Ask me about taxes
Filed under: Tax
Do you have a burning question about your personal income taxes or your small business taxes? Leave your questions in the comments section below and and I'll answer as many as I can.
I'll help you wade through all the details and get down to the nitty gritty. What do those tax rules really say and what do you need to know to follow them?
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud. This column is designed to provide information about taxes that will be relevant to a large group of readers. If you require legal service or other expert assistance, please seek the services of a competent professional.
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Reader Comments (Page 1 of 77)
1-29-2008 @ 6:57PM
Dave said...
I had one question that came to mind. If I go on a business trip for my company, which expenses can I write off? Can I write off all meals? Or only ones that were considered a business meeting meal for example?
Thanks,
Dave
http://www.davepit.com
Reply
3-04-2008 @ 3:40PM
Martin Scura said...
I would like your answer to the following questions. Is the New Jersey Homestead rebate considered a tax recovery and included on the return as taxable income.
Also is the New York State STAR rebate considered a tax recovery and includable on the tax return as tax recovery income.
1-29-2008 @ 10:28PM
Tracy Coenen said...
Dave, I see you are self-employed, so I'll answer with respect to that. Assuming the trip is completely for business purposes, all of your meals would be deductible (but at the IRS rate of 50%, as with all meals and entertainment). If you do add on a day or two or several for fun, make sure to NOT deduct those meals as those wouldn't be related to the business.
Reply
3-11-2008 @ 6:08PM
connie deja said...
Our daughter is in college and will be applying for financial aid.....the FASA form needs to be filled out. Should we claim her or should she claim herself? Which is more beneficial for obtaining financial aid. Any further advice for the FASA would be appreciated.
Thank you!
1-30-2008 @ 12:12AM
Dave said...
Thanks Tracy
Reply
7-05-2008 @ 5:24PM
sonia said...
hi tracy, my husband is self-employed would it be better to get an LLC for his business. what are the pros and cons? also our son just moved out but we help him out with auto insurance,cell phone, and car payments is he considered a dependant. we alos pay for college books and school related items. can we use these items as a tax deductions? thanks,sonia
1-30-2008 @ 8:32AM
C. Hudson said...
Tracy, I have a niece who has been "homeless" since Feb, 07. She contacted me after many years of not hearing or seeing from her. I had her apply for Disability in the state she lives in. She is both Mentally and Physically Disabled. We are waiting for her Disability cks to start. (She has been approved). Since last Aug I have "supported" her; money, apt(in my name), electric, medical, furnished her (my) apt etc. All her income comes from me. It has been really tough on me. I have all the receipts. CAN I DEDUCT any of this on my
income tax? She will never be able to repay me and I
knew that going into this. Can I do anything on my taxes when I file, OR am I just a "good" Aunt? Thank You for this consideration, C. Hudson
Reply
1-30-2008 @ 8:38PM
Tracy Coenen said...
I do not believe you can get any tax benefit for 2007, as she does not appear to qualify for you to claim her as a dependent. If she had lived with you all year and if you had provided over half of her financial support, you likely could have claimed her as a dependent. That would have allowed you to take an exemption (deduction) for her.
More details are found here:
http://www.irs.gov/publications/p501/ar02.html#d0e3763
1-30-2008 @ 8:26PM
Andy Bourassa said...
A good friend and I started a web business in early 2007, and around June or July we decided to hang it up and get full-time jobs. I canceled the LLC we had created (in Delaware) mid-year (probably June or July). We didn't have a lot of expenses - basically the Delaware incorporation fees, cancellation fees, and then living expenses. All I really have documentation for is the incorporation fees, and I'm not sure what part of living expenses and rent for the apartment we were living in could be considered a loss. Do I just need to file a Form 1065 for the business and put all zeros? Would it be worth it to try to claim a loss of some sort and would I then in turn need to make up K-1s for the both of us? At first glance it seems like it may be more trouble than it's worth - am I wrong in assuming such? Thanks for your advice and great posts.
Reply
1-30-2008 @ 8:40PM
Tracy Coenen said...
Andy - If you had any income with the business, you absolutely should file a tax return for it. If you only had expenses, you may be able to file a tax return and get a benefit from those expenses. But you are right... it might be more trouble that it's worth. You could choose to file a tax return with all zero's and mark it as a "final" return so that the business is closed in the eyes of the IRS.
2-04-2008 @ 10:11AM
Thomas Braun said...
Hi Tracy, heres an easy question. Just bought a house with my fiancee. The mortage is in both our names Should we file as tenants in common or individually.
Should we have gotten married before Dec. 2007.
Reply
2-04-2008 @ 1:56PM
Tracy Coenen said...
There is no filing status of tenants in common. If you were unmarried as of December 31, 2007, then you must file as single (or head of household if you have dependents and qualify). You should each deduct your portion of the interest paid on your individual tax returns. Details on doing this are found on this page, about 1/2 way down, under "More than one borrower."
http://www.irs.gov/publications/p936/ar02.html
2-05-2008 @ 12:14AM
Jonathan said...
Tracy: I have a step-son who lives with me and his mother there was no arrangements made in the divorce
decree who gets to file my son on whos tax what are my legal legs to stand on. Thanks Jonathan
Reply
2-05-2008 @ 3:57PM
Tracy Coenen said...
Jonathan - If your stepson resided with you for more than 1/2 of the year and you provided more than 1/2 of his support for the year (i.e. you paid for more than half of his clothing, housing, food etc), then your wife should be entitled to claim the dependency exemption for him.
More details are found here:
http://www.irs.gov/publications/p501/index.html
2-05-2008 @ 12:46AM
amy said...
I cashed in my 401K to move and buy a house in another state, can I claim my down payment on my return to help. I paid the required taxes on the early withdrawal at the time of payout am I only supposed to pay the extra 10% at tax time. I also used this money to pay off my credit card debts, does that count??
Reply
2-05-2008 @ 4:03PM
Tracy Coenen said...
Your downpayment on a house is not a deductible item on your tax return.
When you withdrew your money from your 401(K), there was a certain amount withheld from that distribution toward the taxes you will owe. But it may not be enough to cover all the income taxes and the 10% penalty, so you should be aware that you may still owe money. I typically advise taxpayers that about 50% of their total distribution will end up being paid in taxes and penalties. So look at how much was withheld from your gross distribution to help estimate how much you might still owe. (Also consider that if you usually get a refund when you file your taxes each year, that amount will be applied against what you owe on the distribution.)
Paying off credit card debts with your 401(k) money will not affect your taxes. You don't get any benefit on the taxes from paying off credit cards.
2-05-2008 @ 12:24PM
Mark said...
The company I worked for closed its doors in 2006. At that time, I still had a balance outstanding ($13,000) on a 401(k) loan taken out for purchase of a primary residence. I rolled over my 401(k) into an IRA, but I had to pay off the remaining loan balance, which reduced the net proceeds for the 401(k) and was treated as a premature distribution. Will I have to pay the 10% penalty on this?
Reply
2-05-2008 @ 4:08PM
Tracy Coenen said...
If you are under age 59 1/2, you will have to pay income tax and the 10% penalty on the unpaid loan. You should get a form 1099-R that shows the amount that is taxable.
2-05-2008 @ 2:05PM
Chad said...
Hi Tracy, I bought an investment property in May 2006. I sold it in March 2007, for about 15,000 less than I paid for it. Can I write off the entire loss as a capital loss, or is it limited to $3000? can I claim the real estate agent's broker fees as a commission expense on schedule E?
thanks!
Reply
2-05-2008 @ 4:10PM
Tracy Coenen said...
Chad, you may be able to use up to the entire amount of the losses to offset any other investment gains that you have. If you do not have any other capital gains to offset against, you will be limited to the $3,000.
The costs of selling the property should be included in figuring your capital gain or loss from selling the property, rather than being used on Schedule E.