{Unofficial} Open for tax questions again this year.
21Some of the questions I gotten in previous years have been pretty interesting and thought provoking or maybe I’m just a glutton for punishment. Just celebrated my 50th anniversary of being a CPA.
Anyway I’ll try to answer your questions off the top of my head, look them up, point you the right direction to get the answer or tell you I don’t know the answer. What can be better than that for free?
- 14 comments, 28 replies
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I have a question. My daughter started umpiring softball games this fall. She was paid $80 a game. Most of the times teams paid cash, a but few of the games she got a check from the umpiring organization. She made about $500 total, with $160 being in check form. Her gear for the games was about $300. She is 17 and this is her first income. I’m not even sure how to approach this.
Thanks
@capnjb Don’t think she has to file a tax return. The income she made is well under the filing limit for an single individual. So no income tax owed. The only tax she might have been liable for is self employment tax if net income was over $ 400. But given she made $ 500 and she had $ 300 in expenses for gear (assuming she can’t and won’t use the gear for anything but umpiring) she can deduct that against the $ 500 to determine her net taxable income.
If she had made over $ 600 and got a 1099-NEC from one source then she would have to file including that $ 600 and any any other cash or non cash income and show the $ 300 as expenses of doing business (along with other expenses such as mileage to the game) as an expense to hopefully get her below the aforementioned $ 400. You can owe self employment taxes even if you don’t owe any income taxes.
Hope this answers all your questions.
@Felton10 Great answer, thank you for taking the time. I appreciate it.
Here is another curve ball (sorry… bad softball pun). If I claim her as a dependent, and I also paid for the gear (but have the receipts) can she use those receipts if she needed to file (and I didn’t claim them anywhere?)
@capnjb There is no way anyone is going to know who paid for the expenses listed if you have a receipt with no name on it unless she is audited. Obviously following the letter of the law, she can only deduct what she paid and no one else. So next time just to be safe, give her the money and let her pay for it.
@Felton10 That is sound advice. She has no way to buy things online so I just took care of it. I don’t think $300 is going to move the needle very much either way. Thanks again
SWIM requested a rollover check from their 401k in December (week of X-mas, let’s say 22nd), received early January and deposited into a corresponding IRA first week of Jan.
They overlooked the Roth component of the 401k, which was issued and arrived a couple days later. They’ve sat on this check, would opening a Roth IRA and depositing the check now still count as a ‘Rollover’?
This is past the 30 day mark but not the 60 day mark. Can’t recall which one is the deadline. What if they totally blew past it?
@onae sorry didn’t reply directly to you-see answer below
@Felton10 No worries, I appreciate the effort!
I’m going to go tell this Someone to get their Roth IRA established ASAP as I have a feeling they’re still within the 60 day window.
60 days in the rollover requirement for both regular and Roth IRA’s. But unlike regular one where there might be a tax and penalty (if under 59 1/2) on the contributed amount, if you don’t meet the 60 days requirement for rollover of a Roth IRA, only the earnings become taxable.
If the 60 days is missed, one can always appeal due to unforeseen circumstances.
if i have a roth ira from fidelity and my work has a separate roth ira option, does the limit on contributions to roth ira apply to both combined? or does each roth ira individually have that limit (so 2x)?
@russellmz ugh-don’t know the answer to this off the top of my head, but thought there would be one limitation for both, but found this online which contradicts that-
“Nothing you or your employer contributed to a work 401(k) or 403(b) (Roth or otherwise) will impact your ability to contribute to a personal Roth IRA. At work you may have the option to contribute to a a 403(b) in either Roth or traditional forms. This is a completely separate pool of money than personal IRAs with separate limits.”
Have a couple other places to look for the answer to this and if I find something different will get back to you.
@Felton10 thanks felton10!
Due to having a 1099-NEC, should I consider adjust withholdings on my regular day job to cover some of the inevitable taxes that’ll come out from that additional income, or am I actually better off leaving things as-is and just end up with a bigger bill come April 15?
@narfcake sorry again-response below.
Better off paying in enough by increasing your withholding or paying an estimated tax to avoid being charged an underpayment penalty which one can do by having paid in 100% of last yrs taxes (110% if AGI is over 150K) or 90% of current years taxes.
Remember with 1099-NEC you will probably have both additional income taxes as well as self-employment taxes. And don’t forget state taxes either.
@Felton10 Thank you! Based on what I’ll end up owing for 2024 (which was just one month of $$), I’ll estimate what I’ll end up at for my 2025 and adjust accordingly at my regular work (W-2).
I put a small amount of money in my Roth. They said it didn’t go through, deposit again. Did it again. The next day I saw that both went through. 5 days later I got the excess contribution back (I put in my entire single paycheck so that was all I could contribute). I also got $3.74 in interest back (not bad for 5 days, too bad I couldn’t keep the excess in. I know the interest is taxable.
On the 1099-R lines 1 (gross distribution) and 2a (taxable amount) are correct.
Line 7 says 8 (which is correct) 8–Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2024.
Line 7 also has J which is am not sure is right. J–Early distribution from a Roth IRA, no known exception (in most cases, under age 59½). Except it was not an early distribution, it was getting back what I had overpaid above and beyond what I was eligible to.
Line 16 State Distribution lists line 1 plus line 2a. Reading my state’s tax form it looks like I have to pay tax on what was listed on line 16 rather than line 2a?Shouldn’t line 16 just have the same as 2a?
Thanks.
@Kidsandliz-what a question for this late at night.
Without seeing the form (you could always e-mail it to me if you want as you have my e-mail address) couldn’t tell if there was some reason to combine block 1 and 2a for the state taxable amount but I can’t think of any reason why there would be. The taxable amount is what governs and if you are using a tax prep program I’m sure that the amts put on the return from block 1 and 2a will govern and not what is put in the state boxes at the bottom the form except for any state taxes withheld.
Could always call them as with what happened, its never a given that the info was entered correctly or that the program handled it correctly.
@Felton10 Thanks.
I did call them and they said even though the words on J do not apply, they use it for anything that doesn’t have an “appropriate letter” WTF? They said that even though the entire amount is on line 16 for the state that I’d only pay taxes on line 2a. That is not what the state told me. Who knows. I am going to initially just put line 2a on both the federal and state lines and see if the state audits me. My excuse will be the only taxable income on that form indicated that is the amount on line 2a so that is what I used.
Question - I helped my son buy a house a few years ago. I am on deed, along with my wife and son. I have 100% of the mortgage, so I make the payments and he pays me back, Same with the taxes (he pays me and then I pay them). Can I claim the mortgage interest and/or taxes as a deduction for MY taxes?
@ckcarlton You are on the deed and pay the mortgage and taxes-you’ve met all the qualifications to deduct them legally EXCEPT any limitations re interest and taxes on your own house (might qualify as a second house deduction but could be tricky in justifying that since you don’t use it) and the tax limitation of 10k. That is of course assuming the total is over the standard deduction. If you were auditing the IRS might classify his payback to you as rent which might be another issue. Depends if it is a dollar for dollar payback on what you pay or a different amount.
As far as your son paying you back, it could be treated as a gift from him to you so you might have to deal with gift tax ramifications depending on the amounts but nothing that can’t be handled by splitting his pay back between you and your wife. If he pays is under 18k, you are OK. Even if more than 36k, ways to handle that to avoid any gift tax.
Legally you are the owner of the house, but as noted above a number of risk issues to consider.
@Felton10 Much appreciated!!
I’ve been using an online tax prep software for the past 6-8 years. It asks a battery of questions, which I try to enter answers to the best of my ability, and by the end of that section, the program suggests taking the standard deduction every year. I’d always heard that since we own a home, the interest alone should be enough to push one into filing returns to take advantage of that. Is there in your opinion something that either the tax prep software is missing, something I am missing or should I seek the services of an actual live human being (CPA or similar)? Just for the record, my return is married filing jointly, Income ~$100k, $400k home value for 11 years of 30 year mortgage.
@tohar1 Know it can be confusing but really a simple computation that you can make yourself to see if the tax program is giving you the correct answer. Its which number is higher-the standard deduction of 29,200 (if under 65) for 2024 or your itemized deductions of mort interest, taxes limited to 10k, medical expenses over 7.5% of AGI and contributions.
On a more expensive home with a large mortgage, that alone might be more than the standard deduction but it is strictly a which numbers are larger comparison. Simplest computation for every tax program. You’d be wasting your money to pay for the exact same answer above from a CPA which I’ m sure you read in my post that I am.
If you are still not sure, you can whisper to me your itemized deductions and I will verify that the program is doing it correctly.
@Felton10 That’s where I’m most confused. I don’t know what I’m supposed to be tracking for deductions. Fortunately, we’ve been pretty healthy so far >>Knock On Wood<< & I don’t know if expenses include just deductibles paid, the amount we pay after insurance, even something as simple as do glasses count as a medical expense? I don’t know what to track beyond that, which is why I follow the software prompts & end up with the standard deduction. So much confusion, that I don’t know where to start… I probably take my lumps and give the government more than my fair share because of it… Call me a proponent of the flat tax/file on a postcard type of return…
@tohar1 With the 7.5% deduction from medical expenses before you get your first dollar of medical expenses most people don’t have even $ 1 dollar of medical expense itemized deductions. Used to be easier to itemize deductions but when the IRS did away with the personal exemptions, they increased the standard deduction a lot so most people unless they have a large mortgage can’t and don’t itemize. Also limiting the tax amount re itemized deductions to 10k also made a big difference.
Goggle which medical expenses are deductible and use that to complete sch A and then let the computer choose the best option for you. Good luck.
@Felton10 I really do appreciate your professional help. For me & all the Meh-tizens you’ve assisted, THANK YOU!!
I hear “them” pledging to eliminate taxes on Social Security. Using H&R Block online I haven’t been paying taxes on SS, didn’t think I had to? I also have a small pension - I owed a little over $200 last year. Am I in trouble?
You rock for doing this.
@kdemo Taxes on social security vary from a minimum of zero to a max of 85% based on how much other income you have so think you are OK.
@Felton10 - Cool, thanks!! There’s one less thing to stress over.
This must be your busy season, best wishes!
Under the new Social Security Fairness Act, my application for SS spousal claim is under final review. If/when it’s approved, I will receive a year’s back allotment for 2024, plus the monthly amount going forward. This will put me in a different tax bracket, if it’s taxable. (I’m a retired civil sèrvant.) Will it be taxable in 2025 or 2024? I can’t figure it out. Help-.
@OldCatLady Depends when you actually receive the money. Your are on the cash basis so any money you get is income when it is received regardless if it is for a previous year or not.
How would you handle unemployment compensation where 2 1099-gs were sent, but one was repaid?? 1099g1 1000 - 100 fed tax, -50 state tax – all good. 1099g2 1000 - 100 fed tax, -50 state but repaid?? Numbers made up… but only one line ( line 7 ) on schedule 1 to flag as repaid or not?? Filing married jointly
P.s. i think the answer is… put 1000 in box 7, repaid 1000 in the … area, but that is misleading… but not my fault
very lucky we were each only unemployed for 2 weeks.
@mikibell Not sure what you are talking about re box 7 and if that is on the input screen for your tax program but if there is a section to indicate that the amount you entered above that has been repaid and it was all in the same year, then that is the way to handle it. If the program indicates that you are only being taxed on one of the payments then you know you are doing it right.
Other question is whether you paid back the gross or the net-how that effects the duplicate withholding.
@Felton10 sorry, I thought I mentioned sched 1, line 7. I use an excel spreadsheet 1040xls … to check my math and such, then I will use turbotax or whatever have you to actually file. So real number was 1442. I paid back 1442, hubby was paid 1442. When I enter the 1099gs into the spreadsheet, it calculates line 7 as 2884, but the IRS note says to reduce the 2884 by the repayment. So I took the box 1 1442 off the 1099g in the spreadsheet to make the sched 1, box 7 1442. I THINK I am right, since then I get the taxes back in my return, I did pay gross and the fed had taken out taxes as well as state. I hope this makes sense… why do they only have ONE LINE for 2 people!!! or more if my kids were unemployed
@mikibell Pretty sure reducing line 7 by the amount you returned is the correct way to handle it . The input screen for the 1099-G in my program shows a line 1a for payments repaid (see if your does) and if so that would net the amt received and paid to zero if one returned the entire amount.
Otherwise I would have suggested reporting the full amounts from both 1099-Gs on line 7 and then going to Schedule 1 of form 1040 part 2 Line Z (other adjustments) to show the amount returned to them.
Thank you for the kind offer. I might need your assistance. I am having to do my mom’s and my deceased dad’s taxes again. Unfortunately, mom is a luddite and refused electronic filing last year and I did my best with the forms and filed by mail. I think there was an issue with it but she threw the letter away. Blame dementia brain and her not wanting to release control of everything to me.
I hope they accept this year’s with no issues.
@ironcheftoni If you want to be sure about last year’s return, you could always get her to sign a IRS power of attorney which gives you authorization to talk to them about any issues on the return (if a joint return you better have docs re your dad’s death and have the admin sign the POA in your dad’s place.
The IRS has a pretty antiquated but efficient system so if you want to talk about it then instead of mailing in the POA and waiting for them to process it, you can call them and assuming you have access to 2 lines (the one you are talking on and another line with a fax machine) you can fax them the POA and talk to them about it right then and there. Luckily I have 2 land lines and a fax machine for just that reason alone.
@Felton10 Thank you! That helps a lot. Form printed and I’ll get her to sign it later this month. When dad passed, I got lots of copies of the death certificate.
@ironcheftoni Better have all the papers re his death available-death cert, administration docs etc-never know which ones they want. Getting them on the phone especially during tax season can be a challenge. Best to try early in the morning or right before they close. They have a special line for tax professionals and even I have to wait a bit on hold.
Do I have to claim an adult child (18) as a dependent to claim funds paid for college (we paid their tuition)? We would like them to have their income for future years reflect their slight earnings, for FAFSA etc.