12/31 Vanguard did not send me a 1099 (I entered the info as a "didn't receive 1099") so they probably had no clue (although I thought I checked some box when I did the withdrawal that it was a return of contribution that supposed to attach to the 2011 tax year, although it has been a year so can't remember exactly). They have coded it as a "no known exception" distribution and that all of it is taxable. I noticed in the instructions that you can alter that code if you think it is wrong, but don't know the ramifications of that.  

I guess I should call Vanguard and see what they say.


EDIT: Found this statement in the instructions:

If you made a contribution for 2011 and you had it returned to you in 2012 as described above, do not report the distribution on your 2012 tax return. Instead, report it on your 2011 original or amended return in the manner described above.

That is what I did. So can I just get Vanguard to withdraw the 1099-R? Ignore it?

[Johny Cee]

I probably made the error somewhere along the lines.  I didn't get any benefit for 2011 (or any penalty either). Since I did it after 12/31 Vanguard did not send me a 1099 (I entered the info as a "didn't receive 1099") so they probably had no clue (although I thought I checked some box when I did the withdrawal that it was a return of contribution that supposed to attach to the 2011 tax year, although it has been a year so can't remember exactly). They have coded it as a "no known exception" distribution and that all of it is taxable. I noticed in the instructions that you can alter that code if you think it is wrong, but don't know the ramifications of that.  

I guess I should call Vanguard and see what they say.


EDIT: Found this statement in the instructions:

If you made a contribution for 2011 and you had it returned to you in 2012 as described above, do not report the distribution on your 2012 tax return. Instead, report it on your 2011 original or amended return in the manner described above.

That is what I did. So can I just get Vanguard to withdraw the 1099-R? Ignore it?

You can't ignore it, as you have a 1099-R showing a taxable distribution.  The IRS will look for you to report.  This link is the best I managed with some limited looking around:  http://www.irs.gov/instructions/i8606/ch01.html#d0e545

Step one is to definitely call Vanguard...  You might have to bite the bullet and go to a CPA firm. 

[Abagadro]

Thanks for the help.
 

[Paelos]

This thread delivers!

It's like the ask the butcher thread except less tasty.

[Ragnoros]

Figured since this is here.. I just wanted to check if I have overlooked any easy deductions, like the old Making Work Pay Credit. If this is to broad a question, ignore.

My status: Broke full time college student. Single, 28, have no and am not a dependent. Made like 5.5k last year. Already claiming the Hope American Opportunity Credit and EIC.

I co-own a home with my parents, but I am living in an apartment and have paid nothing into the home in taxes/mortgage/etc this year. I don't have a car. I do have a 401k & RothIRA but have contributed nothing to them this year due to broke status. Nothing else pertinent comes to mind finance wise.

[Yegolev]

Would you itemize at all?

[Ragnoros]

Would you itemize at all?

Good point. When I said deductions I should have said credits. Not itemizing jack.

[Paelos]

No, I think you're in a situation where you don't need to worry too much. The two credits you listed are the most common. Here's a list of credits people usually take with the right criteria:

1 - Earned Income Credit: You made a low to moderate income less than 40k, slightly more if you have kids. There's lots of math here.
2 - Child Tax Credit: There are some AGI limits, but it's about $1000 in credits
3 - Child Care Credit: AGI limits
4 - American Opportunity Credit for College Students: This one is a little compilicated on the income limits.
5 - Retirement Savings Contribution Credit (work sponsored account or IRA contributions and you made less than $28k if you're single)

[Ragnoros]

Thanks. Lines up with what I expected.

[Sky]

I've got to go buy a new mortgage. Since the regional chain bought out our (awesome) local bank, they've done nothing but drive it into the ground with total shit customer service (and at the risk of sounding old, jeans and t-shirts are not acceptable banker attire). I had to pay off a loan a year early because they hadn't sent me the payment book for the final year...for four months running. They send the mortgage payment paperwork so late it arrives the day it's due. Totally set up for screwing people with fees.

Anyway. I sit down to do my taxes yesterday and my 1098 or whatever from them only lists the mortgage interest. Not the real estate taxes or PMI payments from escrow that it's supposed to list.

I have not has a single transaction with this bank in two or three years that hasn't been a clusterfuck. Compared to a small three-branch bank that was amazing (and making money through the banking crisis).

And it's the time of year where I love my new homeowner 'credit' from 2008. $350 off my federal return for the next 14 years. 8 months later the 'credit' became a credit (no repayment unless you sell early).

Oh, an actual tax question after venting: I received a small payment ($78) from my health care as part of a wellness program (basically don't smoke and go to the doctor a couple times and you get that as a minimum bonus at the end of the year). Where would that be reported? Also, after my first year with an FSA, I have to say I like those.

[Paelos]

I don't believe there's any exception for wellness payments. As such you'd report it as "other income" not subject to self-employement tax. However, check the documentation (if any) from your health care company to see if that is a rebate payment on your premiums. If that's the case, I wouldn't bother reporting it as income at all due to it's small size.

[schild]

Can someone explain personal deductions for operating a home office since I worked from home all of 2012. Basically, I have a computer. It is not a cheap computer. I had a cell phone the whole year (Nexus S). It says I can list the fair market value, but doesn't seem to include things like monthly cost for keeping them up (internet, cell phone plans, etc). I'm using turbotax, Halp.

Edit: So things that were gifts to me:

Gift property
The cost is the same as the adjusted basis for the person who gave you the item as a gift.

Can be deducted? I mean, really? I can go by fair market value (sale price on Ebay) for an unlocked Nexus S which is RETARDED HIGH?

Is this really happening? Did I not fuck up on how much I saved?

[Trippy]

If any of the equipment and services were used exclusively for business purposes go ahead and deduct it (though computer equipment can be a bit complicated if you have to use a depreciation schedule). If any of it was shared with personal use you'll want to consult with an accountant.

[schild]

Alright skipped that. Bought a $500 suit for a handful of meetings with a board that I only used for that purpose. Can't figure out where to deduct it. Deducted the SHIT out of my cell phone bill though.

[Trippy]

Edit: So things that were gifts to me:

Gift property
The cost is the same as the adjusted basis for the person who gave you the item as a gift.

Can be deducted? I mean, really? I can go by fair market value (sale price on Ebay) for an unlocked Nexus S which is RETARDED HIGH?

Is this really happening? Did I not fuck up on how much I saved?

You can't deduct gifts if you are the recipient (nor can the donor), nor does it count as income for the recipient if it's below the threshold.

Alright skipped that. Bought a $500 suit for a handful of meetings with a board that I only used for that purpose. Can't figure out where to deduct it. Deducted the SHIT out of my cell phone bill though.

Business attire is not deductible even if used exclusively for your business.

[schild]

Balls.

[schild]

Well my internet and cell phone bill sure as shit is. So that's getting deducted.

[schild]

What else can I deduct, tell me moreeeeeeee. I put away something like $8,100 to cover taxes and I thought I was wrong - didn't even think about deductions. I'm down to owing $8,2XX. BRING ME LOWER. DO IT.

Edit: Also, real happy about rent being part of a "home office." That chopped a fast $2k off of taxes. Yeesh.

[Trippy]

Deduct books, software, and office supplies that you have receipts for that are business-related. Talk to an accountant to see if any of your f13.net expenses are deductible.

Edit: also if you have your own personal health insurance (not paid for by an employer) the premiums may be deductible.

[schild]

I am on my fiancee's health insurance, pretty sure I can't deduct that, but that would be suhweeeet. The only thing I put on there was my cell phone bills and internet bills as the receipts are the statements in my bank account.

[Viin]

I assume you are deducting rent as "% of sq ft that is office" * "% of office time used for business" * rent you paid.

Unless you run your own busines and keep those expenses tracked (with receipts) or donate cash/items, there's not a lot you can deduct besides mortgage interest.