Ask the Taxman, '07 Edition!

Discussion in 'Finance, Investing & Economy' started by wcharriscpa, Jan 4, 2007.

  1. wcharriscpa

    wcharriscpa Member

    Dec 26, 2000
    Austin
    Club:
    Arsenal FC
    Nat'l Team:
    United States
    Open discussion of tax-related questions here...questions, answers, complaints, hyperbole, rants, etc... :)

    I expect this thread to get a bit more activity than the '06 version, as there are some new wrinkles that could affect a lot of individuals.

    April 16th will be here before you know it.

    Keep in mind that your tax return is ultimately your responsibility (even if you engage a paid preparer -- EA, CPA, etc) and noone else's.
     
  2. Matt in the Hat

    Matt in the Hat Moderator
    Staff Member

    Sep 21, 2002
    Brooklyn
    Club:
    New York Red Bulls
    Nat'l Team:
    United States
    What's different this year?
     
  3. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
    I think April 15th is a Sunday, which means you get an extra day.
     
  4. wcharriscpa

    wcharriscpa Member

    Dec 26, 2000
    Austin
    Club:
    Arsenal FC
    Nat'l Team:
    United States
    A few things.

    Remember these Key Tax Changes, Credits and Deductions


    An excerpt that may be of some interest:

    "Telephone Excise Tax Refund — Last May the IRS announced a tax refund on long-distance or bundled-telephone excise taxes paid between Feb. 28, 2003, and Aug. 1, 2006. Applicants must fill out Form 8913, Credit For Federal Telephone Excise Tax Paid. The IRS has announced standard amounts to figure the refund. The amounts are based on the total number of exemptions claimed on the 2006 federal income tax return: $30 for a person filing a return with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions. See the IRS website for more information. http://www.irs.gov/newsroom/article/0,,id=164310,00.html"
     
  5. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
    For those of you who are students, you can deduct up to $4,000 in tutition and fees (depending on income). It's not on the Form 1040 this year because Congress didn't pass the deduction until late December. Instead, you take the deduction on Line 35 and write a "T" next to "35".
     
  6. wcharriscpa

    wcharriscpa Member

    Dec 26, 2000
    Austin
    Club:
    Arsenal FC
    Nat'l Team:
    United States
    And it's not just the tuition and fees deduction that is affected:

    Special Steps Needed for Paper 1040 Filers to Claim Late Tax Changes


    emphasis added
     
  7. Matt in the Hat

    Matt in the Hat Moderator
    Staff Member

    Sep 21, 2002
    Brooklyn
    Club:
    New York Red Bulls
    Nat'l Team:
    United States
    Will they at least update the PDF file?
     
  8. wcharriscpa

    wcharriscpa Member

    Dec 26, 2000
    Austin
    Club:
    Arsenal FC
    Nat'l Team:
    United States
    I would certainly think so, though I'm not sure. I'll try to find out.

    (For clarity: I believe you are referring to the downloadable forms available at www.irs.gov)


    edit: No. It does not appear the 2006 tax forms (printed paper, or downloadable .pdf) will be changed after all. Although I would expect software packages (TurboTax, etc.) to handle the deductions just fine -- just be sure to check for updates if you're using something right out of the box. If you're going to be filing by paper, you're just going to have to familiarize yourself with the changes.

    Tuition and Fees Deduction visual example
     
  9. CrewToon

    CrewToon Member

    Jun 13, 1999
    Greenbrier Farm
    It should be interesting to see whether TurboTax / TaxCut that were distributed in December had provisions for people to update with Congress' last-minute decision to extend such provisions as the Tuition and Fees Credit.
     
  10. CrewToon

    CrewToon Member

    Jun 13, 1999
    Greenbrier Farm
    It also blows that all the returns that will be prepared this year will have to have a bunch of notations just to designate Congress' late provision.


    Thank you, Internal Revenue Service.
     
  11. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
    I don't blame the IRS, this is totally on Congress not getting their job done until the last minute.
     
  12. wcharriscpa

    wcharriscpa Member

    Dec 26, 2000
    Austin
    Club:
    Arsenal FC
    Nat'l Team:
    United States
    Either way, online updates should now be available for those products.
     
  13. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
  14. CrewToon

    CrewToon Member

    Jun 13, 1999
    Greenbrier Farm
    I had my first client today. Due to local income taxes, this construction worker had 16 W-2s.
     
  15. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
    There was a story in the Washington Post a couple of years ago, about how athletes have to file income taxes in every state they play, which in a league like the NBA, is something like 20 state returns.
     
  16. wolfp10

    wolfp10 Member

    Sep 25, 2005
    In cities where there are income taxes, professional athletes also have to file returns in each city. Any athlete coming through Pittsburgh had to file a return. Jose Canseco owed several thousand dollars, IIRC.
     
  17. wolfp10

    wolfp10 Member

    Sep 25, 2005
    OK question...

    I started 2006 as a full time undergraduate student. I graduated in mid-May. I stayed under my parent's health insurance until I started a full time job on October 30. Between July and October 30, I was in Germany during the end of may and June, I lived at home, pretty much dependent on my parents. I still live at home, but am now financially independent, have my own insurance, etc.

    Can my parents claim me as a dependent?
     
  18. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
    I believe so.
     
  19. wcharriscpa

    wcharriscpa Member

    Dec 26, 2000
    Austin
    Club:
    Arsenal FC
    Nat'l Team:
    United States
    I assume your final semster began in January (as opposed to a short-semester that might have begun in March).

    If you were 24 or younger as of 12/31/2006 (age limit is 19 except in the case of full-time college students), and your parents provided more than 50% of your support for the year, then.....yes, you may be claimed by your parents as a dependent. (Probably for the last time ever. :))

    Just make sure that you don't also claim the standard exemption for yourself on your own tax return! It's an "either-or" thing. I'd guess that they would derive more benefit from the exemption, assuming they're in a higher marginal tax bracket. But I'm just guessing.

    There are 5 tests that determine if a child qualifies as a dependent:

    1. Relationship
    2. Age
    3. Residency
    4. Support, and
    5. Special test for qualifying child of more than one person.

    Read more about them here.
     
  20. Frieslander

    Frieslander Member
    Staff Member

    Feb 14, 2000
    North Jersey
    In 2006 I got married and bought a two family house in which I live on one floor and rent out the other. Up until now I've always done my own taxes. Now I've got the wife and income property involved. I've been talking to a guy I work with about owning a two family and he's been giving me tips about what deductions I can make. Are there any other tips I should know/forms I need to use or should I just pay an accountant?
     
  21. wcharriscpa

    wcharriscpa Member

    Dec 26, 2000
    Austin
    Club:
    Arsenal FC
    Nat'l Team:
    United States
    I firmly believe that most people can prepare their own return accurately without assistance. The question (imho) is whether or not they want to spend the time to do so. And only you can answer that.

    Perhaps other individuals could chime in with good/bad experiences?

    Check out IRS Pub 527, Residential Rental Property
     
  22. Frieslander

    Frieslander Member
    Staff Member

    Feb 14, 2000
    North Jersey
  23. GoldFinger

    GoldFinger New Member

    Jun 19, 2004
    If you don't do your own taxes, you will not understand the ins and outs and be in the best position to make tax-wise decisions.
     
  24. ZZZenga

    ZZZenga Member

    Aug 10, 2006
    CT
    I have a question about education expenses. My wife is in med school, and we're paying some of her tuition out of pocket, but the majority is being covered by stafford loans. I know that the tuition I pay is deductible, but is the portion that's paid with loans also deductible?
     

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