Ask MetaFilter questions tagged with Law and tax

Selling Real Estate, and Not Buying Again Immediately

aabbbiee — Thu, 28 Jun 2012 12:59:52 -0800

My house sold earlier this month. I am not buying a new house right away, but... maybe? How long can I wait? How will this affect taxes? And if I could buy property, should I in order to avoid penalties (if there are any)? You are not my lawyer or my accountant, but way more details with a little bit of drama after the jump. Located in Missouri, USA.

I (female) owned the house with my former domestic partner (spiritually, but not legally married) as Joint Tenants. We bought it outright and owned it for just over 6 years. It was my sole residence for all of that time. She moved out in summer 2009 and now lives in another state. Upon selling, we agreed to an 85/15 split of the proceeds, so I received about $25,000 cash from the sale.

I moved in with my boyfriend when the house sold. Our plan is that we will be engaged later in the year, commingle finances at that time, and then get legally married in spring 2013. My boyfriend purchased this home in 2008 and has a mortgage. At some point, I will use the proceeds on my house to invest in his house and become a co-owner of his property. But I don't know what the best timing for this process would be, and how it will affect my taxes. I am hoping you will help shed some light on this, so that we can make the best decision, timing-wise.

If all things were equal, I'd wait until we were happily engaged with combined finances, and then we'd start the paperwork for this with legal marriage on the horizon, so spring 2013. After my experience with my ex, I know that joint home-ownership is a huge legal entanglement that should be saved for wholly committed couples. I see it in the same light as legal marriage. My boyfriend and I have been together about 15 months, and we are very happy and in love, but it still seems early and I'm concerned with jumping too far too fast! We're still transitioning to cohabitation right now, and the boxes aren't even unpacked.
But we'd both want to avoid the tax penalties as much as possible, and there may be other reasons (like getting in while the mortgage rates are still low) to move forward a little sooner rather than a little later. There's just not that much difference between doing this in December 2012 and April 2013. It's only a few months, and we have time to get used to the idea between now and then, if we know it will be an issue. On the other hand, if things end up not working out between us in that time (oh, god, I hate even thinking that), I am not sure what I would need to do in order to avoid those penalties without buying into his place.

So, despite all my internal drama in the last paragraph, this is not a human relations question. I'm already in therapy, Metafilter! This is really a question about the legal and financial issues at play here.

I think there used to be a thing where you had two years to buy a house after selling your primary residence or you had to pay big taxes on the proceeds, but a) I don't know if this is still the case, b) I don't know if I qualify since I only took 15% of the proceeds, c) I don't know if I qualify since I will be buying in on my boyfriend's property, and d) I don't even know if I have those facts right in the first place.

So, questions:
- If I wait to buy in on my boyfriend's property until mid-2013, how will my house sale proceeds be reported on my taxes in 2012? Will I be taxed on them as I would if it was income? How would it be different if I moved forward with investing in my boyfriend's property before the end of 2012?
- I have bought and sold two houses, but I have never been added to an existing title/mortgage. What is involved? I know it's complicated and that it's not cheap. I believe that the mortgage will be refinanced in this process, so it would be convenient to do this while the rates are low. Is that a reason to move forward before the end of 2012, or as soon as possible?
- I know legal marriage gets all kinds of rights and benefits that my ex-wife and I were not entitled to, but I really don't know anything about those rights or benefits. Does the process of legal marriage make any of this easier or moot? Obviously, I will not own any property that is not in my name, but maybe the process for retitling or whatever is easier in conjunction with legal marriage (like a name change is), and so waiting for that step to do this step might be prudent. However, we are not getting married until 2013, so that would have to be weighed against any tax implications.
- What if we split up and we don't go through with this? I don't believe we will, but if we did, I would then have proceeds and no house to put it in. How long would I have before I needed to reinvest the proceeds in real estate? Is that what I would need to do?

Basic overviews are fine. Let me know if you want more info.

You are not my Accountant, my Lawyer, my Doctor, or my Psychologist. I fully intend to discuss this with someone, but I'm already worried about it, and I don't even know if I should call a tax lawyer or accountant to discuss all the dirty details. Which would be better for this?

Thank you in advance!

Common Law, Taxes and Immigration in Canada without SIN

Anonymous — Sat, 02 Jun 2012 08:21:44 -0800

My common-law partner and I are in the process of filing forms for her sponsorship of me to receive permanent resident status in Canada. She changed her marital status to common-law on her most recent tax forms (we have been living together since 2009). She is now being audited by Revenue Canada, since this reflects a change from her last tax return and how her GST/HST refunds are calculated. Specifically, Revenue Canada wants:
- either my SIN or date of entry into Canada, presumed to be 2010 or later
- a letter documenting our partnership and the date of our union.
- my "world income" for 2010 - which was $0 since I was in school and not employed.

I don't have a SIN and my study permit which granted me legal residence in Canada from 2004 - 2012 (with renewals) expired in the latter part of 2011 after I dropped out of school in 2011 for health/financial reasons. I've tried calling the legal aid clinic helping us through the immigration office but they haven't gotten back to me and my partner is getting quite worried.

Does this have any effect on sponsorship process? What kind of document is she expected to send to Revenue Canada? How would this affect my current undocumented status, especially since we haven't gotten the forms in yet? She is also being asked to return the GST/HST credits she received in the last six months (about 120 dollars) so that they can recalculate the allocation; a lesser concern is whether this change in marital status means she will be receiving less GST/HST returns in the future.

Throwaway e-mail account: commonlawforeignstudentaskmefi@gmail.com

You are not my estate lawyer, finance lady, or tax guy. Can you help me find that person?

Anonymous — Fri, 01 Jun 2012 14:44:46 -0800

Grandma set up an uneven trust and we want to distribute it equally. Who do we talk to and what do we ask them? Questions about imbalanced inheritances, DIY redistribution of wealth, and taxes within... Situation: My father passed away recently, and a trust that his mother set up is being disbursed to my half-sister and me in the next 1-3 months. The total amount of the trust is about $108k (before assorted administrative fees, TBD, are taken out).

For reasons known only to her, my grandmother set up the trust to go 3/4 to me and 1/4 to my half-sister. I'd like to divide the money equally (unsurprisingly, half-sister is also ok with this plan). The bank which administers the trust says they can't change the distribution, so it's up to us to do it independently. I'm in Massachusetts and my half-sister's in New York; the trust was set up in New Jersey but is now administered by a big nationwide bank with offices in Philadelphia.

This is my first time being An Heiress and I could use some guidance. It's understood that you are not my lawyer, finance lady or tax guy; I'm looking for help finding the right person and asking them the right questions.

Things I'm considering now:
-Is it worth revisiting the distribution issue with the bank to see if there's a way they can divide things 50/50? They told me their hands are tied legally by the trust; could a financial or legal expert achieve different results?
-What are the income tax implications from receiving an inheritance from a trust, and what is the best way to minimize them? (Half of the trust is about a years' salary for me, so if it's counted as income it's a significant jump.)
-If I transfer a big chunk of what I inherit to someone else, what's the best way to estimate the taxes I'll be asked to pay on that particular chunk of money, as opposed to the inheritance I keep and my usual income, so that we can account for it fairly?
-I understand that there's a gift tax which I'm responsible for if I give an individual more than $13,000 in a year - what's the best way to avoid/minimize gift tax issues in this case, especially given that I would prefer to transfer all the money at once?

I'm happy to read answers/theories on the questions above, but what I could most use help with are:
-What type of expert or experts should I enlist to help walk me through this process - lawyer? Accountant? Financial adviser? Other?
-What vital questions have I neglected to consider?

Thanks for your help, AskMe!

Set up LLC now or later

akomom — Mon, 27 Feb 2012 10:37:02 -0800

Asking business question about setting up LLC and tax savings I am asking for a friend. He will pay for a tax consultant but since it's a simple question, maybe the hive mind can give some generous advice here.

My friend wants to set up a LLC to form a company that create web related products. In the first year, there is no anticipated profit. But there will be $3,000 - $4000 spending on set up and maintain the web site, travel oversees to hire people and form business partners. So is it worth to start LLC now and save tax on those expenses or wait to start LLC later after the partnership is all set and things are more ready for actually running the business? Since this is something he does on top of having a full time job and family work, time, resource, and money are all limited. See, just to hire and meet with a tax consultant takes a lot of resources. That's why he wants to ask here. Thanks a lot! By the way, location is California.

I'm pretty sure the Bluth family is a terrible role model here

Harry Potter and the Puppet of Sock — Mon, 30 Jan 2012 13:48:38 -0800

I'm inheriting $100,000. My parents are inheriting a lot more (around $1mil, but we're not sure the exact amount). Please give us advice. We're in the US (New Mexico). I want to put mine away and get as much interest as possible. I would also consider buying instead of renting (a house or condo or apartment or something) if that is a good idea. But I am guessing that it is not on account of me not needing much space and so apartments are good, and also if the house gets termites or plumbing things or falls apart in some other exciting way I have no ability whatsoever to fix it.

I may spend some of the yearly interest when I get it (probably on travel and possibly health insurance, since my job doesn't have it and I have to go off my parents' in a few years).

I'm totally willing to hire someone to help with it. Or go to a class or something. If you guys have any recommendations on that-- people/classes in New Mexico-- feel free to leave 'em.

My parents are way better at this sort of stuff than I am, but they still have never seen anywhere near this amount of money in their lives, so after paying off the house-- which they already did-- they have general ideas of what to do but are also happy to take any general advice.

Sockpuppeting because I don't really want everyone who knows me to know I got a big chunk of money. I live pretty frugally and want to stay that way.

US Tax Law Change for Americans Living Abroad

foxinsocks — Sat, 27 Aug 2011 22:40:16 -0800

As a US citizen, living and working abroad for many years, I recently heard of a new law that I must file tax returns on the US by Aug 31, 2011 or face a penalty. Anyone know about this? If US citizens live and pay taxes abroad, they generally are exempt up to $91,500.

Is it worth forming an LLC and in which state?

markhu — Mon, 18 Jul 2011 20:01:21 -0800

I'd been wanting to form a corporaton for a long time. So many benefits it seems:

track business expenses for income-tax deductions

protect assets against law-suits

gain credibility for certain transactions

privacy

But all the gory details are getting me down... Details:
I pulled the trigger last month and used LegalZoom.com to form a Nevada LLC, even though I live in California. Main reason was that California registration fees are $800 per year, and Nevada is a fraction of that.
But then I read this article (after the fact) about picking a state at http://sustainableonlinesolutions.com/llc-in-california which has me worried.

Then, it is starting to come true. I went to a [national bank] branch here in Los Angeles and they refused to open a business checking account for my Nevada LLC corp... said I needed to be registered with California. I asked but did not get a clear answer on if that was just a bank policy, or a state/county/local regulation... Also unclear if "registered with California" means throw away the Nevada one and form a California-based LLC, or if there is some sort of cross-border registration.

Did I just waste my time & money forming an out-of-state corporation?

Presumably it wasn't always like this... when did it change?

Oh, and the other annoyance. Using LegalZoom puts you on lots of referral lists and there are now all sorts of "service" companies soliciting me. I feel like a miner being sold picks and shovels and pans.... and maybe thats really where the money is in servicing the dreamers rather than trying to execute a new dream.

tax lawyer in NJ NY?

Anonymous — Mon, 14 Mar 2011 15:54:40 -0800

Tax Lawyer in NJ/NY area? We got into a bit of a tax fix with our very small company and I'm trying to figure out how to find honest/ dependable advice/ consultation. Any ideas on how to find someone in the NJ/NY area?
Throwaway email: jimLOK@hotdak.net

Tip Reporting

sarelicar — Thu, 05 Aug 2010 21:59:44 -0800

You Are Not My Accountant/Lawyer/Whatever. But, do you have any answers or could you point me in the right direction of a resource that could answer the following question regarding tipped service staff in the state of Florida? An employer I know reports full tips, cash and credit cards and in turn the service staff at their establishment pays full appropriate tax on all tips. Most establishments I've heard of report only a minimum (something like 20% of credit card tips) and thusly pay their end of the social security, etc. on that lowest allowed amount.

I know there is a minimum requirement for a business to report that their servers make and beyond that minimum it is the servers' responsibility to report their earnings to the government come tax time.

My specific question is, what is that minimum requirement for the business to report and what resources, other than an accountant, might I find online to back this info up?

Thank you for your time!!

I'm a dependant, full-time student abroad and haven't filed with the IRS for the past three years. Doing immigration stuff and need tax returns. What now?

Anonymous — Wed, 13 May 2009 10:34:23 -0800

I am helping my partner migrate to the U.S. after our marriage. We're nearing the point where we do an Affidavit of Support during our embassy interview abroad, which says I need to bring tax returns. I have not filed income taxes for the last three years, because I have been a full-time student in this country. What should I do? I've been living abroad for the past three years, and now my partner and I are moving / moving back to the U.S. Part of the marriage immigration process deals with an Affidavit of Support. Even though my partner makes a substantial amount annually, and we're filing as if my partner can support can survive on that, we know they will probably still need a co-sponsor. To join the one we file, we're going to get a co-sponsor in the form of one of my partner's relatives in the States. The Affidavit of Support we're submitting together, though, needs tax returns from my filing, and I've not filed for the last three years, because I've been a full-time student, making no money at the taxable rate as a single person. (My partner and I only married this year.)

I'm not sure what I should do. I want the visa process to go smoothly, in which case having the tax returns would probably be preferable, but I'm not sure how to even go about filing in my situation. This is a big reason I've not filed, really. The IRS expects me to have a U.S. address, and I don't. For reasons I won't go into, I also haven't had a very stable, close familial place to send information to, either, so that wasn't an option. When I go to the IRS website, there is the option to contact a local office internationally (in London, Frankfurt and Paris) for help, but none of them is where I am abroad.

Some extra caveats:

- My father is a disabled U.S. veteran, and I've been receiving non-taxable VA educational benefits for the last three years. He has mostly helped pay any leftover costs of my tuition and living. When he's not been reliable, my partner has helped me. I've been a dependent, because of my studies. I have a lot of anxiety issues and can't really work and study at the same time, so that's why. :/

- My parents divorced a little over a year ago, and my mother sent me $10,000 from her settlement with my father. (She was concerned that my father might pull the rug out from under me and not help me pay for things while abroad.) Is this generous gift taxable, or is it part of my being essentially a dependent? I don't know how my parents file me (if they call me a dependent), if they file me, because they don't talk to me much.

- My partner and I have begun pooling our money together--my little bit and my partner's regular income--in preparation of our immigration interview (date yet to be set) and our move. I feel this may complicate things, even with my bank statements. Am I right?

So yes...what should I do? Do I file (and how, if so?) and try to get the returns ASAP, before our interview? Do I not file and just take bank statements and a letter explaining my situation? I can point to p. 8 in the 1040 Tax Instructions Book that shows I don't need to pay, I think, since I've not actually earned over $8900USD in any of the three years, but I'm still not sure if this is good enough.

- I will start working as soon as I am through with my studies next month. I have this lined up. The money I make will go into my and my partner's joint account. How might this affect stuff?

I'm just wanting to do what will help us the most, and harm us the least, for the visa process. Any advice would be welcome.

Masochism expressed through higher-level law degree, or good idea?

bunnycup — Wed, 06 May 2009 12:30:38 -0800

I'm thinking of returning to school for an LLM in taxation, and am looking for advice, experience, pros, cons, etc. In terms of my background, I have a BA from NYU, a JD from Fordham and was admitted to the bar in New York in 2007. I practice in a very specialized, unique area dealing with tax, insurance, alternative dispute resolution, etc. I am very young within my field compared to colleagues, and somewhat of a unique player - I could see myself rising to the top, forging my own path and having a lot of career flexibility.

So, I want an LLM to develop the expertise in taxation that law school did not provide, to increase my flexibility, the likelihood that i can qualify as an expert for tax testimony, and perhaps pursue writing and academic work within the field.

The cons are, I already have $100k of educational debt and would intend on continuing to work full time while in school (though I work exclusively from home). I would also like to consider international tax expertise, and whether this is something I might pursue abroad, if it were worthwhile (I would be able to continue to work while doing so).

Comments? Thoughts? Pros? Cons? Yes? No? Where? When? Why? Is this a waste of time and money to pursue or does it seem to fit well with my life/career goals? Did your LLM change your life?

Can my minor children receive a gift from their great aunt that is excluded from the gift tax?

Duluth?! I Hardly Know Her! — Sun, 04 May 2008 16:08:02 -0800

Can my great aunt make a $12,000 gift to me, my wife, and each of our two kids (for $48,000 total) without incurring the gift tax? My (very generous) great aunt would like to give gifts to various extended family members but wants to be careful with the gift tax. From my research online, it seems beyond a doubt that she can give up to $12,000 per donee per year without triggering any gift tax or any obligation to report the gifts to the IRS.

The one question that I cannot find a straight answer on is whether she can give $12,000 to each of my 2 minor children and have that count separately from her gifts to me and to my wife. It seems to me that the answer is yes - I cannot find anywhere that the answer is no - but confirmation of this specific fact situation has eluded me.

If it matters, my family will use the combined money, including the kids' portion, immediately; it will not go into trust or into an account for when the kids turn older. Instead, we will use the money to fund improvements on our house that we have been deferring because we couldn't afford it. So when the money came in, I would sign my check for myself and sign the kids' checks on their behalf, deposit the money into our family's checking account, and then hand it over to a contractor.

Thanks for whatever help you can offer. I acknowledge that I should consult an independent professional and that if you are a lawyer or accountant you are not mine and you are not offering advice.

How to stay a Indie. Contractor?

mcbietila — Tue, 13 Mar 2007 15:04:41 -0800

I have been freelancing as TV producer for one company for over 6 months now working on various projects. The boss thinks he needs me to stand down for a few weeks to keep my independent contractor status. All of the IRS info I have found is vague on the point of continuous employment. How long will I have to stand down (aka take the vacation I want to take) before I can return to this company? And legally how long is too long to be a contactor for one company (when does the IRS question contractor vs. employee)?

Is Income Tax Illegal in the USA?

IronWolve — Sun, 05 Nov 2006 22:28:52 -0800

Is there a law requiring you to pay Income Tax? I saw this video over at youtube, from The FreedomtoFacisim.com website. They say that Income tax is illegal and there are no laws. They even mention that the 16th admendment isn't valid via the supreme court. Ok, are these guys wackos? IRS has guns, so they make the rules, thats all I know.

SUV subsidy

yclipse — Wed, 24 Aug 2005 18:31:31 -0800

TaxGeek filter: Where can we find the SUV subsidy provision? The Internal Revenue Code, we are told, has a provision for a hefty tax benefit for those who purchase a vehicle over 3 tons when it is used solely for business. Where do we find this provision?

US tax question - telecommuiting

445supermag — Sun, 16 Jan 2005 18:44:50 -0800

Taxfilter: telecommuting across state lines. [mi] We moved from Montana to California last March, my wife continued to work a couple hours a day for her Montana employer (she's a grant writer). Since we lived in both states last year I know we will have to file in both states, but where does my wife have to pay on wages earned from Montana, but living in CA? I though that the bookkeeper at her employer had looked into it, but just learned that they have just been taking out MT taxes with no change. We've always done our own taxes, do we need professional help?

Tax and Stock Options

scarabic — Thu, 13 Jan 2005 15:49:22 -0800

I have exercised stock options and taken possession of a small number of shares. I have not sold anything, but am wondering how screwed I am, tax-wise. First, do I have to declare the value of the stock as "income" for the year that I acquired it? Second, if I should sell it, do I add the money I receive from that sale to my regular taxable income? Do I deduct the amount I paid in? Is the net difference subject to other taxes? Is this handle-able by an average person or do I need an accountant?

Income tax question for an LLC

limitedpie — Tue, 24 Aug 2004 11:51:58 -0800

If one has a business that is registered as an LLC (with no partners-- just the one person) and if: the business location (office) is in one state, the owner lives in another state and most of the business (or clients) are in a third state in which state is state income tax due-- where the office is, the owner's residence or where the clients are?

Taxation and Reporting for eCommerce

lilboo — Thu, 12 Aug 2004 08:31:41 -0800

Ecommerce filter: Here at work we are attempting to understand/define the default business rules for taxation calculations within an ecommerce app. Specifically we are all tied up in knots over the application of rates, reporting issues, etc. Is there an industry standard for handling this aspect of a transaction? Who defines the standards, and how can I find out more about it?

Starting a very small business.

shotsy — Thu, 29 Jul 2004 17:56:01 -0800

I am thinking of starting a very small business, but I have a few questions for those of you who have done so before I really make up my mind wheter to go forward or not. [More Inside] I'd like to start selling original t-shirts over the web, essentially. My goal is not to get rich, just to get a little extra change and also to get some t-shirts I'd want to wear. Hobby meets Cash. I've looked over some of the previous threads on setting up small business, but none seemed to quite address my questions.

A bit about my plan: Start with small runs, maybe 50 prints each of two designs, see how they sell, then react accordingly.

1) I've looked into the process and there are a lot of custom printers out there, and if anybody has experience in that area, I'd appreciate a reccomendation.

2) Taxes: I don't see myself making all that much money on this venture, but I don't want to play games with Johnny Law, so I am wondering how difficult figuring this stuff out will be. Do I need to officiate myself as a company or anything?

3) Advertising: I'd love to hear the good and bad stories of internet advertising. How does it usually work? I'd obviously target sites that cater to people with similar aesthetic ideals, but I'd love to get a rough (or very rough) estimate for how much I should expect to budget for that sort of thing (though I understand it will vary wildly by site).

4) Any other tips on things I haven't thought of would be appreciated.

I realize I've thrown a lot out there, so please just answer parts if you can. Many thanks.

Medical Reimbursement Plan - what does the IRS require?

dirtylittlemonkey — Tue, 06 Apr 2004 11:26:49 -0800

I've recently started a company, structured as a 'C' Corp, to sell my consulting/contracting services. One of the reasons I'm working as a 'C' corporation is so I can have the company pay all medical expenses. I've read from the web and various IRS publications that as long as the Medical Reimbursement Plan is offered to all employees equally (no problem there) then it can be paid for by the company and written off on the corp taxes. But in order to make the MRP legit what, other then limiting medical expenses to those listed as acceptable by the IRS, do I need to do? Special records? Outside plan administrator?