Ask MetaFilter questions tagged with finance and tax

More tax cuts?

Vindaloo — Mon, 12 Jan 2009 06:48:58 -0800

Canadian finance minister, Jim Flaherty, is set to announce our government's plans to stimulate the economy. That plan is rumoured to contain some major tax cuts. Help me understand why every policy, in good times and bad, always calls for tax cuts. The Harper government has already made numerous tax cuts, including the famous 2% reduction in the GST. This reduction means the average Canadian now save about $250 a year, but it costs our government about $7.5 billion in lost revenue. And this was done when the economy was strong, the coffers were full, and the government said it didn't need the money.

Now things are bad, the economy stinks and the government must intervene. With more tax cuts.

I don't get it. Tax cuts when things are good, tax cuts when things are bad. Tax cuts in the morning, tax cuts at lunch, I smoke two tax cuts then I smoke two more. Please help me understand why the solution to seemingly every macroeconomic situation is tax cuts. Is it just my left-bending mind which finds this suspicious?

Lesser of two tax burdens?

al_fresco — Sat, 13 Dec 2008 15:40:17 -0800

My partner and I need to pay off some debt, and unfortunately we need to dip into our retirement funds. Our tax accountant is on vacation and we can't find the answer to our question. We have two sources–either sell some stock or cash out a couple of short-term IRA CDs. Which is the lesser of two evils? The service charge on either transaction would be about the same (~$50). We understand that the painful part would come in the form of the taxes on the amount we receive. Is there a difference in how the two types of transactions would be taxed? If we took a theoretical amount of $10k from either transaction, which would be taxed at a higher rate? What is the tax rate on either of these. I'm in California, and we'd need to do this before the end of 2008. If it matters, the money would go directly to pay off credit cards, car, student loans.

And it always makes sense to pay off debt before saving for retirement, right? (Higher interest rate on debt than retirement fund, blah blah). Oh, and we're living paycheck to paycheck.

Thanks in advance!

30-year investment portfolio which has to start before the end of the year and wants to be left alone afterwards?

Anonymous — Fri, 05 Dec 2008 08:59:37 -0800

If you had a very strong incentive to invest money before the end of the year with a 30-year outlook, and a further strong incentive to not adjust your investment strategy over that timeframe unless absolutely necessary, what kind of portfolio would you assemble? I live in Germany, which has an effective 0% capital gains tax on long-term capital gains from financial instruments. The government has finally decided to end this peculiar state of affairs and will start to tax long-term capital gains at 25% or more starting in 2009. Investments made before 1/1/2009 and held for more than a year will continue to be (un)taxed under the old system. But, naturally, if you redistribute the portfolio at any point, what was redistributed will come under the new law, so there is a strong incentive to leave it alone if at all possible. I don't see this as a suicide pact, and would make changes that were necessary without sweating the tax too much, but I am trying to design a portfolio to put a little money in now that has decent odds of not requiring rejiggering and having acceptable performance over the long timeframe which is available.

Personality and background: I consider good money management to be an obligation but not a pleasure of life or inherently interesting, so I believe in keeping things as simple as possible, within reason. Past experience has taught me that if the workings of a financial vehicle aren't clear to me after one good and comprehensive explanation, I'd do best to avoid it. I have invested for the (shorter) long-term before and I've had good outcomes, and I've been lucky enough to have received my lessons about active short-term trading and speculation at reasonably low prices. My general financial health is healthy and the investment seed is extra money. I'm able to purchase many (but not all) US and other international securities/ETFs/funds/bonds without too much of a markup, so let's just assume for simplicity's sake that I can purchase any of them. This will be retirement money, but not the only source of retirement money.

I've read the Scott Adams article, lots of Warren Buffett, and several good books on index fund investing, and now this is my AskMe gut-check/brainstorm request before proceeding: what would your 30-year fire-and-forget portfolio look like? I would love to hear your ideas and advice if you wouldn't mind sharing. Thank you!

Help me make sense of small businss tax forms!

kmtiszen — Wed, 27 Aug 2008 20:09:14 -0800

Starting a small, part-time, home-based eBay business in New York. What are the implications of registering for a Sale & Use Tax certificate? It looks like I'm going to need this certificate (DTF-17, I believe) before I deal with most wholesalers. I'm having trouble wrapping my head around the purpose/implications of all these wonky tax forms, especially the "sales & use" tax. Could somebody possibly explain this one to me in my right-brained kind of English? What will it mean once tax time rolls around in April?

Unfortunately, I was not born with a gift for this kind of stuff, and I envy all of you who were. So thanks in advance for your big brains!

What is the best financial/tax situation for a family with a kid on the way?

Anonymous — Wed, 02 Jul 2008 06:27:17 -0800

What is the best financial/tax situation for us? Kid on way, financial aid eligibility concerns. Me: grad student for 2 more years, on a teaching assistantship (this covers tuition, fees, health insurance, and gives me a $1600/mo. stipend) and with some student loans on top (less than $10k/year). I also work in the summers, but make less than $5k. I also receive research grants sometimes ($5k-$15k). In 2008, I will only have been in the country for 2 months and will have an income of less than $5k. In 2009 and 2010 I will be be back on the normal track with $1600/mo. and some loans with perhaps 2-3 months of a travel grant of ~$6k.

Him: working person making a good salary (floating around 6 figures)

New factor: baby on the way at end of year (will be on Dad's insurance and Dad's company covers childcare)

The way that we see it, here are our financial options:

(1) Stay unmarried, he claims baby on his taxes.

(2) Stay unmarried, I claim the baby on my taxes. (But would this screw up my student loan/financial aid eligibility by making me look richer?)

(3) Marry and claim kid together. (Again, would this screw up my student loan/financial aid eligibility?)

How do I get old W2s?

cachondeo45 — Fri, 11 Apr 2008 07:38:55 -0800

Tax Filter (surprise surprise!): I didn't pay my taxes in 2000 or 2004 and I need to get my hands on the W2s from those years. I want to pay those taxes (mostly to fix my credit, although I doubt I owe much because I wasn't making much), but I need the W2s. The companies I worked for have already destroyed the W2s from 2000 and are lagging on getting the W2s from 2004. I went to the IRS website AND called the IRS to find out what forms I need to request those, and I have received several different answers. I have sent a check to them requesting the W2s, but have had it sent back to me several times, because I used the wrong form to request those W2s. Help! I just want good credit! And I was making less than $10k both of those years, if that makes a difference.

Being taxed as a business, despite being a public employee

the_bone — Wed, 05 Sep 2007 18:28:35 -0800

Los Angeles is hitting me for a big chunk of money for business taxes... this despite the fact that I am a public employee. (In advance: The answer to this question may very well be "get a lawyer/accountant," but I'm not flush with cash at the moment and would like to know what steps I can take short of that.)

I'm a teacher, and I do a small amount of work as a musician. I moved to CA in 2005, and filed taxes for that year here. I included 1099 forms (all from work done in FL, no less) in my tax filings for that year. I also did a small amount of musical work as an independent contractor in CA during 2006.

LA has decided that I am a business for some reason (I don't know why yet), and has decided to tax me. That's cool... but they are apparently basing their estimated tax on all of my income, including that earned as a teacher. The estimated tax far exceeds what I made from my independent contractor work last year in CA.

I'm filing for a hearing (it doesn't help matters that they've apparently tried to contact me, but I moved a few times last year for personal reasons, and some of my mail is just now starting to catch up with me a year later). I have no idea what to expect, what they want from me in terms of documentation, and so on.

I'm sure I'm leaving relevant information out. I have a lot of general anxiety about all matter financial as a matter of course, am having a world-class freakout over this at the moment, and I might be (hell, probably am) mis-explaining. I'll answer questions in the thread... I think my main reason to posting to AskMe is to find out what questions I should be asking LA about this. Thanks.

Tax planning advice for the self employed.

Nothing — Mon, 26 Mar 2007 13:57:55 -0800

Tax planning advice for the self employed. The web is full of articles, the bookstores are full of guides. But there is so much "get rich quick" and "pay zero taxes" crap out there that I am not sure where to go for good, solid tax planning advice. Is it better to operate as an LLC? An s-corp? What expenses are deductible? What is a good system of recordkeeping? What records should be kept? If I have two related business pursuits, should I keep track of them separately or together? And so on. I know I need to see an accountant, but I'd like to be as educated as possible. Right now I am paying a rather high percentage of a rather small income in taxes. I'm not anti-tax, but I am very pro-eating.

So, what books do you recommend? What websites have accurate, useful articles? What has helped you better understand managing finances as a self employed person?

are my business expenditures deductible?

lgyre — Tue, 23 Jan 2007 14:01:53 -0800

How can I tell whether or not the expenses incurred by my new LLC, which I'm filing taxes for as a partnership and which is operating at a loss this year, can be claimed by the members as deductible business expenses? So supposedly filing as a partnership is the usual thing for an LLC, which is fine with me, except that there seems to be one way in which you have to differentiate-- since the members liability is limitted, not all losses of the company can be distributed among and claimed by the members as deductible business expenses.

My business is new this year. It had a lot of startup costs including purchasing a building (which I will depreciate if possible), improvements to the building, and legal fees, and actually hasn't even opened yet so has not made any income. The money for these costs was put in by the members, so the company is not in debt, but is definitely operating at a loss. I am really hoping to be able to apply my share of this loss as a business expense on my personal taxes, because I spent money on my business assuming I would be able to deduct it. How can I tell whether I can deduct this, or which expenses are elligible?

(All the information I could find on the IRS website was that only a professional could answer this question, but I think I understand everything else about my filing process so I am reluctant to go that way.)

thanks!

Vancouver accountants?

stavrosthewonderchicken — Thu, 14 Sep 2006 17:51:06 -0800

Possibly a longshot : can anyone recommend an accountant in Vancouver? I'm looking for one that can advise me on tax issues and possibly do some document preparation for me, particularly with regard to my lengthy and continuing expatriate status.

Also, a follow-on question: I've never actually sat down with an accountant who wasn't just a professional friend helping me out. My expectation is that I might be able to sit down with one to lay out my requirements and get a price estimate for the actual engagement, without charge. Is this the case, or will the initial consultation cost, and if so, what might I looking at, ballpark, for say the initial 20 minutes of his or her time?

How do you prove you used IRA money for home purchase?

boognish — Fri, 04 Aug 2006 07:10:28 -0800

Tax laws allow you to withdraw money penalty-free from your IRA up to $10,000 if you use it towards a first-time home purchase. We just got the check -- my question is, how do we prove later on that we did use the money for the house?

One roommate owns, one doesn't; how to handle?

commander_cool — Mon, 13 Feb 2006 16:25:54 -0800

I own a condo with a mortgage and tax deductions and equity. SO moving in. How do we split expenses fairly? Many other questions about financial logistics. I've owned a condo for several years and have built up extensive equity between putting in more money and the ridiculous local real estate market.

SO is likely moving in soon, and my life will be much the better for it. Happy Valentine's Day!

It doesn't make sense for both of us to move and get a new place: I have more money than SO does so we just end up with a new problem, we both like the place, SO needs to move anyway because of expiring lease, and the location is great. Also, I just refinanced at a much lower mortgage rate than I could get now, so any move would put us in a downgrade even if I could psychologically accept the loss of sunk costs.

Assume that SO doesn't have the free cash flow to simply pay me for a half-share ownership of the condo, in which case we could just change the title and split expenses down the middle. How do we handle this financially instead?

1) Do we just split the mortgage? If so, what does that do to our tax situation, given that I'm deducting the interest and taxes on my federal taxes? (Odds are that I'll be in a higher bracket, so it would make more sense for me to have the deductions.)

2) How do we handle the fact that a substantial portion of my mortgage check is building up equity? Does SO end up with an ownership interest? (And if so, how much money does SO end up getting when the condo is sold? Or heaven forfend, when SO realizes GOB-style "I've made a huge mistake" and moves out?) Or should we simply treat the equity portion of the bill as my responsibility?

3) If we split expenses some other way (putting her in charge of paying for food, utilities, and the non-deductible condo fee), is this imputed rent income that I need to treat as taxable income? Too, it's hard to add all those smaller expenses up in a way that seems like a fair division, given the size of the mortgage expense.

4) Or do I just say that I'm so thrilled to have my SO move in that I want to handle all of the financial expenses myself? I could afford this to be sure (I'm already paying expenses by myself), but I think SO would actually feel threatened by this.

5) I don't need a prenup for this, do I? SO is an economics major and future heartless lawyer, so it might not be too disastrous if I had to suggest one.

Many thanks, Mefites.

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?